The European Commission, the guardian of EU rules, proposed late
on Friday to activate the 'general escape clause' in the rules
to respond to the pandemic that has caused lockdowns in most EU
countries and the closure of Europe's borders.
"It will allow Member States to undertake measures to deal
adequately with the crisis, while departing from the budgetary
requirements that would normally apply under the European fiscal
framework," the Commission said.
EU rules say that governments have to keep cutting their budget
deficits until they reach balance or surplus and have to reduce
public debt every year to bring it below 60% of GDP.
Once the Commission proposal is formally accepted by EU finance
ministers at their next meeting, government spending to fight
the coronavirus will be excluded from Commission calculations of
deficit and debt.
EU finance ministers, who have ultimate control of EU rules that
limit government borrowing, agreed already on March 5 the
economic impact of the virus was an emergency and an event
outside their control and therefore EU budget rules should not
apply to spending related to it.
They repeated the message last on Monday, agreeing that the
rules will not stand in the way of responding to the epidemic,
which the Commission expects to cause a 1-2.5% recession in
Europe this year.
(Reporting by Jan Strupczewski, editing by Louise Heavens)
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