European debt and deficit criteria: Villeroy de Galhau for a status quo

Even before the question becomes a European debate, it is a Franco-French debate which opens: the governor of the Bank of France, François Villeroy de Galhau advocates the status quo concerning the criteria of debt and deficit of the Pact of European stability. However, the Minister of the Economy Bruno Le Maire launched the idea of ​​a rewrite …

Stability Pact: rewrite or maintain?

It all started on Wednesday April 14, 2021: Bruno Le Maire, Minister of the Economy, said on RMC that the criteria of the Stability Pact, which sets the maximum public deficit at 3% of GDP and debt at 60% of GDP, were exceeded. If he does not want a higher deficit, he calls for the debt criterion to be revised, upwards, in particular because of the health crisis which has caused the debt of all European countries to explode. , and in particular that of France.

It should be noted that the minister is only repeating, a year and a half later, the umpteenth criticism of these criteria from the President of the Republic: Emmanuel Macron, in November 2019, before the health and economic crisis, told The Economist that “ the debate around the 3% in national budgets, and 1% of the European budget, is a debate from another century “.

But the governor of the Banque de France, François Villeroy de Galhau, is of a completely different opinion.

Changes in the rules, yes, but not those requested by the government

Bruno Le Maire had nevertheless specified that the question of changing the Stability Pact would have been brought to Brussels on time, the health crisis not yet being resolved. But the mere idea of ​​raising this issue prompted the Governor of the Banque de France to react.

On Thursday April 15, 2021, François Villeroy de Galhau proposed, on the contrary, that these objectives be maintained: “ contrary to some recent proposals, in my opinion, we should not abandon the numerical objectives which are enshrined in the treaty: they are useful anchors “. The 60% debt, for example, could be a goal ” for long-term debt “.

A change, however, would be welcome, according to the Governor of the BdF: the obligation to reduce debt by 5% per year for countries exceeding 60%, countries of which France is a part. A ruler ” too demanding “, According to him, who” should be adapted ”, In particular in view of the new macroeconomic situation linked to Covid-19.