Germany’s new finance minister signals openness to EU fiscal rules

Germany’s incoming finance minister has stressed the need for “stability” in the eurozone but said it needs to be combined with “growth and investment”, a possible sign of openness to reforming European fiscal rules.

Christian Lindner told journalists on Tuesday that it “encourages” the euro zone to “remain committed to the idea of ​​stability”. “It’s a point in the future [German] the government will issue when considering [EU’s] fiscal rules,” he added.

But he denies that Berlin is now simply advocating a return to the austerity of the past. “Germany will respect stability and at the same time allow investment in competitiveness,” he said.

Lindner becomes finance minister at a time when calls for reform of EU fiscal rules are growing louder. A consultation is underway on how to amend the agreements, enshrined in the Stability and Growth Pact, which were suspended when the pandemic began.

Mario Draghi, Italy’s prime minister, last month said reform of the rules was “inevitable”, not only because of the high economic cost of the pandemic, “but also because of future challenges for the EU, from the fight against climate change to new technology, to huge investments in semiconductors”.

Meanwhile, Klaus Regling, executive director of the European Stability Mechanism, the eurozone’s bailout fund, told German news magazine Der Spiegel in October that a 60 percent ceiling on public debt ratios above GDP in the SGP is “no longer relevant” and should be raised.

Lindner spoke to reporters shortly after the three parties that formed Germany’s new government – the Social Democrats, the Greens and the Liberals – signed a coalition agreement setting out their plans and policies for four years. next year. The signing paves the way for the House of Commons to elect Olaf Scholz as Germany’s new chancellor on Wednesday.

Lindner is the leader of the Free Democratic Party (FDP), many of which oppose Greece’s bailouts during the eurozone debt crisis. During the union negotiations, he resisted efforts to raise taxes and easing Germany’s debt brake, its constitutional limit on new loans.

That has made him a suspect for some in southern Europe, who worry he will push for a return to the austerity policies pursued by the EU in the wake of the financial crisis. global mainstream.

Lindner noted the “massive increase” in debt owed by eurozone countries during the pandemic. “We have to avoid it. . . [having] future fiscal dominance,” he said. That refers to a situation where public finances are so burdened that central banks are forced to keep the cost of government borrowing lower than if they were only concerned about inflation.

Lindner also said the new government would monitor inflation “very closely”. Germany’s inflation rate hit 6% last month, its highest level since 1992, although Lindner noted it was likely triggered by a “one-time impact” related to the pandemic.

He said he had no plans to increase new borrowing next year beyond the 100 billion euros outlined by the outgoing government, and reiterated his intention to re-impose the debt brake – which has been suspended during the pandemic – from 2023 onwards.

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