'Coalition of responsibility' backing Stability and Growth Pact
In June, Finance Minister Gernot Blümel announced formation of a 'coalition of responsibility', backing the Stability and Growth Pact. Ahead of the meeting of EU finance ministers on Friday, finance ministers from eight European countries have published a common position paper in several international newspapers (Financial Times, Frankfurter Allgemeine Zeitung, Le Figaro), in which Austria, Denmark, Latvia, Slovakia, the Czech Republic, Finland, the Netherlands and Sweden have affirmed their unequivocal commitment to the Stability and Growth Pact. Their core demands are that sustainable public finances must continue to remain a central pillar of EU membership and that there should be no exceptions. Only through sustainable budget policies can room for manoeuvre be created for future generations. For this reason, reducing excessive budget deficits and high levels of debt must remain a common goal. According to Finance Minister Blümel, the suspension of debt rules due to the coronavirus crisis should not be coupled with hasty reform of the Stability and Growth Pact. While, he asserts, it is legitimate for a discussion to be held on how the Pact may be structured more efficiently and made more easily enforceable, nevertheless, the core element of the Pact must always consist of sustainable finances. In general terms, at the upcoming discussion on the Stability and Growth Pact, the eight finance ministers will be arguing in favour of 'quality over speed'.
"Back in June, I sent my colleagues a letter and invited them to participate in a coalition of responsibility. These countries are united by the common understanding that long-term implementation of the current debt policy would send the wrong signal for both the markets and the stability of Europe. Only sustainable budget policies have the capacity to create room for manoeuvre for future generations, and they also constitute the best preparation to face future crises. For this reason, the reduction of excessive budget deficits and high levels of debt must remain a common objective. Together we can better commit to a future of financial stability for our children. Fiscal stability is a fundamental pillar of the European Union and, over the coming months, we will be urging as many Member States as possible to join us in reaffirming this understanding," says Blümel, originator of the coalition initiative.
In their letter, the finance ministers point to the excessively high levels of debt in the EU left behind by the coronavirus crisis. Over the past two years, EU public debt ratio has grown by a massive 15 percentage points, to 94 % of GDP. According to the position paper, this will create a particularly heavy burden on those countries which already had very high debt levels before the crisis. The coalition of responsibility urges the EU to reduce its excessive debt in order to prepare to face future crises. Sustainable public finances create confidence and fiscal space for political priorities, says the paper. "The expenditure during the crisis was necessary, but must remain an exception, even if there are a few countries that would prefer to be given carte blanche to incur further debt. We consider this to be the wrong path," says Blümel.
Common position paper "Common views on the future of the Stability and Growth Pact" (PDF, 527 KB) (PDF, 528 KB)