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It’s about money! While the German government is arguing about the draft budget for 2025, it is worth taking a look at Brussels. In his feature, János Allenbach-Ammann explains which criteria the German budget must meet from the perspective of EU debt rules.
Money is also fought over beyond Europe’s borders. A new global climate financing target is to be agreed at COP29 in Baku. The news inform you about the industrialized countries’ demands and Europe’s position. First things first: the fronts are still hardened in the dispute over the inclusion of new donor countries for climate financing.
Yesterday, Eurostat announced the economic growth of the eurozone. The good news: GDP is growing, albeit weakly. The bad news: Germany continues to act as a brake on growth.
I wish you many new insights.
The big sticking point in the 2025 draft budget, which the traffic light coalition is currently arguing about, is the debt brake. But this budget period is also the first time that the new EU debt rules apply, which Germany would have to follow – debt brake or not.
In last week’s ZDF summer interview, Federal Finance Minister Christian Lindner reminded viewers of the European stability rules. “Germany cannot simply run up as much debt as some people want. I am firmly convinced that all the billion-euro programs and special funds that are demanded contradict European law,” said Lindner.
However, the EU debt rules differ from the debt brake in the German constitution in two relevant aspects, among others:
The maximum value for the budget deficit (3 percent of GDP) stipulated in the EU treaties still applies. Likewise, according to Article 126 of the TFEU, debt should not exceed 60 percent of GDP or – if the value is higher – should be “sufficiently diminishing.”
What is new about the EU debt rules is above all how this second criterion is operationalized. Member states that, like Germany, are above the 60 percent reference value must present a multi-annual net expenditure path that should lead to a reduction in the debt level in relation to economic output in the medium term.
The net expenditure path must fulfill a number of criteria to ensure that the debt level actually falls. According to the economic policy think tank Bruegel, which has examined the consequences of the EU debt rules for all member states, the result of the debt sustainability analysis would be relevant for Germany. This sets Germany a slight reduction in the structural primary deficit. This is the cyclically adjusted deficit excluding interest expenses.
The extent to which the structural primary deficit must be reduced depends on whether Germany intends to submit a four-year or seven-year financial plan to the EU in the fall. In the case of a four-year financial plan, Germany would have to reduce its structural primary deficit by a total of 0.4 percent of GDP or 0.11 percent of GDP per year, according to Bruegel calculations. In the case of a seven-year financial plan, it would only be around 0.1 percent of GDP in total – or 0.02 percent of GDP per year.
In absolute figures, this means that Germany will have to save between one and four billion euros in 2025 compared to 2024 or generate corresponding additional revenue – all levels of government combined. “The EU debt rules only require Germany to achieve very manageable budget consolidation,” says Zsolt Darvas, Senior Research Fellow at Bruegel and co-responsible for the calculations.
Moreover, according to the EU Commission’s forecasts, these are figures that Germany would achieve even without changing its budgetary policy. In its May forecast, the Commission assumes that Germany’s structural primary balance will improve by 0.22 percent of GDP in the coming year.
The EU Commission is actually hoping that private and public players in Germany will invest and consume more. Germany is currently experiencing a “macroeconomic imbalance.” This is according to a report published by the Commission as part of the European Semester in June. A more spending-friendly Germany would also boost the economies of other EU countries without burdening their debt balances.
However, it is questionable whether this macroeconomic imbalance in Germany can be remedied in line with EU debt rules. Finance Minister Lindner fears the signal that Germany would send if it were to break the EU debt rules that it has previously campaigned for. “That would be an invitation to others in Europe to take on more debt again than is sustainable,” he said in the ZDF interview.
Hans Henri Kluge’s first term of office as Regional Director for Europe at the World Health Organization (WHO) could hardly have been more eventful. The Belgian doctor took up his post on February 1, 2020, and the coronavirus pandemic spread rapidly just a short time later. As soon as the worst was over, Russia launched a war of aggression against Ukraine – and created a new health challenge. The war in Gaza also demands Kluge’s attention, who is also responsible for Israel in his role. “Four years ago, I took over a quiet region, now it’s in flames,” he says.
When working in the crisis regions, his previous professional positions with the organization Doctors Without Borders, for which he traveled to some of the “most challenging regions in the world,” are helping the 55-year-old. He served in Somalia and Libya during the civil war and was responsible for tuberculosis controls in former gulags in Siberia. He describes his experiences there as the most horrific he has ever had.
