Scholz: Deal on new EU debt rules to arrive ‘shortly’

EU countries are close to a reform agreeing on the bloc’s controversial debt rules, German Chancellor Olaf Scholz said after meeting Italian counterpart Giorgia Meloni, who remained more guarded about the prospect of a deal, on Wednesday.

EU members are negotiating changes to the EU’s strict fiscal rules, which are supposed to enter into force again next year following a COVID-induced suspension. Italy has the second-highest debt burden in the EU and is therefore keen to loosen rigid restrictions on public debt and budgets, while German officials back tight oversight.

However, Scholz (SPD/S&D) was confident that a resolution of the impasse was imminent after he and Meloni discussed the matter at a joint session of the German and Italian cabinets in Berlin.

“I expect that we will reach an agreement shortly,” Scholz told reporters, adding that the solution would take into account stability but would not force “any country into an austerity programme”.

It remained open if the assessment was shared by the Italian prime minister, as the details that have emerged from the negotiations so far point to a deal closer to Germany’s preference for stricter rules.

While Meloni agreed that negotiations were making “progress daily”, she cautioned that they were “not easy”.

What we know about the new fiscal rules

EU finance ministers are optimistic that they have come closer to an agreement on fiscal rules. So what do we know about what they will look like, and what remains open for discussion?

EU debt rules are among the prominent sticking points in the relations between Italy and Germany, with a simmering row over the registration of irregular migrants being another.

Both topics remained largely sidelined at the cabinet meeting, which was dedicated to strengthening the long-term collaboration between the two countries. Scholz emphasised that most of the progress on debt rules was achieved in a meeting of EU finance ministers earlier this month.

‘Things work quite well’

The relationship between Italy and Germany has been mostly harmonious recently despite the advent of Meloni and her Fratelli d’Italia party (ECR), often dubbed ‘post-fascist’ by German media.

Asked by Euractiv, a government spokesperson did not see Meloni’s ideological grounding as a problem, stressing that the chancellor was not “classifying [the political leanings] of other leaders”.

Indeed, Scholz, a Social Democrat, has moved closer towards Italy’s hard-line position in areas such as migration, while Meloni has shown pragmatism in her foreign policy, which has seen the two governments link up repeatedly on the European stage despite occasional disagreements over the details.

“I believe Chancellor Scholz is very reliable, and things work quite well between us because we speak clearly and openly with each other,” Meloni said on Wednesday as both leaders emphasised their alignment in multiple areas.

The joint cabinet meeting – the first of its kind since 2016 – was dedicated to strengthening the bond between the two countries as Scholz and Meloni signed a so-called German-Italian ‘Action Plan’.

While the plan had been launched under the reign of Mario Draghi in 2021, its seamless conclusion under Meloni underlined the rapport between her and Scholz.

The agreement, a friendship treaty in all but name, foresees closer collaboration between the two countries in technology, competition and social cohesion, climate change, global partnerships, and European and cultural relations. The countries also committed to constructing a hydrogen pipeline through the Alps.

(Nick Alipour | Euractiv.de)