This paper reflects the position of Spain and the Netherlands and provides an important basis for cooperation at the European level. In a context marked by the response to the pandemic and the war in Ukraine, the presentation of a joint document by Spain and the Netherlands, two countries traditionally identified with divergent positions in this area, underlines the need to find consensus.
The paper has a clear message: now is the time for unity and determination to strengthen economic, monetary and financial market integration and thus have an adequate framework to address public and private investments, as well as structural reforms necessary for the strategic autonomy of the European Union in the new geopolitical context. "We can achieve much more by acting together than we can individually. This message remains crucial, especially in view of Russia's unjustified aggression against Ukraine," the document states.
"Europe is living in unprecedented times, with serious consequences for inflation, economic growth and public finances, including future investment needs. This deserves our full attention and underlines the need for further progress on priority issues for the medium term.
Thus, both countries consider that, "it is important to reach a consensus in 2022 on the priority issues to further strengthen the European Union: a renewed fiscal framework that is adequate for present and future challenges, a roadmap to complete the Banking Union and the strengthening of the Capital Markets Union."
In a joint appearance with the Dutch Finance Minister Sidrid Kaag on the margins of the Eurogroup in Luxembourg, Vice-President Nadia Calviño stressed that "we must leave divisive debates behind and build on the strong consensus on priority actions to strengthen the European economy and face the challenges of the present and future."
Thus, Spain and the Netherlands call to accelerate the work of the Eurogroup during 2022 in the areas of Fiscal Rules, Banking Union and Capital Markets Union to achieve the following objectives: to reinforce fiscal sustainability in a more efficient and effective way, through country-specific consolidation strategies that are realistic and gradual, while also being ambitious and compatible with economic growth and job creation, inspired by the governance of the Next Generation EU instruments.
In addition, the new fiscal framework should drive investments and reforms, be simpler, transparent, credible and ensure equal treatment for all Member States, with clear safeguards to ensure the application of the rules. All Member States should promote increased public and private investment efforts in the coming years, especially to address the green and digital transition and to strengthen Europe's strategic autonomy. Finally, it is crucial to agree on a clear roadmap for completing the Banking Union and Capital Markets Union projects.
Realistic, gradual and ambitious fiscal strategy
Both countries advocate pushing for the reform of fiscal rules in 2022, breaking with the inertias and blocs of the past and building a framework adapted to today's needs and challenges. Both countries consider that member states must make a "credible" commitment to build fiscal buffers to respond to the next shock through country-specific consolidation strategies that are "realistic and gradual, while also being ambitious and compatible with economic growth and job creation."
"Achieving these objectives requires a sustained reform effort, high quality public investments and a better composition of public finances, so that debt reduction does not depend solely on budgetary consolidation," the text adds.
In addition, Spain and the Netherlands advocate rules that take into account the significant investment effort needed to meet the EU's ambitious commitments, in particular for the green and digital transitions, in the context of the deployment of the Recovery Plans. Rules that are in turn more transparent, effectively enforced, counter-cyclical and ensure equal treatment between Member States.
Following the Recovery Plan governance model, national governments could propose country-specific medium-term fiscal plans to strengthen fiscal sustainability in a growth-friendly way, including through ambitious investment and reform commitments that are credible and verifiable. While recognising the importance of incorporating country-specific circumstances and increasing country ownership, there must also be adequate safeguards and minimum standards to ensure that fiscal strategies contribute to the central objective of the Stability and Growth Pact. The system must have clear safeguards to ensure that the Commission and the Council take the necessary measures for the implementation of the rules.
The document also proposes to define the requirements through an expenditure rule and to strengthen the role of the Independent Fiscal Institutions (AIReF, in the case of Spain).
Completing the Banking Union
The non-paper advocates, secondly, completing work in the area of the Banking Union, in order to improve the economic resilience and financial architecture of the European Union, to protect European depositors and taxpayers, to provide a long-term framework for financing the green and digital transitions and to strengthen the international role of the euro.
"We must seize this window of opportunity to take concrete steps to deliver on our continued political commitment to complete the Banking Union," the signatory countries underline.
Strengthening the Capital Markets Union
Thirdly, Spain and the Netherlands are committed to strengthening the Capital Markets Union, and consider that the European Union's financial system can "play a crucial role" in the development of the green and digital transitions, providing the necessary financing for European companies, particularly SMEs, to innovate and grow.
"The development of EU capital markets should build on the benefits of local markets and be accompanied by clear rules, effective supervision and adequate investor protection, in order to increase public confidence in capital markets and promote cross-border investments," the text concludes.
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