After all the economic shocks of recent years, it is now time for the EU to focus on future growth and strengthening debt sustainability, says the European Commission. She wants member states to “draw up ambitious budgets” for 2024, says Vice-President Valdis Dombrovskis.
In May, it will also provide individual advice to the countries, including on investment and energy measures.
The EU’s day-to-day administration is helping the member states on their way because new fiscal rules are being drafted that will not come into force next year. “We are in a transitional phase,” says Dombrovskis.
EU rules on budget deficits and sovereign debt were temporarily suspended shortly after the start of the corona pandemic in 2020 to allow EU member states to put money into supporting businesses and citizens. As a result, debts in the Member States rose sharply. Subsequently, additional unforeseen expenses were added due to aid to Ukraine and support measures to pay energy bills. Rising inflation added to this. Existing fiscal rules, therefore, remained suspended for longer than expected.
It has now been agreed that the reins will be reintroduced in 2024, but in a different way. The finance ministers are still negotiating this, and there is no legal framework yet.
The economic outlook has also improved somewhat in recent months. Inflation seems to have peaked, and energy prices have also calmed down. “We should start phasing out massive support to people and businesses because of last year’s energy price hike,” says Dombrovskis. “Member States must outline credible paths for debt reduction and identify how they will use reforms and investment for sustainable growth.”