2023-04-26 13:25:17
IIronically, the planned reform of the EU Stability and Growth Pact is of little interest in the country at whose insistence the pact was introduced. The German discussion is dominated by a few old warriors who campaigned for tighter EU budget rules in the 1990s and helped push through the pact.
The rear-guard skirmishes that the Federal Minister of Finance is currently conducting with the EU Commission over the reform proposal that has now been submitted take some account of this clientele, but without being significant. Christian Lindner acts as if his most recent interventions in Brussels have changed the Commission’s proposal. But that’s not correct.
The disinterest is easily explained. Since the then federal government initially violated the pact without hesitation and then roughly enforced a softening in 2005, the EU budget rules have disappeared from everyday reality in Germany. The euro debt crisis revealed that the soft pact favored massive debt accumulation in the EU. But according to the German interpretation, the southern EU states were always to blame for the high debts.
The main culprit is the Commission itself
On the other hand, there is greater interest in the reform in those university countries that feel that they are still being pilloried, at least formally, by the EU budget control. They want to eliminate the pact as much as possible. Many Italian governments have been outraged that “Brussels” is interfering in their affairs. And Bruno Le Maire is not the first French finance minister to assert that his government will of course meet the EU budget targets in the long term, but unfortunately will have to borrow significantly more in the short term.
It is also ironic that the EU Commission adapts its proposals to the respective target group. For those who will listen, she proclaims the “final end of austerity”. A “modern” economic and financial policy requires new priorities: massive investments must be made in the fight against climate change and digital transformation.
On the other hand, she tells German critics that everyone knows that the pact has not prevented a massive increase in debt in the past. Both are not wrong, but they are not at all suitable as justification for the proposals. The solution to fighting climate change and digital transformation is not more debt. It must consist of spending less elsewhere.
And the fact that the Commission is complaining about the dysfunctionality of the current set of rules is ridiculous. Because the main culprit is itself. The pact once gave the EU authority a powerful instrument that allowed it to effectively control the budgetary policies of the states. In monetary union, with a uniform monetary policy but unchanged national financial policy, it should ensure that national policies develop in a solid and more or less the same way – and impose sanctions if necessary.
The Commission missed this opportunity. Yes, it was under a lot of pressure from all Member States. But Commission President Romano Prodi spoke of a “stupid pact”. And Commission chief Jean-Claude Juncker admitted that he would always stretch the pact for France without limits.
The illusion of the Pact Fathers is dead
Today’s claim that the rules would work better if the Commission were given even more powers than before is therefore just absurd. Admittedly, the budgetary control by the EU authority outlined in the pact has long ceased to be politically attractive. During the euro crisis, the Commission was pleased to see that the ESM crisis fund helped the debt-ridden countries out of trouble and that the European Central Bank acted as the real “savior of the euro”. Since then, solid budgets have no longer counted, on the contrary: During the pandemic, the Commission also (helped) enforce the EU to take on debt itself.
Because this strengthens their political influence, it is only logical that the EU authority has no interest in budget control in general. The Commission’s proposals are not historical because the pact has been dead since 2005. Now, to the delight of the EU authorities and some member states, it is only being buried deeper. At the same time, an illusion of the fathers of the pact is finally buried: that the budgetary policy of the member states can be limited by generally applicable EU rules.
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