• Sat. Feb 24th, 2024

New EU Budget Deficit and Debt Rules to Boost Economic Stability: Amid Suspension of Stability Pact, Clear Minimum Requirements Established for Highly Indebted Countries

ByEditor

Feb 11, 2024
EU debt rules to become more flexible under new agreement

The EU Parliament and the governments of the member states have agreed on common rules for budget deficits and national debt, taking into account the current economic situation. The EU will set targets for reducing excessive deficits and debt levels based on the individual circumstances of each country. In addition, clear minimum requirements for reducing debt ratios among highly indebted countries will be established.

The European Union has a rule in place that requires a member state’s debt level to be no more than 60% of their economic output, with a general government financing deficit kept to a minimum of 3% of their respective GDP. However, due to the effects of the Corona crisis and the Russian attack on Ukraine, these requirements have been suspended. If a state violates the 3% deficit limit, they will be subject to an annual fine of at least 0.5% of GDP.

The agreement was reached based on proposals from the EU Commission, which were met with criticism from some quarters who view them as weakening the so-called Stability Pact. These reforms will need to be confirmed by the EU Council of Ministers and plenary session of the European Parliament before they can take effect. This is typically a formality process.

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