EU Reaches Agreement on Spending Rules

The EU has spent two years making an intensive effort to develop reforms to spending rules. PHILIPPE HUGUEN / AFP/File
The EU has spent two years making an intensive effort to develop reforms to spending rules. PHILIPPE HUGUEN / AFP/File
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EU Reaches Agreement on Spending Rules

The EU has spent two years making an intensive effort to develop reforms to spending rules. PHILIPPE HUGUEN / AFP/File
The EU has spent two years making an intensive effort to develop reforms to spending rules. PHILIPPE HUGUEN / AFP/File

The European Parliament and member states reached an agreement early Saturday on reforms to EU budgetary rules aimed at boosting investment while keeping spending under control.
The text modernizes the current rules, known as the Stability and Growth Pact, created in the late 1990s, which limit countries' debt to 60 percent of gross domestic product and public deficits to three percent, AFP said.
"Deal!," the Belgian Presidency of the Council of the EU said on social media platform X after 16 hours of talks.
The European Union spent two years making an intensive effort to develop reforms supported by the more frugal member states like Germany and other countries, such as France and Italy, which seek more flexibility.
After much wrangling between Berlin and Paris, the 27 member states struck a deal in December, then began talks with negotiators from the European Parliament.
The text was criticized for its great complexity and derided by left-wing officials as a tool for imposing austerity on Europe.
The negotiators finally reached an agreement early Saturday, in time for the text to be voted on in Strasbourg this spring before the parliamentary break ahead of European elections.
The reforms will be formally adopted after agreement between lawmakers and states.
The agreement will allow member states to apply the new rules to their 2025 budgets.
"The new rules will help achieve balanced & sustainable public finances, structural reforms, foster investments, growth & jobs creation in the EU," the Belgian presidency said.
Wiggle room
The former budgetary framework was considered too drastic and was never really respected.
The rules had, however, been suspended since the coronavirus pandemic to give member states wiggle room to spend more during a period of great economic upheaval.
During the initial debates between countries, the battle was fierce over how much those old limits should be relaxed to give more room for investment.
With war raging in Europe and the EU making a green transition push, states led by France argued for allowing more space to finance these key areas, including, for example, supplying critical arms to Ukraine.
While confirming the previous limits on debt and budget deficits, the new agreement allows more flexibility in the event of excessive deficits.
The text provides looser fiscal rules more adapted to the particular situation of each state, allowing big spenders a slower route back to frugality.
The tailor-made approach means each country presents their own adjustment trajectory to ensure their debt's sustainability, giving them more time if they undertake reforms and investments and allowing a less painful return to fiscal health.
Monitoring would focus on expenditure trends, an economic indicator considered more relevant than deficits, which can fluctuate depending on the level of growth.
But Germany and its "frugal" allies managed to tighten this budgetary framework by imposing a quantifiable minimum effort to reduce debt and deficits for all EU countries, despite the reluctance of France and Italy.
These modifications have greatly complicated the text.
"We have a deal! A new economic governance framework was much needed," Dutch MEP Esther de Lange said on X.
"We have ensured that the new fiscal rules are sound and credible, while also allowing room for necessary investments," said de Lange, of the center-right European People's Party Group.
The reforms are also supported by the EU's Renew liberals and a large majority of the Socialist and Democrat groupings.
The Greens and some S&D elected officials, however, reject it, as do the radical left.
These elected officials have denounced a return to austerity after three years of suspended budgetary rules due to the pandemic and war in Ukraine.
"We need investments in industry, in defense, in the ecological transition, that's the urgency today, it is not to bring economically absurd rules up to date," economist and S&D MEP Aurore Lalucq of France told AFP.
She denounced it as a "political error which will be used by populists to attack Europe".



Will Escalation Stop Israeli Gas Production?

File photo of the Israeli Leviathan field (Reuters)
File photo of the Israeli Leviathan field (Reuters)
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Will Escalation Stop Israeli Gas Production?

File photo of the Israeli Leviathan field (Reuters)
File photo of the Israeli Leviathan field (Reuters)

The American energy giant Chevron, which operates the Leviathan field off the Mediterranean coast of Israel, has decided to suspend work on laying an underwater pipeline, part of its third pipeline project, due to the escalating conflict and fears of potential missile strikes. This follows the earlier closure of the Tamar and Leviathan gas platforms as a “precautionary measure” during the Iranian attack on Israel on Oct. 1.

These developments came as the Israeli newspaper Yedioth Ahronoth reported that the Leviathan field, located 130 kilometers off the coast of Haifa, was the target of a missile barrage fired by Hezbollah on Wednesday morning at Mount Carmel and Haifa. Chevron subsequently activated “special procedures,” stating that it was dealing with an operational incident on the drilling platform.

During last week’s Iranian missile attack, Yedioth Ahronoth noted that NewMed Energy, a partner in the Leviathan and Tamar gas fields (the latter located about 19 kilometers off the Gaza Strip coast), informed the Tel Aviv Stock Exchange of Chevron’s decision to temporarily shut down the Leviathan field for several hours.

“In light of the latest security developments and based on the system’s operational considerations, the operator occasionally halts production from the Leviathan reservoir for certain periods,” NewMed Energy, which holds a 45.3% stake in Leviathan, stated to the stock exchange.

Chevron holds a 39.6% stake in Leviathan, while Ratio Energies owns 15% of the project. Chevron also has a 15% stake in Tamar.

Leviathan’s partners approved a $429 million investment on Aug. 1 to launch the preliminary engineering design phase to increase Leviathan’s gas export capacity from the Mediterranean Sea field to 21 billion cubic meters annually.

NewMed Energy stated that Chevron had informed the partners that plans for laying the underwater pipeline have been postponed until Apr. 2025—initially scheduled to begin in the second half of 2025—due to the deteriorating security situation. The delay is expected to be at least six months, affecting next year’s projected cash flow.

Currently, gas from the platform is transported to the shore and integrated into Israel’s national grid, where it is distributed to Israel, Egypt, and Jordan.

The Leviathan field was discovered in 2010 by NewMed Energy, Chevron (then known as Noble Energy), and Ratio. Natural gas production from Leviathan began on December 31, 2019, and since then, it has become a key source of gas for Israel, Egypt, and Jordan.

The third pipeline project was initiated by the Leviathan partners in July 2023, aimed at boosting Leviathan’s annual production capacity from 12 billion cubic meters to around 21 billion cubic meters. This increase is intended to meet growing local demand and export to neighboring countries and international markets, according to NewMed Energy.

Israel continues to export gas through pipelines from Leviathan and Tamar to Jordan and Egypt. Israeli exports to Egypt rose from 4.9 billion cubic meters in 2022 to 6.3 billion cubic meters in 2023, while sales to Jordan remained steady year-on-year at 2.7 billion cubic meters. In the second quarter of this year, Leviathan’s total gas production reached 2.8 billion cubic meters, with exports to Egypt rising by 12.5% to 1.8 billion cubic meters during the same period, while 0.6 billion cubic meters flowed to Jordan, according to Energy Intelligence.

Goldman Sachs estimates that the potential global market impact of disruptions at Leviathan and Tamar could reduce global liquefied natural gas (LNG) supply by nearly 9 billion cubic meters annually, or 1.7% of global LNG supplies, according to a report by Energy Intelligence.