MNI SOURCES: Brussels To Delay Decision On Fiscal Rules Return

The EU Commission is set to delay confirming that the escape clause from the rules of the Stability and Growth Pact will end next year, even as it gives initial fiscal guidance to states on their 2023 draft budget plans Wednesday, Commission sources tell MNI.

Officials have made clear that the increased economic uncertainty arising from conflict in the Ukraine makes the outlook for growth more uncertain, although none expect recent events to lead to a full-scale recession in the euro zone.

EU Economic Affairs Commissioner Paolo Gentiloni said recently that 2023 fiscal guidance would “need to take into account the increased uncertainty”.

QUALIFICATION

As a result, one source said he expected any statement on the ending of the Escape Clause in 2023 to be qualified, with a final confirmation of deactivation maybe only coming at the time of the Commission’s Spring Forecasts due in May, when estimates of the impact of the Ukraine crisis on EU growth should be clearer.

Recent discussions among EU finance ministers before the outbreak of war in Ukraine had focused on whether the overall stance of fiscal policy should shift gear from a moderately supportive one in 2022 to a broadly neutral or moderately restrictive stance in 2023.

The increase in economic uncertainty as a result of the Ukraine crisis may lead to the EC’s 2023 fiscal guidance remaining unchanged from 2022 at moderately supportive, sources believe.

Senior Commission officials have cautioned that, while the impact of the war will certainly weigh on EU growth, the strength of the bloc’s recovery from Covid-19 and underlying fundamentals will help prevent a new recession.