French political heavyweights are raising their voices to warn against the risks of an unbalanced and counterproductive debt rules reform, as negotiations look to wrap up before year-end and austere German criteria appear to be here to stay.
Back in April, the European Commission introduced a review of its economic governance framework, which sets rules for the coordination of public debt and deficit levels across the bloc.
Unlike the old rules, which were perceived by a large majority of political leaders and economists to be harmful to investments and growth, the proposed reform of the framework aims to giving member states more leeway to invest in the green and digital transition.
Country-specific investment and reform programmes – aimed at reducing debt ratios over the long term – would be drafted for countries whose public debt levels would go above 60% of GDP, and deficit levels beyond 3% of GDP.
Such programmes would last for a minimum of four years, with the possibility of extension to seven years if the country is undertaking structural reforms or financing critical sectors, including defence and the green transition.
Things started to go sour however as the German government, known for its budgetary orthodoxy and dubbed ‘frugal’ in EU jargon – alongside the likes of Austria, the Netherlands, and the Nordic countries – insisted on introducing uniform numerical criteria, which would apply to all member states indiscriminately.
This, France and other critics said, would just be a repeat of the old rules with marginal tweaks....
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