New German finance minister signals openness on EU fiscal rules


Germany’s incoming German finance minister has stressed the need for “stability” in the eurozone but said it should be combined with “growth and investment”, in a possible sign of openness towards reforming Europe’s fiscal rules.

Christian Lindner told journalists on Tuesday it would be “advisable” for the eurozone “to remain committed to the idea of stability”. “That is a point the future [German] government will make when it comes to the review of the [EU’s] fiscal rules,” he added.

But he denied that Berlin would now simply advocate a return to the austerity of the past. “Germany will respect stability and at the same time enable investments in competitiveness to be unleashed,” he said.

Lindner becomes finance minister at a time when calls for reform of the EU’s fiscal rules are growing louder. A consultation is under way over how to amend the arrangements, enshrined in the Stability and Growth Pact, which were suspended when the pandemic began.

Mario Draghi, Italy’s prime minister, last month said reform of the rules was “inevitable”, not only because of the high economic cost of the pandemic, “but also because of the future challenges of the EU, from the fight against climate change to new technologies, to the gigantic investments in semiconductors”.

Meanwhile, Klaus Regling, managing director of the European Stability Mechanism, the eurozone’s bailout fund, told German news magazine Der Spiegel in October that the 60 per cent ceiling on the ratio of public debt to GDP contained in the SGP “is no longer relevant” and should be raised.

Lindner was speaking to reporters shortly after the three parties making up Germany’s new government — the Social Democrats, Greens and liberals — signed the coalition agreement that sets out their plans and policies for the next four years. The signing paves the way for the Bundestag to elect Olaf Scholz as Germany’s new chancellor on Wednesday.

Lindner is leader of the liberal Free Democrats (FDP), many of whose members opposed the Greek bailouts during the eurozone debt crisis. In the course of the coalition negotiations he resisted attempts to increase taxes and loosen Germany’s debt brake, its constitutional cap on new borrowing.

That has made him a figure of suspicion for some in southern Europe, who worry he will push for a return to the austerity policies pursued by the EU after the global financial crisis.

Lindner noted the “big increase” in eurozone countries’ debts during the pandemic. “We must avoid . . . [having] fiscal dominance in the future,” he said. That refers to a situation where public finances are so burdened that central bankers are compelled to keep government borrowing costs lower than if they simply concerned themselves with inflation.

Lindner also said the new government would be watching inflation “very closely”. Germany’s inflation rate reached 6 per cent last month, its highest level since 1992, though Lindner noted it was likely triggered by a pandemic-related “one-off effects”.

He said he did not plan to raise new borrowing next year beyond the €100bn already outlined by the outgoing government, and reiterated his intention to reapply the debt brake — which was suspended in the pandemic — from 2023 onwards.

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