Brussels keeps national budget rules relaxed –allowing EU states to run up monstrous debts

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In March, the European Commission relaxed its restrictions on national budgets to allow governments to spend their way out of the crisis. Eurocrats agreed to let countries ignore their obligations to work towards the Eurozone’s debt and deficit targets. Under the rules, national deficits are expected to be smaller than three percent of gross domestic product and public debt be lower than 60 percent of GDP.

At the time, Commission President Ursula von der Leyen said changes were needed to handle the “human as well as socio-economic dimension” of the crisis.

Commission vice-president Valdis Dombrovskis said there would be a review of the rules in the autumn.

But he claimed it was “relatively safe to assume” Brussels will not seek to reimpose the rules “because the crisis continues, uncertainty continues”.

“Of course it’s all subject to how the real economic situation develops,” Mr Dombrovskis told the Financial Times.

“We are still surrounded by very large uncertainty.”

He added governments would likely prepare for their 2021 budgets with the suspension of the rules in mind.

Mr Dombrovskis also wants to undertake a policy review of the bloc’s budget 108-page rulebook, which is deemed to be too complicated to effectively enforce.

“So there is a scope for a simplification,” he said, claiming there “seems to be consensus emerging” to move away from the current measurements used by the Commission to judge how an economy could perform.

The Commission will reactive its escape clause “when the condition of severe economic downturn is not in place anymore,” Mr Dombrovskis added.

“We will have a review of this among other things in Spring 2021.”

Last month Brussels lowered its growth forecasts for the bloc’s economy, warning people to expect a slower-than-anticipated recovery from the downturn caused by the pandemic.

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EU officials said measures to halt the spread of the virus would cause a “significantly” deeper recession than previously predicted.

The Commission slashed its forecast for a potential economic recovery in 2021.

It estimated growth of just 5.8 percent next year, down from a previous claim of a 6.1 percent rebound.

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Mr Dombrovskis said the predictions were based on an outlook with no further major coronavirus waves hitting the Continent.

Since the announcement, EU countries, including Spain, Germany, Luxembourg and Belgium, have all witnessed a surge in new cases.

He said: “The current situation is relatively uncertain. We will need to see how the epidemiological situation develops.”

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