EU plans to reform the fiscal rules

The EU will introduce new fiscal rules to adjust the economies to post-pandemic market conditions with high debt and a critical need for investments. The reform mainly touches upon the rules governing national budgets. The reform is now known as the Stability and Growth Pact. 

According to the Maastricht Treaty, a country’s budget deficit should not exceed 3% of gross domestic product, and the overall government debt should not exceed 60% of GDP. However, the rules will remain suspended till the end of the year. These rules need reforming because many countries do not comply with them. Some EU members claim that regulations are not realistic.

The EU offers individual debt reduction paths. The Commission will negotiate and approach each country’s debt individually. Instead of a one-size-fits-all solution, the Commission will adopt a more flexible approach considering the current economic condition of each country and future perspectives. The approach suggests that each country will have four years to put debt on a full downward path through an appropriate setting of net primary expenditure every year. 

This recovery period can be extended to 7 years under heavy investment in areas that are a priority for the EU, like fighting climate change or reforms that improve debt sustainability. But not all countries agree with the solution.