BRUSSELS (Reuters) - The European Union is giving governments all the fiscal leeway they need to individually deal with the economic impact of the coronavirus and may decide on a more concerted stimulus if the economy suffers severely, officials said on Thursday.
FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels, Belgium, April 10, 2019. REUTERS/Yves Herman/File Photo
The decision, the latest by policymakers around the world to open state spending taps to counter the virus, could throw a lifeline to Italy which has been struggling to comply with EU requirements to cut deficit and debt.
Italy has suffered Europes worst outbreak, with most of the infections in the northern region that powers its economy.
EU finance ministers, who have ultimate control of the application of EU rules that limit government borrowing, discussed on Wednesday a response to the impact of the epidemic on growth. They agreed the economic impact of the virus was an emergency and an event outside their control.
In such exceptional cases, EU budget rules, called the Stability and Growth Pact, allow governments to stop cutting deficits and public debt, and address the challenge at hand. There is no limit set in this flexibility clause.
In general, there is political agreement that governments are free to fiscally address the emergency and we will worry about the Stability and Growth Pact later, one official involved in the Wednesday teleconference said.
Two others confirmed that, but noted the extra spending would have to be clearly linked to mitigating the effects of the epidemic, which would be verified by the European Commission.
The meeting was held as the European Commission issued a note estimating the outbreak would curb euro zone growth this year below the 1.2% forecast just weeks ago in mid-February, although it was still impossible to say by how much.
Meanwhile, other countries have also moved to bolster their war chests.
China, the source of the outbreak, said it had earmarked 110.5 billion yuan ($15.9 billion) to fight the epidemic as of Wednesday. The U.S. House of Representatives has approved over $8 billion, while the likes of South Korea, Indonesia and Singapore have all announced big spending packages.
The choice of individual government responses rather than a pan-EU one was, for now, more convenient to speed things up.
It is also good news for highly indebted Italy. The north, which has been most affected by the virus, produces almost a third of the countrys GDP.
Rome introduced 900 million euros of financial support for the worst-hit areas last week and later promised spending of 3.6 billion euros to help the wider economy, a sum which might rise to 4.5 billion, or 0.25% GDP.
As this is an emergency it is ... more effective for countries to act first, said a third official involved in the discussions.
Fiscal rules have a clause available to cope with this, the European Commission will try to make clear in the meantime how this will be implemented, what policies, that it has to be targeted, timely, temporary, the official said.
On top of this, if growth is deeply hurt, we will consider a more accommodative stance at aggregate level, the official said, adding the commitment would remain vague for now.
In the wake of the Lehman Brothers bank collapse, the EU decided in late 2008 on a European Economic Recovery Plan that would pump some 200 billion euros, 1.5% of the then EU GDP, into the economy to boost demand and stimulate confidence in 2009.
The number was an aggregate number of stimulus estimated to be adequate and was to be a reference for governments on how much to boost spending, but many countries went above that.
It is not clear how this would work this time, it would surely need to be linked with investment in policy priorities, the third official said. But it is too soon to say. Also because it is not clear how a demand push would solve a supply chain problem.
Officials said a response to the economic impact of the coronavirus would have been easier had the 19 countries sharing the euro had a euro zone budget to cushion such external shocks.
But a miniscule euro zone fiscal capacity of 12.5 billion euros over 7 years now only under consideration as part of a wider EU budget, excludes such purposes on the insistence of Germany and the Netherlands.
