Don’t Raise the Eurozone’s Public-Debt Limit

In February 2020, the European Commission announced that it would present a plan for reforming the eurozone’s economic governance, including the rules for public debt. After a lengthy postponement due to the Covid-19 pandemic, the project is now back on the table, amid widespread calls to give governments more leeway, for example to finance climate protection spending. But, in view of the already high levels of national debt and rising inflation, this is the wrong way to go. Fiscal policy coordination should instead focus on reallocating public expenditure and thus on increasing its quality rather than its quantity.