The Covid-19 blew up the budgetary doxa

Published on : 28/09/2020 – 10:26

The French government is preparing to present its draft budget for 2021. A budget placed under the seal of expenditure. The floodgates are wide open to finance the recovery, this recovery plan of 100 billion euros announced at the beginning of the month to help companies in particular. This year, for the first time in a long time, we will not talk about the budgetary criteria imposed by the European Union. They were suspended at the start of the health crisis.

Last March, the European Commission blew up the ” European Stability and Growth Pact Which requires States to vote balanced budgets.

The aim was to respond to the health crisis which requires a great deal of expenditure to support businesses and populations. Since the spring, over the amending budgets, the financial imbalances have widened. France is moving towards a public debt which greatly exceeds the GDP. Until 2025, it will be 120%, admitted Finance Minister Bruno Le Maire. This is double the ceiling imposed by European budgetary rules. The issue of debt and deficits once at the heart of debates is taking a back seat. It’s time to spend.

European neighbors are not left out

It can be argued that in France, even if budgetary rigor is constantly debated, it is never really applied. Even among our German neighbors, the dogma of austerity, resulting from the trauma of the crisis of the 1920s is abandoned for the moment. Last week Berlin approved a 2021 budget with new net debt of € 96.2 billion to finance the fight against the effects of the pandemic. The government had to suspend a constitutional rule to sideline this budget and it could continue next year. In total, in the euro zone, public debt amounts to 102% of GDP.

And for now, the European Union therefore supports this movement

Based on the constant that most states will be in recession and largely indebted and that uncertainties will continue to hang over next year, the Commission does not intend to put the budgetary rules back on the table. Not before 2022. She will study the issue next spring. Until then, the European Central Bank continues to help governments get into debt at historically low rates. Above all, the massive European recovery plan of 750 billion euros which, unthinkable, until now will be financed by common debt, must help States to make long-term investments in education, health, weather.

Are we going to talk about budgetary rigor again one day ?

Certainly, but not as long as the clouds continue to pile up over the heads of Europeans, who will have to face a new outbreak of Covid-19 in the weeks and months to come.

But we must not delude ourselves. Most governments keep these rules in mind, which were originally designed to maintain a certain balance between states. In Paris, it is specified that we are not forgetting the objectives of restoring public finances. But in Paris and Rome, calls are also made to review overly complex and unsuitable European budgetary rules, especially in times of economic crisis. Even the experts who advise the Commission find them unrealistic. But the debt is also a political question: when and who will repay it … It is certain that the vast and complex debate will sooner or later return to the table.

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