by Jan Strupczewski
BRUSSELS, May 23 (Reuters) – The European Commission proposed on Monday to extend until the end of 2023 the suspension of the rules governing budget deficits and public debts in the face of economic uncertainties and the slowdown in growth linked to the invasion of Ukraine by Russia.
The application of the rules of the Stability and Growth Pact was suspended at the start of the COVID-19 pandemic in early 2020 in order to allow States to deal with the economic fallout from it, which in particular facilitated the policy of the “whatever the cost” in France.
These rules were supposed to apply again in 2023, but the war in Ukraine, soaring prices and the deterioration of the business climate and household morale have led the Commission to question this timetable.
The suspension of these rules is called in Community jargon “the activation of the general safeguard clause”.
“The conditions for maintaining the general safeguard clause of the Stability and Growth Pact in 2023 and deactivating it from 2024 have been met,” said the Commission.
The latter lowered its economic forecast at the beginning of the month, explaining that due to the war in Ukraine, growth in the euro zone should be limited to 2.7% this year, while it was counting on 4.0%. in February.
“Increased uncertainty and significant downside risks to the economic outlook in the context of the war in Ukraine, unprecedented increases in energy prices and continuing disruptions in supply chains warrant the extension of the general safeguard clause until the end of 2023”, adds the community executive.
The Commission had already announced in March that it would not apply in 2023 the rule according to which the States whose public debt exceeds the ceiling of 60% of the gross domestic product (GDP) provided for by the Stability Pact must reduce it each year. up to one-twentieth of the excess.
Countries like Italy, whose debt represents 160% of GDP, or Greece, where it exceeds 200%, are unable to apply such a rule.
Eurozone finance ministers agreed in March on the principle of starting to tighten fiscal policies next year after three years dominated by often costly measures aimed at limiting the impact of the pandemic, but also on that of new measures in the event that the war in Ukraine makes them indispensable.
German Finance Minister Christian Lindner told a G7 ministerial meeting on Friday that he did not consider the situation so serious as to justify a one-year extension of the safeguard clause, adding that his country would not would not apply it.
“From our perspective, the data is not such that a suspension of the Stability Pact rules is absolutely necessary,” he said. “Germany, in any case, will have no use for it.”
(Report Jan Strupczewski, French version Marc Angrand, edited by Kate Entringer)