Germany and France laid out differing visions for the future of the European economy, signalling a fight later this year to overhaul the bloc’s strict rules on government spending.
The EU wants to simplify the decades old regulations on running
national budgets, and the positions taken by the eurozone’s top two
economies will drive the debate.
The rules force members of the eurozone to cooperate when drawing up
their spending plans, an exercise that gained importance after the debt
crisis of 2010-15, which nearly sank the single currency.
Berlin’s new finance minister, Christian Lindner, was attending his
first meeting with his eurozone counterparts, and made it clear that his
focus will be on keeping spending under control.
Though part of a newly installed coalition with the centre left and
greens, Lindner comes from the liberal FDP, which has traditionally held
to a sound spending, zero deficit policy.
“It is crucial that we continue to pay attention to the importance of
the fiscal rules,” Lindner said as he arrived for the talks.
“Fiscal rules are crucial to maintaining the credibility of governments vis-à-vis the capital markets.”
The rules, known as the stability and growth pact, limit government
debt to 60% of an economy’s annual GDP and its yearly deficit to three
percent.
Constructive spirit
The debt rule is often broken and France and Belgium have joined
Italy, Spain and Greece with debt ratios of more than 100%, reflecting
years of overspending.
In response to the Covid-19 pandemic, the rules were suspended and
are due back into force at the end of the year, hopefully with new
benchmarks in place.
“I’m very much in favour of reducing sovereign debt and this is one of the important details,” Lindner said.
But French Finance Minister Bruno Le Maire insisted the bloc’s energy
should be directed towards growth, especially since Europe’s covid-era
recovery is trailing that of the United States.
“It must be a growth pact first. Growth comes before stability,” Le
Maire said, with France in favour of allowing the massive investments
needed to green Europe’s economy to be absolved from the rules....
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