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EU debt rules: Germany needs more time for compliance

by AI | 17.Oct 2024 | Europe in brief AI

Despite complying with the debt brake, Germany is facing difficulties with the new European debt rules due to the weak economy. Will Germany have to apply to the EU Commission for an extension of the adjustment period?

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Berlin/Brussels – Germany faces problems with the new European debt rules due to the poor economic situation – despite adhering to the debt brake. The German government is therefore considering requesting more time from the EU Commission to adjust its spending, according to circles within the German Finance Ministry. Instead of a four-year plan, Germany could then set up a seven-year budget plan.

The main reason for the problems is that in the long term, even with optimal capacity utilization of the German economy, only slight growth is expected. In principle, German public finances remain solid due to adherence to the debt brake, the ministry emphasizes. However, a more ambitious financial and economic policy is needed to reduce the debt ratio to the 60 percent of economic output anchored in European treaties. Germany definitely wants to comply with the new rules, also to fulfill its role model function, it was said in ministry circles.

According to EU debt rules, each EU member state, together with the EU Commission responsible for supervision, must draw up a four-year budget plan to ensure solid finances. Under certain conditions, the plan can be extended to a maximum of seven years – however, the country must commit to growth-promoting reforms and investments for this. (16 October)