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EU: Gentiloni wants a deep reform of the Stability Pact

2021-03-29T10:43:36.400Z


The European Commissioner for the Economy, Paolo Gentiloni, pleaded Monday for a profound reform of the European stability pact in order to promote investment and growth, once the shock of the pandemic has passed. Read also: Paolo Gentiloni: "This crisis is also a historic opportunity for the EU" “ We need to ensure that our fiscal rules can support growth. In particular, significant levels of p


The European Commissioner for the Economy, Paolo Gentiloni, pleaded Monday for a profound reform of the European stability pact in order to promote investment and growth, once the shock of the pandemic has passed.

Read also: Paolo Gentiloni: "This crisis is also a historic opportunity for the EU"

We need to ensure that our fiscal rules can support growth.

In particular, significant levels of public investment must be allowed in the years to come.

In my opinion, our new budgetary rules should provide for special treatment for investments

”, declared Mr. Gentiloni during a hearing behind closed doors before the Court of Auditors in Paris, according to a text sent by his services.

Since the start of the economic collapse caused by the pandemic a year ago, the countries of the euro zone have temporarily freed themselves from the rules of the stability pact which limits the public deficit in particular to 3% of gross domestic product (GDP) and debt at 60% of GDP.

Obsolete rules

Some of these rules, considered obsolete by member countries, including France, must be the subject of a debate, after the summer, with a view to possible reform.

But differences exist within the euro zone, notably with opposition from so-called “

frugal

” countries in northern Europe.

"

Given the levels of public debt that will be reached at the end of this crisis and the need to finance recovery and ecological transition, an in-depth review of these rules appears more necessary than ever

," underlined Paolo Gentiloni.

The Italian commissioner considers that it is necessary "to

think about scenarios of reduction of the public debt more gradual, realistic and differentiated according to the Member States, than what would dictate a mechanical application of the + rule of the debt + current

".

Danger of sudden fiscal adjustment

He fears that too brutal a budgetary adjustment will slow down the European economy, at the same time preventing the reduction of public deficits in the most weakened countries, as was the case after the financial crisis of 2008.

Imposing drastic budgetary adjustments during a recovery phase would be counterproductive and even dangerous.

This would worsen the social consequences of the crisis and undermine the recovery, thereby compromising the sustainability of public finances.

(...) My deep conviction is that the sustainability of public debts can only be ensured through growth and not austerity,

”added the Commissioner.

Mr. Gentiloni sees in the current crisis "

a historic opportunity to review (the) rules in depth

".

It is undoubtedly possible to make changes through interpretative modifications.

But if we want to be more ambitious then we have to consider legislative changes

, ”he said.

Source: lefigaro

All business articles on 2021-03-29

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