Because of Corona and Russia’s war against Ukraine, EU countries recently did not have to fear criminal proceedings if they spent significantly more money than they had in their pockets. That is now changing again.
The European Commission is initiating criminal proceedings against France, Italy and five other EU countries for taking on excessive new debt. The seven countries had an excessive deficit, said the Brussels authority responsible for compliance with EU debt rules.
In addition to France and Italy, Belgium, Hungary, Malta, Poland and Slovakia are also affected, and proceedings are already pending against Romania. With an expected deficit rate of 1.6 percent, Germany is not facing any trouble with Brussels this year.
Fines in the billions possible
The excessive deficit procedures were recently suspended due to the Corona crisis and the consequences of the Russian attack on Ukraine. If criminal proceedings are initiated, a country must take countermeasures to reduce debt and deficit. The main aim of this is to ensure the stability of the eurozone.
The aim of the deficit procedure is to get countries to manage their budgets soundly. In theory, fines running into billions are possible for persistent violations. In practice, however, these have never been imposed.
The EU Commission monitors whether EU countries comply with the rules on budget deficits and national debt. The rules allow new debt of a maximum of three percent of gross domestic product (GDP). According to the authority, twelve EU countries did not comply with the upper limit for this deficit last year or are forecast to exceed it this year.
This is how it continues
The reason why new proceedings have only been initiated against seven countries is that the Commission takes various factors into account. These include whether the deficit limit has only been exceeded to a very small extent, whether it is considered exceptional due to special economic circumstances or whether more investment has been made in defence.
The next step in the procedure is for the Economic and Financial Committee to issue opinions within two weeks. The Commission will then issue opinions to confirm the existence of an excessive deficit in the countries concerned. Then, in July, the Commission will propose to EU finance ministers that they issue recommendations on deficit reduction for the countries concerned.
The rules governing national debt and deficits, also known as the Stability and Growth Pact, were recently reformed after years of debate. However, the basic rule remains that a member state’s debt level may not exceed 60 percent of economic output. At the same time, the general government financing deficit – the difference between public budget revenue and expenditure, which is to be covered primarily by loans – must be kept below three percent of gross domestic product (GDP).
To ensure sound finances, each country must draw up a four-year budget plan together with the EU Commission, which is responsible for supervision. Under certain conditions, such as if a country commits to growth-enhancing reforms and investments, the plan can be extended to seven years. The EU Commission can also temporarily take the increase in interest payments into account when calculating adjustment efforts.
Source: Stern
I have been working in the news industry for over 6 years, first as a reporter and now as an editor. I have covered politics extensively, and my work has appeared in major newspapers and online news outlets around the world. In addition to my writing, I also contribute regularly to 24 Hours World.
