U.S. Markets

EU to decide on extending suspension of Stability Pact in coming weeks: official tells paper

FILE PHOTO: European Commissioner for Economy Paolo Gentiloni attends a media conference in Brussels, Belgium November 18, 2020. REUTERS/Johanna Geron/Pool/File Photo

ROME (Reuters) - Europe will decide whether to extend the suspension of its rules limiting budget deficits and debt, known as the Stability and Growth Pact (SGP), in coming weeks, the Commissioner for Economy Paolo Gentiloni said on Monday.

“In coming weeks we will decide if and how to extend the freezing of the Pact, and in coming months we will start thinking about how to re-calibrate it according to Europe’s new strategic objectives,” Gentiloni told daily La Stampa in an interview.

Euro zone public debt rose sharply during 2020 as governments borrow to help families and businesses survive restrictions and lockdowns imposed to rein in the coronavirus outbreak. The EU last year suspended its SGP.

Gentiloni also warned against prematurely ending fiscal support measures for European economies during the pandemic, saying that “withdrawing (them) too early is more dangerous than doing so too late”.

Gentiloni said the new government led by former European Central Bank chief Mario Draghi was fundamental to restore confidence in Italy and that it would help overcome any potential resistance from other European member states with regards to reforming the SGP.

He added that recent changes and additions to Italy’s national Recovery Plan - the programme outlining how the country will spend more than 200 billion euros ($242.40 billion) from various EU funds to revive its economy after the COVID-19 pandemic - laid good foundations, but that more was still needed.

“Time is running out... but the Draghi government has the right profile and the adequate parliamentary support to make these further efforts.”

He also called on Italy to carry out reforms which would gradually cut its debt and approve fiscal support policies that would not create new permanent debt.

($1 = 0.8251 euros)

Reporting by Giulia Segreti, editing by Gianluca Semeraro & Shri Navaratnam