Scholz, Meloni Flag Progress on New EU Fiscal Rules by Year-End

(Bloomberg) -- German Chancellor Olaf Scholz and Italian Prime Minister Giorgia Meloni pointed to progress on finding an agreement on new European Union fiscal rules before the end of the year.

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The EU’s Stability and Growth Pact, which limits debt and deficits that bind the euro zone’s eclectic economies, was suspended during the pandemic to allow spending. With the rules coming back into force on Jan. 1, governments want to put in place a new system that takes into account country-specific issues.

While there’s no agreement yet on just how much leeway to allow each member state and when and whether to make exceptions, the German leader said a resolution is “much closer.”

“For us it’s clear that we want stability rules to play a role,” Scholz told reporters in Berlin alongside Meloni. “But at the same time, it’s also clear to us that no country will be forced into an austerity program.”

Meloni reinforced Italy’s position that the rules must protect investments, including spending related to the bloc-wide green transition and defense.

“It’s important that the new governance rules take into account efforts made by the countries in order to support those transitions, those strategic choices,” Meloni said.

The two leaders pledged to cooperate more closely on energy, defense and migration in the highest-level gathering between their governments in seven years. Scholz was due to host a joint cabinet meeting with ministers from Rome, a format reserved for close allies.

Scholz, a Social Democrat, and Meloni of the far-right Brothers of Italy aim to work together despite their political differences. Scholz reiterated that he’s carefully examining an Italian plan to build two asylum processing centers on Albanian territory.

--With assistance from Iain Rogers.

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