Spain says EU nations must be allowed to fix their own fiscal targets

EU budget rules must be reformed to let member states define their own fiscal targets tailored to "the specific circumstances of each country", Spain's economy minister said Monday.

Spain's Deputy Prime Minister and Minister of Economic Affairs Nadia Calvino addresses a press conference following a meeting with the Irish Minister for Finance and President of Eurogroup, in Madrid on February 7, 2022. (Photo by OSCAR DEL POZO / AFP)

Under terms of the EU’s Stability and Growth Pact, member states must keep their budget deficits under 3.0 percent and overall debt under 60 percent of GDP, although occasional adjustments are possible.

“The current ratios of public debt to GDP are much higher than before the pandemic in all countries of the EU,” said Nadia Calviño during a round table in Madrid with Paschal Donohoe who currently heads the Eurogroup of eurozone finance ministers.

“Therefore, the path for public debt reduction must be adapted to this new reality and take into account the specific circumstances of each country,” she said, calling for swift action to change the budgetary rules.

The pandemic has caused soaring levels of debt, which in France had risen to an estimated 115 percent of GDP by the end of 2021, and almost 122 percent in Spain, rendering the targets almost impossible without tough austerity measures.


Spain’s Deputy Prime Minister and Minister of Economic Affairs Nadia Calvino (L) and Irish Minister for Finance and President of Eurogroup Paschal Donohoe address a press conference following their meeting, in Madrid on February 7, 2022. (Photo by OSCAR DEL POZO / AFP)

In order for the European Union to avoid making the same mistakes of the 2008 financial crisis, “member states must play a leading role in setting their own fiscal targets,” Calviño said.

Brussels had urged member states to quickly get back on track to avoid a ballooning of public debt. But experts say the rush to impose austerity hampered the bloc’s recovery and caused long-term damage to its economy.

“We’re all aware of the lessons from the past crisis,” admitted Donohoe, who is also Ireland’s finance minister.

That was why it was necessary to find “the balance between debt sustainability and how to fund growth and investment”, he added.

There is an ongoing debate about the future of the EU’s fiscal rules which have been suspended until 2023 due to the pandemic, with some countries like France, Italy and Spain pushing for reform to allow more flexibility.

But others are reluctant to push through changes, with Germany’s new finance minister insisting last month on the need to reduce the EU’s sovereign debt.

Member comments

  1. We saw what with austerity when it was tried the first tine, reaction from the public can be very severe.

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How the crisis in Spain’s centre-right party is opening the door to the far right

The big winner of the conflict gripping Spain's Popular Party is Vox, analysts say, urging the right-wing opposition to close ranks or risk the far-right faction becoming the nation's second-largest party.

How the crisis in Spain's centre-right party is opening the door to the far right

With a general election on the horizon, Santiago Abascal’s extremist lineup could become Spain’s main opposition party “if the PP doesn’t end its internal crisis properly,” said Astrid Barrio, a political scientist at Valencia University.

At least in the short term, “the biggest beneficiary in political terms is Vox”, which burst onto the political scene less than a decade ago, said Paloma Román, a political science expert at Madrid’s Complutense University.

PP leader Pablo Casado, who just a week ago appeared to be safe in his role, is now counting his final hours as opposition leader after raising explosive corruption allegations about the party’s most popular politician, Madrid’s regional leader Isabel Diaz Ayuso.

READ MORE: Why is Spain’s right-wing PP accusing their own leader in Madrid of corruption?

But it was a gamble he lost very publicly, and will have to step down at an extraordinary party congress whose date will be set on Tuesday during a meeting of the PP’s steering committee.

Walking a tightrope due to a loss of support within his party, Spain’s right-wing Popular Party (PP) leader Pablo Casado delivered a farewell speech on February 23rd 2022 to the Congress. Photo: DANI DUCH/POOL/AFP

Power struggle

At the congress, party members will chose a new leader, which is likely to be Alberto Nuñez Feijóo, a 60-year-old moderate and party stalwart who currently heads the northwestern Galicia region.

“He’s a candidate who has managed to keep Vox in check in Galicia and the leading advocate of the centrist ideology that has allowed the PP to rule Spain,” said Barrio.

Lluis Orriols, a political scientist at Madrid’s Carlos III University, said there were two factors in the current political crisis that could strengthen Vox.

Firstly, he said, surveys suggested “a large number of defections” from the PP are not people who are “likely to abstain or be undecided (in the next general election), but are turning to Vox”.

And the struggle for dominance of the Spanish right is still unresolved.

Galician regional president Alberto Nuñez Feijóo is likely to replace Casado as PP party leader in the coming months. (Photo by MIGUEL RIOPA / AFP)

“Vox is not being restrained, unlike on the left where we see the Socialist party in control of the space which runs from the centre to the extreme left,” he said.

“In the electoral ambit of the conservative voter, Vox is clearly very competitive.”

The popularity of Vox was on show during this month’s regional election in Castilla y León, where the party won 13 seats, up from just one in the previous vote, shattering the PP’s hopes of winning an absolute majority.

READ MORE: Spain’s far-right Vox party poised to enter Castilla y León government

The PP has time on its side

But the game is not yet over for the PP.

Despite concerns Sanchez would call early elections to make the most of his rival’s weakness, he ruled out any such move on Wednesday.

“We’re not going to bring forward the general election” on the basis of the PP’s “vulnerability”, he said.

“The rise of extreme parties reduces the incentive for early elections,” wrote Anna-Carina Hamker and Mujtaba Rahman, analysts with the Eurasia Group, in a note on the crisis.

With the next election to be held no later than early 2024, analysts said the PP had time to get its house in order — and could even emerge strengthened.

“I imagine it will fight back, it’s not going to waste the political capital it has built up over such a long period of time, being the governing party that it is,” said Roman.

“Casado’s leadership degenerated a lot and most PP voters had little or no confidence in him,” said Orriols.

However, any new leader will have to restrain the “internal pressures” that have torn the party apart and resolve the battle “between the traditional, mainstream conservatives and the free agents who tend to sympathise with the populist far-right”.


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