New EU Financial Rules Could Ease Debt Monitoring for Some Large Member States, But Critics Question the Approach

EU Commissioner Nils Torvalds believes that the European Union will not risk categorizing heavily indebted large member states as needing observation under the new financial rules. This comes in response to statements made by Petteri Orpo, who emphasized the importance of avoiding EU monitoring.

After years of negotiations, the European Parliament recently approved the reform of the EU’s financial rules, which maintain acceptable debt and deficit levels for EU countries while simplifying compliance with the rules. Each member country will have a net spending path prepared by the EU Commission based on structural factors. There are different rules for how quickly debt must be reduced based on the debt ratio. Countries with a debt ratio over 90% must reduce their debt by one percentage point annually, while countries with a debt ratio between 60% and 90% must reduce it by 0.5 percentage points.

Member countries facing excessive debt or deficits can request a dialogue with the Commission before adjustments are instructed, allowing them to explain their situation better. However, Finnish Prime Minister Petteri Orpo and Finance Minister Riikka Purra have emphasized the importance of avoiding EU monitoring. MEP Nils Torvalds is skeptical about this approach and questions why larger member states seem to evade such scrutiny.

The public debt to GDP ratio was highest in Greece at 166% in the third quarter of 2023, but other countries like Italy, France, Spain, Belgium, and Portugal also have high debt ratios. Eero Heinäluoma, leader of the Social Democrats, is pleased with the new financial rules and believes they provide a more realistic and acceptable path for member states to follow.

The Council of Member States still needs to approve the reform for it to take effect.