EU lawmakers approve overhaul of budget rules ( p.dw.com ) Englisch

geissi , vor 2 Monaten

Hey, I've seen this one!

misk , vor 2 Monaten

New rules sound like old rules. "Old" EU on average went above 60% right after signing original treaties without any serious issues so it seems like it was very flexible already too.

The worrying thing is that this doesn't even line up with modern economics / science. 60/3 limit is entirely arbitrary and based on 3 decades old wishful thinking.

HowRu68 OP , vor 2 Monaten

Afaik, there ECB was and is trying to lower /cap inflation. The logic being that the (pandemic) inflation ( and interest) rate was too high , and to avoid a living cost/ wage spiral.

There will be many more expendirures to come due to, the energy transition, failing international trade, political instability, wars, climate catastrophe, migration, new virus problems, etc. If I were them, I'd up my budget reservation for " unforseen costs " to a 20% to be safe. It doesn't hurt to build some fat before difficult years.

But, how do modern economics see this?

misk , vor 2 Monaten

You're right that it's preferable to lower debt when conditions are right but we're exact opposite situation. Green transformation, military spending, recovery after pandemic are critical expenditures. Green transformation is an investment that's going to pay for itself so artificial ceiling is just dumb. Without military buildup everything could be for nothing.

Neokeynsian or MMT economics would say that debt ceiling should reflect multiple factors but the currency you're borrowing in is a pretty important. We've also learned time and time again that austerity destroys economies, livelihoods and benefits those that are already wealthy. You have to invest to recover unless you plan on closing down the shop entirely.

For example, Polish debt is at ~50% of GDP at the moment (and that is after being much lower prior to pandemic). 80% of that debt is in PLN so were essentially borrowing from ourselves and repaying ourselves. Yet it's becoming a big deal that our temporary military expenditures are pushing us over 3% yearly limit. The whole policy is divorced from reality and kneecaps European economies. One of economists I follow calls it financial anorexia.

HowRu68 OP , vor 2 Monaten (Bearbeitet vor 2 Monaten)

Tbx for sharing MMT economics, sounds reasonable enough. I'm no economic expert btw ;)

For sure I agree that in these time, major Investments are the only reasonable way forward, especially now. And, like you said, it's now or never.

Add NB: The viewpoint of more domestic spending is also adhered by Mario Draghi, as seen per his speech recently. (Link Speech multilingual )

At the same time, as long as we remain critical to these gvement expenditures, thus procurement, methods and goals, and watch out for corruption, mismanagement, incorrect allocations etc, we should be ok.

Besides our own immediate motives, we don't live in an isolated world; problem being that in our strategic choices as EU & memberstates we must consider the times & geopolitical tides. We must consider the actions of surrounding superpowers ( superstates and superconglomerates) ; which aren't in free-trade; are being creative by falsifying economic data, or stealing IP, have been influencing the market malevolently; are extremely subsidising their own products, but issuing tariffs to imports. Also, unlike the US ,which can issue extra" free "money, we as EU cannot.
I surely hope, that the EU guidelines, offer more choices and leeway then the old ones. For example, there's been the internal discussion of issuing EU bonds for specific goals. They are establishing and expanding funds, for future investments. How that will workout as to membership loan/GDP ratio, depends on then chosen configuration, I reckon.