It was one of the first decisions made by Brussels at the beginning of the pandemic. The activation of the escape clause to suspend the Stability and Growth Pact, which not only limits debt (60% of GDP) and deficit (3% of GDP), but also a very strict compliance path.
Brussels lowers growth to 4% for Spain in 2022, but remains at the head of the EU
But with the pandemic, the European Commission decided to give public spending a free rein in 2020, 2021 and 2022, while opening the debate for the reform of fiscal rules with a view to starting 2023 with a new Stability Pact. But the invasion of Ukraine by Vladimir Putin, the overshoot of energy prices, the bottlenecks due to the lack of materials and the boomerang effect of sanctions, especially in the field of energy, in addition to the increase in defense spending.
All this cocktail has led, According to the Financial Times, to the fact that the Commission has decided to extend the suspension of the fiscal wars for another year, until 2024, as it hinted at in March, when the war had just begun and its effects on the European economies were already beginning to be felt.
The Community Executive is expected to make the decision official next Monday, May 23, when the Economic Vice President of the European Commission, Valdis Dombrovskis, and the Commissioner for the Economy, Paolo Gentiloni, present the annual package of economic recommendations to each Member State.
“Russia’s invasion of Ukraine has undermined European and global security and stability”, states the European Commission: “The EU faces some immediate challenges, such as refugee flows, security and potential Russian responses, impact negative on growth, with repercussions on financial markets, higher pressures on energy prices, persistent bottlenecks in the supply chain and effects on confidence.
“Everyone understands that next year will not be a normal year and that any rule we have in force has to be implemented intelligently,” say community sources cited by Efe.
The proposal comes after the European Commission lowered this week its growth forecast for the eurozone by more than one point due to the impact of the war, leaving it at 2.7% by 2022, and with inflation at 6.1%. . In the data relating to Spain, the Brussels forecasts go from the 5.6% forecast on February 10, to the 4% of GDP announced now due to the impact of the war unleashed in Ukraine after the Russian invasion of the country. Brussels also cuts its forecasts for 2023 for Spain by one point, from 4.4% to 3.4%, delaying reaching pre-pandemic levels until the third quarter of 2023.