Skip to main content

EU clash over budget rules

 France and Italy have launched a push to revamp EU budget rules to spur investment and drive growth in a move likely to face a frosty reception from fiscally conservative member states.In a joint article in today’s Financial Times, Mario Draghi, Italian prime minister, and Emmanuel Macron, French president, call for debt raised to fund investments in priority areas to be “favoured by the fiscal rules”.The EU suspended its strict rules governing member state deficits and debt during the pandemic. It is now consulting over reforms to the regime for when the Stability and Growth Pact is eventually reimposed. Italy and France are among states seeking a less rigid approach to state borrowing.While EU members needed to bring down levels of indebtedness, public spending on future priorities “actually contributes to debt sustainability over the long run”, Draghi and Macron argue in their article.“Our strategy is to curb recurrent public spending through sensible structural reforms,” they say.“And, just as the rules could not be allowed to stand in the way of our response to the pandemic, so they should not prevent us from making all necessary investments.”Economists and some policymakers argue the existing SGP framework is ill-suited to the heavy debt burdens and massive public spending requirements that Europe faces in coming decades.France and Italy did not give any details of what the new SGP should look like. Still, some economists have been arguing for a “golden rule” to be introduced permitting certain investments — for example, green projects — to be stripped out of deficit or debt calculations. HOWEVER, one EU diplomat warned that northern capitals would “dig in” and oppose any such carve-outs from public spending rules, favouring more incremental changes to the SGP.The discussion will gather momentum early next year. Officials want it concluded in the first half while France holds the rotating EU presidency.Northern states are sceptical of golden rules, worrying they may lead governments to ignore swaths of public borrowing.The position of the new German coalition government will be critical. Politicians in Berlin have been discussing raising funds without violating the country’s constitutional debt break.The Dutch coalition said it remains “committed to a sound and prudent macroeconomic policy and necessary reforms by member states, aimed at sustainable debt, higher economic growth and upward convergence”.

Summarised www.sba.tax

Labels:

Comments

Post a Comment

Cloud Bookkeeping

HS2 cost cuts new routes and add delays.

 Trans­port depart­ment offi­cials have begun work on «Project Sil­ver­light» sug­gest­ing the high­speed rail scheme might face four addi­tional years of delay. The planned High Speed 2 rail line faces fur­ther delays of up to four years and more cuts to the project under plans being drawn up by min­is­ters to rein in its bal­loon­ing costs. The extra delays to the coun­try’s biggest infra­struc­ture project would mean that it would not be com­pleted until as late as 2045 — 12 years after ori­gin­ally planned. «This is a func­tion of infla­tion; we are hav­ing to find huge sav­ings because the cost of everything the depart­ment is already doing will have become so much more expens­ive by then,» said one gov­ern­ment offi­cial. In Octo­ber, the FT repor­ted that the Treas­ury had asked HS2’s man­age­ment team to identify poten­tial cuts or «scope reduc­tions» to the high-speed line. Trans­port depart­ment offi­cials have sub­sequently begun work on Project Sil­ver­light aimed at fi...
4 comments
Read more

Doubt on CS's collateral.

  Credit Suisse provided an emergency $140mn loan to Greensill Capital based partly on invoices to companies that deny ever doing the business stated on the documents. The Swiss bank provided the loan in October 2020, less than five months before the collapse of Greensill, a supply chain finance firm that counted former British prime minister David Cameron as a senior adviser. Invoices issued by metals magnate Sanjeev Gupta’s Liberty Commodities and sold to Greensill formed part of the collateral for the loan, according to documents seen by the Financial Times and people familiar with the transaction. Yet several of the parties named on the invoices have told the FT they did no business with Liberty. GFG has consistently denied any wrongdoing. Credit Suisse’s loan had a clause dictating that the collateral value had to be equal to or greater than the $140mn borrowed. The terms of the debt agreement only allowed invoices on Green-sill’s balance sheet to count towards this tally if t...
2 comments
Read more

Tax cut

  Sterling tumbled against the dollar to below $1 . 09 ,  hitting its lowest point since 1985 ,  after UK chancellor Kwasi Kwarteng unveiled a £45bn debt-financed tax-cutting package that sparked a historic increase in borrowing costs .  Kwarteng’s political and economic gamble includes the biggest set of tax cuts for 50 years ,  with the end of the 45p additional rate for the highest earners as well as a sharp reduction in levies on dividends .  But concern over the amount of debt required to finance the tax cuts triggered a frenetic day of trading that raised doubts on whether Britain’s new economic approach was sustainable .  «Britain will be remembered for having pursued the worst macroeconomic policies of any major country in a long time» . Kwarteng has staked the political fortunes of the Conservative party on the bet that the radical tax cuts and deregulation will raise Britain’s sluggish growth rate to 2 . 5 per cent .  «This is a new appr...
Post a Comment
Read more