Portuguese minister: Fiscal discipline suspension should continue due to second wave

"The suspension of the rules of the Stability and Growth Pact (SGP) should continue being in force.". [ EPA-EFE/ANTÓNIO PEDRO SANTOS]

Portugal’s finance minister said on Monday (25 January) that stimulus measures to support the European economy must be maintained until the COVID-19 pandemic “loses momentum”.

Addressing the European Parliament’s economic and monetary affairs committee, Leão said the current wave of the pandemic was much more intense than expected and will therefore affect the economic outlook for recovery this year across Europe.

“This wave is having a tremendous effect on the European economy, with very restrictive measures on various sectors of activity, and it is therefore very important that the measures to support the economy are maintained,” he said, adding that the suspension of the rules of the Stability and Growth Pact (SGP) should continue being in force.

According Leão, Europe is still in an emergency phase, which justifies exceptional measures to support employment and the productive capacity of companies.

“This support should be maintained until we move to the next phase, when the pandemic starts to lose strength,” he said, adding that exceptional fiscal policy and state aid measures should remain in place in order to help the European economy cope with this crisis.

Because of the unprecedented nature of the pandemic, the EU activated last year the so-called “escape clause” on budgetary discipline, temporarily suspending the bloc’s rules limiting public debt and deficits.

Commission proposes unprecedented suspension of EU’s fiscal rules 

The European Commission proposed for the first time on Friday (20 March) the activation of the general escape clause that would ‘pause’ the adjustments member states have to do to meet their fiscal targets and allow them to spend “as much as they need”.

This suspension will be in place at least until the end of 2021 and could be extended, not least because the economic recovery is not expected to be completed before the end of 2022, according to the European Commission’s macroeconomic forecasts.

European Commission executive vice-president Valdis Dombrovskis said earlier this month that the suspension of the Stability and Growth Pact in 2022 will depend on economic developments.

“Our plan is to return to that discussion and potential decisions in the spring cycle of the European semester, which is typically in late May and early June,” Dombrovskis told Lusa.

He said a possible further suspension of the SGP rules “will depend on the economic situation and how we see it in May-June”.

“We are not prejudging the outcome of that decision,” he said, emphasising that for the time being “what is clear to the member states for 2021 is that the safeguard clause [allowing the suspension of the SGP] will continue to be activated”.

Dombrovskis: Continued suspension of EU Stability Pact will depend on spring assessment

The suspension of the Stability and Growth Pact in 2022 will depend on economic developments, European Commission executive vice-president Valdis Dombrovskis told EURACTIV’s partner Lusa, pointing to a possible decision in the spring.

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