Sunday

28th May 2023

EU finance ministers meet for tough clash on spending rules

  • EU Commission president Ursula von der Leyen (centre) and ECB president Christine Lagarde meeting with Eurogroup president Paschal Donohoe (Photo: European Commission)
Listen to article

EU finance ministers meeting in a venue outside Stockholm this week are expected to clash over new spending rules.

So-called 'frugal' countries, led by Germany, will be pitted against indebted countries, led by France and Italy, that would have to cut spending under the proposal.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

On Wednesday, the EU Commission proposed a document that included tougher benchmarks for debt reduction and fines — which was perceived as a concession to Berlin.

However, German finance minister Christian Lindner criticised the rules in a press release, insisting on even harder benchmarks.

Central bank governors will join finance ministers over the weekend to coordinate support for Ukraine's reconstruction and also include sessions on supporting growth in the EU.

The new spending rules are relevant for ECB president Christine Lagarde due to the recently-introduced Transmission Protection Instrument. This allows the central bank to buy up government bonds if individual countries face unsustainable borrowing costs on the capital markets. But to qualify a country has to acquiesce to EU fiscal rules.

Even though the commission has sought a middle ground, talks are not expected to go smoothly. Lindner, in a statement, indicated he would "work constructively, but no one should be under the misunderstanding that Germany will automatically consent to the proposals."

One EU diplomat representing a frugal country previously told EUobserver: "But this is only the start of a very technical phase of the legal negotiations. So I think it's safe to say it will take some time to hammer out a deal. The Germans are staking out a challenging negotiating position, which is pretty good for us as it moves the needle slightly more to where we want it."

Negotiations are expected to last into next year.

Not green enough

A loose coalition of green legislators, economists and NGOs have sounded the alarm, warning that the proposal does not leave enough fiscal space for countries to achieve their climate and social targets. "We are dismayed. Nothing guarantees that the fiscal room generated by this reform will be used for investments in climate action," said Isabelle Brachet, fiscal reform policy expert at Brussels-based NGO CAN Europe.

Debt pathways under the current proposal will result from negotiations between individual member states and the commission and must be signed off by the Council of member states. Crucially they will be based on so-called "debt sustainability analysis."

But the bloc's 'do no significant harm' principle does not apply to the debt-reduction plans, leading Brussels-based think tank ZOE Institute for Future-fit Economies to conclude that "there is a lack of safeguards to ensure" that none of the fiscal plans "do any harm to environmental or social objectives."

"A successful green and just transition will only be achieved with major public funding — however, the new fiscal rules proposed still don't provide enough incentives for investments in climate action and social policy," said executive director Jakob Hafele.

As a solution, the think tank suggests debt incurred by green investments should be granted more leeway, by extending the debt reduction path.

The "obsession with debt-to-GDP ratios" is "unhelpful," Philippa-Sigl-Glöckner and Max Krahé from German think tank Dezernaz Zukunft wrote in a syndicated op-ed on Wednesday.

"Policymakers should focus more on relevant macroeconomic indicators like the primary fiscal balance (which excludes debt service), as well as more meaningful indicators of long-term prosperity, such as the zero-carbon readiness of the bloc's assets," the researchers added.

"This proposal will by a large margin fail to give governments sufficient space to increase climate investment," political economist Philipp Heimberger wrote in an in-depth analysis of EU fiscal rules he wrote on behalf of the EU Parliament.

'Frugals' renew effort to reduce excessive debt

Finance ministers of eight EU member states released a signed letter calling for a renewed effort to "reduce excessive debt" among member states. It is the starting point for renewed debates on debt and deficits in Europe.

Looser EU fiscal rules agreed, with 'country-specific' flexibility

EU finance ministers agreed on new spending rules, copying much of previously existing rules. One worry is that only three countries — Sweden, Denmark and Luxembourg — could currently afford to meet green commitments while meeting debt and deficit rules.

PFAS 'forever chemicals' cost society €16 trillion a year

Researchers found that global societal costs of the so-called forever chemicals or PFAS amount to €16 trillion per year. Meanwhile, the bigger producers of these chemicals are also among the ones spending the most to lobby EU policies.

EU: national energy price-spike measures should end this year

"If energy prices increase again and support cannot be fully discontinued, targeted policies to support vulnerable households and companies — rather than wide and less effective support policies — will remain crucial," the commission said in its assessment.

EU: national energy price-spike measures should end this year

"If energy prices increase again and support cannot be fully discontinued, targeted policies to support vulnerable households and companies — rather than wide and less effective support policies — will remain crucial," the commission said in its assessment.

Opinion

EU export credits insure decades of fossil-fuel in Mozambique

European governments are phasing out fossil fuels at home, but continuing their financial support for fossil mega-projects abroad. This is despite the EU agreeing last year to decarbonise export credits — insurance on risky non-EU projects provided with public money.

Latest News

  1. How the EU's money for waste went to waste in Lebanon
  2. EU criminal complicity in Libya needs recognition, says expert
  3. Europe's missing mails
  4. MEPs to urge block on Hungary taking EU presidency in 2024
  5. PFAS 'forever chemicals' cost society €16 trillion a year
  6. EU will 'react as appropriate' to Russian nukes in Belarus
  7. The EU needs to foster tech — not just regulate it
  8. EU: national energy price-spike measures should end this year

Stakeholders' Highlights

  1. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  2. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  3. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  4. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  5. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics
  6. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains

Stakeholders' Highlights

  1. InformaConnecting Expert Industry-Leaders, Top Suppliers, and Inquiring Buyers all in one space - visit Battery Show Europe.
  2. EFBWWEFBWW and FIEC do not agree to any exemptions to mandatory prior notifications in construction
  3. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  4. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  5. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence
  6. Nordic Council of MinistersCSW67: The Nordics are ready to push for gender equality

Join EUobserver

Support quality EU news

Join us