Is there a threat of a new austerity package? Greens warn of fatal consequences!

Is there a threat of a new austerity package? Greens warn of fatal consequences!

On November 28, 2025, Jakob Schwarz, the Green Party's budget spokesman, expressed concern about recent developments in the reform of the Stability and Growth Pact (SGP). He described the results of the negotiations as “a huge missed opportunity.” The new rules, which came into force on April 30, 2024, aim to ensure fiscal discipline and stable public finances in Europe, as well as promote necessary reforms and investments. Schwarz criticized the fact that the negotiations were not used to address far-reaching reforms; Instead, a minimal compromise was presented that undermines the ambitions of the reforms.

In particular, he described the new opportunity for states to take on more debt as a potential danger that could lead to a billion-dollar hole in the federal government. According to Schwarz, this development could result in another tough austerity package that would particularly affect the broad masses. Nevertheless, he emphasizes that the Greens will continue to advocate for sensible savings instead of heartlessly making cuts. However, there has been progress in the transparency of the state budgets; in particular, Vienna now has to disclose its figures every month.

Background to the Stability and Growth Pact

The reform of the Stability and Growth Pact was initially initiated in 2020 and gained momentum from 2022 after being interrupted by the COVID-19 pandemic. The SGP, which was first adopted in 1997, aims to limit the new debt of the euro countries to a maximum of 3% of GDP and total debt to 60% of GDP. This is intended to contribute to economic and financial stability in the Eurozone. However, there have been numerous challenges in recent years, including as a result of the Ukraine crisis.

The new regulation includes an improvement in financial surveillance and ensures that all EU member states must submit medium-term fiscal-structural plans by early autumn 2024. The EU Commission will also provide reference paths for net primary spending, especially for countries with high debts or deficits. These structures are part of efforts to avoid excessive deficits and give Member States more responsibility.

Current challenges and measures

With 11 Member States with deficits above 3% of GDP and 13 Member States with debts above 60% of GDP, the EU faces significant challenges. Regulations were reformed to introduce a mandatory multi-year spending path for each country based on the states' economic situation. The spending path will be part of a medium-term fiscal-structural plan (FSP) intended to ensure that the debt ratio and deficit resilience targets are met.

According to the new rules for the SGP, member states must also be able to act flexibly with regard to security and defense spending. The focus is on reform goals such as reducing high levels of debt and strengthening the individual responsibility of the member states. In addition, the 1/20 rule for debt reduction was abolished, giving states more leeway when it comes to debt.

In order to overcome these new challenges, the fiscal policy guidelines must demonstrate in practice how effective they can be against financial crises. Fortunately, control over compliance with these requirements will continue to be carried out by the EU, which should contribute to the stability of the entire system. It remains to be seen how these changes will affect national politics.

Black and the Greens face the challenge of finding the balance between necessary austerity measures and promoting investment to ensure economic stability. The next few months will be crucial to see whether the reforms of the Stability and Growth Pact bring the hoped-for success.

For further information about the reform of the Stability and Growth Pact, you can view the relevant reports on the platforms of the [Federal Ministry of Finance](https://www.bundesfinanzministerium.de/ Monatsberichten/Anzeige/2024/05/contente/Kapitel-2-Fokus/reform-stabilitaets-und- Growthspakt.html) and the View Federal Ministry of Economics.