When the state of emergency becomes the rule, rules are no longer needed. The European Commission is just throwing the last remnants of the stability pact overboard, which was supposed to protect the euro from debt crises. The high point of the fight for the European common currency was just ten years ago.
Two years ago it was the corona pandemic that caused the European debt brake to be suspended “exceptionally”. Now the war in Ukraine must be used to ensure that the euro countries are allowed to continue to ignore the ban on increasing their debt ratio to more than 60 percent of economic output or increasing their gross domestic product by more than three percent until the end of 2023 fault.
Always informed: The course of the war in Ukraine in the ticker – Fierce fighting for Bakhmut: Russia attacks the Ukrainian command center in Donbass
No sooner had the Commission made this proposal than German Finance Minister Christian Lindner, who had just arrived in Brussels to meet his European colleagues, drove into her parade: “What we need is deficit reduction. What we need is a reduction in debt-based spending and subsidies. This is our contribution to combating inflation.” Berlin takes note of the Commission’s proposal, but will not go along with it. “Germany will return to the debt brake of our Basic Law next year.”
Well shouted, Lindner. The minister clearly does not want to appear in public as a partner in a debt orgy. Leading German media have unanimously condemned the Commission’s proposal. The “Frankfurter Allgemeine Zeitung” commented that now the last “shame limit” should fall. The “Süddeutsche Zeitung” saw a “completely wrong signal”, the “Handelsblatt” a “license to go into debt”.
But the German finance minister left it at negative words. He has not announced an actual veto by Germany in the European Council. In retrospect, the mantra-like assertions of the former Federal Finance Minister Theo Waigel, with which he wanted to allay the fears of the imminent introduction of the euro in the late 1990s, were also nothing but mere words: “3.0 is 3 ,0.”
Criticism of the commission’s recent cave-ins in Waigel’s CSU and Lindner’s own FDP is particularly loud. The CSU finance and economics expert in the European Parliament, Markus Ferber, and the liberal faction deputy in the Bundestag Michael Theurer fear an encouragement for the southern states of the euro zone to plunge further into debt.
In this part of the currency area, as in France, the debt ratio is over 100 percent. The course taken by the European Commission, headed by Ursula von der Leyen, meets the needs of French President Emmanuel Macron and Italian Prime Minister Mario Draghi, who no longer want to be constrained by the stability corset.
After the meeting of EU finance ministers, France’s head of department, Bruno Le Maire, announced in Brussels on Tuesday that he sees the extended debt leeway as a means of financing state inflation adjustments for needy citizens. At the same time, he considers “restored” state finances to be possible, but did not say how.
After the meetings in Brussels, Lindner called for “a return to normality” and stated: “We must quickly consolidate budgets and also reduce new debt.” A real resistance from Germany or the “frugal four” Austria, the Netherlands, Denmark and Sweden against debt-financed So far, of course, there has been no sign of benefits instead of budget consolidation.
Actually, the Commission should have ideas for a fundamental reform of the stability pact by the summer break. This project has now been postponed until the fall. Instead, ideas for further indebtedness of the EU as a whole are aired in Brussels. This former taboo fell in the interest of the economic recovery after the Corona crisis.
Now the support for Ukraine is apparently to be backed up with a second debt-ridden EU pot. From a German point of view, the Federal Minister of Finance considers “communalisation of a debt-financed instrument” for this purpose to be “precluded from a regulatory perspective” insofar as grants are concerned.
However, according to Lindner, the Commission is now more likely to target loans. Incidentally, the following applies to the reconstruction of Ukraine: “No one can quantify how great the need is to rebuild the country.” This task cannot be left to the EU alone. Germany is politically open to a debate about using confiscated Russian state assets for this purpose. However, “legal concerns” must be taken into account.
So Lindner has to counter debt greed on two fronts. It remains to be seen whether he will show the same will to fight as Ukraine did in repelling the Russian invasion. The march towards the European debt union seems to be in full swing.