European Union finance ministers today formally endorsed the suspension of EU limits on governments borrowing to give the 27 EU countries a free hand in fighting the disastrous effects of the coronavirus epidemic on the economy.
The decision is crucial for Greece which is still reeling from a decade-long economic crisis and analysts predict a significant recession this year for Greece and the entire EU.
«We have the flexibility we need to deal with the pandemic,” Finance Minister Christos Staikouras told journalists after the meeting.
“Greece can tackle the pandemic in a timely and effective manner so that the damage to the economy, which will be significant, can be reversed.»
EU rules require that governments cut budget deficits until their books are in balance or in surplus and that they reduce public debt every year until it is below 60 percent of GDP.
But with the Coronavirus pandemic expected to put the EU into a deep recession this year, governments do not want to be bound by any limits to try to resuscitate the economy and they endorsed the European Commission’s proposal to activate what is called a “general escape clause” in the rules.
“The use of the clause will ensure the needed flexibility to take all necessary measures for supporting our health and civil protection systems and to protect our economies, including through further discretionary stimulus and coordinated action, designed, as appropriate, to be timely, temporary and targeted, by Member States,” the ministers said in a statement.
The full statement of the EU finance ministers is as follows:
The COVID-19 pandemic has led to a major economic shock that is already having a significant negative impact in the European Union. The consequences for our economies will depend both on the duration of the pandemic and on the measures being taken by national authorities and at European level.
The severe economic downturn now expected this year requires a resolute, ambitious and coordinated policy response. We need to act decisively to ensure that the shock remains as short and as limited as possible and does not create permanent damage to our economies and therefore to the sustainability of public finances in the medium term.
Ministers of Finance of the Member States of the EU agree with the assessment of the Commission, as set out in its Communication of 20 March 2020, that the conditions for the use of the general escape clause of the EU fiscal framework – a severe economic downturn in the euro area or the Union as a whole – are fulfilled.
The use of the clause will ensure the needed flexibility to take all necessary measures for supporting our health and civil protection systems and to protect our economies, including through further discretionary stimulus and coordinated action, designed, as appropriate, to be timely, temporary and targeted, by Member States.
Ministers remain fully committed to the respect of the Stability and Growth Pact. The general escape clause will allow the Commission and the Council to undertake the necessary policy coordination measures within the framework of the Stability and Growth Pact, while departing from the budgetary requirements that would normally apply, in order to tackle the economic consequences of the pandemic.
Today’s agreement reflects our strong determination to effectively address the current challenges, to restore confidence and support a rapid recovery.