EU to launch debate on members’ debt caps

Strasbourg, France, Oct 5 (AFP/APP):The European Union will launch public consultations this month on reforming budget rules that cap members’ debt but were suspended due to the pandemic, the EU economic affairs commissioner said Tuesday.

The Commission will launch the process on October 19, the starting point of a debate that may stretch into 2022, Commissioner Paolo Gentiloni said.
The pact restricts member states from running up too much debt, but the limits have often been exceeded.

Fourteen members states, for example, had debts in excess of the 60 percent of gross domestic product limit at the end of 2020, EU data shows.
The commission will “set the framework for the discussion” on reform of the budget rules and “on the lessons to be learned after the Covid pandemic”, Gentiloni said at a press conference in Luxembourg, at the end of a meeting of EU finance ministers.

The limits — which include capping public deficits at three percent of GDP — were suspended to allow governments to stave off economic collapse as the pandemic battered trade, investment and business activity.
With economies now returning to growth, the question arises as to whether the pact should be reinstated.

This was planned for the beginning of 2023.
However, with public debt surging as members increase spending to spur the pandemic recovery, some countries are calling for greater flexibility in reducing deficits.

That argument is reinforced by the heavy public spending seen as vital to fund the fight against climate change in coming years.
Some member states propose excluding green investments from the deficit calculations.

EU countries are divided on the issue, with those in the so-called “frugal” north — including Germany, Europe’s biggest economy — worried that they will have to foot the bill for big spenders.
The imbalance within the EU is a key factor behind tensions arising from the bloc’s debt crisis a decade ago.

“We will come up with proposals within a certain timeframe next year. And of course we have to be ready for 2023” and the reactivation of budgetary rules, Gentiloni said.