Revealed at Summit Meeting with Spanish Prime Minister Sanchez
[Asia Economy Reporter Park Byung-hee] German Chancellor Olaf Scholz expressed a cautious stance on revising the European Union (EU) fiscal rules during a summit meeting with Spanish Prime Minister Pedro Sanchez on the 17th (local time).
According to major foreign media on the 17th (local time), Chancellor Scholz visited Spain and held a summit with Prime Minister Sanchez.
After the summit, Scholz said at a press conference, "Germany and Spain are close allies maintaining a good relationship," but added, "It is still too early to review the fiscal rules."
Scholz further noted that under the current Stability and Growth Pact, a 750 billion euro COVID-19 pandemic recovery fund has been established, and a significant portion of the fund still needs to be spent.
The fiscal rules refer to the 'Stability and Growth Pact,' which limits EU member states' government deficit ratios to 3% of GDP and debt ratios to within 60% of GDP.
Since the 2008 global financial crisis, there have been ongoing calls within the EU to relax the fiscal rules. During the bailout process, government debt increased significantly beyond the fiscal rule limits, and the rules were seen as hindering government investment and economic growth. There is a divergence of views on the fiscal rules between Northern European countries such as Germany, the Netherlands, and Austria, and Southern European countries including France, Italy, and Spain.
France and Italy recently proposed a new revision plan centered on easing the EU fiscal rules. Spain has not yet expressed agreement but concurs on the need to revise the fiscal rules.
After the meeting, Prime Minister Sanchez said at a press conference, "Chancellor Scholz and I have entered a new phase in European-level cooperation," and "we shared a vision regarding socio-economic progress." He added, "We agreed that the fiscal rules are too complex to comply with," but explained that they did not reach consensus on how to change the fiscal rules.
Last month, during a meeting with French President Emmanuel Macron, Chancellor Scholz stated that economic growth and fiscal stability are not opposing concepts but can be achieved simultaneously.
A senior Spanish government official said that although there was no immediate progress, Scholz's visit could serve as a starting point to bridge the differences between Northern and Southern Europe.
Recent statistics show that the average government debt-to-GDP ratio of the 19 Eurozone member countries is approaching 100%. Greece has the highest at 207%, and Estonia the lowest at 19%. Spain's ratio is 122%, above the average, while Germany's is below average but still exceeds the fiscal rule standard at 70%.
A Spanish government official stated, "The Eurozone needs new, reliable fiscal rules," adding, "Most of the major Eurozone countries cannot meet the 60% standard."
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