Italy, Germany likely to bring positions closer over EU fiscal rules

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After his first in-person meeting with new German Chancellor Olaf Scholz, Italian Prime Minister Mario Draghi said the two nations are likely to bring their positions closer on how they respectively look at the European Union’s (EU) fiscal rules.

The two countries have long held different views on the EU’s budget and public debt rules (i.e. on how the bloc’s member states should manage their public spending), with Italy pursuing a more flexible approach and Germany a stricter one, reports Xinhua news agency.

Yet, in the context of the post-Covid phase — and of the 750-billion euro ($846 billion) “Next Generation EU” recovery instrument — the Italian Prime Minister said the bloc needed to proceed further with its integration process and find an agreement on the rules of the Stability and Growth Pact.

As a review of this pact was launched by the EU in October, Draghi and Scholz “briefly discussed” the changes that might be needed to make it consistent with the bloc’s new goals.

“In the post-pandemic phase, all our countries are required to fund unprecedented projects in the fields of digital transition, environmental transition, defence, and also in terms of coordination,” Draghi told a joint press conference after their meeting on Monday.

“These are massive projects, and it will be necessary to see how these projects can be inserted into the new budget rules,” he explained.

“My guess is that an understanding will be found on this … there will be a narrowing of positions. Perhaps I am being too optimistic, but this is a field easier to tackle than others.”

The visiting Chancellor, whose country favours a more rigorous fiscal approach along with other northern EU partners, noted that the current framework of rules already proved flexible but would not reveal whether he would agree to more flexibility.

“The Stability Pact has shown great flexibility in the past and it is plausible that it would prove flexible in the future as well.

“Some 750 billion euros have been made available to the whole of Europe, which is unprecedented. Now that we have mobilised a large amount of funds, our ambition now should be to spend that money,” Scholz added.

Draghi explained that Italy and Germany were willing to strengthen their cooperation in facing “Europe’s big challenges”.

“We want to strengthen our cooperation in science, technology and research on European projects of common interest, and in sectors crucial to our future, such as hydrogen, microelectronics and electric vehicle batteries,” he said.

Draghi said the two governments also wanted to accelerate the ecological transition, stressing that bilateral cooperation among European countries would be crucial considering the “very ambitious goals” the EU has set in this regard.

The Prime Minister added that Italy and Germany agreed on the need for a common defence policy for the EU, which should be complementary and not an alternative to the NATO of which both countries are members.

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