Markets risk forcing eurozone’s hand on debt – German official

by Michael Nienaber

BERLIN, Jan 14 (Reuters) – Eurozone governments will have to consider limiting borrowing and returning to fiscal discipline sooner than expected if they are to avoid markets starting to penalize the most debt among them, said a senior German finance ministry official.

Speaking to counterparts from other countries in a closed-door meeting on Monday, Florian Toncar said Germany should get the eurozone back to a more orthodox attitude to public finances.

“I am convinced that, very soon perhaps, Europe will not be asking how much debt the rules allow or how much the rules can be relaxed but rather how much debt the markets allow”, he said. he explained according to a video recording that Reuters was able to view.

Eurozone leaders agreed at the start of the coronavirus crisis to suspend the application of the Stability Pact rules until 2023 but a debate is underway on the changes to be made to the Pact before it does not apply again.

The German government coalition has so far hinted that it is ready to reform the budgetary rules, but the remarks of Florian Toncar, from the Liberal Democratic Party (FDP), generally adhering to budgetary orthodoxy, suggest a change of your.

“I believe the paradigm shift is going to happen faster than many think,” he said, adding that Germany needed to think about improving its economic performance rather than relaxing the rules. framing deficits and debt.

A finance ministry spokesperson could not immediately be reached to comment on the information and Toncar could not be reached through the ministry.

Several eurozone countries, including France and Italy, have already said that if the rules on deficits and debt remain as strict as before the crisis, Europe is heading for a new period of austerity when it has to increase its investments.

(Report Michael Nienaber, French version Marc Angrand, edited by Blandine Hénault)

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