Gentiloni wants to present the reform of the stability pact after the summer

European Commissioner for Economy Paolo Gentiloni speaks during a news conference on the European Commission’s budgetary guidelines for 2023, in Brussels, Belgium, March 2, 2022. REUTERS/Yves Herman

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TRENTO, Italy, June 4 (Reuters) – EU Economics Commissioner Paolo Gentiloni said on Saturday he intended to present a reform of the euro zone’s stability pact after the summer, adding that the new rules would likely include country-specific debt targets.

The European Union’s pact provides for a 60% cap on the ratio of public debt to GDP (gross domestic product) of each member state, but a debate is underway in Europe on how to relax the rules.

The rules, which also cap the public deficit-to-GDP ratio, have been suspended until 2023 to give governments the breathing room needed to deal with the impact of the pandemic and the economic fallout from the war in Ukraine.

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“We are discussing how to reform the stability pact…I think I can present a proposal after the summer,” Gentiloni said at an economic event in the Italian city of Trento.

“The path to debt reduction must be made more gradual, more credible and less dangerous for growth, also because we all know that without growth, debt reduction is very difficult,” Gentiloni said.

State support and investment programs to counter the economic impact of COVID-19 have caused the debt levels of many EU states to skyrocket beyond the current limit of 60% of the Stability Pact GDP, with the average eurozone debt-to-GDP target currently at 97.5%, according to the commissioner.

Gentiloni said the process would likely require each country to present its plan to contain its public debt, negotiate it with the Commission and, once agreed, the EU Council would put its stamp on it.

The individual plans would be “differentiated and with different debt reduction targets” for different countries.

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Reporting by Francesca Landini Editing by Kirsten Donovan and Helen Popper

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