In the last three years, the countries of the European Union have significantly supported, with a series of fiscal measureshouseholds and businesses to initially deal with the impact of the pandemic and then the energy crisis.

The extended support was made possible by the activation in early 2020 of the general escape clause from the fiscal rules of the Stability and Growth Pact.

However, as announced on Wednesday the European Commission, from 2024 the escape clause will be deactivated, to start a period of de-escalation of the debt that has risen above the 60% of GDP threshold in most EU countries. This means that the scope for increasing public spending will now be smaller.

The Commission gave the general guidelines for the fiscal policy of 2024, while in May it will make recommendations for each country separately, depending on the characteristics of its debt, which will determine the size of the fiscal adjustment that should be made with the budget of 2024.

For Greece, which has the highest debt in the EU at over 170% of GDP, fiscal adjustment has already begun, with this year’s budget forecasting a primary surplus of 0.7% of GDP. For 2024, the target is expected to be a larger surplus to continue debt deleveraging.

In its recommendations, the Commission will move in a line of balance between the fiscal rules in force and the proposals it made last November for their review, so as to take into account the new economic reality after the pandemic and the energy crisis. And this, because the discussion on the revision of the Stability and Growth Pact is still ongoing, with several countries objecting for details of the Commission’s proposals.

The matter will be discussed next Monday in the Eurogroup and the following day at Ecofin, with Commission Vice-President Valdis Dombrovskis expecting some convergence of views on key elements of the Pact review, ahead of the March 23-24 summit.

Until there is an agreement on the new rules, the Commission considers the existing rules to apply which provide that the deficit should not exceed 3% of GDP and that there should be an adjustment of the debt to the limit of 60% of GDP. At the same time, however, it will implement some elements of its proposals, so that there is a bridge between how the rules have been applied in the past and how they might work in the future.

The main objective of the Commission’s proposals is to improve the sustainability of the debt while sustainably strengthening the potential growth rate. For this reason, it places special emphasis on the smooth implementation of the investments that are necessary, especially for the green and digital transition, as well as on reforms that enhance growth.

The EU Economic Commissioner, Paolo Gentiloni, made it clear that the fiscal adjustment should not be made at the expense of public investment, but should be based on the containment of the primary expenses of the regular budget, to which the limitation of support measures will of course contribute on the energy crisis.

“As energy prices settle at lower levels, they should to phase out most support measures, starting with those that are least targeted,” Dombrovskis said. According to the Commission announcement, support can only be provided if prices rise again and only with targeted measures.

The Commission has proposed that all countries submit four-year binding programs with the fiscal goals, investments and reforms they will make.