The European Commission’s recommendation to keep the Stability and Growth Pact frozen until the end of 2023 is “an important development” because it will allow Member States to maintain an “agile” fiscal policy in response to the economic consequences for the EU of the Russian invasion of Ukraine, Eurogroup President Paschal Donohoe said on Monday 23 May (see EUROPE 12958/1).
But “this decision doesn’t change our objective of progressively shifting our fiscal stance from supportive this year to neutral next year”, he added.
Endorsed by the Spring European Council, the recommendation on economic policy in the euro area calls for an expansionary stance in 2022, at 1% of euro area GDP after 1.75% in 2021, and then broadly neutral in 2023, according to the European Commission’s forecast (see EUROPE 12839/1).
The European Commissioner for the Economy, Paolo Gentiloni, noted a difference between the decision to activate the Pact’s general escape clause at the outbreak of the Covid-19 pandemic and the decision to extend its activation until the end of 2023. “We are in a different environment”: Two years ago we provided emergency budget support “in all directions”, while today we are moving towards “more targeted, limited support within a framework of a broadly neutral fiscal stance” for 2023, he noted.
On Tuesday, French Finance Minister Bruno Le Maire said that maintaining the freeze on fiscal rules next year is “a wise and useful decision”, which provides the necessary room for manoeuvre to “protect our citizens against high living costs”. “This does not mean opening the floodgates of public spending” because “the gradual restoration of public finances, the reduction of public debt, remains the long-term objective of all of us”, he stressed.
The day before, his German counterpart, Christian Lindner, said that to fight inflation, Member States must consolidate their public finances by reducing the public deficit and debt. Germany will again apply its “debt brake” from next year, he said.
The Eurogroup will adopt a statement on the fiscal stance of the euro area for 2023 in July. (Original version in French by Mathieu Bion)