BRUSSELS (Reuters) – The European Commission proposed on Wednesday to change the EU’s fiscal rules so that governments would negotiate individual debt reduction paths of a length linked to reforms and investments, but the idea is already facing scepticism, notably from Germany.
The change, which moves away from the current one-size-fits-all obligation of annual debt cuts of 1/20th of the excess above 60% of GDP, is meant to make governments “own” their debt plans, rather than see them as externally imposed by the EU.
But the proposal has already raised concern in EU capitals, notably in Berlin, that longer and individually negotiated debt reduction paths would mean governments will postpone difficult decisions towards the end of the allotted time, often until after their mandate expires.
Still, the changes are necessary because, after the surge in public debt in European Union countries caused by the COVID-19 pandemic, existing debt reduction requirements have become unrealistically ambitious.
(Reporting by Jan Strupczewski)
