ATHENS – Over the last three years, European Union countries have provided significant support to households and businesses to deal with the impact of the pandemic and the energy crisis through a series of fiscal measures. The extended support was made possible by the activation of the general escape clause from the fiscal rules of the Stability and Growth Pact in early 2020.
However, as announced by the European Commission on Wednesday, the escape clause will be deactivated from 2024 to begin a period of de-escalation of debt that has risen above the 60% of GDP threshold in most EU countries. This means that the scope for an increase in public spending will be smaller.
The Commission has provided general guidelines for the fiscal policy of 2024, while in May it will make recommendations for each country separately, depending on the special features of its debt, which will determine the size of the fiscal adjustment that should be made with the budget of 2024.
For Greece, which has the highest debt in the EU at over 170% of GDP, fiscal adjustment has already begun, with this year’s budget forecasting a primary surplus of 0.7% of GDP. In 2024, Greece aims to achieve a higher surplus to continue reducing its debt.
In its recommendations, the Commission will strike a balance between the current fiscal rules and the proposals it made last November for their review, taking into account the new economic reality after the pandemic and energy crisis.
However, the debate on the revision of the Stability and Growth Pact is still ongoing, with several countries objecting to certain aspects of the Commission’s proposals.
The issue will be discussed next Monday at the Eurogroup and the following day at Ecofin. Commission Vice-President Valdis Dombrovskis expects some convergence of views on key elements of the Pact review, ahead of the March 23-24 summit.