European Union finance chiefs remain far apart on how much flexibility to allow countries in reducing their debt burdens as its executive arm pushes for agreement by next month.
(Bloomberg) — European Union finance chiefs remain far apart on how much flexibility to allow countries in reducing their debt burdens as its executive arm pushes for agreement by next month.
Germany, the bloc’s biggest economy, cannot accept the European Commission’s proposed reform of the fiscal rules as it stands, Finance Minister Christian Lindner told reporters in Brussels on Tuesday, adding that the plan needs material changes.
“We acknowledge the investment needs of the member states, we need private and public sector investments for the green transition, but this is not an excuse to avoid structural reforms in our economies,” he said ahead of a meeting of EU counterparts. “We are open for more flexibility in the mid-term perspective, but we need reliable paths to debt reduction and lower deficits.”
Lindner added that the existing limits of 60% and 3% of gross domestic product respectively on countries’ debt and deficits — goals that few nations meet — are fixed.
The EU is reviewing its Stability and Growth Pact to try to soften the bloc’s fiscal rules, which were suspended during the Covid-19 pandemic to allow governments leeway on spending and are due to come back into force from Jan. 1.
Market Perception
A significant number of finance ministers were critical of a commission proposal to negotiate debt-reduction paths bilaterally with member states, people familiar with the discussion at Tuesday’s meeting said. They stressed that common rules and predictability are needed, and were concerned about the market perception.
Speaking at a news conference after the gathering, Swedish Finance Minister Elisabeth Svantesson said there were areas of shared ground but that a lot of work remains.
“We thought it was important to have stronger national ownership while keeping a strong set of common rules and frameworks,” she said. “Finding the right balance between these two will be the key.”
This was reflected in comments from Italy’s finance minister, Giancarlo Giorgetti, who said his country wants the responsibility of single states to be emphasized.
“We agree that the specific situation of each country must be taken into consideration,” he added.
Read more: EU Deficits Must Come Down as Economy Improves, Dombrovskis Says
Commission Vice President Valdis Dombrovskis told the news conference there was broad convergence on some key principles, such as ensuring sustainable public finances by combining gradual fiscal adjustments with reforms and investment, greater medium-term focus, and a better reflection of individual countries’ challenges.
He urged ministers to reach the largest possible consensus in time for next month’s meeting of the European Council on March 23-24 and said the commission aims to present legislative proposals shortly after. Any changes would need to receive the parliament’s approval before its term ends in spring of next year.
In addition, based on these discussions, the commission will provide fiscal guidance for next year to member states in March to give them enough time to prepare national budgets.
Sound Finances
Irish Finance Minister Michael McGrath said earlier that his country was generally supportive of the commission’s proposals and was open to changes to the pact, though he recognized there were concerns among some member states.
France’s Bruno Le Maire added ahead of the meeting that it was important to find a good balance between a return to sound public finances among all member states and the need to invest in green industry and the fight against climate change.
The finance minister said he wanted to see new rules defined in the coming months.
(Updates with comments from Swedish finance minister starting in seventh paragraph, Italian finance minister starting in ninth paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.