On February 10, it was made public that the Council of the Union and the European Parliament had reached an agreement on the new rules of fiscal discipline, applicable to the member states of the European Union. Although the specific content of the agreement has not yet been disclosed, some of its basic lines have been made known (and, of course, the initial proposal from the Commission, from April 2023, which served as the basis for negotiation, is well known).

The previous rules were suspended at the beginning of 2020 when the pandemic was declared, to allow governments to allocate whatever public spending was necessary to deal with the emergency situation, without being limited by the restrictive conditions imposed by those rules in terms of public deficit. This fact is important, as it indicated a 180-degree change in how community institutions approached this crisis compared to how they had done so during the major financial crisis a little over ten years prior. At that time, the strictest budgetary orthodoxy, austerity policy, and zero deficit were imposed, leading to a serious worsening of the situation. Now, in contrast, in 2020, likely learning from that experience, the decision was made to use the necessary public spending to tackle the recession. And the results have shown the wisdom of doing things this way.

This fact, along with the numerous criticisms that the previous fiscal rules had received from all fronts, led to the expectation that when the suspension period was closed, the new fiscal rules would signify a radical change from the previous situation. That is to say, they would be much more flexible in setting limits on public deficit, taking into account the cyclical situation of each country and the need to maintain appropriate levels of public investment (especially to facilitate the energy transition and combat climate change). The Commission's initial proposal, which took steps in this direction, has been the subject of heated discussions within the Ecofin (the council of finance ministers), where once again the significant differences between the so-called ‘frugal’ countries, led by Germany, on one hand, and France, Spain, Italy, and others on the other, became evident. Once an agreement was reached in the Council at the end of December, negotiations were held with the European Parliament, and on February 10, the final agreement was achieved.

It has not been published, but the basic points are known. The outcome must be classified as bittersweet. The European Union has taken some steps in the right direction (in adapting objectives to each country's situation, establishing gradual mechanisms, etc.), but, once again, the results are disappointing when compared to the ambition that should exist. No stabilization mechanisms (the much-requested ‘fiscal capacity’) are foreseen to address the unfavorable phases of the economic cycle, nor has sufficient margin been left to promote public investment without it counting against the public deficit. The European Union will have to continue facing the needs of its citizens and the great challenges we have ahead (starting with the fight against climate change) with one hand tied behind its back. In short, small remedies for big problems.

In the background of this entire situation, there is, needless to say, the difficulty of truly advancing towards genuine political integration that, in the area we are discussing, would mean a real fiscal union. Fiscal union does not consist of establishing a strict discipline applicable to all member states in budgetary matters and public deficit. A fiscal union means three things: a European government with a budget worthy of the name (i.e., with the appropriate dimension to provide the public goods that can only be adequately provided at the European level: public health, defense, energy, climate change); European taxes to finance this budget and prevent ‘big techs’ and the very rich from avoiding the taxes they should pay; and a European Treasury responsible for issuing the public debt needed for the European budget. However, to do all this, to move towards this fiscal union, it is necessary to advance simultaneously towards a true political union.

This is the main challenge we have ahead, and it would be good for pro-European political forces to raise the banner of political integration without complexes in the upcoming European elections. They might be surprised to find that they have many more citizens behind them than they think.