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Tuesday, July 23, 2024

EDP ​​excessive deficit procedure. Brussels starts the EU procedure towards Poland

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The European Commission (EC) stated that the initiation of the excessive deficit procedure (EDP) against Poland is justified. The formal commencement of the procedure itself may take place later. Brussels announces such a step for July – informs TVN24 correspondent in Brussels Maciej Sokołowski, citing the press release.

The EC prepared a report for 12 member states to assess their compliance with the deficit criterion set out in the treaty. These countries are: Belgium, The czech republic, Estonia, Spain, FranceItaly, Hungary, Malta, Poland, Slovenia, Slovakia and Finland – pointed out Sokołowski, describing the announcement.

Excessive deficit procedure (EDP) justified

The press release stated that in the light of the assessment contained in the report opening the excessive deficit procedure is justified for seven Member States: Belgium, France, Italy, Hungary, Malta, Poland and Slovakia.

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The TVN24 correspondent explained that the report pursuant to Art. 126 section 3 is only a first step towards opening excessive deficit procedures and in the light of this assessment and taking into account the opinion of the Economic and Financial Committee, the EC intends to propose to the Council opening an excessive procedural deficit for these Member States in July 2024. as part of the autumn European semester.

Sokołowski also announced the next steps in connection with today's report in connection with the initiation of excessive deficit procedures.

The excessive deficit procedure (EDP) is based on a stepwise procedure detailed in Art. 126 of the Treaty on the Functioning of the European Union. As part of the Spring Package, a report was adopted pursuant to Art. 126 section 3. Now the Economic and Financial Committee has two weeks to formulate its opinion.

In July, the Commission intends to formulate opinions addressed to Member States with excessive deficits. At the same time, the Commission intends to propose decisions to the Council declaring the existence of an excessive deficit.

The next step in the procedure is for the Commission to present a proposal for Council recommendations to the Member States concerned to put an end to the situation of excessive deficit. They should include deadlines for taking effective action and correcting the excessive deficit, as well as a corrective path to ensure that the deficit is brought and maintained below the reference value by that deadline.

The Commission intends to propose such recommendations together with its opinions on the draft budgetary plans. This would ensure coherence between the budgetary requirements under the excessive deficit procedure and the adjustment path set out in the medium-term fiscal and structural plans, in a coherent package including recommendations endorsing the medium-term plans, recommendations on the excessive deficit procedure for Member States with excessive deficits and opinions in on draft budgetary plans for 2025 for Member States euro zone – explained the TVN24 correspondent.

EDP, i.e. excessive deficit procedure

The excessive deficit procedure (EDP) is a mechanism that European Commission may initiate when budget deficit country will exceed 3%. GDP or when the public debt exceeds 60 percent GDP and is not decreasing fast enough. After initiating the procedure, the country may be subject to special control, it must then submit detailed reports and spending plans, and the savings are to lead to a reduction of the deficit by half a percentage point annually, Sokołowski described.

EDP ​​- why now?

When the pandemic broke out, one of the first actions of the European Commission was to suspend EU fiscal rules. Brussels has loosened rules on excessive deficits, giving governments in Europe greater freedom to fight the crisis. When the coronavirus threat passed, another threat appeared – a military one, and after the Russian invasion of Ukraine, no one wanted to return to rigid financial rules – explained the TVN24 correspondent.

He added that this year, however, officials in Brussels are reminding that it is time to return to fiscal rules, and with them comes the risk that the excessive deficit procedure will also be imposed on Poland. The Polish Minister of Finance speaks directly about this possibility, noting that talks with the Commission are still ongoing and that 12 other countries are in a similar situation.

The situation of Poland and EDP

According to calculations by the Polish statistical office, the public finance sector deficit in 2023 is slightly over 5 percent of GDP. The Commission will publish its spring forecasts tomorrow, which will allow it to decide on imposing the procedure, about which the Polish Minister of Finance has already warned. Poland hopes that the procedure will not be too severe, because at the December council of finance ministers it was also agreed that investments in defense will be taken into account as a mitigating factor when assessing the deficit in individual capitals. And according to Poland, our deficit is mainly the result war in Ukraine and expenditure on army modernization.

MF is ready for EDP

In recent months, Finance Minister Andrzej Domański has repeatedly prepared the ground for the Commission's decision.

– The European Commission will definitely start the excessive deficit procedure (EDP) against Poland – says Finance Minister Andrzej Domański. He adds, however, that in his opinion, any recommendations from the European Union on this issue will be very mild – said Domański on June 10.

– There is no way the EC would not open the EDP procedure. It will definitely be opened because our deficit for last year exceeds 3 percent. I believe that we are in a unique situation. (…) In fact, we are investing in the defense of the entire EU and if recommendations regarding EDP are imposed on Poland, which I still hope will not happen, they will be very mild – he added.

Author:Maciej Sokołowski

Main photo source: TVN24

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