The new EU economic commissioner wants to review deficit rules to finance more climate protection. Germany is skeptical.
EU Economic Affairs Commissioner Gentiloni wants more climate protection Photo: Yves Herman/reuters
The European Union is considering relaxing strict debt rules to promote sustainable growth and finance the European Green Deal. The controversial Stability Pact needs to be put to the test, said new EU Economic Affairs Commissioner Paolo Gentiloni. The review should begin as early as January.
The stability pact, which was introduced at Germany’s insistence, sets a 3-percent limit on budget deficits and a 60-percent threshold for debt levels. It was tightened during the euro crisis, but subsequently interpreted flexibly. This has benefited Italy in particular, which is struggling with a growing mountain of debt.
The new Italian Economic Affairs Commissioner Gentiloni would now like to relax the pact. It would be conceivable, for example, to exclude national investments in "green" projects from the deficit calculation. The European Fiscal Committee and some EU countries – including Spain, Portugal and Italy – have come out in favor of this idea.
Economists are also calling for a rethink. For example, the head of the Brussels-based think tank Bruegel, Guntram Wolff, advocated applying the "golden rule." It stipulates that investments can be financed by new debt. However, climate-friendly investments would have to be precisely defined to prevent abuse.
So far, these ideas have met with little approval in Germany. Federal Finance Minister Olaf Scholz (SPD) is sticking to the black zero and the debt brake. Since the election of the new SPD executive, however, there has been movement in the German debate. The European Green Deal could also promote a rethink in Berlin.
The climate package announced by Commission President Ursula von der Leyen (CDU) a week ago provides for investments of around one trillion euros in climate protection. However, these sums cannot be financed from the EU budget. This is why national budgetary policy must now also be reoriented.
According to the Brussels authority, finance ministers should in future no longer be concerned only with stable finances and reducing deficits, but also with environmental sustainability and social justice. "From now on, we will put climate change at the center of our economic governance," Gentiloni explained. So far, however, a "green" stability pact is only on paper. Whether Germany and the other EU states will follow suit remains to be seen.