Christian Lindner (R), German Minister of Finance, and his counterpart from Austria, Magnus Brunner hold a press conference at the Federal Ministry of Finance.

Credit: Wolfgang Kumm/dpa

Germany and Austria joined forces in calling on European nations to reduce their public debt as the countries’ finance ministers met in Berlin on Monday.

“It is the firm fundamental conviction that we need to see falling government debt ratios in Europe again,” Germany’s Christian Lindner said ahead of talks with his Austrian counterpart, Magnus Brunner.

“Debt must be reduced so that fiscal stability is also secured and we maintain the central banks’ ability to act,” Lindner added.

At the same time, he also stressed the importance of investments in the competitiveness of European economies and in clean technology. Although that focuses on private capital, “the states also have a responsibility here,” the German minister said.

Brunner expressed support for simplifying and enforcing more effectively the European Union’s debt rules, but argued that the Stability and Growth Pact already provided sufficient flexibility.

France and other countries have sparked discussions in Brussels on whether to reform the rules. The Stability and Growth Pact stipulates that countries take on no more than 60% of their economic output in debt.

The pact was suspended during the pandemic. It is supposed to come back into force in 2023.

According to the European Commission, the debt ratio in the EU is currently around 92%.

However, there are big differences between member states: Italy, for example, has taken on debt of around 155% of its gross domestic product, the Netherlands around 57%.

Highly indebted countries fear that a rapid return to the rules could damage their economic recovery.

Credit: Wolfgang Kumm/dpa