- 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 each country will be taken into account more than before, as several diplomats told the German Press Agency after a video conference of finance ministers.
- The plans still have to be accepted by the states and negotiated with parliament.
According to the new rules, EU states that are too indebted must, on average, meet a minimum annual level in reducing deficits and debt levels. Germany in particular had pushed for this. Overall, the rules are less strict and rigid than before. France and many southern European states had insisted on this.
Agreement between Berlin and Paris
The new fiscal rules for the EU member states are more realistic and effective at the same time, writes German Finance Minister Christian Linder (FDP) 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.
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 praised the “historic agreement” on X.
More flexibility due to the consequences of the Corona crisis
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 highly indebted countries more flexibility in reducing debts 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, 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. 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.
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 in early June 2024.