Tribune. The new German government is preparing to follow a European schedule of considerable scope. The Coalition Agreement has committed to carrying out the transformation of the European Union (EU) into a “federal State”. This would mean nothing less than the emergence of the United States of Europe. The contrast with the prudence of Angela Merkel’s policy is striking. Previous governments have successfully managed the EU through a series of crises, but have never proposed a proactive schedule for long-term reforms for Europe.
The new Chancellor, Olaf Scholz, had sang the melody of the “Hamiltonian moment” while he was still Minister of Finance of M Me Merkel, about the Next Generation EU program (NGGEU) , voluminous budget of the European Union designed in response to the economic collapse caused by the pandemic. Speaking with enthusiasm before the German Parliament, he stated that it was the beginning of a European budgetary union – remarkable statement by a German finance minister, and very significant of how In Germany, the debate is no longer subject to the domination of hawks which, for more than a decade, accused our European fiscal career partners. This evolution is added to a more general reorientation of the German debate on economic policy which, as shown by the recent rapprochement between the Greens and the Liberals of the FPD favorable to the market, seems more and more to exceed the old market oppositions-state Economics or growth-redistribution.
Although it is fiercely pro-EU, it should not be expected, however, that the new government operates a turn to 180 0 on budgetary and economic policies. Mr. Scholz is not a case-neck, and the Liberals consider themselves the rigorous element of the tripartite coalition, which preserves the traditional ordotal heritage. However, with this unprecedented mix of reforms and remains of budgetary prudence, Germany could be able to shape the European agenda and strengthen the Franco-German axis around four priorities.
Non-anticipated risks
First, the reform of the current fiscal rules provides an opportunity to establish a new balance between debt sustainability and flexibility for stabilization. Mr. Scholz welcomed the flexibility of the Stability and Growth Pact, but at the same time recognizes the need for budget rules that promote growth. In truth, as recently written a group of European economists and lawyers, fiscal sustainability remains essential, but the rules have become obsolete in a post-Covid-19 world where the average levels of indebtedness such as differences of Levels of indebtedness between Member States have increased. Ambitious economic reforms are legally feasible without upsetting the foundations of the budgetary legal framework. It would be enough to give up the “unique size” approach of the budget rules, to give greater priority to debt sustainability, and to authorize differentiated debt reduction goals. Such reforms would take into account the heterogeneity of budget areas across Europe, while preserving fiscal sustainability.
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