SHARE
COPY LINK

EUROPE

Merkel urges eurozone budgets court enforced

German Chancellor Angela Merkel would like to see the European Court of Justice (ECJ) play a role in enforcing the rulebook for the eurozone, particularly on limits for public deficits, deputies say.

Merkel urges eurozone budgets court enforced
Photo: DPA

Members of her parliamentary group said after a specially called meeting on the eurozone debt crisis with the German leader late Tuesday that the ECJ could help beef up monitoring of fiscally errant member states’ budgets.

When violations of the deficit or debt ceilings occur, the court could strike down the budget in question and demand a new calculation.

Volker Kauder, leader of Merkel’s conservative Christian Democratic Union (CDU) parliamentary group, said “state bankruptcy proceedings” could start against debt-mired countries from 2013, in a move to tackle national fiscal crises

“with a clear procedure.

“It is now Europe’s duty to ensure that competitiveness can be established and that sound, necessary reforms can be undertaken,” he said.

“The principle that liability and risk are linked must become the order of the day,” he added, calling on financial markets to do their part for stability in the eurozone.

The EU’s stability pact sets an annual national public deficit ceiling of 3.0 percent of gross domestic product and countries are supposed to work towards a balanced budget or even a surplus in times of economic growth.

Total accumulated debt is supposed to be limited to 60 percent of GDP but both limits have been breached by many eurozone states in recent years, culminating in the debt bailouts for Greece, Ireland and Portugal last year and this.

Kauder said after the meeting with CDU deputies, some of whom have grown increasingly critical, that he expected reforms to Europe’s emergency financial rescue fund to pass both houses of parliament as planned by September 23.

The measures, which were decided at an EU summit in Brussels on July 21, include an enlarged role for the European Financial Stability Facility, which will be able to buy government bonds on public markets and provide emergency aid to banks.

The EFSF is also, under certain conditions, to provide credit to eurozone countries, along the lines of the International Monetary Fund, before they are forced to seek emergency financing.

AFP/mry

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

ECONOMY

German cabinet agrees record levels of new debt for 2021

The German government agreed Wednesday to take on record borrowing this year to weather the economic blow of the coronavirus pandemic.

German cabinet agrees record levels of new debt for 2021
Finance Minister Olaf Scholz. credit: dpa | Kay Nietfeld

In budget adjustments signed off by Chancellor Angela Merkel’s cabinet, Europe’s largest economy will borrow a total €240.2 billion in 2021, a third more than initially planned.

The adjusted budget, which will see Berlin break its taboo on new debt for the third year in a row, still has to be approved by parliament.

“We have decided to suspend the debt brake once again, and I think that’s justified,” Merkel told the Bundestag lower house, adding that the budget was “measured” despite “more insecurity” than usual.

“We are taking the right measures to manage the economic and financial effects of the pandemic,” added Finance Minister Olaf Scholz.

After maintaining a budget surplus for the last decade, the economic slump caused by the pandemic has forced Berlin to take on €370 billion in new debt in 2020 and 2021, with an extra €85.1 billion planned for 2022.

With the country facing a dangerous third wave and shutdown measures extended into April, Germany’s recovery has proved slower than expected this year.

Having originally planned to halt borrowing in 2022, the government is now aiming to return to its golden rule of fiscal discipline a year later, with only €8.3 billion of new debt in 2023.

The so-called “debt brake” is a rule enshrined in the constitution which forbids the government from borrowing more than 0.35 percent of gross domestic product (GDP) in a year.

READ ALSO: Merkel admits Easter coronavirus shutdown plan her ‘mistake alone’

Germany smashed the taboo in 2020 and 2021 as it scrambled to shield businesses and workers from the economic hit of the coronavirus.

The state has already paid out more than 114 billion euros of financial support to businesses since the beginning of the pandemic in the form of guaranteed loans, direct aid and shorter-hours work schemes.

Yet according to a report published by the German Economic Institute on Wednesday, the crisis has still cost the German economy 250 billion euros so far.

Extended restrictions

Hopes of a recovery this year have been dashed with entire sectors of the economy idled for months and the government revising down its 2021 growth forecast to three percent in January.

As a third wave of the pandemic tears through Europe, Germany extended shutdown measures by another several weeks at a marathon meeting between Merkel and state premiers on Monday.

Though plans for a strict five-day lockdown over Easter were scrapped Wednesday, businesses such as non-essential shops, leisure facilities and cultural venues will still remain largely closed until at least April 18.

In a report published Monday, the Bundesbank central bank predicted that restrictions would see economic output “contract markedly” in the first quarter of 2021.

The measures have also been met with growing frustration from business organisations, with the German Commerce Association warning that 120,000 shops could be forced to close if the measures continue to drag on.

The issue of taking on new debt, meanwhile, has also sparked heated political debate ahead of a September general election.

In January, Merkel’s chief of staff Helge Braun caused a major ruckus within his own CDU party when he suggested that the rule on fiscal discipline should be lifted for several years to come.

SEE ALSO: ‘We have finances well under control’: Germany takes on less debt than expected in 2020

SHOW COMMENTS