Spain and the Netherlands, two countries that are usually at odds when it comes to public spending, have struck a surprising alliance to reform the EU fiscal rules.
The rules, known as the Stability and Growth Pact (SGP), require members states to implement financial policies that keep their budget deficit below 3% and public debt below 60% of GDP.
The SGP has been the target of extensive criticism for its complexity, biased enforcement and irregular compliance. The EU decided to suspend the rules in March 2020 to combat the fallout from the pandemic and pump generous fiscal support into the economy.
Member states are now immersed in a debate to reform the SGP before it is reactivated in 2023.
In an unexpected move, Spain and the Netherlands have put forward a joint non-paper to influence the discussions. While they don't make any changes to the 3% and 60% targets, they suggest a "gradual but ambitious" pace to reduce debt, the key question on the table.
The two countries think the rules will be easier to enforce if governments are "empowered" to come up with their own fiscal plans that take into account national needs and characteristics.
"Let’s not waste energy and time on superficial differences. Let’s focus on common ground," said Sigrid Kaag, the Dutch Finance Minister, speaking at a press conference next to her Spanish counterpart Nadia Calviño.
Kaag and Calviño insisted the new fiscal framework should be "simple", "transparent", "credible", and "realistic", and treat all member states equally. They said the SGP should prepare the EU for the next economic shock and promote greater investment in the green and digital transitions.
The European Commission has estimated the dual effort will require nearly €650 billion in annual investments until 2030.
Watch the video explainer above to learn more about the Spanish-Dutch proposal.