European Union budget rules need to be more consistent with expected higher levels of sovereign debt, the bloc’s economics commissioner said, but dismissed calls to cancel debt amassed during the coronavirus crisis.
The idea of debt cancellation has been raised by Italy’s co-ruling 5-Star Movement, backing a proposal by EU Parliament President David Sassoli.
“In Europe debts cannot be cancelled”, Paolo Gentiloni said.
The European Commission, which is in charge of enforcing EU fiscal rules, this year suspended requirements to keep government deficits below 3 per cent of GDP and to cut public debt below 60 per cent of GDP as the economy entered a record recession.
Gentiloni said on Sunday that eurozone average debt to GDP ratio would be 103%-104% at the end of the pandemic next year.
“We need to take in account this new scenario,” the EU commissioner told Italian state broadcaster RAI, adding that discussions on how to adjust the budget would occur next year.
“The answer is not debt cancellation but creating conditions to gradually change and make our rules more consistent with the new reality,” Gentiloni said.