Seeking to respond to the economic fallout from Russia's war in Ukraine, the European Union will extend its members' looser spending limits for another year.
The European Commission recommended today that the EU rules on budgetary discipline be suspended during 2023 as well, because the members need a longer period of fiscal flexibility to deal with the economic risks due to the war.
In 2020, due to the pandemic, the EU deactivated its full control over the level of national debt of its members, and this should have been valid until the end of 2022.
However, looser rules are now planned to apply until the beginning of 2024, given the decline in energy trade with Russia, rising inflation and disruptions in supply chains.
"Our economy is going through a second external shock - the second in two years," said European Economic Commissioner Paolo Gentiloni, adding that the outlook (for the economy) is subject to risks and very high uncertainty.
The recommendation of the European Commission, which needs to be approved by the EU finance ministers, is a response to the short-term consumption needs of the member states, the aim of which is to help their economies, without at the same time undermining the rules that should prevent the growth of budget deficits to the level that triggered the Greek debt crisis. crisis of 2009
Last week, the Commission cut its forecasts for EU economic growth to 2,7 percent in 2022 and 2,3 percent in 2023, from four percent and 2,8 percent, respectively, predicted in forecasts published before the Russian attack on Ukraine.
The EU economy grew by 2021 percent in 5,4 after a deep recession due to the pandemic. In 2020, the gross domestic product of the EU fell by 5,9 percent.
The plan to extend the EU's looser fiscal framework for another year comes as inflationary pressures are expected to prompt the European Central Bank to end years of loose monetary policy, including record low interest rates, in the coming months.
Such a policy was intended to stimulate economic activities in the 19 member states of the euro zone.
Gentiloni said that while going through a new period of turbulence caused by the Russian invasion of Ukraine, governments must have the flexibility to adapt their policies to unpredictable developments.
"We are far from economic normality," the European Commissioner pointed out.
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