21st Mar 2018

Highly indebted countries harming euro, warns Dutch minister

  • "Doubts about sustainability will push up the cost of capital" in the monetary union, says the Dutch finance minister (Photo: European Central Bank)

Public debt in eurozone countries should be monitored more strictly, as high-debt states may undermine the stability of the whole monetary union, Dutch finance minister Wouter Bos has said, in remarks echoing earlier warnings that future expenditure arising from aging populations could pose a risk to the survival of the euro.

Speaking at the Brussels Economic Forum on Thursday (15 May), Mr Bos argued that policymakers in the single currency area should "put the focus on sustainable debt positions on an equal footing with the existing focus on annual budgetary results."

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

He warned that with a greater burden on public budgets due to rising pensions and healthcare costs, coupled with a diminishing working-age population, "three-percent annual deficits are really no longer permissible and in many cases even balanced budgets may be inadequate."

"Large debts have to be purged and sustainability guaranteed," he stressed, adding that otherwise the euro area may suffer, as "doubts about sustainability will push up the cost of capital" in the monetary union.

The "continued differentiation of debt positions [among member states] can frustrate the conduct of a common monetary policy. And it would be even harder if there were doubts about the credit worthiness of one or more member states," said Mr Bos.

Public deficit and debt are the two key indicators governed by rules underpinning Europe's monetary union, with the permitted threshold for the budgetary spending set at three percent of gross domestic product (GDP) and a limit for public debt at 60 percent of GDP.

But while most EU countries have improved in terms of public expenditure performance, seven out of 15 eurozone states ran a higher than allowed debt last year, including the three heavyweights - Germany (65%), France (64.2%), and Italy (104%).

Rome tops the debt blacklist, followed by Greece (94.5%) and Belgium (84.9%), and the Dutch minister appeared to be addressing Italy specifically when he said: "Let me be quite clear that a debt position of, say, 100 percent of GDP is simply not acceptable, even if it were stable."

Mr Bos echoed concerns previously mentioned by his compatriot and ex-commissioner Frits Bolkestein, who suggested in 2006 that states such as Italy facing demographic change problems might put the survival of the euro at risk.

These states "will be forced by political pressure to borrow more and increase their budget deficit, with consequences for interest rates and inflation," he indicated, adding: "the real test for the euro is not now, but in ten years' time".

"Therefore, in my view the long-term chances of survival of the euro should be questioned," noted Mr Bolkestein.

Merkel in Paris for eurozone reform talks

Angela Merkel - who started her fourth term as Germany's chancellor earlier this week - is wasting no time on big issues like eurozone reforms. On Friday she is meeting Emmanuel Macron where the two will seek common ground.

EU insists on US tariffs exemption

Europe is "an ally, not a threat", the EU Commission says - as the US is poised to impose duties in steel and aluminium. Common action on Chinese steel overcapacity could help diffuse the crisis.

Trump starts countdown to EU trade war

EU sales of steel to US to face 25 percent tariff from 23 March, with Europe to hit back on motorbikes and bourbon in looming trade war.

VW dismisses complaints on Dieselgate fix

'I think customers who want to get information (...) are able to receive information if they want," VW management board member Hiltrud Werner told EUobserver. Consumer groups disagree.

News in Brief

  1. EU leaders expected to approve Brexit future talks guidelines
  2. Tusk: EU must 'continue to engage' with US on trade
  3. European elections set for 23-26 May 2019
  4. EU tries to find common candidate for top UN food job
  5. Facebook post triggers Norway no-confidence vote
  6. Merkel: 'no reason' to sanction Schroeder for Russia support
  7. MEPs and Council strike deal on posted workers' rights
  8. EU parliament to investigate Facebook data 'breach'

Stakeholders' Highlights

  1. EUobserverHiring - Sales Associate With 2+ Years Experience - Apply Now!
  2. EUobserverHiring - Finance Officer With Accounting Degree or Experience - Apply Now!
  3. ECR GroupAn Opportunity to Help Shape a Better Future for Europe
  4. Counter BalanceControversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  5. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  6. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations
  7. Martens CentreEuropean Defence Union: Time to Aim High?
  8. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  9. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  10. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights
  11. ACCAAppropriate Risk Management is Crucial for Effective Strategic Leadership
  12. EPSUWill the Circular Economy be an Economy With no Workers?