MNI BRIEF: Commission Proposes More Flexible EU Fiscal Rules

European Commission proposals for reforms of the European Union’s fiscal rules will allow excessively indebted member states more say over designing fiscal trajectories while toughening up enforcement measures, the Commission said on Wednesday.

Under the plan, the Commission would propose four-year plans for reducing excessive debt and budget deficits running above 3% of gross domestic product. Member states could also propose longer adjustment periods, of up to seven years, including commitments for reform and investment to promote debt sustainability, the Commission said.

Countries would submit annual progress reports, and the EU’s excessive deficit procedure would be activated if there is deviation from the agreed expenditure path. The existing deficit-based EDP would be maintained, the Commission said, while the debt-based EDP would be reinforced.

The Commission proposes to toughen enforcement by lowering financial sanctions so that the political bar to their imposition is lower. Wayward states could also be refused structural funds as well as NextGenerationEU programme funding, and debt-reduction plan could be toughened if necessary, the Commission said.

Economy Commissioner Paolo Gentiloni called for “swift agreement” by states on the new rules, which he said was a “pressing priority” given the deactivation of the Escape Clause from the current fiscal rules at the end of 2023.