The European Union should agree quickly on reforming its fiscal rules to reassure markets, with the bloc facing an increasing risk of recession, its economy commissioner Paolo Gentiloni said.
(Bloomberg) — The European Union should agree quickly on reforming its fiscal rules to reassure markets, with the bloc facing an increasing risk of recession, its economy commissioner Paolo Gentiloni said.
“It’s time to move on, leaving behind the traditional divide,” Gentiloni told a conference hosted by the Bruegel think tank in Brussels. “Moving quickly toward a common understanding would also send a strong and reassuring message to markets.”
Gentiloni is due to present a proposal to review the Stability and Growth Pact, the EU’s rules limiting national expenditure, in the next few weeks.
Changes to the fiscal framework have become more urgent to cope with the high level of debt amassed by member states during the Covid-19 pandemic and the need to respond to a worsening energy crisis. But member states still disagree over how much leeway should be given to favor investment in priority areas including green transition or defense.
Gentiloni said that simplifying rules, a bigger say for national governments in proposing fiscal paths in the medium term, and better enforcement would be “the defining features” of an improved fiscal framework.
The reform process takes place against the backdrop of “exceptionally high” uncertainty and “the risk of a recession is rising,” Gentiloni said. The economic outlook would “worsen markedly” if Russia completely cuts off its gas deliveries, he added.
Government subsidies to support citizens amid skyrocketing prices should be temporary and better targeted, as three-quarters of the measures taken so far have not been well-designed, Gentiloni said.
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