German Finance Minister Christian Lindner made no secret of his disagreement with several elements of the European Commission’s proposal for a reform of the European economic governance framework on Monday 30 January in Berlin, following a meeting with the European Commissioner for Economic Affairs, Paolo Gentiloni.
Describing their exchanges as “frank and polite”, Mr Lindner referred to Germany’s “doubts” that “the proposal will lead to a real path of debt reduction” for the public sector. In our monetary union, we want to “keep a multilateral-based approach” for common rules instead of a more bilateral approach based on negotiations between a Member State and the Commission, he added.
Last November, the EU institution proposed that Member States should present macro-fiscal plans covering a period of 4 to a maximum of 7 years during which their public finances should conform to a path of gradual reduction of excessive public debt or, for low-debt countries, maintain a prudent fiscal policy (see EUROPE 13060/1). This would give Member States more room to negotiate with the European level on the investments and reforms they want to undertake. If deviations are found, the Commission would be empowered to take a firmer line in enforcing the rules, including through possible sanctions.
According to the German liberal, there is “not yet a concordant position” between the Commission’s proposal and that of the German Finance Ministry, presented in August 2022 (https://aeur.eu/f/2uu ).
Commissioner Gentiloni said that not all Member States wanted a return to the application of the 1/20th rule for the annual reduction of excessive government debt, a provision of the Stability and Growth Pact that has never been applied. He mentioned two main issues on which a compromise will have to be found to reform the European fiscal rules: (1) strike a balance between the need for common rules and the possibility of taking into account different national situations; (2) ensure that a more flexible path for reducing public debt will be enforceable.
In contrast to Germany, France supports the idea of differentiated requirements that allow for better ownership of policies at national level.
The Ecofin Council will discuss the reform of the European economic governance framework in February and March. (Original version in French by Mathieu Bion)