In a twist, the Netherlands and Spain partner up on fiscal rules – POLITICO Europe

LUXEMBOURG Dutch and Spanish fiscal positions are virtually as far apart as they could be, with The Hague diligently sailing below the EUs threshold 60 percent of debt-to-GDP ratio, and Madrid nearly doubling that.

Yet the two countries on Monday joined up ahead of an ongoing revision of EU fiscal rules, seeking EU-wide consensus in what has largely been a "thrifty North vs. lavish South" debate.

"We need to leave behind the old trenches and the old debates of the past," Spain's Deputy Prime Minister and Finance Minister Nadia Calvio told POLITICO."This is the time to build, on the basis of consensus, an approach which is credible and realistic."

"This means that our rules need to take account of the fact that debt-to-GDP ratios in all European countries are very different from the ones we had before the pandemic hit us," she said. "Europe needs to undertake a massive investment effort in order to ensure our strategic autonomy in this new geopolitical context. This is a fact."

"The political point here is lets not waste energy and time on superficial differences. Lets focus on common ground, build from common ground," said her Dutch counterpart, Sigrid Kaag, at a press conference Monday.

The debate on fiscal rules has lost urgency since the European Commission signaled earlier this year it will likely extend the so-called General Escape Clause for another year to 2023, meaning that countries wouldnt have to comply with and likely breach current fiscal rules for a while longer. But the two think that debate shouldn't lose momentum.

"Independently from whether or not the general escape clause is extended into 2023 ... it is really high time" to have this debate, Calvio said.

The two countries spelled out their common ground in a joint paper out Monday on the margins of a meeting of eurozone finance ministers in Luxembourg. They call for EU countries to set up their own debt reduction path in a way that is "realistic, gradual but ambitious, as well as compatible with economic growth and job creation." They also recognize that "substantial EU and nationally-financed public investment will be indispensable to crowd-in private investments in strategic areas."

That flexibility should come with "clear safeguards" to ensure enforcement and "a greater role for Independent Fiscal Institutions" in ensuring countries toe the line.

They also call for "a simple expenditure rule" that would make rules more comprehensible and more enforceable.

Translated into policy, it would mean giving countries more leeway on the pace of debt reduction and doing away with a requirement to reduce excess debt by 5 percent per year, against the reassurance of more consistent and strict enforcement if countries go astray.

What the two countries dont say is where they differ: Whether investments should count toward the calculation of debt and deficit the so-called "golden rule" pushed by France and Italy or whether the EUs "one-off" experiment in joint issuance to address the pandemic should turn into something more structural.

Kaag has rejected both in a recent interview with POLITICO, while Calvio has spoken of the need to preserve investments while reducing the pandemics debt overhang.

"From the Netherlands we do not think that the risks attached to the sort of off-budget types of investments where there may not be the same definitional priority or burdens ... is the wisest way to go about it," Kaag said.

But there will be time for disagreement.

"The starting point needs to be those elements on which there is a broad consensus," said Calvio. "The next step should be a Commission proposal. And we can have this discussion and consider the different options on the basis of that proposal."

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In a twist, the Netherlands and Spain partner up on fiscal rules - POLITICO Europe