During the suspension, the EU spent two years reforming fiscal rules. (Representative)
Brussels:
France, Italy and five other EU countries were placed in formal proceedings on Friday for violating the bloc’s fiscal rules, a move that could lead to unprecedented penalties unless they take corrective action.
“Today the Council adopted decisions establishing the existence of excessive deficits for Belgium, France, Italy, Hungary, Malta, Poland and Slovakia,” the body representing the 27 member states said.
Known as an ‘excessive deficit procedure’, it sets in motion a process that forces a country to negotiate a plan with Brussels to get its debt or deficit levels back on track.
The seven countries had deficits – the difference between government revenues and expenditures – of more than three percent of gross domestic product, in violation of the bloc’s fiscal rules.
France’s deficit stood at 5.5 percent in 2023, but reducing it appears likely to be difficult due to political uncertainty following the outcome of a snap election won by a left-wing coalition that demanded much higher government spending.
The EU countries with the highest deficit ratio last year were Italy (7.4 percent), Hungary (6.7 percent), Romania (6.6 percent) and Poland (5.1 percent).
The council also said Romania “has not taken effective action” on its excessive deficit, despite a procedure being opened against the country in 2020 and that the country would therefore be monitored.
As a next step, countries will have to submit medium-term plans by September on how they will remedy the breach.
The European Commission will then provide assessments of the plans in November with details of the route they should take to return to a sound budget.
This is the first time Brussels has reprimanded EU states since the bloc suspended rules following the 2020 coronavirus pandemic and the energy crisis caused by Russia’s war on Ukraine, when states supported businesses and households with public money.
The EU spent two years during the suspension reforming fiscal rules to give more room for investment in critical areas such as defense.
But two sacred goals remain: the national debt should not exceed 60 percent of national output, with a government deficit of no more than three percent.
Countries that fail to remedy the situation could theoretically be hit with fines of 0.1 percent of gross domestic product (GDP) per year until action is taken to address the violation.
In practice, however, the commission has never gone so far as to impose fines, fearing that doing so could have unintended political consequences and harm a state’s economy.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)