The European Commission’s guidance, which includes giving the “green light” for the continuation of fiscal flexibility and the continuation of support measures for households and enterprises, fully coincides with the government’s priorities, Finance Minister Christos Staikouras said on Wednesday.
Commenting on the release of the EU Commission’s updated approach to fiscal policy report, Staikouras noted that “a continuation of fiscal flexibility – bearing in mind the country’s cash reserves margins – and the remaining framework of guidance offer the ability to expand, for as long as it takes, the support measures for households and enterprises with efficient, focused and socially fair measures, without leading us to a fiscal derailment”.
The Greek FinMin said that the Commission’s updated approach “follows the right choices that have been made since March 2020 on a Eurogroup and Ecofin level, with the active participation of our country”.
The EU Commission report is providing member states with broad guidance on the conduct of fiscal policy in the period ahead. It provides guiding principles for the proper design and quality of fiscal measures, setting out the Commission’s considerations regarding the deactivation or continued activation of the general escape clause. It also provides general indications on the overall fiscal policy for the period ahead, including the implications of the Recovery and Resilience Facility (RRF) for fiscal policy.
The Commission is committed to ensuring a coordinated and consistent policy response to the current crisis,” it said.” This requires credible fiscal policies that address the short-term consequences of the coronavirus pandemic and support the recovery, while not endangering fiscal sustainability in the medium-term.”
These objectives are:
– Guidance for coordinated fiscal policies
The coordination of national fiscal policies is essential to support the economic recovery. The Communication specifies that fiscal policy should remain agile and adjust to the evolving situation. It warns against a premature withdrawal of fiscal support, which should be maintained this year and next. It provides that once health risks diminish, fiscal measures should gradually pivot to more targeted and forward-looking measures that promote a resilient and sustainable recovery and that fiscal policies should take into account the impact of the RRF. Finally, fiscal policies should take into account the strength of the recovery and fiscal sustainability considerations. This guidance will facilitate Member States in the preparation of their stability and convergence programmes, which should be presented to the Commission in April 2021. The guidance will be further detailed in the Commission’s European Semester spring package.
– Considerations for the deactivation or continued activation of the general escape clause
The Commission proposed the activation of the general escape clause in March 2020 as part of its strategy to respond quickly, forcefully and in a coordinated manner to the coronavirus pandemic. It allowed Member States to undertake measures to deal adequately with the crisis, while departing from the budgetary requirements that would normally apply under the European fiscal framework.
The Communication sets out the Commission’s considerations for how a future decision on the deactivation of the clause or its continued activation for 2022 should be taken. Following a dialogue between the Council and the Commission, the Commission will assess the deactivation or continued activation of the general escape clause on the basis of the 2021 Spring Forecast, which will be published in the first half of May. Country-specific situations will continue to be taken into account after the deactivation of the general escape clause. In case a Member State has not recovered to the pre-crisis level of economic activity, all the flexibilities within the Stability and Growth Pact will be fully used, in particular when proposing fiscal policy guidance.
– Making the best use of the Recovery and Resilience Facility
The Communication provides some general indications on Member States’ fiscal policy in 2022 and over the medium-term, including the link with the funds of the RRF. The RRF will play a crucial role in helping Europe recover from the economic and social impact of the pandemic and will help to make the EU’s economies and societies more resilient and secure the green and digital transitions.
– Public debate on the economic governance framework
The crisis brought about by the coronavirus pandemic has highlighted the relevance and importance of many of the challenges that the Commission sought to discuss and address in the public debate on the economic governance framework. Relaunching the public consultation on the framework will allow the Commission to reflect on these challenges and draw lessons. The Communication confirms the Commission’s intention to relaunch the public debate on the economic governance framework once the recovery takes hold.