September 26, 2020

The Stability Pact will be suspended until at least 2022


Correspondent in Berlin

Updated:

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There is no rush, the euro states will be able to continue generating deficits to finance the measures to boost the economy after the paralysis forced by the pandemic. The president of the Eurogroup, Paschal Donohoe, has assured that there is a “broad consensus” on the block in this regard and that the deficit limits established by the Stability Pact will continue to be suspended until at least 2022.

«There will be no concrete or abrupt end to the measures and, in general, fiscal policy will continue to support the economy‘He said after the conference of European finance ministers in Berlin. The president of the ECB, Christine Lagarde, also spoke in favor of maintaining assisted breathing and, despite the fact that the entity’s forecasts are improving and the growth forecast for this year has been corrected to a fall of only 8 %, instead of the 8.7% calculated in June, has called on the finance ministers to do not become “complacent” Keep in mind that the recovery shown by the data so far is “uneven, incomplete and asymmetric.” “Our monetary policy needs the support of fiscal policy,” he told the ministers, to whom he described an outlook still “dominated by uncertainty.”

Economy Commissioner Paolo Gentiloni agreed that «It would be more damaging to withdraw aid to companies and families too soon “Too late” and was opposed to restoring its validity to the debt and deficit reduction rules established by the Stability Pact. “2021 will not yet be the time to return to stability”The managing director of the European Stability Mechanism (ESM), Klaus Regling, gave clues about the possible end of the crisis.

Danohoe limited himself to saying that he will work “closely with the commissioner to choose the right moment” in which to recover the Community regulations. ‘We are all aware of monitoring national finances within each Member State and to return to the path of sustainability, but the right thing now is to carry out budgetary policies that support employment, “he said, «We must be very careful not to damage the recovery, the transition from the current exceptional state to the new normal is a challenge that requires good management ”.

France’s Finance Minister Bruno Le Maire was openly against the idea of ​​setting a date to restore budget rules because “Would not send the right signal”. “Nobody knows when the crisis will end and nobody knows when we will have access to a vaccine,” he justified, inviting his counterparts to “combine the challenge of public health and the need for economic recovery.” “It would be strange to define the return of fiscal rules before knowing when the crisis will end. Until there is absolute knowledge about the end of the crisis, it is smart not to define a framework that is too rigid », he insisted, with the assent of German Minister Olaf Scholz, host of the conference and focused on his role as mediator in this semester of the German presidency in turn.

Given the critical moment that the Brexit negotiation is going through, the Eurogroup took advantage of the meeting to catch up and launch a new warning to London. It was Donohoe who reminded the British government of Boris Johnson that respecting the Brexit agreement is a ‘prerequisite’ so that both parties can also close a pact on their future commercial relationship before the end of the year.

He was referring to the controversial law that London wants to pass that calls into question several provisions of the previous agreement, including the protocol to protect the Good Friday Agreements in the Ulster. And Holland advanced for its part that it hopes to nominate the supervisor of its Central Bank, Frank Elderson, to occupy a free place on the executive committee of the ECB. Dutch Finance Minister Wopke Hoekstra stressed that his country wants to be present in the union again and that Elderson “is an excellent candidate and we intend to nominate him.” The square will be free in December, with the departure of Yves Mesch from Luxembourg.

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