German authorities recently provided the European Commission their position on the upcoming reform of the European economic governance framework as the European Union institution fine-tunes its legislative proposal on the basis of the Ecofin Council’s guidelines in preparation for a presentation scheduled for Wednesday, 26 April (see EUROPE 13141/22).
On several points, Germany has drawn red lines that will likely make future negotiations with Member States, especially the most indebted countries, more difficult. It notably advocates having common quantitative rules to reduce Member States’ debt—rules that are admittedly less strict than the so-called ‘1/20th rule’, which has never been applied because it was counterproductive. On Thursday, 6 April, the daily Handelsblatt reported that, according to Berlin, heavily indebted [Member] States would thus be expected to reduce their debt ratio 1%, while countries whose public debt exceeds 60% of GDP would be expected to reduce it at a rate of at least 0.5% per year until the debt ratio falls below 60% of GDP.
The German Ministry of Finance also suggests that an EU country’s annual public spending should increase more slowly than its potential growth.
However, German authorities—aware of the need for enormous investment in climate and energy transitions—would consider creating budgetary incentives for spending in these sectors by not fully charging these expenditures to the public debt. (Original version in French by Mathieu Bion)