BERLIN: German Chancellor Olaf Scholz on Tuesday backed calls for greater fiscal prudence, amid concerns that new European Union spending rules will choke investment in key areas.
The response to recent crises meant that “public debt has risen significantly”, Scholz said in a speech to the European Trade Union Confederation Congress in Berlin.
“We now need an agreement on how we can reduce the high levels of debt again,” Scholz said.
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The European Commission put forward proposals in April to overhaul its fiscal rules, which were suspended following the Covid pandemic and the Russian invasion of Ukraine.
The EU’s current spending rules say states’ public deficits should not go above three percent of gross domestic product, and debt should stay below 60 percent of GDP.
Those targets will stay under the new proposals, but there will be more flexibility through individual plans for debt reduction that are country-specific.
Germany is among the EU counties who want the rules to remain stricter, while southern states like Italy say they constrain their ability to invest.
“We need a realistic and binding agreement that at the same time does not overwhelm member states,” Scholz said.
The new rules needed to allow for investment but Germany also stood for “fiscal stability”, he said.
“Unlimited increases in debt would not be a good answer.”
The proposals have also raised concerns that tighter fiscal rules will lead to new spending cuts that will harm worker protections.
There could be “no return” to overly strict fiscal rules, European trade union chief Esther Lynch told AFP.
“We need a different set of rules” that allow “investment for the just transition”, Lynch said.
“The burden needs to shift from working people towards those who are doing very well,” she said, taking aim at the “windfall profits” made by companies as prices have risen with inflation.
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