BRUSSELS, April 29 (EUROPA PRESS) –
The Twenty-seven have given the final green light this Monday to the new EU fiscal rules, which, after four years frozen by the pandemic, will once again limit the debt and deficit of the Member States, although in a more flexible way and adapted to the situation by country. The rules will come into force this Tuesday, coinciding with their publication in the Official Gazette.
This review includes the reform of the regulation on the preventive and corrective arms and the new directive on the requirements for the budgetary frameworks of the Member States.
The objective of this reform is to reduce debt ratios and deficits in a gradual, realistic, sustained and growth-friendly manner, while protecting reforms and investment in strategic areas such as digital, green, social or defending. Furthermore, the new framework will provide adequate scope for countercyclical policies and address macroeconomic imbalances.
Now, each Member State will have to present its first national plans by September 20, 2024, while the Commission, for its part, will present a ‘reference trajectory’ (previously called ‘technical trajectory’) to countries where public debt exceeds 60% of the gross domestic product (GDP) or the public deficit is above 3% of GDP, as is the case of Spain.
The baseline path will indicate how Member States can ensure that, at the end of a four-year fiscal adjustment period, public debt is on a plausible downward trajectory or remains at prudent levels in the medium term.
Furthermore, a Member State may request the submission of a revised national plan if there are objective circumstances that prevent its implementation, even if there is a change of government.
Based on the Commission’s reference trajectory, EU countries will outline their fiscal adjustment, expressed in net spending trajectories in their national medium-term fiscal structural plans, which must be approved by the Council.
The new rules will further encourage structural reforms and public investments for sustainability and growth and Member States will be able to request an extension of the fiscal adjustment period from four years to a maximum of seven years, if they carry out certain reforms and investments that improve resilience and growth potential and support fiscal sustainability and address common EU priorities.
These include achieving a just, green and digital transition, ensuring energy security, strengthening social and economic resilience and, where necessary, developing defense capabilities.
Countries with excessive debt will be subject to safeguard rules that will require them, among other things, to reduce their debt by an average of 1% per year if they exceed 90% of GDP, and by 0.5% per year on average if their debt is between 60% and 90% of GDP, less restrictive provisions than the current requirement that each country must reduce debt annually by 1/20 of the excess above 60%.
If a country’s deficit exceeds 3% of GDP, the requirement will be to reduce it during periods of growth to a level of 1.5% of GDP, in order to create a spending cushion for difficult economic conditions. Other numerical benchmarks for how much the deficit should be reduced per year will also apply.
A country with excess debt will not be required to reduce it to less than 60% at the end of the plan’s period of years, but must have debt that is considered to be on a “plausible downward trajectory.”
