Eurozone: Varoufakis discusses the 'greatest beneficiary' in 2018
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Italian eurocrat Paolo Gentiloni warned that a far-reaching legislative overhaul is required to stop the bloc deliberately ignoring its own rules. In an interview, he called for a “renewed and reviewed” rulebook for the EU’s budget, after much of it was scrapped to help national economies survive the coronavirus pandemic. The former Italian prime minister said new rules should be introduced to boost public investment in green and digital transitions.
Mr Gentiloni told the FT: “It is clear we cannot simply go back to normal.
“You need common rules that are connected to the economic challenges we have. Otherwise, the risk is that the European Commission will spend the next decade finding creative ways to bypass its own rules, which I think is not the best solution we can have.”
The European Commission is due to start its review on how to fix the rules surrounding its so-called Stability and Growth Pact.
The framework for its national budget rule was suspended at the beginning of the coronavirus pandemic to give governments more freedom to spend their way through the economic crisis.
The rules are expected to be reimposed in 2023, but there is set to be a huge debate over whether they should be reformed first.
Even US Treasury secretary Janet Yellen argued that the Stability and Growth Pact restricts governments’ abilities to battle the economic downturns.
Mr Gentiloni said he did not see it as the Commission’s role to question the EU’s governing treaty when it comes to national budget.
The rules are meant to encourage governments to keep public debt at 60 percent of gross domestic product and deficits to three percent.
But the economy chief wants eurocrats to propose new reforms that reflect post-pandemic life, including soaring public debt burdens across the EU.
He said leading people to “muddle through” with the current rules might have previously seemed reasonable.
But he argued for legislative changes, adding: “This is the only way to have real common rules, and not just common rules that are there to be bypassed.”
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Mr Gentiloni said he was upbeat about the short-term economic forecast for Europe, but warned that there is still a risk because of the possibility of future outbreaks linked to the Delta variant.
“We know very well we’re not out of the woods,” he said.
“At the same time, we should be very clear we’re in a different situation from the one last summer and the difference is caused by vaccines and vaccination.”
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The Commission is currently predicting economic growth of 4.8 percent this year and 4.5 percent in 2022.
Mr Gentiloni concluded: “I think the recovery will proceed.
“All in all our brighter forecast is still supported by what we see on the ground.”
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