finance
EU debt rules could also remain suspended in 2023
The strict EU debt rules could also remain suspended next year. Photo: Arne Immanuel Bänsch/dpa
© dpa-infocom GmbH
A reform of the strict EU debt requirements has been discussed in Brussels for months. They should apply again from 2023. But the war in Ukraine radically changed the situation.
The strict EU debt rules could also remain suspended next year because the economic outlook is clouding over the Ukraine war.
This emerges from guidelines for the budget and debt policies of the EU countries, which the EU Commission presented on Wednesday for 2023. The debt and deficit rules were suspended because of the Corona crisis and should actually apply again next year. The commission announced that this would be reassessed “in view of the high degree of uncertainty” by spring.
“The Russian invasion is likely to have a negative impact on EU growth, including through impacts on financial markets, further pressure on energy prices, more persistent supply chain bottlenecks and effects on economic confidence,” said EU Economy Commissioner Paolo Gentiloni in Brussels. “European sanctions will of course also have an impact and cost on the EU economy,” said Commission Vice-President Valdis Dombrovskis, who is also responsible for the economy. However, the consequences of the war are still difficult to assess.
Expect uncertain times
Overall, the European economy is doing well thanks to the Corona aid measures, said Dombrovskis. «We are ready to withstand the negative effects of the war. But these are very uncertain times.” Gentiloni said that energy prices in particular are likely to weaken the economic recovery from the corona pandemic. These are now expected to remain elevated throughout 2022.
Federal Finance Minister Christian Lindner (FDP) said that the economic effects of the conflict must first be analyzed in detail. “I therefore welcome the fact that we will only decide on the application of the fiscal rules when we have more clarity.”
A reform of the strict rules for government deficits and debts has been discussed in Brussels for months – including when they should fully come into force again. The so-called Stability and Growth Pact stipulates that EU countries should not take on more than 60 percent of economic output in debt. Budget deficits are to be capped at 3 percent of gross domestic product. According to the Commission, the average debt ratio in the EU was 92 percent in 2021, and significantly higher in some countries such as Italy.
In its guidelines, the Commission recommends that budget and debt plans for 2023 should reflect the individual circumstances of EU countries. The Brussels authorities want to present more precise specifications in the spring.
Germany has pledged to return to strict debt and deficit rules in 2023. Because the Bundeswehr is to be drastically upgraded in view of the war, the German state will probably have to take on large additional debts this year. Chancellor Olaf Scholz had announced on Sunday a “special fund” of 100 billion euros to strengthen Germany’s defense capabilities – “for necessary investments and armaments projects”.