Eurogroup’s Donohoe Confident on Reaching Deal on Fiscal Rules

(Bloomberg) -- The European Union will reach an agreement on the review of its common fiscal rules because “we need to and we have to,” said Paschal Donohoe, president of the Eurogroup which brings together euro-area finance ministers.

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“There’s far more consensus than what you may think regarding the need for such rules,” he said at the Bloomberg New Economy Gateway Europe event near Dublin on Wednesday. “We need to have credible medium-term fiscal rules.”

The long-awaited reform of the Stability and Growth Pact, the bloc’s rules to control public expenditure, would give more leeway to national governments to determine their fiscal path and space for growth-oriented investments.

Germany has expressed concerns about the possibility of the European Commission, the EU’s executive arm, giving too much space to highly indebted governments to balance their public accounts. Germany has requested more transparency and strict common benchmarks.

The fiscal rules were suspended in the early stages of the Covid-19 pandemic to allow for the extra expenditure needed and remained on hold to cope with the fallout of Russia’s invasion of Ukraine. The framework will be reinstated in January, but some member states have insisted that it is not fit for purpose given its constraints on investment for the EU’s green or defense priorities.

Donohoe, who is also Ireland’s public spending minister, added that it “will take a little bit of time but that work will carry on across the year.”

The commission is expected to put forward a legislative proposal on the rules in April.

The New Economy Gateway series brings together leaders from the private and public sectors to analyze and propose solutions to the economy’s most pressing problems. This week’s event focuses on the theme of “Reglobalization” — exploring the forces transforming trade and industry, from banking to aviation and energy to semiconductors.

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