ECB’s Nagel Criticises Weakening of EU Fiscal Rules

25 May 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Thursday that the EU’s economic governance framework should not be weakened, and criticised the Commission’s proposal for reform of the EU’s fiscal rules.

Speaking at an annual meeting of KPMG partners in Obbürgen, Switzerland, Nagel, who heads the Deutsche Bundesbank, said that he was ‘concerned about whether a reliable reduction of debt ratios will be achieved’ within the framework proposed by the Commission.

The Bundesbank had a ‘fundamental scepticism’ towards the proposals, he said. The draft rules were ‘difficult to reconcile with the goal of universally applicable, transparent, and binding fiscal rules for all member states.’

Furthermore, the negotiation process proposed by the Commission was ‘likely to lead to significant fiscal discretion’, he said. Budgetary surveillance ‘would be highly complex, and the analysis of fiscal sustainability would heavily depend on assumptions about future economic developments.’

The rules could lead to fiscal objectives becoming ‘intertwined with other policy goals.’, he said.

The ECB had ‘taken decisive action’ against its fight against inflation, he said, and would ‘continue on this monetary tightening path’.