German Finance Minister Christian Lindner, a self-proclaimed fiscal hawk, is offering a compromise in the ongoing debate over EU fiscal rules: tighter enforcement of spending limits, in exchange for some degree of flexibility on the pace of debt reduction.
In an interview published Thursday in the Handelsblatt, he delivered Berlin’s opening salvo. “I am advocating for more binding rules, but in a realistic way,” he said. “Almost like Halloween: trick or treat.”
Lindner ruled out changing the EU’s 3% annual deficit ceiling and its 60% debt-to-GDP threshold – a move that would have been difficult anyway, as it would require unanimity from EU capitals. EU.
Instead, he called on member states to make so-called medium-term fiscal targets binding under EU fiscal rules. These are country-specific fiscal targets that countries should aim for by limiting their budget deficit to 0.5% per year.
If a country fails to do so, the Commission could issue a warning – dubbed a ‘meaningful derogation procedure’ – before launching the full-fledged sanction of an ‘excessive deficit procedure’, which could potentially impose fines to offending countries.
In practice, these rules are rarely enforced – something Lindner wants to change.
“So far…these are decisions left to the discretion of the European Commission. I fear that will render them useless,” he explained. “My proposal therefore aims to make these medium-term budgetary objectives binding.”
If a country does not meet these targets, “its financial plan will not be accepted,” Lindner said.
In exchange, Lindner offered to waive a rule requiring countries to reduce their excess debt by 5% per year – a requirement that “has been overtaken by reality” due to the piles of debt that governments have incurred during the crisis. pandemic, he acknowledged.
Lindner, a liberal, noted that the other parties in Germany’s governing coalition – the Social Democrats and the Greens – “agreed on the principles” of his proposals.
The European Commission has said it will present proposals after the summer on how it intends to reform the rules.