The European Commission on Tuesday launched a debate on how to reform EU tax regulations to address rising public debt following the pandemic and massive investment needs to combat climate change, Reuters reports.
“We are relaunching this review of economic governance in the context of enormous investment needs, as the climate emergency becomes more acute with each passing year. At the same time, the strong fiscal support provided during the pandemic has led to a higher level of debt. making it essential to have a transparent and efficient budget framework, “said Economy Commissioner Paolo Gentiloni.
The debate would lead to the fourth reform of regulations, since they were implemented in 1997, to limit government borrowing in order to protect the value of the euro. Revised in 2005, 2011 and 2013, the so-called Stability and Growth Pact is now so complex that few people fully understand it, writes Reuters.
The main concern is the high level of public debt, as public support for European economies during the pandemic led the euro area to increase its debt to about 100% of GDP, from 60-70% in the early 1990s, when the debate began. on tax regulations.
An annual debt reduction required by current regulations is unrealistic for countries with a debt level of over 160% of GDP (Italy), or over 200% of GDP (Greece).
But, although many EU finance ministers see the debt reduction requirements as too strict, no agreement has yet been reached on managing this issue, according to Agerpres.ro.
After analyzing all points of view, in the first quarter of 2022 the European Commission will “provide guidance” on fiscal policy “for the next period”, so that governments know the regulations they need to meet when preparing long-term fiscal plans.
The European Union suspended in March 2020 the application of the rules of the Stability and Growth Pact. Obligations that EU Member States no longer have to comply with now include the famous rule that the government deficit should not exceed 3% of Gross Domestic Product, as well as the obligation to keep public debt below 60% of GDP. .
Following the suspension of budgetary discipline rules, Member States have announced billions of euros in public spending to help healthcare systems and support economies, companies and the labor market cope with the impact of the coronavirus pandemic.
