The coming fiscal adjustment in Europe
Fecha: septiembre 2023
The fiscal response to the COVID-19 pandemic added significantly to European public debt. This was only to be expected, and in March 2020 the European Commission triggered the ‘general escape clause’ of the Stability and Growth Pact to accommodate the need for greater public spending. That ‘general escape clause’ will be deactivated on 31 December 2023. Whether or not there is a reform of the rules for European macroeconomic policy coordination, policymakers across Europe will need to begin consolidating their fiscal accounts in preparation. Such efforts will be particularly important for the six European Union (EU) member states with public debt worth more than 100 percent of gross domestic product (GDP). The high rate of inflation in the wake of the pandemic has eased some of that adjustment burden, but the swift monetary tightening introduced to calm rapid price increases will add to the challenge.