EU finance ministers urge change in budget rules

Since 2020 MS have more fiscal strength to address the crisis

Photo: EPA Paolo Gentiloni

EU finance ministers announced that any changes to the common budget rules should support continued investment in the post-pandemic economy. Currently the EU budget rules, which set limits on government borrowing to protect the value of the euro, are suspended until the end of next year to give EU countries leeway in fighting the economic slump caused by the coronavirus pandemic, Reuters reported.

A paper supported by finance ministers from eight countries including Austria, the Netherlands, Denmark and the Czech Republic declared a willingness to discuss “improvements” to the EU’s Stability and Growth Pact. The EU suspended its usual spending rules last year in response, giving member states more fiscal strength to address the crisis. The signatories to the paper include some of the EU’s most fiscally conservative states. The language reflects their deep suspicion of calls from other countries, mainly in southern European, for a looser fiscal regime.

Some officials propose that once the rules are reinstated in 2023, they should allow for continued large government investment, especially in fighting climate change. They argue the rules should also set new ways for debt reduction as current ones are far too ambitious to comply with for countries whose debt has ballooned well over 100% of GDP. The paper comes as finance ministers meet in Slovenia on Friday and Saturday, when the topic is expected to be informally discussed. Decisionmakers including EU economics commissioner Paolo Gentiloni had urged for legislative changes to the Stability and Growth Pact given the damage done to public finances during the crisis and the need for public investment. Among the ideas being floated by economists and politicians are changes to strip out investment in green projects from deficit restrictions.

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