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Berlin's Former Authority on EU Spending Rules No Longer Holds

Germany's formerly influential role in shaping EU spending rules is waning, illustrated by the challenging negotiations to update those rules, potentially as soon as Thursday evening. The German dominance, marked by strict fiscal oversight under former Chancellor Angela Merkel, is diminishing. The economic giant's strategies in Brussels are losing their rigidity, with discussions now hinging on whether to maintain strict spending limits or introduce more flexible terms.
Finance ministers aim to finalize a deal during a Thursday dinner in Brussels. Germany's current internal political strife and economic woes, including a budget-impacting supreme court ruling, contribute to its diminished sway over EU fiscal policy.

The essence of the Stability and Growth Pact, key to EU economics and suspended since the pandemic, demands countries to limit deficits to 3% of GDP and debts to 60% of GDP. A draft compromise introduces more tailored and less rigid regulations, addressing the conditions of highly indebted nations, primarily in southern Europe.

These adjustments appear as a backtrack from Germany's initial firm stance on strengthening fiscal rules, signifying a likely compromise after enduring talks. The negotiations reignite traditional financial divides between northern and wealthier EU members and their southern counterparts.

Recent concessions indicate a softer German position, despite fears of austerity measures. However, French and Italian ministers threaten vetoing any deal that hinders investment in environmental and defense initiatives, with the matter remaining a contentious point.

Ultimately, the latest compromise draft offers elements to satisfy both frugal and spendthrift nations, indicating that a balanced agreement might be achieved during the upcoming meeting. Despite not achieving all its objectives, Germany has secured several key agreements, emphasizing a steady debt reduction among heavily indebted nations.

Nevertheless, finance ministers still confront various negotiation obstacles, with a primary issue being the methodology for calculating deficit reduction. While some fear these differences could derail the agreement, others maintain an optimistic outlook.

The shift in dynamics is evident: Germany no longer dictates EU economic policy decisions unilaterally.

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