Successful negotiations: new debt rules are ready for decision-making

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This was announced by the current Belgian Presidency of the EU Council. In particular, the plans stipulate that the individual situation of countries will be taken into account more than before when setting EU targets for reducing excessive deficits and debt. At the same time, there should be clear minimum requirements for reducing the debt ratios of highly indebted countries. The finance ministers of the EU member states already agreed on this at the end of last year, but negotiations with the European Parliament were now necessary.

In principle, there is a rule in the EU that the debt level of a member state may not exceed 60 percent of economic production. In addition, it is important to keep the national financing deficit – that is, the difference between the income and expenditure of the government budget, which is mainly covered by loans – below three percent of gross domestic product (GDP).

Proposals from the European Commission

However, critics have long viewed the existing rules for monitoring and enforcing these requirements as too complex and strict. Due to the Corona crisis and the consequences of the Russian attack on Ukraine, it was recently completely suspended. Especially in 2020, deficits in almost all EU countries were well above 3 percent.

The agreement now reached was based on reform proposals from the European Commission, which were mainly criticized by the German government because they would excessively weaken the so-called Stability Pact. After months of negotiations, EU governments have agreed on a number of changes, including minimum requirements for reducing debt ratios.

“Achieving sustainable public finances”

States are still targeted to achieve an annual structural improvement of at least 0.5 percent of GDP if they exceed the 3 percent deficit limit. However, opponents of very strict rules ensured that the European Commission, which is responsible for supervision, can take into account the increase in interest payments during a transition period when calculating adjustment efforts.

For the reform of the so-called Stability and Growth Pact to enter into force, the agreement must now be confirmed by the EU Council of Ministers and the plenary of the European Parliament. As a rule, this is just a formality.

“The new rules will help achieve balanced and sustainable public finances, implement structural reforms and promote investment, growth and job creation in the EU,” the Belgian EU presidency said of the agreement.

(SDA)

Source: Blick