(Bloomberg) -- The European Union’s new fiscal framework got only a lukewarm welcome from Scope Ratings, which warned the outcome will probably cut public investment without increasing compliance.

In a report released Monday, the Berlin-based credit assessment company said the bloc didn’t go far enough revamping its regime to curb debt and deficits, and that it risks acting as a brake on the region’s ambitions.

“The EU’s revised fiscal rules, while better in certain areas and looser in others, remain inadequate with respect to Europe’s high green, digital and defense investment needs,” Scope analyst Alvise Lennkh-Yunus said. “If fully enforced, the rules would reduce public investment.”

The region’s finance ministers, who are due to meet Friday, agreed on the overhaul in December to allow for more budgetary flexibility while adding safeguards to ensure debt reduction. The deal arrived just in time for the end to a pandemic-era suspension of the regime, though it’s yet to become law. 

Scope’s analysis, incorporating estimates from the Brussels-based Bruegel institute, shows the revised framework will require annual fiscal consolidation averaging 0.8% to 1.2% of output for Belgium, Italy, Spain and France in the next four years. 

“Credibility and effective compliance are unlikely to improve and might even weaken” because of the emphasis on enforcement by European authorities, said Lennkh-Yunus, who’s Scope’s head of sovereign and public sector ratings. Meanwhile ministers’ failure to pool resources more is a key flaw in the revamp, he added.

“A credible fiscal framework will not only focus on individual fiscal positions and sustainable adjustment paths but would also include the creation of permanent financing capacity,” Lennkh-Yunus said. “The revised framework remains a missed opportunity in the current geopolitical environment, not least since the outcomes of the US election and Russia-Ukraine war present considerable risk.”

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