Economy

The electoral campaign rules in the new European Stability Pact

Tell me you're on the election campaign, without telling me you're on the election campaign. The European elections of 8 and 9 June are getting closer and closer and the parties are starting to position their pawns in order to be able to play their electoral campaign on multiple fronts. Obviously the EU and its policies will be the fulcrum on which the game will be played. Given the climate, the vote on the new Stability Pact could not have come at a worse time. In fact, yesterday the EU plenary voted by majority on the new Stability Pact, receiving the approval of only four Italians: Herbert Dorfmann and Lara Comi of the EPP, Marco Zullo and Sandro Gozi of Renew, who, among the EP benches, sits in the ranks of the Macronians. The centre-right and the Democratic Party abstained while the M5S and the Greens voted against.

The compromise reached last December 21st by the Economy Ministers of the 27 was therefore not liked by the Italian parties. It must be said that Italy's vote against was announced on Monday evening, during the hearing on the Def, by the Minister of Economy himself, Giancarlo Giorgetti. While on the one hand it is certainly true that it is a Stability Pact that does not meet all the desired flexibility requirements, on the other «what has been obtained is certainly a step forward compared to the budget rules that would have come into force effective exactly starting next year. This stability and growth pact does not exactly meet the criteria of those who think that growth depends on the “LSD” model, i.e. laxity, debt and subsidies”, Giorgetti replied today during his answers in the Chamber on the Def. Un Patto which brought home three small victories: the automatic extension of the Pnrr investment plan, having considered defense as a significant factor (an aspect that does not satisfy the Minister of Defense, Guido Crosetto) and the deduction of interest expenditure from the structural deficit until 2027.

A new pact with the same parameters

The new Stability Pact presents some innovations while remaining anchored to two basic principles of the old treaty, namely the containment of the deficit at 3% and the debt at 60%. What is new, however, are the paths to return to the parameters which will range from 4 to 7 years, in exchange for the countries' commitment to making sustainable investments and reforms for growth. EU partners with a debt to GDP higher than 90%, like Italy, will have to reduce it by at least 1% per year, while if it is between 60 and 90% the reduction will be 0.5%. As regards the deficit, member states will have to leave a fiscal cushion equal to 1.5% of GDP, below the mandatory threshold of 3%, to deal with any crises. To constitute this reserve, the annual adjustment should be equal to 0.4% of GDP, in the case of four-year recovery plans, which could be reduced to 0.25% of GDP, in seven-year recovery plans. On the subject, Giorgetti declared at the hearing that the public finance scenario for 2024 is already “compatible with the new rules” and “the data presented show that between 2025 and 2027 Italy would achieve an adjustment in the average annual structural balance of 0.7 points of GDP and of the primary structural balance of 0.83 points”.