Posted on Dec. 2021 at 18:04Updated 29 Dec. 2021 at 18:21
Between now and next March, when an informal summit of heads of state is due to rethink the European Union’s budgetary framework, test balloons and working hypotheses will flourish with a view to changing the European economic system.
This involves unlocking the stability pact which limits public deficits to 3% of gross domestic product (GDP) and, in theory, prohibits having a debt greater than 60% of GDP. These criteria were suspended until 2023 to deal with the pandemic while States and the European Central Bank have taken, for two years, exceptional budgetary and monetary measures, which have exploded all the thresholds.
On the political level, Paris, which takes over the presidency of the Union on 1is January, is in the front line on this site. But it is the Commission which is in the process and which, in the autumn, launched a debate on the changes to be made. In an interview with the German daily “Frankfurter Allgemeine Zeitung” (FAZ), the European Commissioner for Economic Affairs, Paolo Gentiloni, who is preparing the reform of the Stability Pact, explained that he wanted the Commission to have more effective instruments to ensure compliance with budgetary rules by member states. And, above all, that he would like to set debt targets individualized by country.
Gradation of ratios of this
“We cannot put all countries on the same level. The differences in debt ratios are currently too large for this to be possible, ”said Paolo Gentiloni. According to the latest Eurostat figures available, gross general government debt in the second quarter of 2021 reached 207.2% (!) of GDP in Greece, 156.3% in Italy, 114.6% in France, but 30.7% in Denmark and 26.2% in Luxembourg.
But if, faced with such a disparity, a gradation of debt ratios is justified, the Commissioner is against the idea of Klaus Regling, the director general of the European Stability Mechanism, to raise the debt ceiling to 100% of GDP for all of the Twenty-Seven. “This simply does not correspond to my idea of a differentiated vision of states,” he explained to the German daily.
French Finance Minister Bruno Le Maire, who will chair Ecofin from January, is very much on this line and has already started discussing it with his counterparts. In particular with the liberal Christian Lindner, who has just taken over the finance ministry in Germany.
For “debt sustainability”
Berlin would be ready to see the possibilities of indebtedness of the Twenty-Seven evolve, on condition of being able to sanction those who overstep the limits with mechanisms that could be triggered without the intervention of the Commission. The Netherlands, rather orthodox in terms of finances, could also be more open, since the arrival of a new coalition in power.
The idea is gaining ground. In a column in the “World” dated December 17, a small group of economists (including Philippe Martin, Jean-Claude Pris and Jean Pisani-Ferry) pleaded for a reform which “gives greater priority to the sustainability of the debt , creates room for maneuver for stabilization and allows a differentiation of medium-term debt targets ”. An ambition all the more achievable, according to them, as it only requires a special legislative procedure and does not require the ratification of each member state.
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