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The EU Parliament and the government of the member states have agreed on new common rules for budget deficits and national debt, given the current economic situation. These rules will be based on individual situations of EU countries, with clear minimum requirements for reducing debt ratios among highly indebted countries provided.

The European Union has a long-standing rule that limits a member state’s debt level to 60% of their economic output, with a general government financing deficit kept to a minimum of 3% of GDP. However, due to the Corona crisis and the consequences of the Russian attack on Ukraine, these requirements were suspended. If a state violates the three percent deficit limit, they will face an annual fine of at least 0.5% of GDP.

The agreement was reached after reform proposals from the EU Commission were considered. Critics argue that these reforms weaken the so-called Stability Pact too much. The reform needs to be confirmed by the EU Council of Ministers and the plenary session of the European Parliament before taking effect. This is usually a formality process.

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