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“A European race to see who helps their people the most”

WELT meets the Austrian Finance Minister Magnus Brunner a few hours before the meeting of the finance ministers of the euro zone.

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“A European race to see who helps their people the most”

WELT meets the Austrian Finance Minister Magnus Brunner a few hours before the meeting of the finance ministers of the euro zone. From Brussels he flies on to the COP27 climate conference in Sharm El-Sheikh in Egypt. Climate, corona, war, energy shortages and inflation - the crises have accompanied the ÖVP politician since the beginning of his term in December. In an interview with WELT, he warns against giving up sound financial policy in the current mood of crisis. Only orderly state finances secured the financial leeway in the next crisis.

WORLD: On Wednesday, EU Economic Commissioner Paolo Gentiloni will make proposals for reforming the debt rules for the euro zone. What are the red lines for Austria?

Magnus Brunner: Above all, the existing limits must continue to apply. The annual new debt must not be higher than three percent and the total debt must not be higher than 60 percent. These values ​​are important for orientation so that it is clear in which direction public finances must move. And both goals have proven themselves. I am glad that the Commission does not seem to want to touch either value.

WORLD: However, they have been torn again and again in the past.

Brunner: You are absolutely right. Therefore, the rules must not be relaxed any further. I understand a certain flexibility, but public finances must be stable and sustainable over the long term. We also have a very specific proposal as to how it can be possible to deviate from the budgetary targets in the short term. This could work like a working time account: if a government incurs more debt than allowed in one year, it has to compensate for it in the coming year. We have such control accounts for the public budget in Austria and also recommend this to our EU partners.

WORLD: The federal government could have a budget deficit of four percent of gross domestic product this year and thus more than the prescribed three percent. However, the deficit should then only amount to a maximum of two percent in the coming year to compensate.

Bruner: Right. Of course you have to talk about the exact form, but it would be a mechanism with which we can maintain the goals and still have a certain flexibility.

WORLD: Do you have supporters for this idea?

Brunner: I think so. The initial reactions of my counterparts were positive. Now we will see what further discussions bring.

WORLD: However, the most beautiful rules are useless if they are not enforced.

Brunner: We are also committed to that. The rules must be enforceable and consistently enforced. In the future, the Commission wants to agree bilateral plans for reducing their debt with member states that are particularly heavily indebted. That is all well and good, but clear guidelines, procedures and any sanctions must be agreed upon. We will not accept vague qualitative assessments. And these negotiations between the Commission and states must be transparent. It must be clear who talked to each other, what was discussed and what was agreed. To put it mildly, there is still room for improvement at EU level when it comes to transparency.

WORLD: The fact that the Commission wants to agree individual plans for reducing their debt with the affected member states in the future is generally interpreted as a relaxation of the debt rules. Why couldn't Austria, Germany and other fiscally more conservative countries prevail in Brussels?

Brunner: Of course, we first have to see what concrete proposals the Commission is making. But times have obviously changed. Corona, war, inflation, energy shortages - we are going through multiple crises and the permanent exceptional situation has ensured that the standards have shifted. However, the current crisis situation must not obscure our view of the future.

There will also be tasks in the future for which we must prepare. And that's why we have to make sure now that there are clear rules again after the current challenges. We must not just stare at the current crisis situation, we must emerge from these crises and return to sustainable budgets in the medium and long term. This is not an end in itself, but is necessary in order to prepare for the future. Solid state finances are important in order to have the leeway to be able to react.

WORLD: States that do not have this leeway are instead demanding new common debts in the EU.

Brunner: We reject that and that can't be a solution either. We also see that we need this scope not only at national but also at European level. In the fight against high inflation, the ECB cannot raise interest rates as vigorously as it would like at the moment because it has to take countries with high debts into account. Without this restriction, the ECB could certainly act more clearly, confidently and quickly.

WORLD: The strongest inflation drivers are energy prices. In your opinion, is the EU doing enough in the energy crisis?

Brunner: Well, if I want to put it positively, I would say there has been movement in the last few weeks. We are now discussing things that the European level did not address or even tackle a few months ago. Nevertheless, I expect more initiative from the Commission in the energy crisis, above all more concrete proposals that can also be implemented.

WORLD: What do you mean?

Brunner: At the national level, we can only cushion hardship and that is also the task of the nation states. But when it comes to bringing prices down, the EU is called upon. That makes no sense at the national level. But there is still not enough coming from Brussels. Meanwhile, as Member States, we are caught in a dangerous upward spiral in aid efforts. Without European regulations to lower prices, we are forced to launch new aid programs over and over again.

We are in a European race to see who will help their people the most. Every new aid program in a neighboring country almost forces us to follow suit. That is why we need EU-wide measures to reduce gas and electricity prices and not just guidelines to skim off the profits of the crisis. Skimming off profits is fine and we also implement this in Austria, but that's not enough. We need regulations to lower prices and I expect more from the European level.

WORLD: What do you specifically want at EU level?

Brunner: For example the Iberian model, in which gas that is burned to produce electricity is subsidized. I come from the energy industry and I think this is a useful mechanism that could be extended to all of Europe.

WORLD: The EU Commission and other countries see it differently. Germany in particular is opposed to this idea because it could become very expensive for Germany. Do you understand your counterpart Christian Lindner?

Brunner: I'm in constant contact with Christian Lindner and of course it's not always easy in the three-party coalition in Berlin. But I hope that we can find a solution in the EU. In principle, I am not a friend of market interventions, but we are in a crisis situation and I think it is necessary.

And at the European level, because that is not possible on a purely national level. The Iberian model was feasible because Spain and Portugal are largely isolated from the rest of the European electricity market. But it's a completely different situation for countries like Germany or Austria in the middle of Europe. We need European solutions for that.

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with the financial journalists from WELT. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.

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