Deficit rules will not apply in 2021 – EU

The EU will be allowing more flexibility to its Member States in administering their budgets for next year, by extending the suspension to limits on government borrowing to 2021. This is intended to support the 27 countries in their efforts towards recovery from the recession caused by the Covid-19 pandemic.

This was announced by Economy Commissioner Paolo Gentiloni.

The European Commission, had originally suspended the need for Governments to maintain a budget deficit lower than 3% and to reduce public debt every year until the end of 2020 as the EU economy headed towards a significant recession.

“In terms of fiscal policy, we sent a letter last week to EU finance ministers to provide guidance as they are preparing their national budgets for 2021,” Gentiloni told a news conference after a meeting of euro zone finance ministers.

“The General Escape Clause will remain active in the year 2021 and fiscal policies should continue to support the recovery next year, both at the level of the euro area and in individual member states,” added.

However, Gentiloni said that governments should carefully choose the fiscal measures they want to use to sustain the recovery because they would have to be well-targeted and temporary. “There is, of course, a difference between a fiscal policy aimed at tackling the emergency and one that is focusing on achieving a durable recovery,” he said.

“Agility and flexibility will be key in designing and implementing fiscal policies for and during 2021.”

Members of the eurozone, included Malta, must send their budget assumptions for 2021 by mid-October. Yesterday, the Maltese Government indicated that next year’s budget will be announced on the 19th October.

via The Guardian