Germany caves in on euro demands as Emmanuel Macron pushes for key changes to debt rules | World | News

Olaf Scholz‘s government published a paper on Friday outlining its proposals to amend the EU’s Stability and Growth Pact governing how much debt member states can take on and how they must pay it back. In January, German finance minister Christian Lindner, insisted Germany wants to keep spending under control.

He said: “It is crucial that we continue to pay attention to the importance of the fiscal rules.

“Fiscal rules are crucial to maintaining the credibility of governments vis-à-vis the capital markets.”

But his then French counterpart, Bruno Le Maire, insisted the bloc should focus on growth now that it comes out on the other side of the pandemic.

He said: “It must be a growth pact first. Growth comes before stability.”

The European Union’s Stability and Growth Pact is meant to stop governments from borrowing too much in order to safeguard the value of the euro common currency.

Last year, EU Commissioner Paolo Gentiloni warned differences between northern and southern states are a risk worth taking in order to reach an agreement, as he backed Spain, France and Italy on their proposals.

He said: “The risk of differences is there — you could even argue the risk is stronger if you don’t open the debate on the rules.”

Last year, former Austrian Finance Minister Gernot Bluemel said the rules had been central to reducing debt-to-GDP ratios across the bloc after the sovereign debt crisis.

Mr Bluemel wrote in the letter: “A key lesson after the financial crisis was the need to reduce high debt ratios and increase fiscal sustainability in order to prepare for unforeseen future events.

“The Commission will come up with a review of the economic governance framework in the coming months.”

He added some ideas for reforms of the EU’s Stability and Growth Pact presented by southern states were “concerning”.

He said: “I am somewhat concerned about some contributions questioning a rules-based framework or diluting the value of sustainability.

“Our common objective must be a reduction of debt to GDP ratios over the medium- and long term.”

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