Germany’s finance ministry firmly rejected proposals on new European Union joint debt on Thursday (26 January), saying such a move, backed by France and European Council President Charles Michel, was not needed and would send a wrong signal to markets.
“In times of rising interest rates and high inflation, the European Union must send out signals for fiscal stability, not for debt instruments,” the ministry said in a statement.
According to the ministry, issuing debt in this context would lead to a loss of confidence in international financial markets and would counteract the European Central Bank’s monetary policy tightening, which aims to tame inflation.
It also argued that there was no fiscal need for common debt. “Only a fraction of the funds made available by ‘Next Generation EU’ has been used,” the ministry said.
German Chancellor Olaf Scholz has made clear that he believes there is still a lot of untapped EU money – more than €200 billion – from the EU’s post-pandemic recovery fund that should be used first before any discussions on new funding.
Draft conclusions for an upcoming EU summit in February showed that leaders are to back new EU funding for the green tech industry to counterbalance subsidies in the United States and China, and will expect the EU executive Commission to come up with a plan for a European Sovereignty Fund to support investment.
However, EU officials were quick to play down the draft as going too far: In their current form, they would signal that Germany and other northern European countries are ready to drop objections to the EU jointly raising more money.