In the Stability Pact, the euro countries agreed to limit their budget deficits to three percent based on national economic power and limit their total debt to 60 percent.
(Photo: dpa)
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 to three percent based on national economic power and limit their total debt to 60 percent. Many countries fail to comply with these requirements, with the burden of debt servicing having fallen sharply thanks to low interest rates even in highly indebted countries such as Italy.
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