Economics
Pandemic Sets Stage for Euro-Area Showdown Over Debt Rules
- Now-suspended Stability and Growth Pact must be reworked
- The crisis has challenged old views on debt sustainability
Photographer: Hannelore Foerster/Bloomberg
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The European Union’s three-decade-old strategy for keeping its debt in check has been shattered for good by the pandemic, and that threatens to open up battle lines over what should replace it.
The Stability and Growth Pact requires countries to aim for budget deficits of less than 3% and debt burdens below 60% of gross domestic product. The European Commission expects those figures to be more than 6% and 100% for the euro area this year, and by cutting its growth forecast on Thursday signaled the bloc may be even further off its goal than that.