17th Jun 2021

EU suspends deficit rule to end of 2022 to help with crisis

  • "We continue to apply the general escape clause next year, but no longer in 2023 - it means that for the next year we are not setting quantitative budget deficit targets," commission vice-president Valdis Dombrovskis said (Photo: European Commission)

The EU will keep the deficit rules suspended throughout next year as well as for 2021, the EU Commission said on Wednesday (2 June), to allow governments to keep supporting their pandemic-stricken economies.

Deficits will increase in most member states in 2021, with almost all EU-27 countries' deficits remaining above the EU threshold of three percent, except for Denmark and Luxembourg.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Thirteen member states are expected to have deficits higher then three percent of GDP next year.

The commission, publishing its policy recommendations to EU governments, warned that premature withdrawal of fiscal support could derail the recovery.

The commission also told member states to make full use of the EU's forthcoming €800bn recovery funding.

"We continue to apply the general escape clause next year but no longer in 2023, it means that for the next year we are not setting quantitative budget deficit targets," commission vice-president Valdis Dombrovskis told reporters.

"The overall message is that we should continue to support the economy so fiscal policy should be supportive both this year and next, and we should avoid premature withdrawal of the fiscal support," he added.

The commission said countries with a high ratio of debt compared to the GDP should be prudent, to not compromise their debt sustainability.

Rethinking taboos

Waving the deficit rules for another year shows how the steepest economic recession since the second world war has triggered the EU to rethink longstanding taboos.

Instead of the austerity policy followed during the 2008-09 crisis, the EU has - temporarily - decided to issue debt jointly to finance the recovery fund, suspend deficit and debt rules, which could lead to rethink of those rules for after the pandemic.

The commission expects the that EU economy will reach pre-pandemic level at the end of 2022.

The EU executive said the scale of fiscal support provided by member states in 2020 was 6.6 percent of GDP for the whole bloc, compared to 2019, and will be just above seven percent in 2021, and 3.4 percent in 2022.

The recovery fund should amount to 0.4 percent of the GDP this year and a 0.5 percent support next year.

Money from the recovery fund should reach member states during the summer.

The commission is currently assessing the national plans which member states submitted on how they plan to use the recovery fund available to them.

The EU executive is expected to finish the analysis by the end of June, and the council of member states could take decisions on the disbursement of funds in July.

First recovery euros could be paid out in July

Economy commissioner Paolo Gentoloni said the real challenge is whether member states can stick to their national plans and timelines. However, more than a dozen EU countries still need to ratify legislation to start the funding.

Europe needs to help sea rescues, say NGOs

Amnesty International and Human Rights Watch, along with Ecre, a Brussels-base NGO, have proposed a plan to increase sea rescues. The call comes ahead of an EU summit later this month among EU heads of state and government.

News in Brief

  1. Northern Ireland parties agree new first minister
  2. EU set to welcome back US tourism
  3. EU approval of Russian vaccine faces delays
  4. UK asks EU to freeze 'sausage war' for more talks
  5. Reynders 'deeply regrets' Hungary anti-LGBTIQ law
  6. EU states slammed for weakening roaming rules
  7. Euro 2020 Greenpeace activist could have 'paid with his life'
  8. German platoon in Lithuania shames Nato force

Stakeholders' Highlights

  1. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  2. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals
  3. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  4. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  5. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  6. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance

Latest News

  1. US and Russia restart talks on cyber and nuclear war
  2. Europe needs to help sea rescues, say NGOs
  3. EU countries can start 'going to the bank' for recovery funds
  4. EU 'concerned' at Johnson & Johnson vaccine shortfall
  5. Why the EU renewables target needs to be (a lot) higher
  6. EU and US make peace on trade before Russia summit
  7. Hungary passes anti-LGBTIQ bill ahead of 2022 election
  8. Prisoners, homeless, migrants, 'overlooked' in EU vaccine race

Join EUobserver

Support quality EU news

Join us