MNI SOURCES:Covid Surge Threatens To Delay EU Debt Rule Review

The review of the eurozone's strict rules on public borrowing may be delayed beyond its expected autumn start-date due as a third wave of Covid 19 infections hits harder than expected, sapping the bloc's economy, officials in Brussels told MNI.

The Stability and Growth Pact has already been suspended until the end of 2022 due to the pandemic, but countries including France and Italy have called for a review to loosen its limits on public borrowing and stipulations for how quickly excessive debt must be reduced. But officials said there is no hurry to start that difficult discussion, in which fiscally more hawkish countries like the Netherlands are likely to oppose proposals for easier rules, while the economy is still on convalescence.

"At least some sense of normality is needed, such as the reopening of businesses and their proper functioning, before we can anticipate what is coming up and that is not where we are now," one Brussels official said.

With the Pact and rules on state both suspended, and significant monetary stimulus from the European Central Bank, member states have ample room to respond to the crisis, officials noted. They also reiterated that the EU's Covid Recovery Fund remains on track to start borrowing by July, with the 27 member states still expected to ratify a measure allowing the Commission to access its own resources, despite a surprise ruling to pause the process by Germany's Constitutional Court.

URGENCY OVER OWN RESOURCES

One official told MNI that Germany is now so politically invested in the EU's Recovery and Resilience Facility that it would do "whatever it takes" to get the measure approved. In response to an investment bank report warning that borrowing under the RRF could be delayed until the fourth quarter, another source said that was very much a "worst case" scenario, and noted that not all the member states' national recovery plans would need to be approved for some of the facility's prefinancing, which will make up 13% of its planned total borrowing, to start on time.

"If by the end of April, you only have, say, 15 member state plans submitted - that's fine. The rest could submit later on or even at year-end, if they're not in a rush to get the money."

Twenty-three states have so far submitted draft plans and the Commission is said to be in intensive talks with states to help them finalise their plans.

"Own Resources is where the urgency is, because if that doesn't happen the Commission has no power to borrow on markets and disburse to member states."

Sources point out that it is not just Germany blocking the ratification of the measure, and that no clear timeline for parliamentary approval has been established in either the Netherlands, Poland or Hungary.