Correcting the previous headline, “Debate about 3% deficit belongs to another century, says EU’s Gentiloni”, which was inaccurate
The EU’s new economy commissioner Paolo Gentiloni said the bloc should consider loosening its strict budget deficit rules to respond to climate risks and weak growth, echoing a similar call by French President Emmanuel Macron.
The rules, which aim to enforce budgetary discipline among European Union members, were born out of the financial crisis and needed to be updated, Gentiloni told the Monday edition of the daily Sueddeutsche Zeitung.
“We have different challenges now: the fight against climate change and the danger of having low growth and low inflation for an extended period,” he said in comments translated into German and published on 9 December.
The EU’s so-called Growth and Stability pact limits budget deficits to three percent of gross domestic product and overall debt to 60% of GDP in member states.
Some countries have achieved compliance through either years of austerity or economic good fortune, while others lag behind with massive debt mountains.
Critics have long argued that countries need more flexibility to be able to spend where needed to boost growth and fight downturns.
Macron recently added his voice to calls for EU states to be allowed to loosen the purse strings.
“We need more expansionist policies, to invest more. Europe cannot be the only area not to do it,” he told The Economist.
The debate about the three-percent limit “belongs to another century”, he added.
Gentiloni, a former centre-left premier in Italy, said he would launch “consultations” on the pros and cons of the rules with a view to coming up with proposals “in the second half of 2020”.
His heavily-indebted native country is one of the loudest opponents of the current budget rules.
But Italy’s push for reform has faced fierce opposition from richer EU nations loathe to ease the pressure on Rome’s chronic overspending.