EU Financial Reforms: Balancing Simplification with Accountability

In response to statements made by Finnish Prime Minister Petteri Orpo, MEP Nils Torvalds believes that the EU Commission will not risk categorizing heavily indebted large EU member states as in need of observation. This is in contrast to the recent approval of the reform of the EU’s financial rules by the European Parliament, which aims to simplify and improve compliance with the rules.

Under the new 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. If debt exceeds 90 percent of GDP, it must be reduced by one percentage point annually. Countries with 60–90 percent debt ratio have a lower adjustment rate of 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 and questioned why larger member states seem to evade such scrutiny.

The public debt to GDP ratio was highest in Greece at 166 percent in the third quarter of 2023. Other countries with high debt ratios include Italy, France, Spain, Belgium, and Portugal. 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.

However, if larger member states continue to evade scrutiny and fail to reduce their debts at an acceptable rate, they may face consequences such as fines or even exclusion from certain programs within the EU. It is important for all member states to take responsibility for their financial health and work together towards achieving sustainable economic growth within the union.