The ministers of Economy of the euro zone agree to keep the public spending tap open until 2023

You cannot turn off the tap on public spending. At least this year and the next. This is the conclusion reached this Monday by the ministers of Economy and Finance of the euro zone. Two weeks ago the European Commission already proposed to maintain the free bar of public aid in the face of the new waves of the pandemic during this year and next. Of course, the European Commission plans to reactivate the Stability and Growth Pact in 2023, at which time the requirement to comply with debt ceilings (60% of GDP) and deficit (3% of GDP) would be resumed with a path that , with two years ahead, it is not yet defined.

“The Eurogroup is committed to supporting the euro area in 2021 and 2022, also taking into account the fiscal stimulus derived from the recovery funds”, say the conclusions of the finance ministers: “Ambitious reforms and investment , supported by recovery funds, are key to increasing growth potential in the medium term. The Eurogroup takes note of the Commission’s preliminary indication that the general safeguard clause will continue to apply next year. ”

Thus, the European Commission recognizes that “the pandemic has significantly changed the context of public debate, with higher levels of debt and deficits and significant production losses, greater investment needs and the related introduction of new policy tools at the EU level. Furthermore, the general escape clause was used for the first time in the application of fiscal supervision. Re-launching the debate on the economic governance framework will allow the Commission to reflect on these challenges and draw lessons. the COVID-19 crisis and the need to focus on recovery funds and immediate political response, that debate has been postponed. ”

“We are united and determined in our efforts to protect jobs, businesses and our citizens in this health crisis. We all believe that this is the best contribution we can make to long-term fiscal sustainability at this time,” said the President of the Eurogroup, Paschal Donohoe, after the meeting.

According to the European Commissioner for Finance, Paolo Gentiloni, withdrawing the stimulus “too soon would be a mistake” and stressed that there is a “growing consensus that the best way to ensure the sustainability of public debt is to support the recovery and reduce the risk that the crisis will leave scars and divergences “.

According to the Eurogroup, “for the time being, and as long as the acute health emergency persists, extensive fiscal measures are still necessary to protect citizens and businesses. Fiscal policy must remain agile and be effectively adjusted as the health and economic situation evolves. Once the health situation improves and restrictions are eased, fiscal measures should gradually shift towards more specific actions to promote a resilient and sustainable recovery. ”

In this sense, the ministers defend “helping viable but still vulnerable companies to avoid solvency problems, reopen and adjust their business models. Policies must continue to protect relationships between employees and companies, while facilitating each time plus job transitions and the creation of job opportunities for the unemployed and inactive. Measures must be tailored to the pace and strength of the recovery in each Member State and must be supported by an ongoing commitment to budgetary sustainability. ”

And they also draw attention to something that will affect countries like Spain, Italy, France or Greece, for example: “Once the recovery is firmly underway, euro area member states should address rising debt levels. through the implementation of sustainable fiscal strategies in the medium term, with an emphasis on improving the quality of public finances, increasing investment levels and supporting green and digital transitions. Member States should focus on reforms that they will promote private investment and increase the productive capacity of the euro area. ”

In any case, “in the face of persistent uncertainty, the Eurogroup will closely monitor the economic situation and reflect on the fiscal position of the euro area in the medium term over the next few months.” At the end of May, the European Commission will publish its new fiscal policy guidelines, as part of the 2021 Spring European Semester package and following the Commission’s spring economic forecasts, which it will publish in early May.


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