European Union finance ministers on Saturday backed a timeline calling for the reform of the bloc's fiscal rules by the end of the year as they look to balance debt cuts with investing in an individually tailored yet equal way.
"It may be challenging but... the Spanish Presidency is committed to this timeframe and just today we outlined the way to do it, the fiscal 'camino'," European Commission Vice-President Valdis Dombrovskis told a news conference.
Dombrovskis was referring to the "camino de Santiago" or Saint James's way, a famous Catholic pilgrimage to the shrine of the apostle James in the cathedral of Santiago de Compostela -- the city in north-western Spain where the talks took place.
EU fiscal rules underpin the value of the euro used by 20 countries and set a limit on budget deficits of 3% of GDP and a public debt limit of 60% of GDP.
However, most EU countries exceed these limits as two years of the COVID-19 pandemic and the energy price crisis have both required massive government spending.
As a result, the Commission and EU governments are discussing changes to the framework that would take into account big differences in debt levels and economic growth among EU countries while guaranteeing equal treatment.
The main clash is between Germany, which wants annual debt reduction benchmarks that are the same for all, and France, which believes individually negotiated debt reduction paths are the way to go and that one-size-fits-all policies do not work.
Adding to the complexity of the talks is the need to provide incentives for governments to invest in the green and digital transition of their economies and the need for large defence spending after Russia's invasion of Ukraine.
Spanish Finance Minister Nadia Calvino said that Spain, which holds the rotating EU presidency until the end of the year, is aiming for an initial agreement at the next finance ministers' meeting in October, but that more talks could be necessary.
She said 70% of the text of the new rules has been agreed in technical work over the summer.
"Now the time has come to look for a compromise, which will need to strike the right balance between sustainable debt reduction paths and ensuring the necessary fiscal space for investments, as well as incentives for structural reforms," Calvino said.
