Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

EU starts debate on budget rules amid high debt, investment needs

EconomyOct 19, 2021 14:50
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: European Commissioner for Economy Paolo Gentiloni delivers his speech about the Pandora Papers and the implications on the efforts to combat money laundering, tax evasion and avoidance at the European Parliament, in Strasbourg, France October

By Jan Strupczewski

BRUSSELS (Reuters) - The European Commission opened a debate on Tuesday on how to reform the European Union's fiscal rules to deal with a pandemic-induced surge in public debt and with the huge investment needed to fight climate change.

"We are re-launching this review of our economic governance against a backdrop of enormous investment needs, as the climate emergency becomes more acute with every passing year," European Economic Commissioner Paolo Gentiloni said.

"At the same time, the powerful fiscal support provided during the pandemic has led to higher debt levels. These challenges make it all the more essential to have a transparent and effective fiscal framework," he said.

The debate is to produce a fourth reform of the rules since they were established in 1997 to limit government borrowing to safeguard the value of the EU's currency -- the euro. Revised in 2005, 2011 and 2013, the so-called Stability and Growth Pact is now so complex that few people fully understand it.

High public debt is the main headache now because public support to European economies during the pandemic boosted average debt in the euro zone to around 100% of national output from 60-70% in the early 1990s when the rules were drafted.

Annual debt reductions required by the current rules are simply not realistic for countries with debts of 160% of GDP like Italy or more than 200% like Greece.

But while many EU finance ministers see the debt reduction requirements as too strict, there is no agreement yet on how to deal with it - whether through the interpretation of existing laws or through the more difficult changes to legal texts.

The other big challenge is to make sure that the rules do not tie governments' hands at a time when the 27-nation EU needs to mobilise hundreds of billions of euros to bring net CO2 emissions to zero by 2050.

An analysis by the Bruegel think-tank for EU finance ministers in September showed additional public investment to meet the EU’s climate goals will have to be 0.5%-1.0% of GDP annually during this decade alone. Bruegel proposed exempting investment to fight climate change from EU deficit calculations.

The idea has the general backing of Spain, Italy, France and others, but officials also point out the difficulty in defining what is and what is not a "green" investment.

The Commission said that after gathering all the views on what should be done during the debate, it would "provide guidance" in the first quarter of 2022 for fiscal policy "for the period ahead" so that governments know what rules to stick to when preparing long-term fiscal plans.

EU starts debate on budget rules amid high debt, investment needs
 

Related Articles

Bulls back in charge as Omicron worries wane
Bulls back in charge as Omicron worries wane By Reuters - Dec 07, 2021

By Marc Jones LONDON (Reuters) - Waning Omicron variant worries and a timely booster shot of Chinese stimulus lifted world stock markets and oil on Tuesday, and left traders...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email