The current budgetary rules of the European Union date back to the Treaty of Maastricht: member states must limit their deficit to 3% of their gross domestic product and keep their debt below 60% of their GDP.
During the Covid-19 pandemic, these criteria were put on hold.
But in the face of "increased uncertainty and significant downside risks to the economic outlook in the context of the war in Ukraine, unprecedented energy price hikes and continuing supply chain disruptions", the Commission European Union is playing the extension of this suspension in 2023. In principle, this clause will be deactivated in 2024. But Christine Lagarde, the boss of the European Central Bank has warned that the era of negative rates which have greatly facilitated certain economies to withstand the shock of the epidemic by increasing spending could cease "by the end of the third quarter".
In the meantime, this suspension "offers room for maneuver for national budgetary policies to react quickly if necessary", according to the Vice-President of the Commission, Valdis Dombrovskis.
And however to add: “Fiscal policy will have to be prudent in 2023, by controlling the growth of primary current expenditure financed by the State”.
According to him, “Member States’ fiscal plans for next year will need to be part of prudent medium-term adjustment paths, reflecting the challenges associated with high levels of debt which have further increased due to the pandemic.” .
The war and the impact of sanctions against Russia prompted Brussels last week to drastically cut its forecast for GDP growth for the EU and the eurozone in 2022. It now expects 2.7% against 4% at the start. year and does not rule out further deterioration.
New constraints have appeared
The economy is currently suffering from soaring commodity prices which, beyond energy, are spreading to food prices.
The conflict has also increased supply chain problems and increased uncertainty for both businesses and households.
The fact remains that the budgetary rules of the European Union remain, even excluding exceptional events such as the Covid epidemic and today the war in Ukraine, increasingly difficult to apply for member countries.
New constraints have emerged, such as the need to make significant investments in the ecological or digital transition.
The economic context has also changed with the increase in public debt, the need for countries to invest in the green and digital transition while at the same time, the public debt of the countries of the euro zone is approaching 100% of GDP .