French Finance Minister Bruno Le Maire is convinced that the European Union has changed for the better during the Corona crisis. A few years ago there was an awkward silence at the table when he advocated for large-scale investments among his colleagues. And the word “common debts” should not be used. Now, he says, everyone has recognized the value of breaking taboos if necessary.
The crisis as an opportunity: By suspending European stability criteria and a massive reconstruction program, European states have avoided a lasting recession and mass unemployment. France even expects growth of more than six percent this year. Over the next year, all 27 countries are expected to return to the economic output they had before the pandemic. “This should be a source of pride for Europe,” said Le Maire.
The Mayor was the guest of the meeting of the Eurogroup and the “Economic and Financial Affairs” Council in Brussels on Monday and Tuesday. The message he sent on Tuesday at his press conference was addressed mainly to his country: “Europe is the best protection for states!” It is to be understood as a declaration of war on the nationalists who challenge its president Emmanuel Macron in the electoral campaign. But Le Maire is not the only one to have the impression that finance ministers are unusually in agreement on the positive effectiveness of European policy. European Commissioner Paolo Gentiloni, responsible for the economy, also referred to “many proud faces around the table”. It remains to be seen what follows. More debt?
On this issue, all eyes in Brussels are on the coalition negotiations in Berlin. Austrian Finance Minister Gernot Blümel has made it clear that he wants Christian Lindner, President of the FDP, as a new colleague – in the hope that he will again strengthen German solidarity in the EU. In addition to the new pride, there are apparently a lot of old prejudices in the EU. The Mayor, on the other hand, denies that the old divide between more stable and more growth-oriented countries still exists. He praised Franco-German cooperation during the Corona crisis, which bridged all the gaps and made the reconstruction fund possible with 800 billion euros. This partnership will also continue under Chancellor Olaf Scholz. Ultimately, he says, everyone is aware that Europe needs growth and must continue to invest heavily – in order to finance the transition to climate neutrality; but also become independent from China and the USA.
The European Stability and Growth Pact provides the national framework for public investment. The Commission initiated a reform two weeks ago, and finance ministers discussed it for the first time. The rules of sound financial management are likely to come into force again in early 2023, but the targets – a budget deficit of no more than 3% of economic output with a debt level of no more than 60% – appear to have become unachievable. . for many countries. The Mayor indicated that he considered parts of the pact as “obsolete”. It advocates that each state pursue its own realistic fiscal consolidation targets. He is also one of the proponents of the idea of deducting “green” investments from debt. The debate will accelerate under the French presidency in the first half of 2022.
For now, finance ministers want to focus on the current dangers threatening their economies. Inflation will be more persistent than initially feared, mainly driven by energy prices, everyone agrees. This is why the Mayor took advantage of the meetings in Brussels to promote the reform of the energy markets. Among other things, he proposed an “automatic price stabilizer”: energy producers who make high profits because of the increase in prices should pass them on to their customers. As an example, he cited EDF, the majority state-owned French energy company. “If the price of gas is 150 euros and an electricity supplier has production costs of only 50 euros, as is the case with EDF, high profits are automatically generated. Private customers and businesses should benefit from this.
As serious as these problems are, says Bruno Le Maire: a year and a half ago, when the coronavirus paralyzed all of Europe, they would have been considered luxury problems.