As EU finance ministers met in Brussels on Monday (May 23rd) to discuss the pros and cons of the European Commission’s proposal to suspend the bloc’s fiscal rules for another year, civil society organizations took the opportunity to question fiscal rules more deeply. .
The EU executive on Monday proposed continuing to apply the general warning of abandoning EU budget rules until the end of 2023 due to the economic consequences of Russia’s invasion of Ukraine.
The general waiver provision, in place since the start of the 2020 pandemic, has allowed Member States to ignore mandatory EU deficit and debt rules and provide financial support to citizens and businesses during the crisis.
While the finance ministers of Spain and Belgium welcomed the Commission’s proposal, German finance minister Christian Lindner was more critical.
“It is clear to Germany that we will not use the general provision on retreat. We will return to the debt brake “he told reporters before a meeting of eurozone finance ministers in brussels.
“We need to end our dependence on ever-growing debt”, Mr. Lindner continued, believing that the fight against inflation should be a priority now. To do this, he said “We need to get out of our expansionary fiscal policy and debt so that the Central Bank can fight inflation on its own.”.
It is unclear how the Central Bank should fight inflation, as the Central Bank does not have the power to reduce energy or food prices, which remain the main drivers of inflation.
One of the reasons put forward by the Commission to justify maintaining the general disclaimer is that it allows more investment in environmental transition and, more precisely, in the exit from Russian fossil fuels, which contributes to disproportionate “inflation”.
Despite sharp criticism of public debt, Lindner did not say he would block the European Commission’s proposal.
“Friendly Hawk” and “Sneaky Hawk”
Although Mr. Lindner was far from that “friendly hawk” with whom he recently compared himself, Dutch Finance Minister Sigrid Kaag was less aggressive in her rhetoric, although the Netherlands is traditionally considered very frugal. “We are open to the proposal of the European Commission. We understand the reasons. “ She told reporters on Monday.
However, she also stressed that the general waiver provision is not a free decision and that the level of debt needs to be reduced.
In April, the Dutch finance minister and her Spanish counterpart, Nadia Calvinho, presented a joint document reforming EU budget rules to bridge the gap between the most economical and the most indebted countries. Reform of these rules is currently under consideration.
“Spain calls for reform of these budgetary rules as soon as possible”Ms Calvinho said, saying it would be unwise to apply budget rules to reform them.
“From this point of view, it is good that the provision on general derogation has been extended for an additional year.”she added.
This view was also shared by Belgian Finance Minister Vincent van Petegem, who said that governments still need to support business and citizens.
Inadequacy of fiscal rules
Civil society organizations have responded to the Commission’s proposal with much deeper criticism of EU fiscal rules. Benoit Lalleman, Secretary General of the NGO FinanceWatchbased in Brussels, said the move showed “How outdated tax rules”.
While he welcomes the ability of governments to spend more, he fears the money will be wasted because of the short-term vision. ” Funds to stimulate the pandemic have been used to strengthen the status quo – we must make sure that this does not happen again. “explained Mr. Lallemand.
Isabelle Brachet from an NGOClimate Action Network (CAN) Europe has also argued that the new suspension of fiscal rules shows how inadequate they were in the beginning. She stressed that the temporary suspension of tax rules to overcome crises is not a viable alternative to long-term reforms.
“The crisis caused by the war in Ukraine was unexpected. However, the climate emergency is neither unexpected nor inevitable. “she noted, adding that“There is an urgent need to reform EU budget rules to stimulate public spending for the fair transformation of our economies and our societies.”.