EU Commission wants to ease debt rules
The EU Commission has presented proposals for a reform of the European debt rules. Under the new regulations heavily indebted states are to be given customised options for reducing excessive public debt. This represents a major departure from the current principle according to which the same rules apply to all member states. Opinions are divided.
Pragmatism instead of empty orthodoxy
For Expresso rethinking the Eurozone's stability criteria is a sensible move:
“We can always insist that debt should be at 60 percent of GDP and that governments should do everything they can to ensure this. However it's best to be pragmatic. In 2022, apart from the four countries that have never exceeded the debt limit there are only four others that are already below 60 percent. Ensuring debt reduction is key and should be a priority. Having rules that are not enforced and don't work is no good. It's just empty orthodoxy.”
Threat of instability
The new rules sound logical but they must also be enforced, warns De Volkskrant:
“Today's strict pact will still result in continuous political pressure from Brussels on the capitals. The risk of a looser pact is that the pressure will decrease and that after a violation there will still be no intervention. If that happens the relaxed rules could lead to more instability in the long run and cause major damage to state finances. Not only Berlin but also The Hague should be worried by such a scenario.”
More flexibility than before
This is a radical step that will benefit Italy, says economist Carlo Cottarelli in La Repubblica:
“It is likely that Italy will be required to make a more gradual adjustment than under the previous rules. The latter required the government debt-to-GDP to be reduced by 4 percentage points per year. Under the new rules, the main specification is that the government debt-to-GDP ratio must drop within 4 to 7 years (by how much is not stipulated) and be put on a 'plausibly downward path'.”
The same rules must apply to all
The German government must not agree to this proposal, urges the Handelsblatt:
“If the bill were to pass, the debt rules in Europe would effectively be suspended. The proposals pose an incalculable risk to the survival of the euro. The EU Commission wants to agree individual, tailor-made debt reduction programmes directly with EU states. And that's precisely the problem: debt reduction becomes a negotiable matter instead of being governed by clear, universally applicable rules.”
A balanced but divisive compromise
It will be difficult to reach a consensus on the new rules, comments The Irish Times:
“The commission has just put forward a generally well-balanced proposal. But already big member states are at odds on what should happen, with Germany's finance minister, Christian Lindler [sic], criticising the commission's latest proposals as not being sufficiently strict. Other major players, notably France and Italy, take the opposite view, arguing that more leeway is needed to take account of vital climate investment. ... The commission has tried to take a middle road, proposing more leeway to allow countries to boost investment, but also rules obliging countries with higher national debts and budget deficits to reduce them at a prescribed rate.”