EU to extend breakout clause but warn 11 countries, including Spain, to stabilize public accounts
The extension of the break-out clause next year will in practice not lead to an open bar for the states with the most debt and deficits in the European Union (EU). In early May, Brussels urged the most indebted European countries to clean up their public accounts as soon as possible and is following with particular concern the situation of 11 states, including Spain.
This list also includes Portugal, Italy, Greece, France and Belgium, which the EU considers to be the Member States most vulnerable to future crises and likely to persist in this situation in the long term. This is what the Community Executive states in its Financial Sustainability Report, in which it recommends national authorities, including the Spanish government, to tackle a consolidation process as soon as possible that will restore balance in government accounts. It also advises them to use the exceptional benefits to reduce their debt.
Economic forecasts suggest that the vast majority will manage to reduce their deficit in these two years. In Spain, despite the fact that the war in Ukraine will reduce economic growth to 4%, the national debt will be reduced to 115.1% of GDP in 2022 and 113.7% in 2023. With regard to the rest of Europe however, Spain will continue to be one of the most indebted countries, behind only Greece and Portugal.
The extension of the suspension of the tax rules will serve as an oxygen balloon for European economies, which are under pressure from the fallout from the Russian invasion. The mechanism, which stipulates that European economies must keep the deficit below 3% of GDP and that debt must not exceed 60% of GDP, has been suspended since the pandemic. The Twenty-seven then decided to relax tax rules to cope with an unprecedented economic shock and avoid mistakes of the past, such as the era of austerity and austerity implemented after the financial crisis of 2007.
The extension of this measure has a political consensus in the EU and is expected to be adopted on Monday at the meeting of EU finance ministers (Ecofin) and will give Member States more strength to deal with the economic consequences of the war . In the temporary context of the EU crisis, Member States have mobilized millions of state aid to support consumers and businesses affected, among other things, by high energy prices.
At the same time, and according to Brussels guidelines, the most indebted countries should continue to make the necessary investments to implement the green and digital transition, relying on the European Recovery Plan. In this process, the Next Generation funds, from which Spain has already received an initial distribution of EUR 10,000 million, will play a crucial role.
Looking ahead, the twenty-seven agree that they should review the EU’s Stability Pact so that the requirements are adapted to the realities of each Member State. In this sense, Spain and the Netherlands – countries that have taken very different positions on this matter – have put forward a proposal to promote this debate and that the fiscal rules leave room for economic growth, investment and reforms.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
