March 23, 2020 / 4:54 PM / 16 days ago

Governments endorse suspension of EU limits on borrowing amid epidemic

BRUSSELS (Reuters) - European Union finance ministers formally endorsed on Monday the suspension of EU limits on governments borrowing to give the 27 EU countries a free hand in fighting the disastrous effects of the coronavirus epidemic on the economy.

EU rules require that governments cut budget deficits until their books are in balance or in surplus and that they reduce public debt every year until it is below 60% of GDP.

But with the coronavirus pandemic expected to put the EU into a deep recession this year, governments do not want to be bound by any limits to try to resuscitate the economy and they endorsed the European Commission’s proposal to activate what is called a “general escape clause” in the rules.

“The use of the clause will ensure the needed flexibility to take all necessary measures for supporting our health and civil protection systems and to protect our economies, including through further discretionary stimulus and coordinated action, designed, as appropriate, to be timely, temporary and targeted, by Member States,” the ministers said in a statement.

Reporting by Jan Strupczewski

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