Urges the European Commission to “take advantage” of the escape clauses activated since the Panemide to adapt current rules and make them more flexible
The International Monetary Fund (IMF) is urging the European Commission to “take advantage” of the current situation in which all EU countries find themselves enormously, with intense public support plans to contain the effect of inflation, to reform those tax “old rules” “with all the problems” they bring. Such is the bluntness of the organization advocating for this reform to be implemented now, after which the escape clause will be activated, at least until 2023. That is, the flexibility that states have to not have to meet the historic deficit and debt targets set by Brussels. has always shown an iron demeanor.
These limits set a maximum government deficit of 3% of gross domestic product (GDP) and a debt that does not represent more than 60% of the national wealth of each Member State. Goals that seem more than far away. Only in the case of Spain, the deficit is expected to exceed 5% this year, despite the significant decline over the past two years; and government debt, well above 110% in the medium term.
That is why for the IMF “the opportunity should not be wasted”, referring to that reform. He specifically points out that the EU “needs renewed fiscal rules that provide the flexibility for bold and swift policies when needed, but without jeopardizing the sustainability of public finances.” In addition, he believes that “it is essential to avoid debt crises that can have major destabilizing effects and endanger the EU itself.” Which requires “building bigger fiscal buffers in normal times.”
The IMF proposal is structured around three main axes: modernizing numerical fiscal rules to explicitly take into account the risks countries face, and with a clear medium-term orientation; strengthening national tax institutions to improve policy debate and ownership; and the creation of an EU fund to help countries better manage the economic downturn and provide essential public goods.
First, the IMF believes that the deficit and debt targets should be achieved at a pace “depending on the degree of fiscal risk”. Those risks should be identified through a debt sustainability analysis using a common methodology developed by a new and independent European Fiscal Council, or EFC, in consultation with each state. And he believes that “the countries with the greatest fiscal risks should converge to zero or a positive general budget balance over the next three to five years.” At the same time, economies with lower fiscal risks and debts below 60% should “have more flexibility, but still need to factor risks into their plans.” Therefore, he believes that “the accumulation of fiscal buffers that provide significant flexibility to respond to adverse shocks and implement counter-cyclical policies would be encouraged,” as in the case of the pandemic or the war in Ukraine.
On the other hand, it suggests that all EU countries should set medium-term budgetary frameworks and set multi-annual annual expenditure ceilings that are in line with their balance sheet anchor over the period. With fiscal councils that would play a greater role in strengthening checks and balances at the country level, including preparing or approving macroeconomic projections, assessing fiscal risks and ensuring the consistency of spending ceilings and budget plans. The European Commission would continue to fulfill its main supervisory role and the EFC would serve as a central hub for a network of national tax administrations.
Finally, two keys would be identified: improving macroeconomic stabilization, especially when politics is operating at the effective lower bound, and enabling the delivery of common public goods at EU level, such as climate change and energy security infrastructure. And a dedicated climate investment fund is an important part of the proposal.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
