The US finance head chastised Von der Leyen’s Commission for its “inflexible” recovery plan.
URSULA VON DER LEYEN has been cautioned that her Commission’s centerpiece recovery plan does not provide the flexibility needed for EU member states to recover from the pandemic.
The warning came from US Treasury Secretary Janet Yellen, who questioned whether the eurozone’s strict spending and deficit restrictions should be reinstated. “It’s important to think about whether or not [the rules]create the flexibility that countries in the EU need in order to be able to address cyclical developments,” the US finance chief said, aligning with southern EU states, which are already at odds with northern and more frugal countries in the bloc.
“We’ve been in a period of really low interest rates.
“I believe we will stay there, albeit that has to be seen, but is a 60% debt-to-GDP ratio the proper metric?
“On the fiscal side, we did far too little.
“Monetary policy had reached a point where it couldn’t do much more, and fiscal stimulus was required.
“It took a long time for us to get back on our feet.
“We should not withdraw budgetary assistance too quickly.”
The problem is already dividing the EU, prompting Commissioner Paolo Gentiloni to warn that the divide between northern and southern states will widen.
He said that taking this risk was worth it in order to reach an agreement.
“The possibility of disparities exists — you might even argue that the risk is greater if the rules debate is not opened,” he said.
And the debate is already underway, with both parties planning how to best put their foot down on the subject.
Last month, Austrian Chancellor Sebastian Kurz attempted to assemble a group of EU dissident countries to avoid a relaxing of the bloc’s budget rules when they are reviewed later this year and in 2022, urging a greater focus on debt reduction.
In a letter to EU peers, Austrian Finance Minister Gernot Bluemel stated that the rules were crucial in lowering debt-to-GDP ratios across the EU following the sovereign debt crisis.
Along with Sweden, Denmark, and Finland, the Netherlands, Germany, the Baltics, Slovakia, and the Czech Republic, Austria is part of a group of EU countries known for their thrift.
“A significant lesson after the financial crisis was the necessity to lower high debt ratios and strengthen fiscal sustainability in order,” Mr Bluemel stated in the letter.