Lagarde calls for ‘timely adoption’ of new EU budget rules and agreements this year

The President of the European Central Bank (ECB) called this Monday for the “timely adoption” of reform of European fiscal rules with an agreement by the end of the year, insisting on the end of member states’ support for economies due to the energy crisis.

“A sound economic governance framework is very much in our common interests, and an agreement on EU fiscal reform should be reached by the end of the year. […] It’s time to move on with this file, and I look forward to… […] timely adoption,” said Christine Lagarde.

At a regular hearing in the European Parliament’s Economic and Monetary Affairs Committee, the ECB leader stressed that “there is still important legislative work to be done before next year’s elections,” referring to reform of the EU’s fiscal rules taking into account debt and deficits. ceilings, but also the completion of the banking and capital markets union and the adoption of the digital euro.

According to Christine Lagarde, new rules on public debt and deficits in the EU should ensure “lower sovereign debt and less heterogeneity in debt levels between countries” as well as “higher growth rates and more counter-cyclical fiscal policy.”

In his speech, the official repeated previous calls: “As the energy crisis subsides, governments must continue to reduce relevant support measures to avoid increasing inflationary pressures in the medium term.”

“At the same time, fiscal policy must be designed to make the eurozone economy more productive and gradually reduce high public debt,” he urged.

The position will come as a recovery is expected in 2024, after a pause due to the pandemic and war in Ukraine, with new wording despite the usual ceilings of 60% of gross domestic product (GDP) for public debt and 3% of GDP. for the deficit.

Portugal advocates introducing a counter-cyclical nature of this reform, so that in times of higher economic growth, countries make greater efforts to reduce public debt and, instead, have a slower pace of reduction in times of more subdued GDP.

The discussion builds on the European Commission’s proposal, published last April, for risk-based fiscal rules with a technical and personalized trajectory for EU debtor countries such as Portugal, giving them more time to reduce deficits and debt.