The European Commission proposed the activation of the general escape clause of the Stability and Growth Pact (SGP) as part of its strategy to respond quickly, forcefully and in a coordinated manner to the coronavirus pandemic. Once endorsed by the Council, it will allow member states to undertake measures to deal adequately with the crisis, while departing from the budgetary requirements that would normally apply under the European fiscal framework.
The coronavirus pandemic is a major shock for the European and global economies. Member States have already adopted or are adopting budgetary measures to increase the capacity of their health systems and provide relief to those citizens and sectors that are particularly impacted. These measures, together with the fall in economic activity, will contribute to substantially higher budgetary deficits.
Under the SGP, unusual events outside the control of government qualify for the general escape clause. The Commission believes that more far-reaching flexibility under the SGP is required to protect European citizens and businesses from the consequences of this crisis and to support the economy following the pandemic. Therefore, the Commission decided to propose the activation of the general escape clause of the Stability and Growth Pact.
The Commission’s strategy to counter the economic impact of the coronavirus pandemic includes using the full flexibility of our fiscal and state-aid frameworks, mobilizing the EU budget to allow the EIB Group to provide short-term liquidity to SMEs and directing €37 billion to the fight against coronavirus under the Coronavirus Response Investment Initiative.
The proposal follows the Commission’s adoption of a Temporary Framework for State-aid to enable member States to ensure that sufficient liquidity remains available to businesses of all types and to preserve the continuity of economic activity during and after the coronavirus pandemic.