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Fiscal rule not to hinder fight against coronavirus

Ljubljana, 17 March - The Slovenian government has welcomed EU-wide agreement that fiscal rules should not stand in the way of action to fight the coronavirus epidemic. "The role of the fiscal rule is acknowledged and will be respected, but saving lives and economic recovery must be given priority in these times," Finance Minister Andrej Šircelj said.

"We are pleased that the importance of flexibility in respecting fiscal policy has been acknowledged by European institutions as well," said Šircelj in a press release published by the Finance Ministry on Tuesday, after eurozone and EU finance ministers held a videoconference on Monday.

The finance ministers announced strong measures to contain the economic fallout from the coronavirus pandemic. They agreed that in the current situation flexible fiscal policy was key.

Fiscal leeway is in line with EU law under such extreme circumstances. Member states, including Slovenia, as well as the EU Commission are drawing up various measures to fight the economic crisis caused by coronavirus.

The ministers agreed on a fiscal stimulus package worth 1% of eurozone GDP as well as committed to providing liquidity facilities equalling at least 10% of eurozone GDP.

Slovenia's Fiscal Council agreed with Šircelj today, saying that during an epidemic it was possible to declare emergency circumstances to alleviate the detrimental economic impact and thus temporarily deviate from the objective of medium-term fiscal balance.

Fiscal slippage designed to resuscitate the economy and demonstrated as counter-cyclical fiscal policy boosting growth is in line with the fiscal rule but should not jeopardise fiscal sustainability, highlighted the council, adding that such a step should only be temporary and pertaining to efforts dealing with the epidemic.

When the crisis is over, budget balance should be restored, reads the council's press release.

The council, the formal guardian of compliance with the fiscal rule, urged the government to take action in line with the EU measures as much as possible so as not to put Slovenia in a position where it would be forced to deal with the financial markets situation alone.

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© STA, 2020