MNI SOURCES: EU Commission To Tell Countries To Boost Stimulus

The EU Commission is likely to send a strong signal to Eurogroup finance ministers that their 2021 draft national budget plans will probably need to be revised in light of the second wave of the Covid virus and further widespread economic shutdowns, an EU official indicated today.

The Commission is due to issue its latest set of economic forecasts next Wednesday and a significant cut in its growth outlook looks likely.

"There has been a very rapid transformation in the tone of the debate (on the economy)," the official said. "There is an extreme state of uncertainty. New containment measures are being rolled out daily and it's difficult to anticipate how all this takes effect."

While member states have already submitted 2021 budget plans to the Commission, the initial response from officials was already that economic assumptions underpinning them were too optimistic.

NO CHANGES TO COVID AID

"Things have changed quite a bit … We need to discuss if they're still up to date," the senior EU official said. "The fiscal impulse will have to stay for next year."

EU officials are ruling out any changes to the planned Recovery and Resilience Facility at the heart of their EUR750 billion Covid aid scheme to make it more supportive of economic recovery. Instead they stress that national governments, helped by the European Central Bank's asset-purchasing programmes, will need to provide further fiscal stimulus.

However, the source said it was still too early to discuss whether the restart date for the Stability and Growth Pact, which places limits on national borrowing, should be pushed back even further. Ministers have agreed at previous meetings that this should not happen before 2022.

But the official said that member states would be given a lengthy lead time to prepare for any return to the SGP.

"There is a clear understanding that there should be no abrupt or destabilising cliff-edge effect," the official said.