The European Union (EU) has agreed on common rules for budget deficits and national debt, taking into account the current economic situation. These rules will be based on the unique circumstances of each EU country, with clear minimum requirements for reducing debt ratios among highly indebted countries provided.
In addition to these rules, the EU has a long-standing rule that a member state’s debt level must not exceed 60 percent of their economic output. However, due to the Corona crisis and the consequences of the Russian attack on Ukraine, this requirement has been suspended. If a state violates the three percent deficit limit, they will be subject to an annual fine of at least 0.5 percent of GDP.
The agreement was reached after reform proposals from the EU Commission were taken into consideration. Critics argue that these reforms weaken the so-called Stability Pact too much. The reform will need to be confirmed by the EU Council of Ministers and the plenary session of the European Parliament before it can take effect. This is usually a formality.