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Dutch finance chief open to changing EU fiscal rules — but not the fundamentals – POLITICO Europe

The Dutch government wants to reform the EU’s fiscal architecture — but don’t ask the Hague to go too far.

“I’m neither a hawk nor a dove,” Sigrid Kaag, Dutch deputy prime minister, finance minister and leader of social liberal party D66, told POLITICO on Sunday.  

“We believe that reform and modernization of the [Stability and Growth Pact] is necessary,” she said. “The system has become so complex with so many other mini escape routes and adaptations that ultimately, it’s very hard to actually align or comply with this system itself, the way it’s evolved over time.”

“We’re looking to establish the way in which the system could be made to work,” she added.

Kaag outlined her government’s approach to the ongoing review of EU fiscal rules in a letter to Parliament on Friday, in which she wrote that existing rules on debt reduction were ineffective and seldom enforced. Instead, she proposed that countries set up their own debt-reduction trajectories over multiple years, which would then be enforced by an independent body such as the European Fiscal Board.

“We’d like a realistic pace in debt reduction; we’d like to see debt reduction actually happen because it’s important, but [also] space for investments and space for reforms that are so much needed,” she said.

“So this is a more open and constructive approach with no firm fixtures other than the 3 percent and the 60 percent. But no one feels the need to debate those, fortunately, because that’s just beside the point,” she said, referring to the deficit and debt-to-GDP threshold at the heart of the bloc’s fiscal governance.

At the same time, she expressed doubts about a proposal by high-debt countries, most notably France and Italy, to prevent certain investments from counting against deficit and debt calculations, such as those to do with climate protection or defense. The Commission itself has been warming to that approach.

“There are risks attached to an approach whereby you basically sort of place investments under a special category. Because ultimately, we do need to work towards debt reduction, we need to be transparent, we need to be able to establish effective oversight,” she said.

Kaag and her counterparts in EU capitals are exchanging ideas on how to reform the bloc’s rules and ensure more consistent enforcement. The Commission is in listening mode and will present proposals this summer, with a view to reaching consensus by the end of the year.

It may be possible that negotiations will stretch beyond that, but as Kaag said, “if you plan for a delay, you will get a delay.”

This article is part of POLITICO’s premium policy service: Pro Financial Services. From the eurozone, banking union, CMU, and more, our specialized journalists keep you on top of the topics driving the Financial Services policy agenda. Email [email protected] for a complimentary trial.

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