Brussels (Brussels Morning) The European Commission has advised that the EU should continue to suspend national borrowing limits next year in order to help the bloc’s economies recover from the coronavirus crisis, Reuters reports.
European Commissioner for Economy, Paolo Gentiloni, stressed that the EU would maintain “a supportive fiscal policy”, noting that this is in line with what large world economies are doing.
The limit was suspended in 2020
The EU suspended budget limit rules last year in response to the coronavirus pandemic, using the general escape clause of the Stability and Growth Pact.
The EC stressed that its recommendation is intended to help EU member states prepare their fiscal strategies by April.
“Today, the Commission states clearly that pulling back support too quickly would be a policy mistake”, Gentiloni observed, adding that “the best way to secure public debt sustainability is to support the recovery”.
According to EC forecasts, the bloc’s economic output should reach 2019 levels in mid-2022, with the Commission proposing to de-activate the emergency clause in 2023.
The Commission stated that “in case a member state has not recovered to the pre-crisis level of economic activity, all the flexibilities within the Stability and Growth Pact will be fully used, in particular when proposing fiscal policy guidance”.
Final decision in May
The EC is to issue an economic forecast in May, after which EU finance ministers will have the final say about whether to keep borrowing limits suspended through 2022.
EC Vice President Valdis Dombrovskis stressed the importance of becoming less reliant on support on a gradual basis. He cautioned that EU member states with high debt should be careful about the supportive policies they implement, advising that they use EU grants to finance investment projects.
He noted that EU member states with relatively low debt could afford more supportive policies to help their respective economies weather the coronavirus crisis and recover from it faster.