Belgium, (Brussels Morning Newspaper) The European Commission is preparing changes to debt rules and is to come forward with a proposal later today.
New rules would allow EU member states to negotiate with the EC their individual debt reduction plans that would be conditional on national investments and reforms, according to Reuters reporting on Tuesday.
The Commission pointed out that the bloc needs to change its debt rules because debt reduction plans currently in effect have become unrealistic after EU debt spiked due to COVID-19 policies.
According to the rules in effect, eurozone members have to cut their national debt by 5% of the excess over 60% of GDP. This reduction is highly unlikely in Italy and Greece, whose debts stand at 148% and 186% of GDP, respectively.
EU officials pointed out that the Commission’s proposal moves away from the executive’s one-size-fits-all approach and takes into account economic diversity of the bloc.
According to the proposal, each bloc member would negotiate its debt reduction plans with the EC and seek approval from the EU Council. The four-year plans could be extended to seven years if planned reforms and investments justify the move.
Special privileges
France heads the group of EU member states that want debt reduction plans to take into account reforms and investments. According to the group, the EC should provide special treatment to countries that invest in the green push and defence capabilities.
According to officials, the EC is planning to introduce limits on government spending that will be tied to the country’s debt. EU member states would still have to maintain deficits under 3% of GDP, with officials noting that the Commission wants to lower fines for non-compliance but make them easier to apply.
While the EU Council approved reforms in 2011 that make fines for fiscal irresponsibility difficult to stop after the EC proposes them, the Commission has not proposed any. France, Spain and Portugal repeatedly exceeded deficit limits, but the Commission did not react.
Officials pointed out that EU member states do not trust EU institutions, noting that Germany expressed doubts about the Commission’s proposal and adding that some bloc members see the EC as too lenient.
