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Budget deficit warning from IMF to EU countries

The International Monetary Fund (IMF) reported that the European Union (EU) should update its budget rules and countries with high debt should reduce their budget deficits by up to a few years.

Budget deficit warning from IMF to EU countries

The IMF published its report titled "Reforming the EU Financial Framework-Strengthening Fiscal Rules and Institutions".

The report stated that while the current fiscal rules of the EU have some effect in limiting budget deficits, they do not prevent budget deficits and debt ratios that threaten the stability of the monetary union and present vulnerabilities.

Reminding that the EU financial framework has a failed history of controlling financial risks and stabilizing production, the report said, "The EU financial framework needs reform." expression was used.

In the report, it was noted that the financial framework did not provide sufficient tools for stability, low real interest rates forced the policy tools of the European Central Bank (ECB), and therefore the inflation target could not be met.

Emphasizing the importance of establishing a stabilization instrument to soften macroeconomic shocks in the Eurozone, the report stated that this could provide protection against sudden economic shocks such as Kovid-19, and also contribute to the financing of initiatives to combat climate change.

The report emphasized the importance of EU countries with high public debt to balance their budgets between 3 and 5 years.

According to EU rules, budget deficits of member states should not exceed 3 percent of their GDP and public debt should not exceed 60 percent of their GDP under normal conditions. When this limit is exceeded, the measures to be implemented must be notified to the EU Commission and an effective fight must be made.

However, EU member states decided to suspend the rules due to the epidemic and rapidly increased their budget deficits and public expenditures.

Among EU countries, the countries with the highest public debt to GDP ratio are Greece with 189.3 percent, Italy with 152.6 percent, Portugal with 127 percent, Spain with 117.7 percent, France with 114.4 percent and 107.9 percent. with Belgium.


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