Reducing debt without stifling growth, Eurogroup guidelines for 2025

Brussels – Reduce debt, but without stifling growth. This is the challenge, as delicate as it is necessary, to which the euro area’s economic ministers are called upon to respond. This commitment applies to all and is triggered virtually immediately because it is hinged on the Eurogroup statement on spending guidelines for 2025. The benchmark objective, and the key passage in the document, is the one that says that “gradual and sustained fiscal consolidation in the euro area continues to be necessary going forward,
given the need to reduce the high levels of deficit and debt. At the same time, this should be carried out in a way that minimizes the impact on growth.“

The recipe for this line to be followed passes the virtuous way of spending. Economic ministers from EU countries with the single currency agree to work on “improving the efficiency, quality and composition of public spending.” Spending less, but spending better: this is the key to a future strewn with uncertainty. Because “the risks to the economic outlook remain tilted to the downside, amid a still challenging external environment,” the Eurogroup, which shares the guidelines already expressed by the European Commission with the latest economic forecast, once again acknowledges. 

“Having a fiscal consolidation is not an easy task for anyone, but it is necessary for some countries,” summarizes Economy Commissioner Paolo Gentiloni. In any case, “consolidation is entirely possible, in France as in countries with a high level of debt.” There is no escape, then. Deficit and debt will have to be reduced. Not least because the Nordic countries, which have always been staunch defenders of austerity, will not relent. “It is important to follow the rules we have jointly agreed upon,” stressed the Dutch Finance Minister, Eelco Heinen, referring to the new stability pact with deficit reduction trajectories. “Domestically, the priority is to have sustainable finances, and I don’t think producing new public debt is the way forward.” More peremptory, but for that reason no less clear, German Finance Minister Christian Lindner: “We have rules, and I expect everyone to abide by them.“

On the accounts, no discounts, but only special attention for meeting the investments needed for the dual green and digital transition and supporting defence policies. Here, Gentiloni returns to reviving the idea of “common tools” for spending. “It means raising money in the markets,” the Economy Commissioner stresses. “So far, political will has been lacking,” and the real challenge will be knowing how to find it in the new European legislature.