There is an agreement in the EU on new common rules for budget deficits and national debt. In the future, EU targets for reducing excessive deficits and debts should take greater account of the individual situation of countries.
The reform of the European debt rules, which has been discussed for years, has overcome an important hurdle: negotiators from the EU states and the European Parliament fundamentally agreed on the new rules that night, as the Belgian EU Council Presidency announced in the short message service X, formerly Twitter.
“Deal!” wrote the Council Presidency after 16 hours of negotiations. “The new rules will help achieve balanced and sustainable public finances and structural reforms and will promote investment, growth and job creation in the EU.”
modernization of the Stability Pact
In particular, the plans stipulate that the individual situation of countries will be taken more into account than before when setting EU targets for reducing excessive deficits and debt levels. At the same time, there should be clear minimum requirements for the reduction of debt ratios for highly indebted countries.
The reform is intended to modernize the stability pact. The aim is to enable investments and at the same time prevent individual member states from becoming too indebted.
Warnings about requirements that are too strict
The member states agreed on the reform shortly before Christmas. Federal Finance Minister Christian Lindner (FDP) then explained that the new rules combine “clear figures for lower deficits and falling debt ratios with incentives for investments and structural reforms.”
However, there were concerns in the European Parliament: the Left, the Greens and parts of the Social Democrats warned against excessively strict requirements and excessive austerity policies.
Annual New debt should remain below three percent
The so-called Maastricht criteria should remain unchanged despite the reform. According to this, the annual new debt of a state must not exceed three percent of gross domestic product (GDP). The total debt of a country may not exceed 60 percent.
However, the states should be able to interpret the requirements more flexibly. Highly indebted EU states such as France and Italy in particular insist on this. This should give states more time to adjust their budgets if they have very high deficits if they also make reforms and investments. However, Germany implemented minimum requirements for reducing deficits and debts. In December, Lindner spoke of “safety lines for lower deficits and debt levels.”
According to the agreement reached by the negotiators, the new regulation still requires the final approval of the member states and the European Parliament. During the corona pandemic, the EU temporarily suspended the stability pact in order to enable member states to provide billions in aid for the economy. The old rules have been temporarily back in force since January.