Sunday

5th Jul 2020

Member states disagree on debt figures

  • Member states will have to find a compromise on what to count as part of their debts (Photo: Jorge Franganillo)

Nine member states have proposed that EU statistics on public debt should reflect which country has already reformed its pension system and therefore has a higher level of borrowing. Germany has warned against the move however, saying it will cause confusion.

"Maintaining the current approach to debt and deficit statistics would result in unequal treatment of member states and thus effectively punish reforming countries," the nine - Bulgaria, the Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Sweden - said in a letter last week addressed to the EU's special taskforce on economic governance.

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The text, seen by EUobserver, said the introduction of state-funded pension schemes was "critical for enhancing the long-term stability of Europe's public finances."

"[But] the experience of member states that have introduced such reforms is that they have led to a significant deterioration in the ... statistics of their general government debt and deficit," it added, referring to "fundamental unfairness and inefficiency in the current Stability and Growth Pact."

The basis of the reforms in central European and Baltic countries lies in transformation of a single distributive pay-as-you-go pension system based on the principle of solidarity between generations to a pre-funded capital-based system.

The German finance ministry on Tuesday (17 August) reacted by saying it is "very sceptical" about making a change which could make figures from the relevant countries "more difficult to interpret at the EU level."

"It would also disadvantage governments that have chosen different ways of reforming their pension systems and share the costs of the reform differently," the German communique noted, Bloomberg reports.

The European Commission, for its part, said the same day that it is mulling over its position on the issue.

"Of course the commission would like the criteria on public debt to be strengthened and to be taken more seriously so it is highly relevant that this matter be raised now," the body's spokesman Amadeu Altafaj told reporters.

The EU executive aims to react to the letter ahead of the next meeting of the taskforce on 6 September.

The taskforce, led by EU Council President Herman Van Rompuy, is looking into new EU fiscal rules designed to prevent a repeat of the recent financial crisis.

Felix Roth, a Brussels-based analyst from the Centre for European Policy Studies think-tank, came down on Germany's side in the debate.

"If you give in to nine member states you just water the Stability and Growth Pact down, which could be a huge problem, as we have seen now during the crisis," he told EUobserver.

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