German Finance Minister Christian Lindner rejected the idea of ​​new joint loans at the European Union level as a way to respond to the energy crisis facing the EU bloc, saying it would be cheaper for individuals. member states to borrow on their own, given the high interest rates at which the European Commission borrows.

“The financial advantage that the Commission and many member states once counted on for common European debt, as opposed to issuing debt on a national basis, no longer exists,” said Christian Lindner in an interview with the Financial Times.

Christian Lindner’s opposition to the idea of ​​new joint loans will fuel tensions with those member states who believe Germany has done too little to jointly respond to the energy crisis that threatens to plunge the eurozone economy into recession.

Olaf Scholz reluctantly accepted the idea of ​​capping gas prices in the EU, even if it would include numerous exceptions and preconditions

Officials in Berlin are already under fire for their decision to launch a unilateral €200 billion program to ease the burden of high energy costs on German households and businesses. Also, at the beginning of the month, German Chancellor Olaf Scholz reluctantly accepted the idea of ​​capping gas prices in the EU, even if it would include numerous exceptions and preconditions.

The energy crisis caused by a cut in Russian gas supplies has sparked fresh debate over the need for new joint EU borrowing after the EU bloc launched an unprecedented EU bond program that raised 800 billion euros and offered support to member states during the pandemic. . Recently, EC President Ursula von der Leyen emphasized the need to finance new cross-border energy infrastructure projects, given that the EU wants to accelerate the transition away from Russian gas and expand renewable capacity. The International Monetary Fund has come up with a proposal for the “fiscal capacity” of the EU, which will be financed by issuing joint bonds and new sources of income.

However, member states in the north of the continent remain skeptical of the idea of ​​new joint loans, pointing out that the funds raised during the pandemic came against the backdrop of an exceptional situation. German Finance Minister Christian Lindner was clearly against it. “We should not spread the idea of ​​new joint loans from the EU every time there is an opportunity, every time we need additional investment,” the German official said.

The cost at which the European Commission borrowed last year, when it began issuing bonds designed to fight the pandemic, was among the lowest in the eurozone.

For example, in June 2021, the EU executive issued ten-year bonds with a yield of 0.086%, lower than what investors required to buy ten-year bonds issued by France or Belgium, 0.171% and 0.146% respectively.

But in the meantime, local government borrowing costs have exceeded those of France or Belgium. The 10-year bond issued by the EU is currently yielding 2.89%, compared to 2.63% in France and 2.71% in Belgium.

Christian Lindner also criticized the Commission’s proposal to reform the rules of the Stability and Growth Pact. The EU executive is working on a reform that would allow member states to agree multi-year debt reduction plans for each country. The proposal would effectively give EU member states more freedom over the trajectories to follow to reduce their debt levels.

According to Lindner, “it is not reasonable to have individual agreements on the application of the rules of the Stability and Growth Pact, which are negotiated on a bilateral basis.” Confidence in the Pact stems from the fact that “the rules must be followed by everyone equally,” the German finance minister added.

Source: Agerpres