Friday

6th May 2016

German minister calls for EU budget rules to be loosened

  • “Anyone who doubts that austerity has failed should look at the election result of the right-wing parties,” said Gabriel (Photo: Images_of_Money)

Germany’s economy minister has signalled that the EU should loosen its rules on budget deficits to allow governments more space to pursue growth-driving economic reforms.

“No one wants higher debt, but we can only cut the deficit by slowly returning to economic growth,” Sigmar Gabriel said following meetings with French counterpart Arnaud Montebourg on Monday (16 June).

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

“Countries that are embarking on reforms must have more time to cut their deficits, but it has to be binding - a binding chance to reform in return for more time,” said Gabriel, who is also the leader of the Social Democratic Party, the junior coalition party of Angela Merkel.

“This is what we intend to put up for debate in the weeks and months ahead as part of a reorganization of European policy,” he said.

The EU’s stability and growth pact requires governments to keep to within the constraints of a 3 percent annual budget deficit and a debt to GDP ratio of 60 percent.

France has been the most high profile country to recently fall foul of the regime. Earlier this month the European Commission warned that Paris would miss the 3 percent target in 2015 despite being given an extra two years to hit the target. France is forecast to run a deficit of 3.8 percent this year followed by a 3.4 percent shortfall in 2015.

Italian prime minister Matteo Renzi has also indicated that the issue will be raised during his country's six-month EU presidency, which starts next month.

Meanwhile, speaking last week at the Brussels Economic Forum, senior IMF official Reza Moghadam called on the EU to scrap its strict deficit targets describing them as a “labyrinth of rules that is difficult to communicate.”

“Debt dynamics i.e., the evolution of the debt-GDP ratio, should be the single fiscal anchor, and a measure of the structural balance the single operational target,” said Moghadam, who heads the Fund’s European department.

Meanwhile, in a break from the economic mantra used by Merkel and her long-serving finance minister Wolfgang Schauble, Gabriel stated that austerity policies had failed.

“Anyone who doubts that austerity has failed should look at the election result of the right-wing parties,” said Gabriel, a reference to last month’s European elections which saw Marine Le Pen’s National Front party top the country’s poll.

Analysis

How the EU helped erode Turkish democracy

By neglecting Turkey for years and by failing to find its own solution on refugees the EU lost leverage on Turkey and finds itself played "like a yoyo" by its hardman leader.

Feature

Renzi's chance to act like a grown-up

With other EU states busy on internal issues, the Italian PM sees a chance to push his vision of Europe. Friday's Papal visit by EU leaders will showcase the new Renzi.

Stakeholders' Highlights

  1. Centre Maurits CoppetiersBrexit Could Increase Support for Independence in Pro-EU Scotland
  2. European Music CouncilRegister Now for the 6th European Forum on Music in Wroclaw, European Capital of Culture 2016
  3. Belgrade Security ForumJoin Our Team for the 6th Belgrade Security Forum. Apply Now! Deadline May 20
  4. European Roundtable of IndustrialistsCompanies Make Progress on Number of Women in Leadership Roles
  5. Counter BalanceParliament Gets Tough on Control EU Bank's Funds
  6. ICRCSyria: Aleppo on the Brink of Humanitarian Disaster
  7. CESIWorld Day For Health and Safety at Work: Public Sector Workers in The Focus
  8. EFABasque Peace Process-Arnaldo Otegi Visits the European Parliament
  9. EscardioChina Pays Price of Western Lifestyle With Soaring Childhood Obesity
  10. Centre Maurits CoppetiersThe Existence of a State is a Question of Fact, Not a Question of Law
  11. ICRCSyria: Aid for Over 120,000 People Arrives in Besieged Town Near Homs