In practice, the extension of the escape clause for next year won't mean that the States with the highest debt and deficit in Europe (EU) will be exempt from the provisions. Brussels called on the European Union's most indebted countries to immediately improve their public finances at the beginning of May. It is particularly concerned about the situation of 11 states, including Spain.
The EU also included Belgium, Portugal, Italy and Greece on this list. These are the countries that the EU considers most at risk from future crises. The Financial Sustainability Report of the Community Executive states this. It recommends that national authorities, including Spanish Government, begin to consolidate public finances to restore balance. They are also advised to take advantage of the extraordinary benefits to reduce their debt.
According to economic forecasts, the majority of people will be able to reduce their deficit within these two years. Although the war in Ukraine will reduce economic growth by 4% in Spain, the public debt of Spain will be reduced to 115.1% and 113.7% respectively in 2022, 2022, and 2023, respectively. Spain will remain one of Europe's most indebted nations, just behind Portugal and Greece, however.
The European economies will be able to breathe easier after the Russian invasion, if the suspension of fiscal rules is extended. Since the pandemic, the mechanism that requires European economies to keep their deficits below 3% GDP and that debt not exceed 60% of GDP has been suspended. To avoid an unprecedented economic shock, the 27 members of the group decided to loosen fiscal rules.
This extension has achieved political consensus within the EU. It is expected that it will be approved on Monday at the meeting EU finance ministers (Ecofin). It will give member states more power to deal with the economic effects of war. The temporary EU crisis has seen the Member States deploy millions of dollars of state aid to help consumers and businesses affected by high energy prices.
The guidelines from Brussels stipulate that the most indebted countries should continue to make the investments necessary for the green and digital transformation, while also utilizing the European Recovery Plan. The Next Generation funds, which Spain already received a disbursement in the amount of 10,000 million euros, will be crucial to this process.
The 27 agree to review the EU Stability Pact in the future. This will allow the requirements to be adapted to each member state's reality. Spain and the Netherlands, which have taken very different positions on the matter, presented a proposal to encourage this discussion and ensure that the fiscal rules allow for economic growth, investments, and reforms.