Show leniency on EU fiscal rules, says German MP

The EU should continue to suspend strict fiscal rules to help debt-mired countries like Italy until the pandemic is over, the new chairman of the German parliament’s powerful EU affairs committee told AFP Monday.

Anton Hofreiter, a senior Green party MP, said Rome in particular deserved leniency as it finds its feet again after the blows levelled by Covid-19.

That flexibility should also extend to countries making ambitious expenditures in climate protection, he added.

Asked how the EU should help struggling countries, Hofreiter replied, “by continuing to temporarily suspend the Stability Pact because we’re really in a very special crisis”.

“We don’t know how long the corona crisis will continue,” he said, sounding a more conciliatory note than new chancellor Olaf Scholz of the centre-left Social Democrats.

“Under (Prime Minister Mario) Draghi, Italy has done a lot of things well in recent months. No one has an interest in it sinking even deeper into an economic crisis.”

The European Union suspended its fiscal discipline rules in 2020, allowing eurozone members to boost their public spending in response to the pandemic.

Italy’s public debt soared to 155 percent of its GDP -- more than double the EU’s 60 percent ceiling -- and Brussels has expressed concern that it is still budgeting to spend too much this year.

‘Smart proposal’

Hofreiter said his party, junior partners in Germany’s ruling coalition along with the pro-business Free Democrats, said proposals for allowing greater investment in “green” projects were “very smart”. 

Nevertheless, he said, some of the planks of the bloc’s Stability and Growth Pact, which dictates rules on debt and public deficits, “stand in the way of the Green Deal”, which aims to make the EU climate neutral by 2050.

French President Emmanuel Macron, whose country holds the rotating EU presidency, has joined forces with like-minded leaders such as Draghi to urge Brussels to reform its fiscal rules to allow greater investment spending while still managing debt levels.

Scholz, however, has tacked closer to Angela Merkel’s previous course of enforcing at least long-term fiscal rectitude -- a potential source of friction in the government’s first 100 days.