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Debt watch of the taxpayers' association: repeatedly breaking the rules
Photo: Jörg Carstensen / dpa
The International Monetary Fund is recommending that the European Union reform its debt rules soon.
This cannot wait, according to an IMF blog published on Monday, a few days before the meeting of European finance ministers in Prague.
Because the debt rules are still suspended up to and including 2023 due to Corona, there is now a good opportunity for change.
"This opportunity should not be wasted."
You can read the IMF blog here: European Fiscal Governance: A Proposal from the IMF
Fiscal policy plays a crucial role in stabilizing households and companies in times of crisis.
"But that requires sound public finances." High debt and rising interest rates made it harder for governments to address the many challenges, including the high cost of living and the climate crisis.
At the same time, Europe needs a degree of flexibility, but also sustainable debt.
The so-called stability pact, which is intended to secure the value of the euro, actually limits the new debt of EU countries to three percent and the total debt to 60 percent of the respective economic output.
However, the rules have been repeatedly violated in the past without any noticeable consequences.
The southern EU countries have been demanding reform for a long time.
Federal Finance Minister Christian Lindner (FDP) is pushing above all to make the rules more enforceable.
In the paper, the IMF now proposes maintaining the numerical targets.
However, the pace of approach to this must be made dependent on the risk that the debt would have for the respective country.
To this end, an independent body – the European Fiscal Council – should contribute analyzes of debt sustainability.
States with a higher risk would have to approach balanced budgets or even surpluses more quickly within three to five years.
Other states would get more flexibility.
In addition, the IMF calls for medium-term financial plans, including upper limits on spending.
The Washington-based international financial organization is also in favor of setting up an EU fund to respond to sudden economic downturns.
He could also help with adaptation to climate change and the transformation of the economy.
However, no volume was given for this.
mike/Reuters