German Finance Minister Christian Lindner presents the German proposals for a revision of the European Stability Pact through the Handelsblatt newspaper.
Fiscal discipline at the European level as well, after the difficult years of the pandemic and for the economy, the German Minister of Finance calls for Christian Lindner by the Liberals through an interview with the financial newspaper Handelsblatt. It thus presents a first outline of the main positions of the current German government for a reform of the European Stability Pact.
As the economic newspaper notes on its front page, “the Stability and Growth Pact is the basis for the cohesion of the euro. However, these rules are already 25 years old and need to be revised. The direction in which the reform will move depends to a large extent on the positions of the German government”, with the Liberal Minister of Finance stressing that “Germany remains an advocate of political fiscal stability”.
No new debt of more than 3% of GDP annually
“A reliable and ambitious path is needed to reduce the debt,” the German minister says, noting that “in principle, the German government is in agreement” with his proposals.
So schematically, according to Christian Lindner, the current European rules on public debt should initially be maintained: Member States should therefore not create new debt exceeding 3% of GDP per year, while the total percentage of public debt should not exceeds 60%.
As the economic newspaper observes, after the pandemic period, the public debt in many countries skyrocketed, with the majority of member states since then “violating” the debt rules (Maastricht rules). “Many countries are so heavily indebted that it is not clear how they could reduce their debt levels below the Maastricht limit of 60% of GDP. The debt ratio in Greece is 185%, in Italy it is 150%,” observes the financial newspaper.
Binding medium-term targets
Christian Lindner additionally requests through Handelsblatt the so-called medium-term targets for the annual structural deficit to become mandatory for the member states something that has not been the case until now. As stated by Kr. Lindner: “Until now, the relevant decisions were based on the discretion of the Commission (…) My proposal aims to make the medium-term budgetary targets binding”.
According to the Lindner proposal “Member States should not show in their budgets a structural deficit of more than 0.5% per year or at least gradually approach this goal”. The structural deficit is a “tool” for building a sustainable fiscal plan. As for Germany and the European Union, Christian Lindner also supports the idea of ​​consistently balanced budgets in the long term.
“Tough” negotiations are expected in the autumn in the EU
Officially, the Lindner ideas are expected to be discussed at the European level in the autumn, while their discussion is not expected to be easy. There are already different “camps” within the EU on the question of reforming the Stability Pact, with Germany rejecting the idea of ​​relaxing European fiscal discipline rules.
The negotiations are expected to be “tough”, notes the financial newspaper, since any proposal by the Commission to reform the Pact requires the agreement of all 27 member states and the approval of the European Parliament. According to the statements of the Italian Finance Commissioner Paolo Gentiloni, a balance should be sought between a realistic reduction of the public debt and “the huge investment needs” in all EU countries.
DW – Dimitra Kyranoudis, Berlin
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