The organization believes that it is more effective for states themselves to determine their medium-term debt levels and for Brussels to approve and monitor compliance, but without sanctions
Bruelas will decide in the coming days what his proposal will be for the reform of the eurozone’s fiscal governance framework. And the Fiscal Authority (Airef) presented this Friday its own proposal, which it has already presented to the Commission, based on medium-term spending targets that the various governments commit to for their entire term.
In this way, the published tech paper proposes that each new government establishes a specific debt anchor for its country at the beginning of its mandate and commits to a derived spending path for the entire legislature. This path must be approved by Congress and by the European Commission and would be the binding reference for the next four years.
This proposal is realistic for a country like Spain because there are already others doing it, as is the case in the Netherlands, Airef sources said. However, they recognize that public debt in the Spanish economy has reached record highs in times of peace, so it is “essential” to design a medium- and long-term fiscal policy strategy that creates room for maneuver to meet future economic challenges and failures, the document indicates.
In his view, after the changes introduced with the 2008 crisis, the European fiscal framework has not been sufficient to design stable and predictable national fiscal policies. On the contrary, fiscal policy has been pro-cyclical in nature and has led to a gradual increase in government debt-to-GDP ratios to values that increase the vulnerability of economies to possible changes in market perception that could endanger stability.
Currently, the budgetary targets are set for three years, but are adjusted every year, so there is really no medium-term fiscal policy. In that sense, the debt anchor proposal would be country-specific, taking into account the starting level, where revenues and expenditures would go in the absence of measures, and information on how debt has responded to shocks at other times.
Of course, in exceptional circumstances, the path can be changed by activating an escape clause. It would therefore have the necessary flexibility in the event of a change of government or exceptional economic circumstances.
In addition, it should be evaluated year after year whether the spending limit has been met and how much has been carried out. If a major flaw is discovered, the European Commission comes to analyze the situation, although Airef believes the economic sanctions are ineffective and are never applied.
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.