Reporting by Jan Strupczewski; Editing by Alexandra Hudson and Pravin Char
Read the original post:
- Iceland Reopening With Its Economic Freedom Largely Intact - Daily Signal - June 24th, 2020
- Tips and Murmurs: is the Collaery case about to open up? - Crikey - June 24th, 2020
- Around Town: WWII Museum offers Victory Six Swing Band July 2 - Journal Record - June 24th, 2020
- In CA: The mask argument continues; schools jump into the debate on racism and policing - USA TODAY - June 24th, 2020
- Rep. Dina Titus urges Appropriations Committee to block Trump Administration from conducting explosive nuclear testing in Nevada - KLAS - 8 News Now - June 24th, 2020
- Everything To Know About The H-1B Visa That Has Been Suspended Till The End Of 2020 - ScoopWhoop - June 24th, 2020
- White Jews fled to the suburbs. Here's why that matters today. - The Jewish News of Northern California - June 24th, 2020
- GOP members of House Foreign Affairs Committee urge Trump to reconsider US troop withdrawal from Germany - Washington Examiner - June 24th, 2020
- Two thousand march with call to defund police; Council's $4.1M order was a 'drop in the bucket' - Cambridge Day - June 24th, 2020
- Quebec To Introduce The Most Punitive Privacy Laws In Canada - With Fines Of Up To $25 Million - Privacy - Canada - Mondaq News Alerts - June 24th, 2020
- For one Iraqi refugee, Columbus finally feels like home this World Refugee Day - The Columbus Dispatch - June 20th, 2020
- Troy H. Middleton's name to be removed from LSU's main library - Greater Baton Rouge Business Report - June 20th, 2020
- 'This is amazing,' says mayor as Iowa City Council passes resolution to restructure ICPD and address other demands of the Iowa Freedom Riders - Little... - June 20th, 2020
- Salomone: Juneteenth and Today - Greenwich Free Press - June 20th, 2020
- Latest Texas news, sports, business and entertainment at 9:20 pm CDT - KBTX - June 20th, 2020
- Dear Tito: Heres where to cut tax, make grants to save SA. MUST READ! #budget - BizNews - June 20th, 2020
- Debt settlement: An effective way of reducing debt - AZ Big Media - June 13th, 2020
- Strengthening our armed forces - The Highland County Press - June 13th, 2020
- Defunding the Police Is Not Nearly Enough - New York Magazine - June 13th, 2020
- Advocates Push To "Defund The Police" While Officials Call For Reforms - WVXU - June 13th, 2020
- Burrows disappointed with sports budget cuts EyeWitness News - EyeWitness News - June 13th, 2020
- Over $722,000 awarded to protect and improve Florida military installations - Florida Politics - June 13th, 2020
- Global Perspective: As US, China lock horns, Japan, others must think about ways ahead - The Mainichi - June 13th, 2020
- Golf course move on Caven Point is obscene; Honor the flag | Letters - nj.com - June 13th, 2020
- The return of the tea party | News, Sports, Jobs - Minot Daily News - June 13th, 2020
- PM Modi says command and control regime over, lets plug and play - Hindustan Times - June 13th, 2020
- June 12: She clearly does not understand what it is. Readers react to RCMP head disputing systemic racism, plus other letters to the editor - The... - June 13th, 2020
- Shame on Olmsted Falls mayor for his rant about the cost of policing George Floyd protest - cleveland.com - June 13th, 2020
- If youre surprised by how the police are acting, you dont understand US history - The Guardian - June 6th, 2020
- Opinion: The conservative path to a fairer country - National Post - June 6th, 2020
- The Movement To Defund DC Police - Washington City Paper - June 6th, 2020
- Tailoring the Socioeconomic Response to COVID-19 in Peacebuilding Contexts - UNDP - June 6th, 2020
- Nigeria In The Eyes Of The World On Freedoms - The Nigerian Voice - June 6th, 2020
- OPINION: NIGERIA IN THE EYES OF THE WORLD ON FREEDOMS - thewillnigeria - June 6th, 2020
- A Leg Up in the Search for Prosperity: Economic Freedom - Governing - June 1st, 2020
- COVID-19 reveals conflict, compassion of Kansans wrestling with threat of pandemic - Leavenworth Times - June 1st, 2020
- Rich Lowry: The return of the tea party - Salt Lake Tribune - June 1st, 2020
- To Rebuild the Economy, India Needs to Be Atmanirbhar in Ideas - The Wire - June 1st, 2020
- Beyond the doomsday machine: Reimagining economic policies and practice in a post-Covid world - Daily Maverick - June 1st, 2020
