The European Union (EU) has reached an agreement with the EU Parliament and member states on common rules for budget deficits and national debt. These rules will take into account the unique economic situations of each individual country. Additionally, clear minimum requirements for reducing debt ratios among highly indebted countries will be established.
The EU has a longstanding rule that requires a member state’s debt level to be no more than 60 percent of their gross domestic product (GDP). However, due to the impact of the Corona crisis and the Russian attack on Ukraine, this rule has been temporarily suspended. If a country exceeds the three percent deficit limit, they may face an annual fine of at least 0.5 percent of their GDP.
The agreement was based on recommendations from the EU Commission. While some critics argue that these reforms weaken the so-called Stability Pact, it is expected that the EU Council of Ministers and the plenary session of the European Parliament will confirm these changes as a formality before they take effect.