World, As Seen from the most beautiful islands: Ireland and Cyprus

OECD calls to abandon strict and uniform budgetary rules

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The European Union must abandon the strict rules that force member states to comply with budgetary targets. This is also true when the economies of EU countries have fully recovered from the coronavirus crisis. This is what the Organisation for Economic Cooperation and Development (OECD) advocates.

The Paris-based think tank recommends that the EU align fiscal rules for member states. The objectives must be made less complex and more long-term. Where necessary, the rules should not be the same for each country.

The EU rules are designed to prevent an accumulation of debt. Under the existing rules, a government deficit may not exceed 3% of gross domestic product (GDP). Furthermore, public debt must not exceed 60% of GDP. As a result of crisis spending, the debt ratio has risen to record levels.

During the pandemic, the rules were suspended to allow countries to pay for emergency health and economic stimulus measures. In addition, there was little belief that the strict rules would ever return in the same form. The OECD urges EU countries to avoid a “premature tightening ” of fiscal policies.

“The EU needs to review its fiscal framework with a view to sustainable public finances, adequate countercyclical behaviour and greater ownership,” said the OECD.

Among other things, the think tank wants countries in need to retain the opportunity to invest in projects aimed at the future.
More and more criticism of the strict rules

Criticism of the fiscal rules has increased in recent years, as it forces the economically weak countries to make cuts, preventing investment.

A prime example of this is Greece in the financial crisis. The EU forced the country to make cuts because of its financial malaise, but those cuts only led to a deeper crisis, resulting in higher unemployment and an increase in poverty.

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