EU debt rules: reform in the final phase before the European elections - financial expert explains position

EU debt rules: reform in the final phase before the European elections - financial expert explains position

According to a report from www.euractiv.de, after months of negotiations, finance ministers of EU member states have agreed on new debt rules for EU countries, with a focus on reducing budget deficits and public debt. It is a complex process involving the European Parliament, the Member States in the Council of the European Union and the European Commission.

The new rules that are the focus of the trilogue involve setting rules that tell member states in advance how much they can spend. In particular, there is a “safeguard clause” on budget deficits, which was included in its position by the Council of EU Member States at Germany's insistence.

This safeguard clause states that EU countries must aim for a budget deficit of no more than 1.5 percent of GDP; If they are above this, they must reduce their deficit by at least 0.25 percent per year. However, renowned expert Zsolt Darvas from the think tank Bruegel explains that this rule is of little consequence and will only have a limited impact, especially in a few countries. He also emphasizes that austerity will return despite the safeguards, especially due to the EU treaties and the Maastricht criteria.

Although the negotiations are due to be completed before the European elections, the pace of budget adjustment is the big question and in this respect, according to Darvas, the new rules are much better than the old rules.

Overall, the agreement on new EU debt rules does not appear to have a drastic impact on the market or the financial sector, as the main steps have already been taken and the new rules have a limited impact. It remains to be seen how the negotiations before the European elections will be concluded and how the states will deal with the new regulations.