EU, the climate of economic uncertainty justifies a new stop of the Stability Pact. Warning to Italy on growth and Pnrr
New stop of Stability pact. One of the pillars on which the budgetary policy of European countries is based will suffer a further one block. This is stated in the recommendations of the spring package of the European semester. The framework can only be restored starting from 2024.
To pay a series of factors key such as “the strong downside risks for economic prospects in the context of the war in Ukraine, the unprecedented increases in the price of energy and the continuing disruption of the supply chain ”, reads the note.
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“The continuous activation of the clause general safeguard in 2023, explains the Commission, will allow national fiscal policy to react promptly when needed, while ensuring a smooth transition from broad based support to the economy during the period of the pandemic towards greater attention to temporary and targeted measures and to fiscal prudence necessary to ensure medium-term sustainability. There Commission will provide guidance on possible changes to the economic governance framework after the summer recess and in time for 2023 “.
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However, this should not be considered as “a return to unlimited spending”, Specifies the European Commissioner for Economic Affairs Paolo Gentiloni. “I would like to highlight two key messages about the general safeguard clause. First, we are far from economic normality. Second, we are not proposing a return to unlimited spending.”
If we want to see the “glass half full”, remark Gentiloni, consider that “the European Commission proposes to extend the suspension clause of Stability pact foreseen and invites countries to make the best use of the common resources of the Next Generation Eu. By doing this we can reduce the slowdown in our economies and therefore increase the work, well-being and competitive capacities of our country “.
Overall, the EU Commission’s spring economic forecasts predict that the economy of the EU will continue to grow in 2022 and 2023. However, as the EU economy continues to show resilience, Russia’s war of aggression against Ukraine has created a new environment, exacerbating pre-growth headwinds that were previously predicted to subside. .
It also poses further challenges to the EU economies in relation to security of energy supply and dependence on fossil fuels from Russia. The European semester and the mechanism for recovery and resilience, at the heart of NextGenerationEUprovide solid frameworks to ensure effective policy coordination and address current challenges.
The recovery will continue to guide Member States’ investment and reform programs for years to come. It is the main tool for accelerating the green and digital dual transition and strengthening the resilience of Member States, including through the implementation of national and cross-border measures in line with REPowerEU.
In this regard, the specific nature of the macroeconomic shock caused by the Russian invasion of Ukraine, as well as its long-term implications for the EU’s energy security needs, require careful planning of the fiscal policy in 2023. Tax policy should broaden public investment for green and digital transition and energy security. Full and timely implementation of RRPs is key to achieving higher investment levels.
There budgetary policy should be prudent in 2023, controlling the growth of nationally funded primary current expenditure, while allowing automatic stabilizers to work and providing temporary and targeted measures to mitigate the impact of the energy crisis and to provide humanitarian assistance to people fleeing the country. Russian invasion of Ukraine.
Furthermore, Member States’ fiscal plans for next year should be anchored in prudent medium-term adjustment paths reflecting the sustainability challenges associated with high debt / GDP levels which have further increased due to the pandemic.
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