Federal Court of Auditors warns of reform in expert opinion

Berlin The Federal Court of Auditors urgently warns against the planned reform of the EU debt rules. “The reform of the EU fiscal rules will not ensure the sustainability of public finances in the European Union. There are no binding guidelines that ensure the reduction of excessive debt quickly and sustainably,” says a report by the Federal Court of Auditors to the Bundestag, which is available to the Handelsblatt.

The federal government must continue to work for clear debt targets and for a limitation of the interpretation and discretion of the EU Commission. “The federal government should not agree to a reform of the regulations that does not ensure this,” the auditors demand.

A reform of the EU rules has become necessary because the debt levels of many EU countries have risen far above the permitted level of 60 percent of gross domestic product as a result of the crises of the past few years.

If the existing rules were to continue to be applied, some countries would have to pursue a tough austerity course, which even supporters of fiscal austerity consider to be wrong. In its proposal, which is to apply from 2024, the EU Commission is sticking to the previous targets of a maximum of 60 percent total debt and a maximum of three percent budget deficit per year.

In the future, the EU Commission also wants to agree a tailor-made, multi-year debt reduction plan with each EU country. Its specifications vary in severity, depending on how heavily indebted the country is.

“Proposal undermines Maastricht criteria”

“However, the new set of rules does not ensure that the member states will comply with the reference values ​​in the medium to long term,” warns the Court of Auditors in its report. Should the proposal be implemented in its current form, “this could undermine the Maastricht criteria”.

The federal government must work for “sufficiently ambitious and binding quantitative targets” by which EU countries must have reduced their debt.

The Federal Audit Office has “considerable doubts” that a period of 60 years or more is appropriate for this. “A set of rules that would allow debt reduction to get out of hand in such a way would send the signal that the European Union has de facto abandoned the Maastricht debt criterion and thus also from long-term sustainable public finances in the member states.”

>> Read here: Lindner gets bogged down in a dispute over debt rules

The opposition shares the concerns of the Federal Audit Office. CDU budget politician Christian Haase says: “In order to strengthen the negotiating mandate of the federal government, the coalition factions should take up the proposal of the Federal Court of Auditors and fix guidelines and positions in writing in a Bundestag resolution. The Union would not shut itself off from such an approach.”

Federal Finance Minister Christian Lindner (FDP)

Lindner has already opposed a softening of the Stability and Growth Pact.

(Photo: IMAGO/photothek)

Federal Finance Minister Christian Lindner (FDP) also goes too far with the EU Commission’s proposals. He fears that negotiations between the EU Commission and EU member states would overly politicize European debt rules.

>> Read also: Pros and cons: EU debt reform – are all the dams breaking in Europe?

“The consolidation of budgets is not a matter for negotiation,” says Lindner’s house. “Proposals that point in the direction of a softening of the Stability and Growth Pact cannot be accepted.” The EU needs debt rules “that apply equally to all member states,” according to the Federal Ministry of Finance.

The federal government therefore sent the EU Commission its own proposal for a reform, which had been agreed in the traffic light government, at the beginning of April. According to this, highly indebted countries should in future reduce their debt ratios by at least one percentage point per year, states with average debt by at least 0.5 percentage points per year. The countries should do this until the debt ratio is no longer above 60 percent – the currently applicable debt ceiling.

EU Commission rejects Germany’s proposal

The EU Commission rejects the German initiative. The Commission wants to “give highly indebted countries more personal responsibility – combined with stricter enforcement of the common rules,” EU Commission Vice President Valdis Dombrovskis told the Handelsblatt. Generally applicable guidelines for debt reduction therefore do not fit into the Brussels concept.

>> Read here: Le Maire hands out against Lindner in the dispute over new EU debt rules

The EU Commission can count on the support of southern Europe. The EU Commission’s proposal is not about making debt rules a matter for negotiation, but about “achieving sustainable public financing that also depends on our ability to invest and grow,” said Laurence Boone, French Secretary of State for Europe Government and former chief economist of the industrialized countries organization OECD, the Handelsblatt.

The rigid debt rules of the past have not served that purpose and too often have not been complied with, Boone said. “So now let’s fix the rules and make sure they’re more appropriate.”

More: Federal government draws red lines on EU debt rules

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