“It is a firm fundamental belief that we must see government debt ratios falling again in Europe,” said Finance Minister Christian Lindner on Monday before a meeting with his Austrian counterpart Magnus Brunner in Berlin.
“The debt must be reduced so that fiscal stability is also secured and we maintain the ability of the central banks to act,” said the FDP politician. At the same time, investments must be able to flow into the competitiveness of the European economies and into clean technology. The main focus is on private capital, “but the states also have a responsibility here,” said Lindner.
Brunner was open to simplifications and better enforceability of the debt rules, but emphasized that the Stability and Growth Pact already provides sufficient flexibility.
A possible reform of the rules for spending and debt of the EU states is currently being discussed in Brussels, driven by France, among others. The Stability and Growth Pact stipulates that countries should not borrow more than 60 percent of economic output. The pact was suspended during the Corona crisis, but is scheduled to come into force again in 2023.
According to the Commission, the debt ratio in the EU is now around 92 percent. There are big differences: Italy, for example, has debts of around 155 percent compared to the gross domestic product, the Netherlands around 57 percent. Germany is around 70 percent. Highly indebted countries fear that a quick return to the strict guidelines could damage the recovery.
The head of the euro bailout fund ESM, Klaus Regling, had recently called for a permanent pot of money from which euro states could be provided with loans in emergencies. The loans could be granted by the European Stability Mechanism (ESM), for example. He also called for the Stability and Growth Pact, which stipulates how much debt EU countries can take on, to be relaxed. In the Süddeutsche Zeitung, Regling proposed raising the debt ceiling from 60 percent of gross domestic product (GDP) to 100 percent. In addition, the deficit limit of three percent of economic output should be relaxed in individual cases.
During the Corona crisis, for the first time in its history, the EU put together a loan package financed by shared debt to help the member states that were particularly hard hit by the pandemic to modernize their infrastructure. However, exactly how its use is controlled is unclear. Lindner has just rededicated a supplementary budget planned for Corona funds, which the Union considers unconstitutional. The EU’s economic stimulus program called “NextGenerationEU” is intended to create a temporary vehicle to stimulate the economy and mitigate the effects of the corona virus on the economy.
The funds made available from the economic stimulus program amount to 806.9 billion euros, adjusted for inflation. At the time of the announcement, it was €750 billion in 2018 prices to be invested to create jobs and opportunities and transform countries’ economies. The goal is an ecological transformation. (BLZ, with dpa and AFP)