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EU executive moves to formalise suspension of EU budget rules

BRUSSELS, March 21 (Reuters) - The European Union executive moved to formalise an agreement reached by EU finance ministers on March 5 to suspend EU budget rules that put limits on borrowing so that governments have a free hand in fighting the coronavirus.

The European Commission, the guardian of EU rules, proposed late on Friday to activate the 'general escape clause' in the rules to respond to the pandemic that has caused lockdowns in most EU countries and the closure of Europe's borders.

"It will allow Member States to undertake measures to deal adequately with the crisis, while departing from the budgetary requirements that would normally apply under the European fiscal framework," the Commission said.

EU rules say that governments have to keep cutting their budget deficits until they reach balance or surplus and have to reduce public debt every year to bring it below 60% of GDP.

Once the Commission proposal is formally accepted by EU finance ministers at their next meeting, government spending to fight the coronavirus will be excluded from Commission calculations of deficit and debt.

EU finance ministers, who have ultimate control of EU rules that limit government borrowing, agreed already on March 5 the economic impact of the virus was an emergency and an event outside their control and therefore EU budget rules should not apply to spending related to it.

They repeated the message last on Monday, agreeing that the rules will not stand in the way of responding to the epidemic, which the Commission expects to cause a 1-2.5% recession in Europe this year. (Reporting by Jan Strupczewski, editing by Louise Heavens)