By Jan Strupczewski
BRUSSELS (Reuters) - France and Germany clashed on Friday over how to reform the European Union's fiscal rules and both claimed they had the backing of many other EU governments in a dispute that is unlikely to be resolved before the end of the year.
The fiscal rules, called the Stability and Growth Pact, aim to prevent excessive borrowing by governments sharing the euro. But a surge in public debt caused by the pandemic and later the war in Ukraine forced a revision of the whole framework as the old rules become unrealistic.
At the heart of the dispute is whether there should be numerical benchmarks and automatic rules for all on annual debt reduction, or if each country should individually negotiate its debt cuts with the EU's executive arm, the European Commission.
"There is one real point of disagreement: must we have, yes or no, automatic and uniform rules in the Stability and Growth Pact? Our answer is clearly: no," French Finance Minister Bruno Le Maire said on entering talks of EU finance ministers on the subject in Luxembourg.
"We think that would be an economic and political mistake. We tried in the past to have automatic and uniform rules and it led to recession and economic hardship, it led to a loss of production and growth in Europe," Le Maire said, adding a large majority of countries shared France's view.
His German counterpart Christian Lindner held the opposite view.
"In our view, automatic rules are very OK and are needed, we need equal treatment, we need numerical benchmarks and we need a common safeguard and not too much leeway for the Commission to negotiate bilaterally with member states," Lindner said.
"We are not alone in this position, there are many member states that prefer numerical benchmarks," he said, referring to a letter signed by 11 EU countries, including Germany, that endorses Berlin's position.
The existing rules, which require governments to cut debt every year by 1/20th of the excess over 60% of GDP, are now suspended until the end of the year, but will come back into force from 2024 unless new ones are agreed by then.
"We wish to come to an agreement on new rules of the Stability and Growth Pact by the end of 2023 (...) I prefer to look at what unites us as Europeans rather than at what divides us," Le Maire said.