The exceptions to the strict EU debt rules introduced during the Corona crisis are due to expire at the end of the year. This emerges from guidelines for the budget and debt policies of the member countries, which the EU Commission presented on Wednesday for 2024. What is important for the Brussels authorities, however, is that the debt regulations are reformed.
It would be nonsensical to just go back to applying the existing rules as if nothing had happened, said EU Economic Commissioner Paolo Gentiloni in Brussels. One must acknowledge the new post-pandemic reality and the reality of the ongoing war in Ukraine.
A reform of the strict rules for government deficits and debts has been discussed in the EU for months. In a first discussion paper last November, the Commission spoke out in favor of giving highly indebted countries more flexibility in repaying irregular debts. The goals of the so-called Stability and Growth Pact, to limit debt to a maximum of 60 percent of economic output and to keep budget deficits below 3 percent of gross domestic product, would basically remain in place. Germany, among others, is campaigning for this.
With the guidelines published on Wednesday, the EU Commission wants to ensure that the member states plan for 2024 in such a way that the public debt ratio is brought on a downward path or kept at a “cautious” level. The budget deficit should remain below the reference value of three percent of gross domestic product in the “medium term”.
In the spring, the Commission will then present country-specific recommendations on the basis of which it can monitor the budget results. Criminal debt proceedings, so-called deficit proceedings, are not to be reopened until spring 2024 in view of the ongoing economic uncertainty.
Due to the high level of uncertainty resulting from the Russian war of aggression in Ukraine, high energy prices and bottlenecks in the supply chains, the debt requirements had been suspended for a year longer than originally planned in the previous year. Economy Commissioner Gentiloni said now is the right time for the derogations to end. “Of course, uncertainty remains high, but the risks to growth are now largely offset.”
