EUROPEAN COMMISSION MAY SANCTION EU COUNTRIES FOR EXCESSIVE NEW DEBT

BRUSSELS, June 19 (Bernama-dpa) -- The European Commission may threaten France, Italy, Belgium, and other EU member states, with legal action on Wednesday for accumulating excessive new debt, reported German news agency dpa. 

The EU executive arm anticipates that several EU countries will breach regulations on budget deficits and national debt levels, as indicated by an economic forecast published in May. 

In addition to addressing the issue of excessive new debt, the commission is also expected to propose the design for the European Union's 2025 budget. 

The EU decided to suspend the debt and deficit regulations in the economic fallout of the Covid-19 pandemic and the full-scale Russian invasion of Ukraine.

With the rules now back in place, after some reforms were negotiated, any EU country that breaches the debt and deficit limits risks legal punishment, should the commission decide to act.

This is primarily to ensure the stability of the eurozone with the aim of the excessive deficit procedure to bring countries to a sound financial position.

This starts a process where an EU country must introduce countermeasures to reduce its debt and deficit under the supervision of the commission for four years.  

Under certain conditions, for example, if a country commits to growth-promoting reforms and investments, the plan can be extended to seven years. 

The commission can also temporarily take into account the increase in interest payments when calculating the adjustment efforts.

According to the reformed rules, EU member states may not accumulate debt in excess of 60 per cent of gross domestic product (GDP). 

Highly indebted EU countries with debt levels over 90 per cent of GDP have to reduce their debt ratio by one percentage point annually, and countries with debt levels between 60 and 90 per cent by 0.5 percentage points.

In addition, the general government deficit - namely the gap between income and expenditure of the public budget, which is primarily covered by loans - must be kept below 3 per cent of GDP.

According to the commission's economic forecast, France at -5.5 per cent, Italy at -4.4 per cent , and Belgium at -4.4 per cent will breach this deficit limit in 2024. 

-- BERNAMA-dpa