MNI: EU Officials Expect Calls For Fiscal Exceptions To Grow

Italy's Finance Minister Giancarlo Giorgetti was the only eurozone minister to call for a further relaxation of the eurozone’s fiscal rules at Monday evening's Eurogroup meeting, but EU officials told MNI they expect such calls to increase as the economic situation deteriorates. 

The minister called for an activation of the General Escape Clause allowing all countries within the bloc to ignore the fiscal rules. As a second-best option, he called for coordinated use of the national escape clause to address the energy crisis impacting Europe as a result of the conflict in the Middle East, similar to that which has been taken up by several EU countries in order to increase defence spending. 

France did not support the Italian call, with officials pointing to that country’s lack of fiscal space as the probable reason. 

Economy Commissioner Valdis Dombrovskis told the meeting the escape clause would only be triggered if EU economies get into "deep problems," adding that "we are not there yet". 

A third source told MNI that the Commission is reluctant to trigger the escape clause also because of the current context of stagflationary risk, and concerns that any fiscal stimulus could boost energy consumption, prices and inflation still higher. 

"We don't want to go for a fiscal stimulus right now, at least that is the current assessment, though of course that could change." 

With the situation already worse than just a few weeks ago, demands for fiscal flexibility from eurozone states are likely to increase, one official said.

The European Commission is scheduled to release its Spring economic forecasts on May 21. (See MNI INTERVIEW: Easing EU Fiscal Rules Now Dangerous-EFB Member)