The European Commission, on Wednesday proposed allowing highly indebted member states more time to reduce national debt levels, in an effort to reform the bloc’s joint budget rules.
The EU’s debt and deficit rules have been suspended since the COVID-19 pandemic prompted even frugal countries like Germany to take on large amounts of public debt.
“New challenges such as the green and digital transitions and energy supply issues will require us to make major reforms and investments for years to come,” EU Commission Vice-President, Valdis Dombrovskis said in a statement.
Under the new rules, which could apply from 2024, member states would still be obliged to reduce their debt to 60 per cent of their economic output and their deficit to three per cent of gross domestic product (GDP).
Individual plans however, would allow countries with excessive debt more time to reach these levels taking needed investments, such as fighting climate change, and reforms into account.
Indebted countries would initially be given four years to get their budgets on a sustainable track with a possible three-year extension
Monitoring of the implementation of the individual plans should be simplified, while violations would be punished more easily to enhance accountability.
The updated rules should avoid excessive austerity which risks harming EU economies in the long-term.
German Finance Minister Christian Lindner, has been critical of the country-specific plans which would be negotiated between the different member states and the commission.
EU finance ministers are due to discuss the commission’s ideas at their next meeting in December before more precise legislative steps follow.