German Chancellor calls for reducing public debt

German Chancellor Olaf Scholz stressed that the “unlimited increase in debt is not a good response” to the investment needs in the economy.

“We want to make growth and investment possible to ensure the transformation of our economies. But an unlimited increase in debt would not be a good response,” Scholz told a conference of the European Confederation of Trade Unions that will bring together some 40 trade union representatives from Tuesday to Thursday.

Today, Tuesday, trade unions expressed their fears about the return of austerity in the European Union budget after years of almost unlimited spending to confront the outbreak of Covid-19, the energy crisis and the repercussions of the Ukrainian-Russian war.

“We cannot go back to the budgetary rules that existed before the crisis,” in the face of “the investment needs for a fair environmental transition,” said Esther Lynch, general secretary of the European Confederation of Trade Unions, in an interview with Agence France-Presse.

For his part, Scholz said, “We need an agreement on how we can reduce the current high levels of debt again” so that “the citizens have certainty that their country is able to act in times of crisis.”

The Stability and Growth Pact, which requires EU members to have budget deficits of less than 3% and public debt of less than 60% of GDP, has been suspended since 2020 to counter the COVID-19 outbreak. It is scheduled to be reactivated at the end of 2023.

However, at the end of April, the European Commission proposed an update to budget rules to give member states more flexibility.

But the project “will lead to a return to austerity and prevent climate action,” according to the European Confederation of Trade Unions.

Some European countries, including Germany, currently reject this reform because, according to the German Finance Minister, they reject any “weakening of the stability and growth pact,” even if Berlin has spent generously in recent years to confront crises.

Speaking of negotiations to update the budget rules, Scholz said Tuesday, “We need an agreement that is realistic, binding and does not burden member states too much.”

The debts of the European Union countries increased after the 2008 financial crisis, then with the onset of the Covid-19 crisis in 2020, and today they amount to 150% of GDP in Italy and 110% in France, compared to 66.4% in Germany.