MNI INTERVIEW: EU Debt Rules Should Be Stricter-Germany's FDP

The deputy chairwoman of Germany's Free Democrats, which could play a key role in forming the country's next government after Sept. 26 elections, told MNI European rules on public borrowing should be toughened and penalties against member states which exceed debt limits increased.

With a review of Europe's Stability and Growth Pact, which sets limits on borrowing, on hold until after the German vote, which polls suggest could be won by the centre-left SPD, European Parliament Vice President Nicola Beer dismissed calls by countries such as Italy for a more permissive approach to debt.

"The Corona crisis clearly showed that those with solid public finances came through the crisis better. So, our task should be to strengthen the Stability and Growth Pact, not to water it down," she said in an interview. "We should put the Stability and Growth Pact back into full force as quickly as possible and reform it in such a way that it becomes more robust: for example, by including the new EU debts taken on as part of the reconstruction package and by increasing sanctions on those countries that permanently violate the principles of sound management of public finances."

Member states should all achieve debt sustainability, Beer said. Another senior FDP member has previously told MNI that European debt rules should be enforced (see MNI INTERVIEW: Germany's FDP To Push For Tough EU Debt Rules), but Beer went further.

"We need clear fiscal guard rails that apply to everyone and are enforced. Otherwise, we will end up endangering the euro," she said.

NEXTGENEU

While there is speculation that the FDP could join a so-called "traffic light" coalition with the SPD and the Greens, Beer told MNI that she was concerned by the prospect that the SPD and the Greens could enlist the support of the Left party instead. Fiscal conservatives who formerly supported the ruling centre-right CDU should switch their votes to the FDP, she said.

Beer also insisted that Germany must maintain the constitutional debt brake limiting its own borrowing and said there must no permanent joint European borrowing. While she supports the EU's EUR800 billion-plus NextGenerationEU Covid recovery programme, which is jointly funded, she stressed that it must remain an exceptional, one-off measure.

"Liberals in the Council, the Commission and the European Parliament have emphasised that a clear principle applies: 'money for reforms'. If we want to come out of the crisis stronger together than we went in, these funds must be used to implement structural reforms," Beer said, adding that the European Commission must ensure that member states do not use the recovery fund to finance "legacy issues".

"At the same time, NextGenEU must not lead to permanent joint borrowing at EU level," Beer said, "We reject such proposals from the Social Democrats, the Greens and the Left. Instead of seeking a debt union, we should rather focus on greater competitiveness in the EU."

The SPD has said it will keep the debt brake, but, as MNI has reported, some officials say it could seek ways to skirt the rule to allow for more green investment.