A message to Europe for a return to “fiscal orthodoxy” was sent today Tuesday by Olaf Solz. The Stability Pact, which requires member states to have a budget deficit below 3% and public debt below 60% of GDP, has been suspended from 2020 due to Covid. It is about to be implemented again at the end of 2023.

The “unlimited increase in debt is not a good answer” to the investment needs of the economy, the German chancellor explained to representatives of European unions, who express fears of a return to austerity.

“We want to enable growth and investment to ensure the transformation of our economies. But the unlimited increase in debt would not be a good answer’ said the social democratic chancellor.

Solz was addressing the conference of the European Trade Union Confederation (CES), attended by around 40 European trade union representatives, which is meeting from today until tomorrow, Thursday, in Berlin.

On this occasion, the unions expressed their fears of a return to fiscal austerity in the European Unionafter years of almost unlimited spending to deal with Covid, the energy crisis and the consequences of the war in Ukraine.

“We cannot go back to the fiscal rules that were in place before the crisis” to deal with the “investment needs for a just ecological transition”, Esther Lynch, the general secretary of the CES, said yesterday, Monday, in an interview with French Agency.

“We need an agreement on how we can reduce the current high levels of debt again” so that “citizens have the certainty that their state can act in times of crisis”, emphasized Soltz.

The Commission

The European Commission proposed at the end of April a modernization of the fiscal rules to give more flexibility in Member States. But the plan “will bring back austerity and block climate action,” according to CES.

This reform is currently rejected by the so-called “thrifty” states, with Germany being the first. Germany’s finance minister denies any “weakening of the stability pact”, even as the eurozone’s top economy, traditionally a herald of fiscal orthodoxy, has also spent recklessly in recent years to mitigate crises.

“We need a realistic and binding agreement, which, however, does not overburden the member states,” Chancellor Soltz said today regarding these negotiations.