March 13, 2020 / 1:31 PM / 21 days ago

EU to offer greater leeway under fiscal rules for crisis spending

BRUSSELS (Reuters) - The European Commission is ready to activate a clause in EU fiscal rules that would allow a suspension of budget commitments by countries most affected by the coronavirus crisis, the EU executive’s vice president said on Friday.

“We stand ready to activate the general escape clause to accommodate a more general fiscal policy support,” Valdis Dombrovskis, the commissioner in charge of economic affairs, told a news conference.

“This clause would suspend the fiscal adjustment recommended” and can be triggered in case of a severe downturn, Dombrovskis said.

However, that does not entail a full suspension of fiscal rules known as the Stability and Growth Pact. That could limit the speed of spending by EU governments.

“We are not suspending the Stability and Growth Pact. We are using flexibility which is there in the Stability and Growth Pact,” Dombrovskis clarified when asked.

Spending that could be excluded from national budget targets set by the EU includes money for crisis-hit firms, workers, the purchase of medical equipment and support to ailing sectors such as retail, transport and tourism, officials said.

States will need to notify other expenditures, such as reimbursements for canceled events, and the Commission will decide whether to exempt them from the application of EU fiscal rules on a case by case basis, EU officials said.

Reporting by Francesco Guarascio @fraguarascio and Philip Blenkinsop; Editing by Alison Williams

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