German Economic Affairs Minister Sigmar Gabriel has advocated giving crisis-ridden countries more time to get their budgets in order, triggering a debate in Germany and rumours of a divide within Germany’s grand coalition over its course for EU stability policy. EURACTIV Germany reports.
“We are in agreement: There is no necessity to change the Stability Pact,” said German Chancellor Angela Merkel in Berlin on Wednesday (18 June).
The Chancellor and Economic Affairs Minister Sigmar Gabriel deflected accusations on Wednesday that there is a rift within the German government over changes to Europe’s Stability and Growth Pact. The two were clear that they are in agreement over the fact that the pact does not need to be altered.
Rumours of dissent came on Monday (16 June) after Gabriel said countries should be given more time to fix their budgets in exchange for carrying out reforms, while speaking in Toulouse, France.
Countries like France and Italy have been struggling with the strict conditions of the Stability Pact for some time now and continue to call for more flexibility and time.
Gabriel’s initiative seeks to accommodate these concerns, a proposal that originally came from the family of social democratic parties in Europe. The French and Italian governments are run by parties belonging to this group.
On Wednesday, Merkel spoke with Gabriel before a cabinet meeting. “Everything we need to overcome problems, in terms of flexibility, is already included in the current Stability Pact. That is our joint opinion,” the German Chancellor said.
Federal Finance Minister Wolfgang Schäuble, who also hails from Merkel’s centre-right Christian Democratic Union (CDU), intends to hold fast to the current rules of the Stability and Growth Pact.
He spoke with Gabriel on Wednesday as well, offering an explanation on Deutschlandfunk public radio station afterwards. “We do not have any differences in opinion,” Schäuble said. The German government is in agreement, he indicated: “Solid financial policy is a prerequisite for lasting growth.”
But criticism for Gabriel’s proposal on Monday did not take long to materialise.
Markus Pieper from the CDU and Markus Ferber from the Bavarian conservative Christian Social Union (CSU), warned against threatening the stability pact and the reform process by softening the deficit criteria: “That fact that this strategy is also supported by socialists in the European Parliament and Economic Affairs Minister Gabriel, is unacceptable.”
The chairman of the CDU/CSU Group in the European Parliament Herbert Reul and Co-Chairman Angelika Niebler criticised softening the Stability Pact as well, calling it the “beginning of a debt union”.
A generous interpretation of the Stability Pact is in complete contradiction with European interests, they said: “German taxpayers will get to thank Economic Affairs Ministers Gabriel again for pressing ahead. Not very long ago, the SPD’s debt policy drove Europe into one of its biggest economic crises.”
Exchange rather than change
Speaking to the daily Tagesspiegel, Gabriel defended his suggestion against criticism that he supposedly wants to soften up the Stability Pact: “Apparently some people do not understand that my position does not require the Stability Pact to be softened.”
An exchange “of binding reforms for more time to reduce deficits”, he said, is not exclusively possible within the Stability Pact but could already take place in practice. For this reason, there are no differences within the German government over the “time in exchange for reforms” principle.
Nobody wants to change the Stability Pact, Gabriel emphasised. “To say it clearly: I will take on a mediating position and would like to build a bridge for Italy and France so they can finance investments in growth and jobs in parallel to implementing reforms. They must do this; otherwise not only unemployment will continue to grow but also anti-European nationalism.”
The European Commission signalled on 3 May 2013 that the bleak economic outlook allowed some scope for slowing the pace of austerity in the eurozone.
France, Spain and the Netherlands were all given leeway to meet their budget deficit reduction targets as a result.
In exchange, countries are expected to table structural reform plans to reduce their deficits in the long term.