European Union budgetary rules were suspended following the Covid-19 pandemic, to allow Member States to deal with the crisis, and a consensus was then reached regarding the need to review and update legislation on economic governance before being the Stability and Growth Pact, originally created at the end of the 1990s and considered outdated, was resumed.
The Council of the European Union today adopted new community rules for public deficit and debt, as part of the reform of the bloc’s budgetary rules that comes into force on Tuesday, guaranteeing the recovery of public finances and investment.
“The Council today adopted three pieces of legislation that will reform the European Union’s economic and budgetary governance framework. The main objective of the reform is to ensure the soundness and sustainability of public finances, while simultaneously promoting sustainable and inclusive growth in all Member States through reforms and investments”, indicates the institution that brings together the Member States, in a statement.
According to the organization, “the new legislation will significantly improve the current framework and provide effective rules”, as it will safeguard “balanced and sustainable public finances, placing greater emphasis on structural reforms and investments to stimulate growth and job creation in the entire European Union”.
“The time has come to apply them quickly”, calls for the Council of the European Union.
The European Parliament gave the final green light to the European Union’s new budgetary rules for public deficit and debt, last Tuesday, clearly approving three pieces of legislation in the last plenary session of the current legislature, in the French city of Strasbourg.
A European source explained to Lusa that, after these final approvals from MEPs and countries, the legislative package will be published on Tuesday in the Official Journal of the European Union to come into force on the same day.
Until precisely this Tuesday, European Union countries, including Portugal, had to send simplified versions of their Stability Programs to Brussels, but, as the new European budgetary rules come into force, this deadline no longer exists and countries will have more time, until September, to submit a national plan to the European Commission.
These will be the new national budgetary-structural plans (they will no longer be called national reform and stability programs) and will include measures to correct macroeconomic imbalances and guidelines on priority reforms and investments for four or seven years.
The European Union’s budgetary rules were suspended following the Covid-19 pandemic, to allow Member States to deal with the crisis, and a consensus was then reached on the need to review and update legislation on economic governance before the Stability and Growth Pact, originally created at the end of the 1990s and considered outdated, should be resumed.
The European Commission presented a proposal in April last year, consisting of three pieces of legislation.
At issue is the planned resumption of these budgetary rules after the suspension due to the covid-19 pandemic and the war in Ukraine, with a new formulation, despite the usual ceilings of 60% of GDP for public debt and 3% of GDP for deficit.
Debt reduction is expected to be at least one percentage point per year for countries with a debt ratio above 90% of GDP (as is the case in Portugal) and half a percentage point for those between this ceiling. and the level of 60% of GDP.
It will be up to Member States to prepare their national plans, which the European Commission will evaluate, defining a period of at least four years for the debt to be placed on a downward trajectory, with this period being able to be seven years in the face of reforms and investments (such as those included in the Recovery and Resilience Plans).
An annual public spending cap will be introduced for maximum diversion and non-compliant countries may face excessive deficit procedures and fines.
