BERLIN/BRUSSELS (dpa-AFX) – The German government does not believe that the reform proposals for the European debt rules presented by the EU Commission are sufficient. “What has been presented does not yet meet our expectations,” said Finance Minister Christian Lindner in Berlin on Wednesday. Significant adjustments are still needed in order to achieve really reliable, transparent and binding rules. “But at least there are starting points in the Commission’s proposal that make further debate worthwhile. That must now be explored in the context of the talks and built on,” said the FDP politician.
In reform proposals for the so-called Stability and Growth Pact, the Brussels authorities proposed on Wednesday that highly indebted European countries should be given more flexibility in reducing debt and deficits. Instead of uniform guidelines for all countries, the authority relies on individual ways for each country to reduce debt and deficits in the long term.
“We live in a very different world than 30 years ago. Different challenges, different priorities,” said Commission Vice-President Valdis Dombrovskis in Brussels when presenting the proposal. The new rules would have to reflect these changes. The EU is facing a massive need for reform and investment for the green and digital transition.
The debt rules prescribe upper limits for the EU countries. According to the proposal, the previous goals of limiting debt to a maximum of 60 percent of economic output and keeping budget deficits below 3 percent will remain in place. However, there should no longer be any uniform specifications, especially for achieving the 60 percent target. Individual plans are intended to give countries with excessive debt more time and flexibility. The monitoring of implementation is also to be simplified. Violations should be easier to punish.
Due to the Corona crisis and the consequences of the Russian attack on Ukraine, the rules in force up to now have been suspended until 2024. So far, states have normally had to repay five percent of debt that is above the 60 percent mark per year. For highly indebted countries such as Italy or Greece, this would be devastating for growth. Even before the pandemic, the rules were often disregarded – also by Germany.
The heavily indebted countries would have more time under the proposal to reach the deficit target and reduce their debt. According to the proposed law, as long as the deficit is above 3 percent of gross domestic product (GDP), the “corrective net expenditure path” of the countries must be adjusted by at least 0.5 percent of GDP each year. According to a Commission spokeswoman, it is about the structural balance with the exception of temporary measures. These could be corona aid or spending on climate protection. The balance is the difference between the expenditure and income side.
Lindner criticized the lack of clear and uniform rules for debt reduction: “We don’t have the numerical specifications, we don’t have a stop line.” The proposal still does not do what it should – reliable deficit reduction, reliable reduction of government debt ratios.
In the month-long debate about the new rules, Germany had called for strict minimum requirements. According to the Ministry of Finance, countries with high debt ratios should have to reduce them by at least one percentage point per year. For countries with medium debt ratios, it should be half a percentage point. The positions on the debt rules are very different in the individual EU countries.
The states and the EU Parliament must now negotiate the proposed reforms. According to Lindner, there will be an initial exchange of views on the reform proposals at an informal meeting of EU finance ministers in Sweden at the end of the week, but he does not expect any breakthroughs yet.
The SPD MEP René Repasi criticized the fact that the Commission wanted to agree on debt reduction bilaterally with the federal states in the future and that national parliaments played no role in the proposals. From the point of view of the economic policy spokesman for the Christian Democratic EPP group, Markus Ferber (CSU), the Commission has “lost sight of” financial stability in the reform proposal. The Green MEP Rasmus Andresen criticized Lindner’s statements. His criticism was “not covered by the actually constructive German line of negotiation”. You need an open federal government, not a confrontational course that further divides the EU./red/DP/nas