MNI: EU To Postpone Decision On Debt Rule Freeze - Officials

The European Commission is likely to postpone a decision on whether to extend the escape clause waiving EU Stability and Growth Pact rules on borrowing and debt until the summer, with this coming Monday’s Spring Forecasts unlikely to indicate an imminent recession, EU sources told MNI.

“In March, the Commission was pretty upfront and said in an open way that they would revise fiscal guidance at the time of the Spring forecasts and leave wide open the door to prolonging the Escape Clause in May,” one source said. “I have the impression that they are having second thoughts in terms of timing, although not in principle.”

The Commission is due to produce proposals to reform the Stability and Growth Pact in June or July and officials said that this may be a more apt time to decide on whether - and for how long - to extend the waiver on the borrowing rules introduced during the Covid pandemic. (See MNI SOURCES: EU Near Certain To Extend Debt Rule Escape Clause)

“I have the impression that they want the issue of the Escape Clause linked to the revision of fiscal rules,” one source said.

SPRING FORECASTS

Next week’s Spring Forecasts are likely to indicate weaker growth in the wake of the Ukraine crisis, rather than an outright recession, another said.

A delay in consideration of the escape clause will have no impact on states’ fiscal policies, which will have to remain very flexible for the foreseeable future, officials stressed.

“Whatever they decide, it will have to be equivalent to suspending the rules,” one said.