EU member states agree on new debt rules
France's Finance Minister Bruno Le Maire declared on X: "Historic agreement!" Dutch Finance Minister Sigrid Kaag emphasized that she was "glad that we have reached a good agreement on the EU budget rules after long discussions and tough negotiations". Lindner pointed out that the new rules were "more realistic and more effective at the same time".
The reform is intended to modernize the EU Stability Pact in order to enable investment and at the same time avoid excessive debt in individual member states. The debt rules from the end of the 1990s stipulate that a country's new debt may not exceed three percent of its gross domestic product (GDP). The total debt of a country may not exceed 60 percent. They remain unchanged in principle.
However, the new rules are to be interpreted more flexibly and realistically for countries whose debts are too high and which need to make adjustments - without choking off their economy. Southern EU countries in particular, including France, had criticized the debt rules for years as being too radical - and in some cases simply ignored them.
Prior to the agreement now reached by the EU finance ministers, Germany and France had coordinated and agreed on a compromise. After the meeting in Paris on Tuesday, Lindner explained that the Franco-German agreement provides for "safety lines for lower deficits and debt levels" in the member states, as demanded by Germany. At the same time, it provides incentives for reforms and investments, which France and other countries are insisting on.
The reform agreed in the EU now stipulates, among other things, that countries with an excessive deficit of more than three percent of gross domestic product (GDP) must reduce this by at least 0.5 percentage points per year. Germany succeeded in achieving this. In return, France achieved a relaxation of this requirement in the period from 2025 to 2027. In these years, the significantly increased interest costs for refinancing public debt are to be taken into account.
Lindner also obtained a concession from his colleagues on the structural deficit, which is adjusted for economic influences. This should be a maximum of 1.5 percent of economic output for all countries in order to create a safety margin of three percent.
At the same time, the deficit reduction periods for reforms and investments in individual countries are to be extended. Compared to the previous rules, the "deficit target is now less binding, the rhythm for achieving it is gradual and rewards investment", it was stated in Paris.
The EU had suspended its debt rules during the coronavirus pandemic to allow countries to receive billions in aid for their economies. They will come back into force on January 1 - without an EU agreement on reforms, the credibility of member states on the financial markets would have been at risk.
After the member states have agreed in principle, the states and the European Parliament still have to seal the reform. It could then theoretically come into force at the end of spring.
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- German Finance Minister Christian Lindner commended the new EU debt rules, stating that they are more realistic and effective.
- The Agreement reached in Paris included safety lines for lower deficits and debt levels, as per Lindner's demands.
- Sigrid Kaag, Dutch Finance Minister, expressed her satisfaction with the agreement on the EU budget rules after tough negotiations.
- France, one of the southern EU countries, had long criticized the debt rules for being too radical and sometimes ignored them.
- Following the agreement, Bruno Le Maire, France's Finance Minister, declared it to be historic and a significant achievement.
- The EU states agreed to adjust the debt reduction periods for reforms and investments in individual countries to extend the deficit targets.
- Lindner also secured a concession on the structural deficit, setting a maximum of 1.5% of economic output for all countries.
- The EU will reinstate its debt rules on January 1, following the member states' agreement, to preserve the credibility of its states on financial markets.
Source: www.stern.de
