Ministers suspend EU’s budget rules in order to fight coronavirusEuropost
European Union finance ministers formally endorsed on Monday the suspension of EU limits on governments borrowing to give the 27 EU countries a free hand in fighting the disastrous effects of the coronavirus epidemic on the economy. Ministers, meeting by videoconference, gave the green light to a European Commission proposal triggering the “general escape clause” from the bloc's budget rules.
Governments can now use more financial muscle to stimulate their economies - pumping money into hospitals, businesses, benefits to citizens and the like - without fear of punishment from Brussels.
EU rules require that governments cut budget deficits until their books are in balance or in surplus and that they reduce public debt every year until it is below 60% of GDP. But with the coronavirus pandemic expected to put the EU into a deep recession this year, governments do not want to be bound by any limits to try to resuscitate the economy and they endorsed the European Commission’s proposal to activate what is called a “general escape clause” in the rules.
“The use of the clause will ensure the needed flexibility to take all necessary measures for supporting our health and civil protection systems and to protect our economies, including through further discretionary stimulus and coordinated action, designed, as appropriate, to be timely, temporary and targeted, by Member States,” the ministers said in a statement.
“This temporary flexibility will help national authorities do all they can to support their health systems, businesses and workers,” Commission Executive Vice President Valdis Dombrovskis said in a statement. “We will continue to act decisively and in full solidarity with our Member States at this time of need.”
“Today’s agreement reflects our strong determination to effectively address the current challenges, to restore confidence and support a rapid recovery,” ministers said in a statement. They adding that they “remain fully committed to the respect of the Stability and Growth Pact.”
The Commission has power to fine euro members - which it has never exercised - or cut off EU funds to any country that breaches the rules. But none of that applies under the escape clause, which can only be invoked in a severe economic downturn.