COMMUNICATION FROM THE COMMISSION TO THE COUNCIL on the activation of the general escape clause of the Stability and Growth Pact
Date: 2020-03-20
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: budget deficit, budget policy, economic consequence, economic recession, epidemic, fiscal policy, gross domestic product, infectious disease, stability pact

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   EUROPEAN COMMISSION  Brussels, 20.3.2020  COM(2020) 123 final  COMMUNICATION FROM THE COMMISSION TO THE COUNCIL on the activation of the general escape clause of the Stability and Growth Pact    
 
 
The  COVID-19  pandemic  has  led  to  a  major  economic  shock  that  is  already  having  a 
significant  negative  impact  in  the  European  Union.  The  consequences  for  GDP  growth  will 
depend  on  the  duration  of  both  the  pandemic  and  of  the  measures  being  taken  by  national 
authorities and at European level to slow its spread, protect production capacities and support 
aggregate  demand.  In  its  Communication  of  13  March  2020  on  the  coordinated  economic 
response to the COVID-19 outbreak, based on a scenario analysis, the Commission presented 
an economic scenario that showed that real GDP could contract by 1% in the EU in 2020. The 
Communication  pointed  out  that  more  adverse  scenarios,  linked  to  a  deeper  impact  of  the 
pandemic,  could  not  be  excluded.  Developments  since  then  suggest  that  such  adverse 
scenarios  have  become  likely.  Indeed,  assuming  an  extension  of  the  health  crisis  up  to  the 
beginning of June or beyond, the fall in economic activity in 2020 could be comparable to the 
contraction of 2009, the worst year of the Economic and Financial Crisis.  

Member  States  have  already  adopted  or  are  adopting  budgetary  measures  and  further 
measures  are  being  adopted  to  increase  the  capacity  of  health  systems  and  provide  relief  to 
those  citizens  and  sectors  that  are  particularly  impacted.  Significant  liquidity  support 
measures  and  other  guarantees  are  also  being  adopted,  although  these  do  not  have  an 
immediate impact on the general government balance.  

The  Commission  is  closely  monitoring  these  measures,  which  together  with  the  fall  in 
economic activity will contribute to substantially higher budgetary deficits. The Commission 
and  the  Council  have  already  clarified  that  the  full  flexibility  available  in  the  Stability  and 
Growth  Pact  will  be  applied  for  the  measures  linked  to  the  outbreak  of  COVID-19. 
Specifically, as the crisis is an event that is outside the control of governments with a major 
impact  on the public finances, the unusual  event  provision of the Pact  applies. This  implies 
that  the  budgetary  impact  of  the  above-mentioned  measures  will  be  excluded  when  the 
Commission assesses compliance with the Stability and Growth Pact. An assessment will be 
made,  including  on  the  eligible  amounts,  on  the  basis  of  observed  data  as  provided  by  the 
Member States.   

However,  the  scale  of  the  fiscal  effort  needed  to  protect  European  citizens  and  businesses 
from  the  consequences  of  this  crisis,  and  to  support  the  economy  following  the  pandemic, 
requires the use of more far-reaching flexibility under the Stability and Growth Pact.   

The EU must continue to respond quickly, forcefully and in a coordinated manner to this fast-
evolving  crisis.  During  the  video  conference  with  members  of  the  European  Council  of  17 
March 2020, the President of the Commission announced the imminent activation of the so-
called  general  escape  clause. The clause was introduced as part of the ‘Six-Pack’ reform  of 
the Stability and Growth Pact in 2011, which drew the lessons of the economic and financial 
crisis. Notably, that experience highlighted the need for specific provisions in the EU’s fiscal 
rules  to  allow  for  a  coordinated  and  orderly  temporary  deviation  from  the  normal 
requirements  for  all  Member  States  in  a  situation  of  generalised  crisis  caused  by  a  severe 
economic downturn of the euro area or the EU as a whole.  

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The clause, as set out in Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and 
Articles 3(5) and 5(2) of Regulation  (EC) 1467/97,  facilitates the coordination of budgetary 
policies in times of severe economic downturn.  

The  general  escape  clause  allows  Member  States  to  undertake  budgetary  measures  to  deal 
adequately  with  such  situation,  within  the  preventive  and  corrective  procedures  of  the 
Stability  and  Growth  Pact.  Specifically,  for  the  preventive  arm,  Articles  5(1)  and  9(1)  of 
Regulation (EC) 1466/97 state that “in periods of severe economic downturn for the euro area 
or  the  Union  as  a  whole,  Member  States  may  be  allowed  temporarily  to  depart  from  the 
adjustment  path  towards  the  medium-term  budgetary  objective,  provided  that  this  does  not 
endanger fiscal sustainability in the medium term”. For the corrective arm, Articles 3(5) and 
5(2) stipulate that in the case of a severe economic downturn in the euro area or in the Union 
as  a  whole,  the  Council  may  also  decide,  on  a  recommendation  from  the  Commission,  to 
adopt a revised fiscal trajectory.   

forecast,  and 

The  upcoming  assessment  of  Member  States’  stability  and  convergence  programmes,  the 
for  country-specific 
the  subsequent  Commission’s  proposal 
spring 
recommendations  by  the  Council  will  provide  an  opportunity  to  ensure  such  necessary 
coordination and to set the guidance to achieve an appropriate supportive fiscal stance at the 
national and aggregate level.  

Based  on  the  above  considerations,  and  given  the  expected  severe  economic  downturn,  the 
Commission considers that the conditions to activate the general escape clause are met, for the 
first  time  since  its  inception  in  2011,  and  asks  the  Council  to  endorse  this  conclusion  to 
provide clarity to Member States.  

The general escape clause does not suspend the procedures of the Stability and Growth Pact. 
It will allow the Commission and the Council to undertake the necessary policy coordination 
measures within the framework of the Pact, while departing from the budgetary requirements 
that would normally apply. 

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