Lindner reports breakthrough
Berlin and Paris agree on EU debt rules
December 20, 2023, 12:02 a.m
First Corona, then the Ukraine war: The EU’s debt rules have been suspended since 2020. Before they take effect again in 2024, a reform should be achieved. France and Germany are now announcing a breakthrough in the dispute over a realistic framework for countries with high deficits.
After months of struggle, Germany and France have agreed on a reform of European debt rules. France’s Finance Minister Bruno Le Maire wrote late in the evening on the short message platform X that he had reached a “100 percent agreement” with his German colleague Christian Lindner. This is “excellent news for Europe, ensuring healthy public finances and investments”. FDP leader Lindner traveled to Paris in the evening to finalize the compromise. Lindner spoke of a productive conversation. The key elements of the reform have been agreed. This means there is now a chance for a political agreement on Wednesday, when the European finance ministers meet for a special virtual meeting. Both sides did not provide any precise information about the details of the agreement.
Lindner had expressed confidence in advance that an agreement between the two largest European economies would be the harbinger of a fundamental agreement between all 27 EU finance ministers. The specific legislation could then be completed before the European elections in early summer 2024. The previous EU debt rules, which are considered outdated and unrealistic, have been suspended since 2020 – initially because of the corona pandemic, later because of the consequences of the Russian attack on Ukraine. They should be effective again from 2024, which is why reform is urgent. The new rules would only come into effect for the first time in the second half of 2024, when the budget plans for 2025 have to be assessed by Brussels.
Violating upper limits again and again
Debt levels in Europe have risen significantly in recent years. The EU actually has an upper limit on the budget deficit of three percent of the respective economic output and 60 percent of the total debt level. However, these requirements have been repeatedly violated in the past without having any significant consequences. For a long time, the main question that was controversial was how quickly highly indebted countries had to get closer to the requirements. Southern European EU countries in particular fear that necessary investments will not be made if the rules are too strict. France, for example, does not expect to bring new debt back below three percent before 2027 and has repeatedly emphasized that it wants to invest more money in future technologies.
Lindner said there would have to be improvements every year in deficits and total debt in highly indebted EU countries. “We’re still talking about the exact numbers,” he said before meeting Le Maire. But there will be safety nets. After the meeting, he wrote on X that there were also incentives for reforms and investments.
According to previous information, the EU Commission wants to individually negotiate reduction paths for EU states with excessively high budget deficits and debt levels. EU countries should generally have to improve their values over a period of four years, and in some cases within seven years.