In the dispute over the Stability Pact, Germany’s finance minister has so far failed to prevail in Brussels, comments the German Press
Everyone agrees on at least one point, according to the newspaper Die Welt: “the old Stability Pact is not working.” But what needs to change? Here opinions differ. The Commission wants to soften the stability pact, Germany is against it and insists on tough regulations. Although according to Welt “the position of the federal government could help Europe”.
Economic Commissioner Paolo Gentiloni, “an Italian”, as the newspaper pointedly notes, “wants to interpret European debt rules more loosely”. The Stability Pact currently stipulates that EU countries must limit their deficits to 3% of their economic output and their debt to 60%. Gentiloni instead wants to negotiate what he calls “separate paths” to debt relief with each country, different rules for Germany and others for Greece, “which has the most devastating debt ratio in the EU: 178%,” comments Welt.
Christian Lindner is supported by the economists of the German Economic Institute, who calculated, according to Welt, how the budget deficits of Italy, France, Spain and Germany could develop in the next five years. “If the EU follows the German proposal, the debt in the four countries will be significantly reduced. If not, the rate of decline will be very slow.”
But why does the Commission insist on more “relaxed rules”? The economic newspaper Handelsblatt provides the answer. “The European Commission had bad experiences with the predetermined reduction targets. Until now, the rule has been that governments must reduce their debt levels to 60% of GDP within 20 years,” the paper said.
“In the case of Italy and Greece, this would require one strong mix of tax increases and spending cuts; that the economy could collapse and the debt-to-Gross Domestic Product (GDP) ratio would likely rise.”
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