.png){kind=spacer}
The European Commission has today (3 March) announced that it intends to extend its relaxation of the fiscal rules under the Growth and Stability Pact. The EU will extend the “general escape clause” until 2023.
The relaxation of the rules will remain in place after 2023 if the level of economic activity in the EU or euro area has not returned to pre-crisis levels (end-2019), this will be the key quantitative criterion for the Commission in making its overall assessment of the deactivation or continued application of the general escape clause.
Today’s guidance also provides general indications on the overall fiscal policy for the period ahead, including the implications of the Recovery and Resilience Facility (RRF) for fiscal policy.
Executive Vice-President Valdis Dombrovskis, said: “There is hope on the horizon for the EU economy, but for now the pandemic continues to hurt people's livelihoods and the wider economy. To cushion this impact and to promote a resilient and sustainable recovery, our clear message is that fiscal support should continue as long as needed.”
“Our decision last March to activate the general escape clause was a recognition of the gravity of the unfolding crisis,” said Paolo Gentiloni, Commissioner for Economy “It was also a statement of our determination to take all necessary steps to tackle the pandemic and support jobs and companies. One year on, the battle against COVID-19 is not yet won and we must ensure that we do not repeat the mistakes of a decade ago by pulling back support too soon.”
Gentiloni added that the EU’s approach was also that of the G20 finance ministers who met last Friday.
Agility
The word of the moment appears to be ‘agile’, meaning that economies should be able to respond to the evolving crisis which still holds many uncertainties. The hope is that fiscal measures can gradually move towards supporting more forward-looking measures that promote a sustainable recovery. The guidance will be further detailed in the Commission's European Semester spring package.
Making the best use of the Recovery and Resilience Facility
It is hoped that the Recovery and Resilience Facility (RRF) will play a crucial role in helping Europe recover from the economic and social impact of the pandemic and will help to make the EU's economies and societies more resilient and secure the green and digital transitions.
The RRF will make €312.5 billion available in grants and up to €360 billion available in loans to support the implementation of reforms and investments. As well as providing a sizeable fiscal impulse, it is hoped that it will help mitigate the risk of divergences in the euro area and the EU. Importantly for the facility, expenditure financed by grants from the RRF will provide a substantial boost to the economy in the coming years, without increasing national deficits and debt.
