06/19/2024 – 7:51
The European Commission, the executive arm of the European Union (EU), this Wednesday reprimanded seven countries – including France and Italy – for disregarding the bloc’s financial rules on the size of their budget deficits.
The seven countries are Belgium, France, Italy, Hungary, Malta, Poland and Slovakia. The Commission announced the opening of disciplinary proceedings against the seven States.
In 2023, countries presented deficits exceeding 3% of their respective GDPs and, therefore, must respect the bloc’s budgetary rules or be exposed to significant financial sanctions.
Fines, which can reach 0.1% of GDP, have never been applied in the EU to date.
In addition to the seven countries that were warned, Romania has been the target of a disciplinary investigation for the same reason since 2019.
The procedures assume that affected countries must negotiate a plan with the EU to return their indicators to approved standards.
The rules on deficit and its relationship with GDP were temporarily suspended in 2020, due to the coronavirus pandemic, to allow the bloc’s countries to respond with higher spending and reactivate their economies.
Two fundamental pillars of the bloc remain in force: preventing a country’s overall debt from exceeding 60% of GDP and ensuring that the deficit does not exceed 3%.
Thus, the Commission notes that fiscal policies “should reduce debt or maintain it at prudent levels, while preserving investment”.
Spain and the Czech Republic recorded deficits slightly above 3% in 2023, but forecasts indicate that they should remain within EU rules this year.
Estonia has a deficit of more than 3%, but its debt is only 20% of GDP, well below the 60% threshold.
EU budget rules require countries with an excessive deficit to reduce it by 0.5 percentage points per year.
The goal, however, is difficult to achieve, as countries must inject money into their economies to finance the so-called ‘green transition’ and increase spending in the defense sector.
Commission analysts also examined the situation of countries and their payment capabilities. The group concludes that Ireland, Greece, Spain, Cyprus and Portugal “maintain the ability to pay their debts”.
The European Commissioner for the Economy, Paolo Gentiloni, stated that the Commission’s position “does not mean a ‘return to normality’, because we do not live in normal times, and much less a return to austerity’, because that would be a terrible mistake”.
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