Valdis Dombrovskis: “We recommend not applying broad fiscal stimulus in 2023″ | Economy | The USA Print

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Valdis Dombrovskis, Vice President of the European Commission, this Monday in Brussels.
Valdis Dombrovskis, Vice President of the European Commission, this Monday in Brussels.STEPHANIE LECOCQ (EFE)

The fiscal policy that Europe needs, in the eyes of the European Commission, has something to huff and suck. Investment is needed, a lot, to finance the energy transition, the digital revolution and react to the war front opened by Russia in Ukraine, but the high debt —especially in countries like Spain, Italy or Greece— and high inflation advise being cautious with public expenditure. The vice president of the community executive, Valdis Dombrovskis (Riga, Latvia, 50 years old), rehearses this speech with a group of European media, including EL PAÍS, one hour before presenting the fiscal policy recommendations for the Member States in 2023, this Monday in Brussels. “We have decided to keep the escape clause [suspensión de reglas fiscales] for next year and deactivate it in 2024. And at the same time send a clear message that prudent fiscal policies need to be applied.”

Dombrovskis, responsible for coordinating the other commissioners in the economic area of ​​the Commission and also in charge of Trade, emphasizes throughout the interview on this side of the speech, that of budgetary containment. He explains it several times during the meeting and for that he uses the expressions “clear message” and “prudent fiscal policy” a couple of times. Although the recovery is slowing down, he justifies this position by the evolution of the deficit and inflation, which has pushed up interest rates and, therefore, made credit more expensive. “All of these signs point in the direction of the need for fiscal prudence.” And he adds that not all countries are in the same position: “We are differentiating between low, medium and high debt countries, in a sense, also sending a clear message.” This, in the case of countries such as Spain or Portugal, translates into “limiting the growth of current spending [en los presupuestos] below the medium-term potential economic growth” of the economy.

The clarity of which this Baltic conservative politician speaks is, rather, in nuances. The former Latvian prime minister at the beginning of the last decade stresses that the escape clause remains active and that for now excessive deficit procedures will not be opened to countries with the greatest imbalances in their public accounts. For now. It does not hurt to repeat it. “We will reassess this situation in the fall and spring of next year,” he warns.

And following that argument leads to this point: “It does not seem to be justifying a broad fiscal stimulus, we are not recommending a general fiscal stimulus in 2023,” he argues when asked if there is no contradiction between keeping the fiscal rules suspended and the policies that is beginning to apply the European Central Bank to curb the escalation of prices. When he speaks of “broad general stimulus”, Dombrovskis seeks to underline that space must be left for emergencies in which it may be necessary to use the public budget: for example, aid to refugees and displaced persons due to the invasion of Ukraine by Russia.

energy concern

When asking about the Spanish pension reform, he refers without additional evaluations, with his usual impassive gesture, to the exams that will be made in the next requests for tranches of the recovery fund, not in the one that is now underway: “It is something that we will evaluate in the context of the Spanish recovery and its resilience plan. Also [evaluaremos] the main objectives of the pension reform that are described there, which means guaranteeing the sustainability of the system in the short, medium and long term, maintaining the purchasing power of pensions or guaranteeing intergenerational equity”.

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Among the concerns of the European Commission, energy autonomy and the disconnection of fossil fuels from Russia have risen many steps since this country began the invasion of Ukraine. It appears in the words of Dombrovskis when he speaks of France, a country to which he recommends “accelerate the deployment of renewables, improve its energy efficiency and expand its energy interconnection capacity.” Are you referring to the connections through the Pyrenees with Spain? “That is clearly an element. Well, if you read the country-specific recommendations, the recommendation doesn’t. Although that is for all countries, because it does not refer to specific projects. But clearly, if you are going to say that we thought of this interconnection capacity for Spain and Portugal. We know that exactly the interconnections between France and Spain, and from the point of view of the entire Iberian Peninsula, are very limited and clearly need to be improved”.

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