EU wants to reduce monetary value of existing fines
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The European Union (EU) is considering a more flexible set of penalties if member states breach debt reduction commitments.
The European Commission also wants to reduce the monetary value of existing fines as the current system has proven politically unfeasible to apply in the past, said the EU official, who asked not to be identified. said on condition that
The proposal supports investment to account for a more uncertain economic environment, and a bloc stability and growth pact (which reduces public deficits and debt levels to management) will be part of the review. .
The EU administration is expected to outline the review on November 9th, and may submit legislation early next year. The amendment could bring some of the most significant changes to the bloc’s financial rules in over 20 years. A committee spokeswoman declined to comment on the proposal.
Member States have signaled their willingness to scrap some of the existing requirements that force severe fiscal cuts in the event of excessive debt.
Even in the Netherlands and Germany, which have long supported strict budget rules, these countries’ proposals suggest that the budget should be balanced as long as stronger mechanisms are in place to ensure compliance with fiscal targets. Willing to offer more flexibility to governments.For review.
Main trade-off
EU Economic Commissioner Paolo Gentiloni said last September that trade-offs between more room for member states to set adjustment pathways and tighter controls to ensure they deliver on their commitments said it was necessary.
“Simplification, stronger state ownership and better enforcement, along with the overall objective of supporting debt sustainability and sustainable growth, will be the defining features of the improved framework. Let’s go,” he said at the time.
EU officials want to avoid having only a ‘nuclear option’ of fines totaling 0.2% of the GDP of sanctioned member states. In fact, the penalties are so burdensome that they have never been applied to Member States, despite many violations.
Instead, the commission is considering smaller fines, such as those applicable to countries that violate statistical regulations. Officials also said public debates over budget plans and negative comments from committees would increase media and market pressure, prompting governments to revise budgets that do not comply, as was the case in Italy in 2018. He said that he played a decisive role in persuading
The EU executive is considering giving governments up to seven years to reduce their debt overhangs in exchange for investment and reform proposals, along with spending caps to ensure the sustainability of national spending, it said. said an EU official familiar with the plan. Subject to change prior to publication date.
The commission will offer a common four-year period to balance public budgets, plus an extension period of up to three years for member states to take effective measures, officials said.
The Commission plans to maintain the existing deficit and debt thresholds of 3% of GDP and 60% of GDP respectively under review. But after being suspended at the start of the pandemic, it will be difficult to adopt revisions before fiscal rules start again in 2024, one of the officials warned.
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