Portugal’s finance minister reacts positively to EU Commission’s proposal to suspend budget rules in 2022

It is with excitement that Portugal’s finance minister, João Leão, reacts to Wednesday’s announcement by the European Commission that it will propose in May the suspension of the rules on budgetary discipline in 2022, as in 2020 and 2021. The final decision will be up to member states, but the Portuguese finance minister, who now chairs ECOFIN, seems confident that the proposal will see the day of light.

“We welcome the European Commission’s guidance on maintaining the general escape clause in 2022, just as we argue fiscal stimulus should’t be withdraw too soon,” João Leão wrote on the finance ministry’s Twitter account. The minister added that this issue will already be discussed at the next ECOFIN meeting on March 16.

Tweet from @pt_financas

The European Commission is expected to make the formal proposal to member states in May when it releases its spring economic projections and package of recommendations on countries’ fiscal policy. The EU executive’s intention is that a quantitative criterion be applied to the decision to reapply the deficit and public debt limits: only when GDP returns to the pre-crisis level, as suggested by the European Public Finance Council.

Given Brussels’ current economic projections, the aggregate GDP of the European Union or the eurozone will only return to the 2019 level before the pandemic hits Europe in mid-2022, meaning the budgetary rules should not be applied next year. However, European commissioners have made it clear that the rules will return in 2023, according to current forecasts, and that mainly the most indebted countries should have a “prudent” policy.