EU debt rules are complicated and have often been broken in the past. They should therefore be reformed. The countries have been arguing about innovations for months – now there is a compromise.
The finance ministers of the EU states have agreed on plans to reform European debt rules. Among other things, they stipulate that the individual situation of the countries will be taken into account more than before, as several diplomats from the German Press Agency said after a video conference of finance ministers on Wednesday. The plans still have to be accepted by the states and negotiated with parliament.
The new fiscal rules for the EU member states are more realistic and effective at the same time, wrote Federal Finance Minister Christian Linder (FDP) on Wednesday on the X platform (formerly Twitter). “They combine clear figures for lower deficits and falling debt ratios with incentives for investment and structural reforms.” Stability policy has been strengthened.
The agreement between the 27 countries was preceded by a German-French proposal, which Lindner and his counterpart Bruno Le Maire agreed on on Tuesday evening. In particular, the EU’s two economic heavyweights faced each other for a long time in the debate. An agreement between all 27 countries without an agreement between Paris and Berlin was considered almost impossible.
Le Maire: Excellent news for Europe
According to information from German government circles, the neighboring countries’ proposal included more effective security lines for reducing budget deficits and national debt than before. At the same time, investments and structural reforms by the member states should be better taken into account. Le Maire wrote on X (formerly Twitter) on Tuesday evening about excellent news for Europe, guaranteeing healthy public finances and investments in the future.
Europe’s finance ministers struggled for months to find a compromise to reform the so-called Stability and Growth Pact. The basis was a proposal from the European Commission in April. It envisages giving heavily indebted countries more flexibility in reducing debt and budget deficits due to the consequences of the Corona crisis and the Ukraine war.
The proposals were controversial in the capitals. The federal government, for example, demanded strict and uniform minimum requirements. France, on the other hand, the EU’s second largest economy after Germany, had clearly spoken out against uniform rules.
The rules currently in force stipulate that debt should be limited to a maximum of 60 percent of economic output and that budget deficits should be kept below 3 percent of the respective gross domestic product. Due to the Corona crisis and the consequences of the Russian attack on Ukraine, they are temporarily suspended until 2024. So far, states have normally had to repay five percent of debts that are above the 60 percent mark per year. A return to the old rules is seen as a threat to Europe’s economic recovery. In addition, the rules were often ignored even before the pandemic – including by Germany.
Before the new rules can come into force, they must be adopted by the states and negotiated with the European Parliament. It is expected that the legislation will be finalized before the European Parliament elections. The European elections will take place at the beginning of June 2024.
Source: Stern
