Europeans are renowned sticklers for rules. But the Brussels attitude toward its own fiscal edicts is often reminiscent of the irreverence of the late American comedian Groucho Marx: “Those are my principles, and if you don’t like them… well, I have others.”

Enshrined in the 1992 Maastricht Treaty and repeatedly tweaked since then, the EU’s budgetary strictures limit members’ debt to 60% of annual output and government budget deficits to 3%.

In theory, at least. In fact, 11 of the bloc’s 27 members currently exceed the 3% fiscal ceiling; 13 surpass the 60% debt threshold. The EU’s five largest economies – Germany, France, Italy, Spain, and Poland – are all infringing one of the two limits; France and Italy are breaching both.

The more important reason, however, is that in recent years the rules have barely been in force at all.

Initially suspended in 2020 to allow EU capitals to splurge on support for households and businesses during the pandemic, the Stability and Growth Pact (the rulebook’s formal name) was shelved again in 2022 until 2024 amid the global energy crisis sparked by Russia’s full-scale invasion of Ukraine. These debt-busting shocks also came as EU capitals were still recovering from the previous decade’s output-crushing eurozone crisis (which caused debt-to-GDP ratios to soar).

In April 2024, however, an amended version of the rules finally entered into effect. Almost immediately, Brussels formally reprimanded seven EU countries for breaching the fiscal threshold, including France and Italy. Eurozone finance ministers also repeatedly warned that the rules would require a “contractionary fiscal stance” (i.e. budget cuts) in subsequent years.

The rules, it seemed, were back. And this time they actually mattered.

Except they didn’t.

Following US President Donald Trump’s threats to withdraw the American military from Europe, European Commission President Ursula von der Leyen announced in early 2025 that EU countries should, in effect, jettison the rules that had only recently been agreed.

The so-called national escape clause that Brussels urged capitals to activate – a provision which, conveniently enough, was only introduced into the amended version of the rules in 2024 – was gratefully invoked by seventeen EU countries.

(This escape clause, which allows member states to boost military expenditure by 1.5% of annual GDP without flouting the rules, is different from the EU-wide ‘general escape clause’ that was activated during the pandemic.)

Inadequate enforcement meant that “the fiscal rules faced a major credibility problem before the [2024] reform”, said Zsolt Darvas, a senior fellow at Bruegel, a Brussels-based think tank. But “what undermined the [new] rules is that the Commission approved the German fiscal plan without providing any critical remarks”.

A suspended debate

The energy shock triggered by the US-Israeli war on Iran has, somewhat inevitably, reopened the debate about suspending the rules.

On Wednesday, the European Trade Union Confederation, which represents 45 million European workers, said shelving the Stability and Growth Pact is necessary to “to save jobs, people’s livelihoods and strategic industries” amid surging oil and gas prices.

The remarks were echoed the next day by Giorgia Meloni, Italy’s prime minister, who argued that “discussing a possible temporary ​suspension” of the rules “should not be taboo”.

This time, however, the Commission quickly sought to stamp out any sign of potential fiscal revolt.

“The general escape clause can only be activated in the event of “a severe economic downturn in the euro area or the European Union as a whole”, Valdis Dombrovskis, European Commissioner for economy, told MEPs on Thursday. “We are currently not in this scenario.”

Dombrovskis has a point. But discussions over whether there are solid grounds for suspending the rules arguably miss the forest for the trees: the rules, once all is said and done, simply aren’t fit for purpose.

This is not just because the 3% and 60% figures have essentially zero economic rationale. The International Monetary Fund, for instance, has argued that improved “debt-carrying capacity” means that EU public debt levels could remain sustainable even at 90%; the European Stability Mechanism has even proposed increasing the permitted debt ratio to 100%.

Rather, it is underscored by the history of the rules themselves, which has been one of persistent violations, suspensions, and revisions – all driven by Brussels’ desperate attempts to wriggle out of the fiscal shackles that it has imposed on itself.

“Reform is politically difficult, so the incentive is to work around” the rules, said Nils Redeker, acting co-director of the Jacques Delors Centre, a Berlin-based think tank. “That erodes credibility. In the end, we will either have to reform them again or they will be bent into oblivion.”

Groucho’s gripe

Perhaps the most decisive argument of all against the rules, however, is the case of Germany.

“No one should want to see Germany pushed into an ‘excessive deficit procedure’ for doing so,” he said. “But that is precisely the corner the current rules risk backing Europe into.”

As it turns out, Berlin’s predicament wouldn’t be unfamiliar to Groucho Marx. “I wouldn’t want to belong to a club that would have me as a member,” he once quipped.

Economy news roundup

EU still at risk of ‘stagflationary shock’ despite Iran ceasefire, warns economy chief. Valdis Dombrovskis, European Commissioner for economy, told MEPs in Brussels on Thursday that the fragile two-week truce, brokered by Pakistan on Wednesday, represented a “much-needed de-escalation” of the conflict but that Europe’s “longer-term outlook still remains clouded by profound uncertainty”. The war, which has roiled global markets and prompted Iran to close the Strait of Hormuz, a critical energy chokepoint, could reduce the bloc’s GDP by 0.6 percentage points and cause inflation to surge by 1.5 percentage points in both 2026 and 2027, he said. Read more.

World economy faces potential ‘double whammy’, warns financial stability chief. “We’ve got volatile markets… what if that, in a sense, coincides with one of these other things, let’s say, private credit becoming a much bigger problem?” Andrew Bailey, chair of the International Financial Stability Board (FSB), told MEPs in Brussels on Thursday. The remarks come amid tumultuous ructions in financial markets over the past year, as well as growing concerns about the private credit sector, with defaults rising in an area of global finance that Bailey described as “relatively opaque”. Read more.

EU households face ‘devastating’ energy bills due to Iran war, study finds. The European Trade Union Confederation (ETUC) reported on Wednesday that a 50% average increase in energy costs this year would see the average EU household’s energy bill rise from €3,792 to €5,688: equivalent to just over 12% of total household expenditure. “This research lays bare the devastating consequences for working people and their families of the failure to address Europe’s dependency on highly volatile fossil fuels,” said Esther Lynch, ETUC general secretary, whose organisation represents 45 million European workers through their trade unions. Read more.