The stability pact limits public deficits to 3% and debt to 60% of GDP. To avoid an economic collapse during the economic crisis caused by the Covid-19, the European Union had put it aside temporarily.
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This is a subject on which the Franco-German section does not agree. While France has made the advent of a “new growth model” one of the priority subjects of his presidency of the Council of the European Union, the French Minister for the Economy and Finance, Bruno Le Maire, considered that the rules of the stability pact should be reviewed, which constrains the expenditure of the Twenty-Seven.
“We need a pact, we need common rules, but it must first be a growth pact”, he said, Monday, January 17. “Growth comes before stability”, he hammered, after jugé “obsolete” the rule limiting public debt in an interview with European media published on Sunday evening.
The Stability Pact limits public deficits to 3% and debt to 60% of Gross Domestic Product (GDP). To avoid an economic collapse during the economic crisis caused by the Covid-19, the European Union had put it aside temporarily. With the return of growth, the question of its reinstatement arises.
In October, the European Commission launched a public consultation on the development of the stability pact. The countries of the South, such as Spain, Italy, Greece or Portugal, whose debt soared during the crisis, are demanding more flexibility. They fear that a strict return to the stability pact will lead to a sharp reduction in public investment, at the risk of plunging the whole of Europe back into recession. As was the case after the 2008 financial crisis.
On his side, German Finance Minister Christian Lindner believes that the pact “has proven its flexibility during the crisis. But now is the time to rebuild fiscal buffers, which is why I strongly advocate sovereign debt reduction.”