Berlin and Paris agree on EU debt rules
First coronavirus, then the war in Ukraine: the EU's debt rules have been suspended since 2020. A reform is to be achieved before they take effect again in 2024. France and Germany now announce a breakthrough in the dispute over a realistic framework for high-deficit countries.
After months of wrangling, Germany and France have agreed on a reform of the 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 counterpart Christian Lindner. This was "excellent news for Europe, ensuring healthy public finances and investment". FDP leader Lindner had traveled to Paris in the evening to finalize the compromise. Lindner spoke of productive talks. The key elements of the reform had been agreed. There is now a chance for a political agreement on Wednesday when the European finance ministers meet for a special virtual meeting. Neither side gave any precise details of the agreement.
Lindner had expressed confidence in advance that an agreement between the two largest European economies would be the precursor to an agreement in principle between all 27 EU finance ministers. The concrete legislation could then be finalized 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 The previous EU debt rules, which are considered outdated and unrealistic, have been suspended since 2020 - initially due to the coronavirus pandemic and later due to the consequences of the Russian attack on Ukraine. They are due to take effect again from 2024, which is why a reform is urgently needed. However, the new rules would only be applied for the first time in the second half of 2024, when the budget plans for 2025 have to be assessed by Brussels.
Violating ceilings time and again
Debt levels in Europe have risen significantly in recent years. The EU actually has an upper limit for budget deficits of three percent of the respective economic output and 60 percent for total debt. However, these requirements have been repeatedly breached in the past without any significant consequences. For a long time, the question of how quickly highly indebted countries had to come into line with the targets was particularly controversial. Southern European EU countries in particular fear that necessary investments will fail to materialize if the rules are too strict. France, for example, does not expect to bring its new debt back below three percent before 2027 and has repeatedly emphasized that it wants to invest more money in future technologies.
Lindner said that highly indebted EU countries would have to improve their deficits and overall debt every year. "We are still talking about the exact figures," he said before the meeting with Le Maire. However, there will be safety nets. After the meeting, he wrote on X that there would also be incentives for reforms and investments.
According to earlier statements, the EU Commission wants individually negotiated reduction paths for EU countries with excessive budget deficits and debt levels in future. As a rule, EU countries will have to improve their figures over a period of four years, in some cases within seven years.
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The agreement between France and Germany on EU debt rules could potentially impact highly indebted countries like France, which has stated it won't bring its new debt below the EU's 3% limit before 2027. German Finance Minister Christian Lindner mentioned that there will be incentives for reforms and investments under the new rules, aiming to strike a balance between budget deficits and necessary investments. The national debt of European countries, including Germany, has been a topic of concern during the European debt crisis, with some countries having exceeded the EU's set ceilings for budget deficits and total debt.
Source: www.ntv.de
