Restoring fiscal rules in the EU; general escape clause abolished from 2024
The European Union countries have significantly supported over the last three years, with a series of fiscal measures, households and businesses to deal with the impact of the pandemic and the energy crisis.
The extended support was made possible by the activation in early 2020 of the general escape clause from the fiscal rules of the Stability and Growth Pact.
However, as the European Commission announced on Wednesday, from 2024 the escape clause will be deactivated, to begin a period of de-escalation of debt that has risen above the 60% of GDP threshold in most EU countries. This means that the scope for increase in public spending will now be smaller.
The Commission gave the general guidelines for the fiscal policy of 2024, while in May it will make recommendations for each country separately, depending on the special features of its debt, which will determine the size of the fiscal adjustment that should be made with the budget of 2024.
For Greece, which has the highest debt in the EU at over 170% of GDP, fiscal adjustment has already begun, with this year's budget forecasting a primary surplus of 0.7% of GDP. For 2024, Greece will aim to a higher surplus to continue debt reduction.
In its recommendations, the Commission will move in a line of balance between the fiscal rules in force and the proposals it made last November for their review, so as to take into account the new economic reality after the pandemic and the energy crisis.
And this, because the debate on the revision of the Stability and Growth Pact is still ongoing, with several countries having objections to certain aspects of the Commission's proposals.
The issue will be discussed next Monday at the Eurogroup and the following day at Ecofin, with Commission Vice-President Valdis Dombrovskis expecting some convergence of views on key elements of the Pact review, ahead of the March 23-24 summit.