Key facts
- EU budget rules were suspended during the COVID-19 pandemic.
- The rules are not expected to be reinstated in the near future.
- The bond market may constrain fiscal flexibility for some countries, including France.
- Initial budget conditions are a factor in market acceptance of fiscal slippage.
The Stability and Growth Pact, the EU's fiscal rules, were temporarily suspended in March 2020 to allow member states to respond to the economic shock of the COVID-19 pandemic. While discussions about reforming and potentially reinstating these rules are ongoing, their return is not imminent, leaving a period of fiscal uncertainty for the bloc.