The parliamentary state secretary to the finance minister rejects the new protective shield.
(Photo: IMAGO/photothek)
Berlin The federal government rejects the proposal by the European rescue package ESM to create a new aid fund for euro states in the amount of 250 billion euros.
The parliamentary state secretary in the Federal Ministry of Finance, Florian Toncar (FDP), told the Handelsblatt: “The ESM is not there for general and permanent economic policy challenges. That would be as if the fire brigade were also responsible for urban development.”
ESM economists presented a proposal for a new stability fund this Thursday. States that have gotten into an external crisis through no fault of their own, such as a war, a pandemic or storm damage, should be able to take out cheap loans from the fund, which they will later have to repay.
“We shouldn’t constantly think about how to override market signals, but rather reinvigorate market discipline. Without them, the concept behind the ESM will not be successful in the long term,” says Toncar. “The ESM is the fire brigade of the euro area. If the fire brigade doesn’t have to be called out every day, that’s good news.”
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Economists gave different assessments of the proposal. Thiess Büttner, Chairman of the Federal and State Stability Council, told the Handelsblatt: “The European economy can cushion asymmetric shocks well, and there is also considerable flexibility in public budgets.” The proposal leads “to a fiscal union for which the EU is not designed”.
Economists advocate EU tax policy
Alexander Kriwoluzky, Head of Macroeconomics at the German Institute for Economic Research (DIW), said: “I do not think it makes sense to further develop the ESM in this direction. The ESM was created to give the recipient countries rescue packages with clear conditions.” The euro zone urgently needs a common financial policy “that can both levy taxes across Europe and issue promissory notes”.
Jens Hogrefe from the Kiel Institute for the World Economy welcomed the proposal. He sees the disadvantages of such an aid fund. However, in view of the high level of debt and the threat of a global economic slowdown with simultaneous high inflation, the euro zone is teetering towards a new crisis. And you have to deal with it somehow.”
>>> Read here: European protective shield calls for new mega protective shield for the euro
The debate about new aid programs in the EU has recently become more intense again. The reason for this is, on the one hand, the Ukraine war and its consequences.
But the withdrawal of the European Central Bank (ECB) from loose monetary policy as a result of high inflation is also causing concern. Economists and politicians fear that this could significantly increase borrowing for highly indebted countries like Italy.
The interest rate difference between Italian and German government bonds had already risen to its highest level since the outbreak of the corona pandemic on Thursday. This was preceded by the ECB’s announcement that it would raise the key interest rate in July for the first time in ten years in order to provide the banks with fresh capital.
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