BRUSSELS – The European Commission made official today, Monday 23 May, the decision to suspend the budget rules for another year, in light of the serious uncertainty that characterizes the European economy. On the occasion, the EU executive, however, urged member countries to have a “prudent” policy and announced new assessments on the performance of public accounts in the autumn of 2022 and then in the spring of 2023.
“Our common priorities are investments and reforms. This is reflected in the country recommendations presented today, which focus on the implementation of national recovery and resilience plans and on the energy transition. Fiscal policies should continue to move from universal support provided during the pandemic to more targeted measures “, explained economic affairs commissioner Paolo Gentiloni here in Brussels.
Gentiloni: the economic situation has not yet normalized
According to the former Italian prime minister, the economic situation “has not yet normalized”. In this sense, “the increase in uncertainty and the strong downside risks to the economic outlook in the context of the war in Ukraine as well as the unprecedented increases in energy prices and the continuing disruption of the supply chain justify” the choice of extend until the end of 2023 the suspension of the budget rules decided in 2020, at the outbreak of the pandemic.
In this context, Brussels has announced that it does not want to open excessive deficit procedures (the opposite would have been surprising given the suspension of the Stability Pact). However, he warned that he would assess the budgetary situation of member countries next autumn. Subsequently, it reserves the right to open excessive deficit procedures in 2023, “on the basis of data from 2022, and taking particular account of compliance with the country recommendations”.
In fact, the suspension of the budget rules is associated with a particular monitoring of the trend of the public accounts which could lead to the opening of an excessive deficit procedure in the countries most in difficulty. Italy is one of these: still today Brussels explained that it believes that the country remains marked by a serious macroeconomic imbalance, due to a very high public debt and an increasingly weak competitiveness of the economy. Stability, but at the same time reserving the right to open excessive deficit procedures reflects the desire to find a balance between the different souls of the Commission and the Council. Germany’s finance minister, the liberal Christian Lindner, explained to the Financial Times on Saturday: “The fact that member states are now able to deviate from the Stability and Growth Pact does not mean that they must actually do so.” European Commission itself show a sharp slowdown in growth (see Il Sole / 24 Ore of 17 May). In the euro area, the latter is expected to be 2.7% in 2022 and 2.3% in 2023. The February forecasts indicated an expansion of the economy of 4.0 and 2.7% respectively. According to EU forecasts, the Italian economy should grow by 2.4 and 1.9% (previous estimates spoke of +4.1 and + 2.3%).