This work paved the way for Hans Henri Kluge to join the WHO, where he worked in Moscow and Myanmar in the following years. After a ten-year term as Head of the Department of Health Systems and Public Health, he finally became Regional Director. He is not only responsible for the 27 EU states but for a total of 53 countries “from Greenland to Vladivostok.” On his travels to the countries in the region, he holds talks with health ministers, governments and people in the field with the aim of “keeping health at the top of the political agenda.”
Despite the difficult last few years, Kluge sees steps forward in the health sector: he describes digitalization since the outbreak of the pandemic as a “revolution,” which is particularly evident in telemedicine. In addition, many EU countries have recognized the need for cooperation with external partners. “The majority have now understood that they will never be safe without their neighbors,” says Kluge. They have thus reduced their dependence on China and India and increasingly built regional resilience. The WHO is supporting these efforts by setting up the Pan-European Network of Disease Control.
Nevertheless, Kluge does not see Europe and the rest of the region in a good position. He says: “To be honest, I don’t think Europe is sufficiently prepared for future crises.” The reasons for this are varied: in most countries, preventive healthcare still has a low priority, which has actually continued to decline despite the devastating consequences of the pandemic. One example of this is the cut in the EU for Health program, in which €1 billion is being used to support Ukraine.
Less investment in healthcare systems could lead to socio-economic aspects deciding on treatment – and lead to “further mistrust in healthcare institutions” in the future. Kluge does not expect a short-term improvement in the EU. “The issue of health will receive even less attention in the new Commission,” he says.
The challenges have never been greater. In addition to a growing number of patients with chronic illnesses such as cancer, diabetes or cardiovascular complaints, more and more people are struggling with mental illness. “Since I have been in office, we have unfortunately seen a sharp deterioration in mental health,” says Kluge. According to Kluge, one in seven Europeans currently live with mental health problems. With initiatives such as the Pan-European Mental Health Coalition, the WHO Europe wants to achieve “that every hospital offers contact points for mental health” to establish the matter in primary medical care.
Due to the critical situation of healthcare systems in the region, Kluge is calling for a “paradigm shift.” He says: “We often talk about the resilience of the healthcare system, but we should be talking much more about the resilience of people.” He calls for a “path to a healthier lifestyle” in order to reduce the demands on healthcare systems. Otherwise, they would collapse in the future. Jasper Bennink
It’s about money! While the German government is arguing about the draft budget for 2025, it is worth taking a look at Brussels. In his feature, János Allenbach-Ammann explains which criteria the German budget must meet from the perspective of EU debt rules.
Money is also fought over beyond Europe’s borders. A new global climate financing target is to be agreed at COP29 in Baku. The news inform you about the industrialized countries’ demands and Europe’s position. First things first: the fronts are still hardened in the dispute over the inclusion of new donor countries for climate financing.
Yesterday, Eurostat announced the economic growth of the eurozone. The good news: GDP is growing, albeit weakly. The bad news: Germany continues to act as a brake on growth.
I wish you many new insights.
The big sticking point in the 2025 draft budget, which the traffic light coalition is currently arguing about, is the debt brake. But this budget period is also the first time that the new EU debt rules apply, which Germany would have to follow – debt brake or not.
In last week’s ZDF summer interview, Federal Finance Minister Christian Lindner reminded viewers of the European stability rules. “Germany cannot simply run up as much debt as some people want. I am firmly convinced that all the billion-euro programs and special funds that are demanded contradict European law,” said Lindner.
However, the EU debt rules differ from the debt brake in the German constitution in two relevant aspects, among others:
The maximum value for the budget deficit (3 percent of GDP) stipulated in the EU treaties still applies. Likewise, according to Article 126 of the TFEU, debt should not exceed 60 percent of GDP or – if the value is higher – should be “sufficiently diminishing.”
What is new about the EU debt rules is above all how this second criterion is operationalized. Member states that, like Germany, are above the 60 percent reference value must present a multi-annual net expenditure path that should lead to a reduction in the debt level in relation to economic output in the medium term.
The net expenditure path must fulfill a number of criteria to ensure that the debt level actually falls. According to the economic policy think tank Bruegel, which has examined the consequences of the EU debt rules for all member states, the result of the debt sustainability analysis would be relevant for Germany. This sets Germany a slight reduction in the structural primary deficit. This is the cyclically adjusted deficit excluding interest expenses.
The extent to which the structural primary deficit must be reduced depends on whether Germany intends to submit a four-year or seven-year financial plan to the EU in the fall. In the case of a four-year financial plan, Germany would have to reduce its structural primary deficit by a total of 0.4 percent of GDP or 0.11 percent of GDP per year, according to Bruegel calculations. In the case of a seven-year financial plan, it would only be around 0.1 percent of GDP in total – or 0.02 percent of GDP per year.
