According to the head of the IMF Georgieva, the EU rules on budget spending should be reformed. A reform of the Stability and Growth Pact has been discussed in the EU for months.
Brussels (AP) – The head of the International Monetary Fund (IMF), Kristalina Georgiewa, has spoken out in favor of reforming the strict EU rules for budget spending.
The fiscal rules would have to be adjusted to reflect the economic reality after the pandemic, Georgieva said at a press conference in Brussels on Monday. “The application of the current rules would represent an unrealistically large and counterproductive burden for some highly indebted countries,” said the economist on the sidelines of a meeting of finance and economics ministers in the euro zone.
Discussion about the Stability and Growth Pact
A possible reform of the so-called Stability and Growth Pact has been discussed in Brussels for months. This stipulates that EU states take on no more than 60 percent of economic output in debt. Budget deficits are to be capped at 3 percent of gross domestic product (GDP).
In the wake of the corona pandemic, however, EU countries had to take on enormous debts in order to cushion the consequences of the crisis. Therefore, the pact was suspended until 2023. According to a communication from the Eurogroup, the debt of the euro countries will reach 100 percent of GDP this year, the deficit ratio 7.1 percent.
In view of this, states like France and Italy are calling for reform. More frugal countries – such as the Netherlands or Denmark – are against it. Georgieva said it will be difficult to find consensus by 2023. She advocated a transitional arrangement.
It is important that climate-friendly investments are not “stifled”, said Georgieva. The IMF therefore recommends setting up a climate fund at EU level. The IMF is also examining whether a change in the debt ratio of 60 percent is advisable, said Georgieva. Overall, she advocated simplifying the complicated rules and making them easier to implement.