The EU warned on Wednesday that recovery measures in France and Italy are not affordable in the long term, as it expressed fear the coronavirus crisis is fuelling runaway spending.
The European Commission said that while no country’s budget for 2021 was an immediate problem, given the challenges, massive stimulus measures must be strictly temporary and not go beyond the coronavirus pandemic.
Despite the urgency, “we need to look beyond the short term as well,” EU executive vice president Valdis Dombrovskis said.
“Member states should take supportive measures that are targeted, temporary and do not permanently burden public finances,” he told reporters.
The EU pointed to a wage hike for health care workers in France and tax cuts to poor regions in southern Italy as stimulus decisions that would have to be financed if made permanent.
“Some measures set out in the plans of France, Italy and Slovakia do not appear to be temporary or matched by offsetting measures,” the EU’s economic affairs commissioner Paolo Gentiloni told reporters.
The European economy crashed in the wake of massive lockdowns in March, with a recovery seen this summer now under threat with the second wave of covid-19.
To avert an economic catastrophe, national governments, backed by the European Central Bank, triggered a spending bonanza, with several countries seeing public debt balloon to unseen levels.
As the health emergency drags on, the EU executive is turning a blind eye to the extra spending, with budget rules that Brussels is usually tasked to enforce suspended until 2022.
Even before the pandemic, debt levels in Belgium, France, Greece, Italy, Portugal and Spain were an acute EU concern.
But the worry has been overshadowed by the ECB’s massive wave of bond-buying that has kept the financial markets at bay and left borrowing prices for the overspenders at record lows.