Saturday 21 March 2020 11:11 am

European Union to suspend bloc's budget rules in order to fight coronavirus

The European Union has formalised an agreement reached by the bloc’s finance ministers earlier this month to suspend EU budget rules.

The legislation placed limits on government borrowing but its suspension will now give countries a free hand in fighting the coronavirus.

The European Commission proposed late on Friday to activate the “general escape clause” in the rules to respond to the pandemic.

A number of countries across the union are in lockdown and travel restrictions are in place throughout.

“It will allow Member States to undertake measures to deal adequately with the crisis, while departing from the budgetary requirements that would normally apply under the European fiscal framework,” the Commission said. 

Current EU laws require governments to cut budget deficits until they reach at least balance and reduce public debt every year until its below 60 per cent of GDP.

Once the proposal is formally accepted by EU finance ministers at their next meeting, the money government’s spend on fighting the coronavirus will be excluded from Commission calculations of deficit and debt.

It was agreed on 5 March by those finance ministers that the economic impact of the virus was an emergency and outside of their control, so EU budget rules should not apply.

They repeated that message on Monday and said rules would not stand in the way of responding to the pandemic.

The Commissions expects the coronavirus outbreak to cause a 1 – 2.5 per cent recession in Europe this year.