LISBON – Government expects EU budgetary rules to be suspended until at least 2022

The Portuguese government said it expects Brussels’ budgetary rules to remain suspended until at least 2022 when EU member states are expected to recover last year’s GDP.

Portuguese Prime Minister António Costa told reporters on Thursday (1 October) he had spoke to Commissioner Margrethe Vestager “about the need to extend the flexibility on state aid rules, which expires at the end of this year”. “It is clear that by the end of 2021, we will have the economy still heavily constrained by this crisis, and that this deadline must therefore be extended,” Costa said.

However, the case of Romania shows that the application of the general escape clause of the Stability and Growth Pact (SGP) could prove to be tricky.

Romania’s Parliament recently voted a 40% pension increase, a move that raised eyebrows in Brussels.

An EU official told EURACTIV that the EU’s executive would take the activation of the general escape clause fully into account in its assessment of whether Romania has taken effective action in autumn. Read more.

“The general escape clause allows the member states under the preventive and corrective arm of the SGP to deal adequately with the covid-19 crisis, provided that this doesn’t endanger fiscal sustainability in the medium term,” the official said.

“In its assessment of effective action, the Commission will take into account both the measures to cushion the impact of the crisis as well as fiscal sustainability considerations,” the official added, emphasising that Romania should continue to avoid the implementation of permanent measures that would endanger fiscal sustainability.

In addition, Romanian President Klaus Iohannis said there were discussions with senior Commission officials “who have frankly told us that, if this budget revision enters into force, € 3 billion will be cut from EU funds, because we are violating several provisions in the treaties”.

Asked if this could be the case, sources commented: The Council can suspend (on a proposal from the Commission) commitments from the EU funds, including from the Recovery and Resilience Facility once it is approved, in particular in two cases:
• where a member state is in excessive deficit and fails to take effective action to correct it
• where a member state is in a macroeconomic imbalance procedure and fails twice to take the recommended actions

(Ana Matos Neves and Ivone Gravato, Lusa.pt | Sarantis Michalopoulos, EURACTIV.com)

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