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EU debt rules: Germany will have to spend less in the future

EU debt rules: Germany will have to spend less in the future
EU debt rules: Germany will have to spend less in the future

The EU debt rules are intended to ensure financial stability in Europe. Anyone who breaks them risks criminal proceedings. Germany will probably have to tighten its belt, according to Brussels.

According to the EU Commission’s guidelines, Germany must spend less in the next few years than previously planned in order to comply with European debt rules. For next year, the guidelines from Brussels are somewhat more generous than the federal government’s financial planning, said Finance State Secretary Florian Toncar. However, there will have to be significant consolidation in 2026, by the federal government, states and municipalities together. This is clear from a communication from the Commission to Berlin last week, the so-called reference paths.

In order to ensure sound finances, each member state of the European Union must draw up a four-year budget plan together with the EU Commission, which is responsible for supervision. Under certain conditions, such as if a country commits to growth-enhancing reforms and investments, the plan can be extended. The EU Commission can also temporarily take into account the increase in interest payments when calculating adjustment efforts.

German financial plan to be ready by September

Based on the reference paths, Germany is now drawing up a financial plan and submitting it to the EU Commission, just like all other member states. “This will probably happen by September,” said Toncar. After that, there could be further changes to the spending path set by the Commission. The budget plans also have to be approved by the Council of Ministers.

The EU debt rules, also known as the Stability and Growth Pact, stipulate that a member state’s debt level may not exceed 60 percent of economic output. At the same time, the general government deficit must be kept below three percent of gross domestic product (GDP). Anyone who exceeds the upper limits risks criminal proceedings. Last week, the EU Commission initiated a so-called deficit procedure against seven member states, including France and Italy. Germany is currently not facing any trouble from Brussels.

Repeated criticism of the debt rules

The rules are also repeatedly criticized. During the financial crisis in the 2000s, around 20 countries violated them. In theory, fines running into billions are possible for persistent violations. In practice, however, these have never been imposed. Critics of the requirements also emphasize that the rules stifle necessary investments, for example in climate protection.

Source: Stern

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