France And Germany See EU Deal On Fiscal Rules On Wednesday
France’s Bruno Le Maire and Germany’s Christian Lindner clinched a bilateral agreement late on Tuesday.
(Bloomberg) -- The finance ministers of the European Union’s two biggest economies said they are confident they will reach a deal on new fiscal rules with their counterparts from the bloc at a virtual meeting on Wednesday.
France’s Bruno Le Maire and Germany’s Christian Lindner clinched a bilateral agreement late on Tuesday, the French minister said in a post on X, formerly known as Twitter. The ministers expect this to help convince others.
“We found the right balance between the absolute necessity to come back to sound public finances, to reduce the level of public debt and to have sustainable public finances everywhere in Europe,” Le Maire said earlier at a joint news conference.
There is also a need for more investment in the climate transition and defense, he added.
Speaking alongside him, Lindner said: “We allow investment, we maintain fiscal space for structural reforms, but compared to the old rules, the new rules will lead reliably to lower debt levels and lower deficits.”
One element still open for discussion among ministers is the speed at which countries have to converge to a new fiscal buffer below the deficit threshold of 3% of gross domestic product, which Spain proposed setting at 1.5%, an EU diplomat said earlier. The other issue yet to be agreed upon is the deviation allowed from the expenditure ceiling, which will become the key indicator to keep budgets in check.
Le Maire and Lindner met in Paris on the eve of a final push to get a broader deal on fiscal rules between all EU countries before the end of the year.
The framework is a key plank of the EU’s economic policy that will determine how much governments can invest and how much they must focus on cutting debt burdens. The old rules, which were suspended to allow spending leeway during the pandemic and energy crisis, are no longer considered fit for purpose.
The two neighbors had struggled on a way forward as Germany pushed for a rigid application of debt constraints while France favored more leeway. Lindner and Le Maire found a compromise in marathon talks in Brussels last week that would allow for a transitory period of flexibility, but it was unclear whether other countries would accept such a deal.
--With assistance from Jorge Valero.
(Updates with Le Maire comment in second paragraph.)
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