The EU Parliament and the member states have agreed on new rules for budget deficits and national debt, with the aim of addressing the current economic situation. The EU will target different excessive deficit and debt reduction goals based on each country’s individual circumstances. Additionally, specific minimum requirements will be set for highly indebted countries to reduce their debt ratios.
The European Union has long had a rule in place stating that a member state’s debt level must not exceed 60 percent of its economic output. Additionally, the general government financing deficit should be kept to no more than three percent of GDP. However, due to the Corona crisis and the consequences of Russia’s attack on Ukraine, these rules have been temporarily suspended. It is now suggested that if a state violates the three percent deficit limit, they will face an annual fine of at least 0.5 percent of GDP.
The agreement was reached after reform proposals from the EU Commission were put forward. While some critics see these changes as weakening the so-called Stability Pact, it is important to note that this agreement is simply a formality before coming into effect. The EU Council of Ministers and plenary session of the European Parliament must confirm it before it becomes official policy.