In absolute figures, this means that Germany will have to save between one and four billion euros in 2025 compared to 2024 or generate corresponding additional revenue – all levels of government combined. “The EU debt rules only require Germany to achieve very manageable budget consolidation,” says Zsolt Darvas, Senior Research Fellow at Bruegel and co-responsible for the calculations.
Moreover, according to the EU Commission’s forecasts, these are figures that Germany would achieve even without changing its budgetary policy. In its May forecast, the Commission assumes that Germany’s structural primary balance will improve by 0.22 percent of GDP in the coming year.
The EU Commission is actually hoping that private and public players in Germany will invest and consume more. Germany is currently experiencing a “macroeconomic imbalance.” This is according to a report published by the Commission as part of the European Semester in June. A more spending-friendly Germany would also boost the economies of other EU countries without burdening their debt balances.
However, it is questionable whether this macroeconomic imbalance in Germany can be remedied in line with EU debt rules. Finance Minister Lindner fears the signal that Germany would send if it were to break the EU debt rules that it has previously campaigned for. “That would be an invitation to others in Europe to take on more debt again than is sustainable,” he said in the ZDF interview.
Hans Henri Kluge’s first term of office as Regional Director for Europe at the World Health Organization (WHO) could hardly have been more eventful. The Belgian doctor took up his post on February 1, 2020, and the coronavirus pandemic spread rapidly just a short time later. As soon as the worst was over, Russia launched a war of aggression against Ukraine – and created a new health challenge. The war in Gaza also demands Kluge’s attention, who is also responsible for Israel in his role. “Four years ago, I took over a quiet region, now it’s in flames,” he says.
When working in the crisis regions, his previous professional positions with the organization Doctors Without Borders, for which he traveled to some of the “most challenging regions in the world,” are helping the 55-year-old. He served in Somalia and Libya during the civil war and was responsible for tuberculosis controls in former gulags in Siberia. He describes his experiences there as the most horrific he has ever had.
This work paved the way for Hans Henri Kluge to join the WHO, where he worked in Moscow and Myanmar in the following years. After a ten-year term as Head of the Department of Health Systems and Public Health, he finally became Regional Director. He is not only responsible for the 27 EU states but for a total of 53 countries “from Greenland to Vladivostok.” On his travels to the countries in the region, he holds talks with health ministers, governments and people in the field with the aim of “keeping health at the top of the political agenda.”
Despite the difficult last few years, Kluge sees steps forward in the health sector: he describes digitalization since the outbreak of the pandemic as a “revolution,” which is particularly evident in telemedicine. In addition, many EU countries have recognized the need for cooperation with external partners. “The majority have now understood that they will never be safe without their neighbors,” says Kluge. They have thus reduced their dependence on China and India and increasingly built regional resilience. The WHO is supporting these efforts by setting up the Pan-European Network of Disease Control.
Nevertheless, Kluge does not see Europe and the rest of the region in a good position. He says: “To be honest, I don’t think Europe is sufficiently prepared for future crises.” The reasons for this are varied: in most countries, preventive healthcare still has a low priority, which has actually continued to decline despite the devastating consequences of the pandemic. One example of this is the cut in the EU for Health program, in which €1 billion is being used to support Ukraine.
Less investment in healthcare systems could lead to socio-economic aspects deciding on treatment – and lead to “further mistrust in healthcare institutions” in the future. Kluge does not expect a short-term improvement in the EU. “The issue of health will receive even less attention in the new Commission,” he says.
The challenges have never been greater. In addition to a growing number of patients with chronic illnesses such as cancer, diabetes or cardiovascular complaints, more and more people are struggling with mental illness. “Since I have been in office, we have unfortunately seen a sharp deterioration in mental health,” says Kluge. According to Kluge, one in seven Europeans currently live with mental health problems. With initiatives such as the Pan-European Mental Health Coalition, the WHO Europe wants to achieve “that every hospital offers contact points for mental health” to establish the matter in primary medical care.
Due to the critical situation of healthcare systems in the region, Kluge is calling for a “paradigm shift.” He says: “We often talk about the resilience of the healthcare system, but we should be talking much more about the resilience of people.” He calls for a “path to a healthier lifestyle” in order to reduce the demands on healthcare systems. Otherwise, they would collapse in the future. Jasper Bennink