Revised Fiscal Rules in the EU: A Tailored Approach to Reducing Debt Ratio

New budget rules agreement in Europe

The 27 EU member states and the European Parliament have reached a new agreement on revised budget rules, according to the Belgian EU presidency. The revision of European fiscal rules is intended to provide member countries with a more tailored approach to reducing their debt ratio.

In principle, the rule in the EU is that the maximum debt ratio may not exceed 60 percent, and the GDP deficit may not exceed 3 percent. However, critics found these rules too complex and strict, so after months of negotiations, some adjustments were made.

Under the new rules, countries that record a larger deficit than the 3 percent rule will be required to make an annual effort of 0.5 percentage points towards reducing their debt burden. The requirements will be higher for countries with a higher debt burden.

The European Parliament and member states still need to formally give their approval before these changes can take effect.

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