And the revelation has prompted one prominent Brexiteer to suggest the UK should be thankful for the decision to quit the bloc when it did – because otherwise it would be facing the prospect of picking up the tab. Valdis Dombrovskis, European Commission Executive Vice President, and Paolo Gentiloni, European Commissioner for Economy, confirmed their plans today as they unveiled proposals to reform what is known as the Stability And Growth Pact (SGP), which caps budget deficits at three percent of economic output and tries to drive public debt down to 60 percent of GDP.
Neither was explicit – but speaking in Strasbourg, Mr Dombrovskis gave a clear indication that leniency would be the order of the day.
He said: “There is the possibility for the Commission to come with an interpretative communication on the best use of flexibility.”
Mr Gentolini added: “We should not see the ghost of ‘back to austerity’.
“We all know that we have to keep a supportive fiscal stance.”
The news will be welcomed by Cyprus, Belgium, France, Greece, Italy, Portugal and Spain, all of whom are running national debts equal to at least 118 percent of their annual GDP.
However, other member states – not least those in the so-called Frugal Four of Sweden, Denmark, the Netherlands and Austria – are concerned at the prospect of green-lighting high levels of public spending.
JUST IN: Gloves are off! €1trn bloc of four EU states poised to defy EU
Mr Habib explained: “In extremis, such as that credit crunch or the more recent lockdown induced recession, the poorer Euro countries are caught between a rock and a hard place.
“They cannot deflate their currency to recover because they do not have one. And the SGP prohibits taking on more debt.”
The net result was enforced austerity when actually the levers of government should be working to boost growth – not putting on the brakes, Mr Habib stressed.
He added: “At one level it should be welcomed that the Commission is considering rewriting the SGP to avoid austerity being its natural outcome.
“But in doing so all they will achieve is the foisting of even more debt on countries that, by any independent measure, are already bust.
“The plain fact is that the Euro is a disaster and with it the economies of all its members.
“Thank goodness we never joined up and thank goodness we left the EU before being forced to pick up their tab!”
With COP26 on the horizon, if the EU is to hit its target of reducing greenhouse gas emissions by 55 percent by 2030, it must €520billion a year – cash which will have to come from both the public and private sectors.
There is also uncertainty about what to do with the high debt levels of Southern European countries have.
Currently, SGP rules would force them to drive their debt down to 60 percent within 20 years – a highly unlikely prospect.