Finance minister wants new ‘growth-friendly’ EU budget rules

Finance minister João Leão, on Monday advocated a review of European budget rules that is “growth-friendly”, ahead of a meeting of the Eurogroup in Brussels, which has economic governance on the agenda.

Pointing out that the issue of European economic governance and the revision of fiscal rules is “very important” and that “this is the right time” for a reflection at the European level, before the announced reintroduction in 2023 of the budgetary discipline rules provided for in the Stability and Growth Pact – suspended since 2020 due to the Covid-19 crisis – Leão anticipated the Portuguese position that he will defend in this afternoon’s debate between the eurozone finance ministers.

“We already know that in 2022 the budgetary rules will be suspended and that they will come back into force in 2023. We need a revision of economic governance that is growth-friendly, that ensures that we have the capacity to make investments, namely investments of a green nature to fight climate change, which are fundamental for Europe and for the world, and at the same time that ensures a recovery of public debt that is growth-friendly,” he said.

Recalling that this was a topic that Portugal launched at the end of the Portuguese presidency of the EU Council last July, as part of the summit for economic recovery in Europe, João Leão stressed that “this is the right time” for “a reflection on how to change these” budgetary discipline rules, before they are reintroduced in 2023.

The finance minister is attending a meeting of the Eurogroup in Brussels today, less than two weeks after the Portuguese parliament rejected the State Budget for 2022 (OE2022), a matter he is also expected to address informally with the European Commission.

The draft budget plans of the member states for next year are not on the agenda for today’s meeting of eurozone finance ministers, nor for Tuesday’s Council of EU finance ministers (Ecofin), because at this stage the Commission is still analysing the budget ‘outlines’ it received in mid-October, but European sources said it was natural that João Leão would take advantage of the trip to Brussels to discuss the Portuguese situation with the EU executive.

On October 28, a day after the rejection of the OE2022 – which led the President of the Republic to announce last Thursday the dissolution of parliament and the calling of early elections for January 30 next year – Executive vice-president Valdis Dombrovskis admitted that “consultations” were needed with the government to decide the way forward, since the budget project that the Commission has in hand was ‘doomed’.

“We will now have to assess the situation with the Portuguese authorities regarding the draft budget plan for 2022 and decide how to proceed. We need to understand with the Portuguese authorities what the prospects are, how soon the next budget might come,” Dombrovskis said at the time.

Also on the agenda of today’s meeting is a discussion on the escalation of energy prices in the context of macroeconomic developments in the single currency area.