The finance ministers of Germany, Luxembourg, Austria, Switzerland and Liechtenstein on Monday made a joint appeal for a return to discipline in government spending and an end to an era of expansionary fiscal policy, according to Reuters.
Germany has long been a leading advocate for balanced budgets within the European Union, most famously during a series of sovereign debt crises a decade ago. Critics say an insistence on balanced budgets deepened economic downturns at the time.
“After a phase of very expansionary fiscal policy, we are now entering a phase in which we have to ensure more resilience again,” said Germany’s Finance Minister Christian Lindner after a meeting with his four counterparts in Aschau im Chiemgau, a village in Bavaria, in the south-east of Germany.
Lindner said an expansionary fiscal policy would also counteract the European Central Bank’s (ECB) efforts to fight inflation. This would make the tightening campaign to contain inflation longer, he said.
A joint declaration by the five ministers called for a “return to fiscal normality” after an era of expansive fiscal policies to combat the effects of the pandemic and the energy crisis.
“It is about creating room for manoeuvre for future crises,” said Austria’s Finance Minister Magnus Brunner.
Germany’s Lindner said it had become habit for the state to always rush to the rescue with borrowed money and that had to stop.
“Otherwise, Germany will have to raise taxes to finance the interest on the debts of the past. That would strangle the economy,” Lindner said.