Because of the corona pandemic, the EU commission suspend the rules for Member States’ budget deficits until further notice in an unprecedented step. For the first time, the authority is activating “the general evasion clause” in the EU Stability Pact, Commission President Ursula von der Leyen said in a video message. “The move means that national governments can pump as much liquidity into the economy as necessary.”
According to the rules of the Stability and Growth Pact, the EU states are not allowed to New debt of more than three percent of their gross domestic product, i.e. the economic output of their country,
allow. Otherwise, the EU can initiate a deficit procedure and impose severe penalties. The total debt should
moreover not exceed 60 percent of economic output.
“Most industries will be affected”
The corona crisis has “dramatic consequences for our economy,” said von der Leyen. “Most industries will be affected sooner or later.” The EU therefore wanted to do everything necessary to assist citizens and businesses. “To make this possible, we temporarily mitigate the otherwise very strict budget rules,” said von der Leyen. “This has never been done before.” Von der Leyen listed several measures that were decided at European level to deal with the economic crisis. Her video message ended with the words: “And we will do even more to support you and your family in the crisis.”
Last week the EU Commission decided to use a clause in the Stability Pact for exceptional circumstances such as natural disasters. This allows flexibility when examining the deficits of the member states. The Commission had also announced that it was ready to go further to provide more general fiscal policy support in the event of a severe economic downturn.
The President of the European Parliament, David Sassoli, welcomed the decision to suspend the Stability and Growth Pact. This gives Member States the opportunity to protect citizens from the Corona crisis, Sassoli tweeted. The EU finance ministers still have to approve the decision. They meet on Monday via video conference.