German Finance Minister Christian Lindner pleaded in Brussels on Monday for a return to budgetary discipline, put on hold since the start of the pandemic. Conversely, several countries including France are calling for a relaxation of the rules.
The Stability Pact, which limits public deficits to 3% and debt to 60% of Gross Domestic Product (GDP), ‘proved its flexibility during the crisis. But now is the time to rebuild fiscal buffers, which is why I strongly advocate sovereign debt reduction,’ Lindner said ahead of a first meeting with his eurozone counterparts.
The European Commission launched a public consultation in October on the reform of the stability pact, hoping to reach a consensus this year among member states divided on the pace of reduction in public deficits to be adopted following the pandemic.
Private capital
‘I don’t think that we can realistically expect fundamental changes to the debt and deficit criteria, which would require a change in the treaties,’ said the German minister. If he recognizes the need for a revival of investments, this liberal leader believes that it is not opposed to the reduction of the public debt and wants to mobilize more private capital.
While Paris has made the reform of the stability pact one of the priority topics of its presidency of the EU council in the first half of the year, Mr Lindner said he expected this debate to ‘really get started in June’, when the European Commission will have presented its proposals.
“Growth comes before stability,” insisted French Finance Minister Bruno Le Maire. “We need a pact, we need common rules, but it must first be a pact of growth,” he said.
This debate, which began before the health crisis, had to be suspended at the start of 2020 due to the Covid-19 which led to a historic recession.
To avoid an economic collapse, the European Union had temporarily set aside the stability pact. With the return of growth, the question of its reinstatement arises.
This is scheduled for early 2023. But some countries are calling for more flexibility in reducing spending, highlighting the soaring debt in the states most affected by the crisis and the need for heavy investments once morest climate change.
/ ATS
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