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budgetary rules in the EU
Global investment

Budgetary rules in the European Union require revision

21.07.2022
2 min read

Why the European Union budget rules are outdated: expert opinion

The EU is revising its budget rules, which relate to government spending, debt obligations, and investments. Such a step is quite serious for the region, as it affects the development of the EU economy and its future direction.
The rules that are in place now are designed with the Maastricht Treaty in mind. According to the latter, the EU government must control the budget-debt ratio. It is necessary that the budget deficit should remain within 3%, and the public debt should not exceed 60% of GDP. During the pandemic, this rule was not respected, and now the new realities require a revision of the norms.
The geopolitical conflict in Europe, which has affected not only the region but also the whole world, affects the budget formation processes in the EU. Representatives of the Netherlands and Spain have stated the need for reforms. First of all, the changes should affect public investments – officials propose to spend more money in the field of green energy and energy efficiency. In addition, digital transformation also requires large investments.budgetary rulesTo launch the process of changing budgetary rules, the European Commission has already conducted a comprehensive analysis of various areas. In the report, many scientists, financial institutions, and ministries of finance of European states gave their recommendations. According to experts, the new budget rules will help stabilize the financial processes, and at the same time should stimulate the development of green investments.
The problem of climate change is becoming increasingly urgent. A striking example of this is the city of Verviers in Belgium. Last year the local river there burst its banks as a result of climate change. As a result, the city’s buildings were destroyed, the restoration of which will cost more than 45 million euros. This amount is serious for the municipal budget. Moreover, experts warn that this flooding will not be the only one. Experts predict that such cases will occur every 10-15 years.
In addition, climatologists warn of rising temperatures and hot and dry weather. Climate change has to be taken into account in both restoration and construction, but city budgets cannot allocate enough money for such large-scale changes. All this also puts pressure on the economy as a whole, which is already suffering from the effects of pandemic and geopolitical conflicts.
An important issue is to increase investment in green energy, which will reduce dependence on energy exporters. Now EU countries are increasing the number of solar and wind power plants, and their construction requires large funds. This entails enormous expenditures, resulting in growing national debt. Fighting climate change also requires more and more investment.

Tags: Global investment
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