New EU fiscal rules to narrow Germany's fiscal room, finance ministry says

By Maria Martinez

BERLIN (Reuters) - New European Union rules further restrict Germany's fiscal space for its budgets, requiring stricter adjustments than under national regulations, the finance ministry said on Wednesday.

Germany has received an adjustment path for the next four year from the European Commission, which serves as the basis for the discussions that will follow later in the year.

"It shows that indeed the new rules will make necessary more adjustments and fiscal policy must be moderately restrictive," Finance State Secretary Florian Toncar said on Wednesday.

The new budget rules, put in place in April, allow countries at least four years to cut back on red ink before they face sanctions that could include fines or a loss of EU funding.

With the adjustment path it has received, Germany has to prepare its own medium-term fiscal-structural plan, which will be submitted to the Commission in September.

Toncar said Germany must significantly consolidate its budget in 2026 from the existing mid-term financial planning of the ministry. He added further consolidation would be needed in the multi-year average.

"There will be no room for additional borrowing," Toncar said.

(Reporting by Maria Martinez; Editing by Madeline Chambers)