The European Commission does not want to return to the fiscal rules that EU member states have to comply with in normal times until 2023. The condition is that economic activity in the union is on average at the same level as before the coronavirus crisis, measured at the end of 2019, according to the day-to-day EU administration.
“There is hope on the horizon for the European economy, but the pandemic is still harming the economy and citizens ‘livelihoods,” said Vice-President Valdis Dombrovskis. “Our message is that support measures should remain as long as necessary. The member states must also make maximum use of the European Recovery Fund because it gives them the unique opportunity to support their economy without the subsidies weighing on public finances.”
The temporary recovery fund contains EUR 672.5 billion, of which EUR 312.5 billion is distributed among the 27 countries and EUR 360 billion is available in favourable loans. The money is intended to invest in sustainable and digital projects, which need to be matched by reforms in, for example, the labour market or the pension system. For the Netherlands, a maximum of almost 6 billion is available. The outgoing government has announced that it will not use the loans.
In March last year, EU finance ministers agreed to the commission’s proposal to temporarily abandon the fiscal rules related to the coronavirus crisis. By activating an ‘escape clause’ in the stability and Growth Pact (SGP), which lays down the rules, member states do not have to comply with a budget deficit below 3% of gross national income (GNI) and a public debt of no more than 60% of GNI. As a result, EU countries can now get away with pumping as much money into their economies as is necessary to keep businesses and jobs as much as possible.
With additional billions of dollars spent to combat the crisis, deficits and debt in the countries are rapidly rising. The commission states that as health risks decrease, the EU should gradually re-tighten budgetary discipline.