Brussels The European Commission warns the EU governments against adopting an austerity course prematurely. A drastic, hasty reduction in debt ratios “would be associated with high economic costs and therefore counterproductive”, writes the Brussels authority in an economic situation analysis with which it intends to initiate a debate on the reform of the Euro Stability Pact on Tuesday. A draft is available to the Handelsblatt.
The reduction of the debt, which has risen sharply in the pandemic, is a “central challenge” in order to “build up a buffer before the next crisis strikes,” write the Commission experts. The consolidation process must, however, take place “in a sustainable and growth-friendly way”.
In the Stability Pact, the euro countries agreed to limit their budget deficits, measured against national economic power, to three percent and their total debt to 60 percent. Many countries are failing to comply with these requirements, with the budgetary burden of debt servicing falling sharply thanks to low interest rates even in highly indebted countries such as Italy.
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