The countries of the European Union agreed today that they need to amend the EU regulations. to allow debt reduction at a slower pace and reach a common fiscal framework that will be truly respected, Reuters quoted senior eurozone officials as saying.
EU fiscal regulations – the Stability and Growth Pact – are designed to prevent governments from borrowing too much to protect the value of the euro. However, according to Reuters, these rules have often been violated, which led to the debt crisis in 2010, while minimal efforts have been made to enforce them.
Regulations are now under evaluation as the COVID-19 pandemic has increased public debt to such an extent that existing regulations can no longer be enforced. At the same time, tackling the climate crisis will require huge investments over many decades, something that many argue should be reflected in EU regulations.
“Some areas of broad consensus appear to be emerging on a more gradual adjustment to debt reduction, in particular Regulation 1/20,” Commission Vice-President Valdis Dombrovskis told reporters on Monday.
The current regulation is that governments should reduce their debt each year by 1/20 of the amount in excess of 60% of GDP. With many countries owed more than 100% of GDP, such a goal is considered unrealistic by eurozone finance ministers.
“We need a credible way to reduce debt. But it must also be realistic and allow for a green and digital transition,” Dombrovskis said shortly before the finance ministers’ meeting.
Dombrovskis said there was also a broad consensus that regulations needed to be simplified and focused on structural imbalances.
Finally, ministers want to agree on changes that will force governments to follow the rules because they benefit, instead of risking financial sanctions, which for many is an empty threat.
“The discussion starts from the beginning that the sanctions have not been used much. No use, basically,” said high-ranking officials who participated in the preparations for the meeting.
Lindner (German Ministry of Finance): Time to start reducing public debt in the EU again
Source From: Capital