- Opinion:Buying the Third Congressional District | LAMonitor.com - Los Alamos Monitor - June 1st, 2020
- The National WWII Museum Celebrates 20 Years of Telling the Story of the American Experience in World War II - My New Orleans - June 1st, 2020
- COVID-19 and the future of world trade | VOX, CEPR Policy Portal - voxeu.org - June 1st, 2020
- CBD Sydney: Traces of loyalty in hunt for Turnbull superspreaders - Sydney Morning Herald - June 1st, 2020
- More than $250000 spent in race for Mehaffie's 106th House District seat; money mostly coming from PACs - Middletown Press and Journal - June 1st, 2020
- 'Centre Has Offered Nothing Against Jobs Lost By Informal Workers, Circular Migrants' | - IndiaSpend - June 1st, 2020
- The world in front of the mirror - Explica - June 1st, 2020
- Violation of service code - The Tribune India - May 11th, 2020
- Letters to the Editor 5-10-2020: Pannebecker rebuttals - The Macomb Daily - May 11th, 2020
- Godfrey calls on Washington to immediately approve more stimulus - Patch.com - May 11th, 2020
- Are you left-wing or right-wing? Probably both. The Oxford Student - Oxford Student - May 11th, 2020
- For the Europe of tomorrow - EuroScientist - May 11th, 2020
- Framework for the Management of COVID-19 Funds in Nigeria under the Treasury Single Account - Proshare Nigeria Limited - May 11th, 2020
- Nikes Air Jordan 1 Has Entered the Influencer Age - The Ringer - May 11th, 2020
- Shaw warns that Freedom Mobile isn't adding as many customers as planned due to COVID-19 - CBC.ca - April 11th, 2020
- Clarification of UCSC policy and expectations on funding researchers during the temporary cessation of non-essential on-campus research due to... - April 11th, 2020
- MI Governor Leads the Way with Water Reconnection Order - Natural Resources Defense Council - April 11th, 2020
- How S.C. lawmakers increase their odds of staying in power - The Nerve - March 26th, 2020
- MTS Awarded Seismic Simulation Project Valued At Over $70 Million For China's National Facility For Earthquake Engineering Simulation At Tianjin... - March 26th, 2020
- Letters to the editor, March 26, 2020 | Opinion - Idaho Press-Tribune - March 26th, 2020
- Junk rating this week may be least of SA's problems - Fin24 - March 26th, 2020
- Junk rating likely the least of South Africas problems - BusinessTech - March 26th, 2020
- Brexiteer claims coronavirus could spell end of eurozone but there's a catch - Express.co.uk - March 26th, 2020
- Statement of the Hellenic Chapter of Republicans Overseas- Abroad on Greek Independence Day - The National Herald - March 26th, 2020
- Governor calls for stronger collaboration with Kilili - Marianas Variety - March 26th, 2020
- Will the market stabilise in the second half of 2020, what experts say? - Kalkine Media - March 26th, 2020
- A pandemic, an economic blow and the big fix - The Hindu - March 24th, 2020
- 12:28 Heritage Foundation: Armenia needs to improve judicial effectiveness to have freer economy - Information-Analytic Agency NEWS.am - March 24th, 2020
- D4 Billion Debt Repayment in the face of a Pandemic - Freedom Newspaper - March 24th, 2020
- Why the Navy's F/A-18 Super Hornet Is Still One Dangerous Fighter - The National Interest - March 24th, 2020
- Opinion | The world should be wary of smoking the China pipe again - Livemint - March 24th, 2020
- Coronavirus has shattered the myth that the economy must come first - The Guardian - March 24th, 2020
- Mnuchin and McConnell Say Cash for Companies Is Not a Bailout - The Fiscal Times - March 24th, 2020
- The Myth of Taxpayer Money | Opinion - Harvard Crimson - March 18th, 2020
- Access to government information: another coronavirus casualty? - Center for Public Integrity - March 18th, 2020
- What to Look For in Illinois and Ohio Congressional Primaries - Bloomberg Government - March 18th, 2020
- The Wrap: A-REITs, BNPL And Aged Care - FN Arena News - March 18th, 2020
- Babacan's new party vows Turks can tweet without fear of arrest - Middle East Eye - March 18th, 2020
- The Home Depot, The TJX Companies, And ICON PLC: Three Safe Stocks In A Stormy Market - Forbes - March 18th, 2020
- To Kill Markets Is the Worst Possible Plan - The Heartland Institute - March 18th, 2020
- The art of 'social distancing' inside the Washington Beltway - ABC News - March 18th, 2020