Advertisement

Updated December 21st, 2023 at 08:28 IST

EU nations reach compromise on overhaul of fiscal rules

Earlier this month, thousands of protesters marched in Brussels, expressing concerns about perceived new austerity measures associated with the reform.

Business Desk
Europe
Europe | Image:unsplash
Advertisement

European Union finance ministers reached a consensus to reform the bloc's fiscal rules, ending months of negotiations, as France and Germany embraced a compromise. 

The overhaul pertains to the Stability and Growth Pact, which imposes limits on debt and deficits for the 27 EU member states. The Stability and Growth Pact, often challenging to enforce and a source of tension, was temporarily suspended during the COVID-19 pandemic but is slated for reactivation next year.

Advertisement

Valdis Dombrovskis, European Commission Executive Vice President, expressed optimism, stating, “Once this agreement is formalised into a general approach, which should happen very soon, negotiations can begin with the European Parliament so that EU Member States have clarity and predictability on their fiscal policies for the years ahead.”

The breakthrough occurred a day after France and Germany endorsed the compromise proposed by Spain, the current holder of the rotating presidency of the Council of the EU.

Advertisement

The two economic powerhouses had previously disagreed on how to support investment when budget deficits exceed EU-set limits.

France's Finance Minister Bruno Le Maire hailed the agreement as a "historic agreement" on social media platform X, formerly Twitter, noting the culmination of two years of intense negotiations.

Advertisement

Key targets from the previous Stability and Growth Pact will persist, requiring countries to keep government deficits below 3 per cent of gross domestic product and public debt below 60 per cent of GDP.

The overhaul's central pillar, outlined by the European Commission, grants member countries more independence in designing plans outlining fiscal targets, addressing imbalances, and detailing reforms and investments.

Advertisement

The compromise includes additional safeguards to ensure debt reduction. Countries with debt ratios exceeding 90 per cent must reduce debt by one percentage point annually, while those with ratios between 60 per cent and 90 per cent face a required reduction of 0.5 per cent per year.

The Spanish presidency, responsible for the compromise, noted that the rules incorporate a transitional regime until 2027, softening the impact on the interest burden increase and safeguarding investment capacity.

Advertisement

Earlier this month, thousands of protesters marched in Brussels, expressing concerns about perceived new austerity measures associated with the reform.

(With PTI Inputs) 

Advertisement

Published December 21st, 2023 at 07:27 IST

Your Voice. Now Direct.

Send us your views, we’ll publish them. This section is moderated.

Advertisement
Advertisement
Whatsapp logo