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New provisions to foster investment, factor in social convergence, and increase national commitment to plans
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The updated rules set minimum reduction of average deficit and debt
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Time to achieve objectives in national plans may be extended, and deviation from the plan would be allowed in exceptional circumstances
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First national plans outlining expenditure, reforms and investments to be prepared by September 2024
MEPs approved a revamp of EU fiscal rules making them clearer, more investment friendly, better tailored to each country’s situation, and more flexible.
The new rules, approved on Tuesday, were provisionally agreed upon between European Parliament and member state negotiators in February.
Focus on investments
MEPs significantly beefed up the rules to protect a government’s capability to invest. It will now be more difficult for the Commission to place a member state under an excessive deficit procedure if essential investments are ongoing, and all national expenditure on the co-financing of EU funded programmes will be excluded from a government’s expenditure calculation, creating more incentives to invest.
Ensuring credibility of the rules – deficit and debt reduction mechanisms
Countries with excessive debt will be required to reduce it on average by 1% per year if their debt is above 90% of GDP, and by 0.5% per year on average if it is between 60% and 90%. If a country’s deficit is above 3% of GDP, it would have to be reduced during periods of growth to reach 1.5% and build a spending buffer for difficult economic conditions.
More breathing space
The new rules contain various provisions to allow more breathing space. Notably, they give three extra years over the standard four to achieve the national plan’s objectives. MEPs secured that this additional time can be granted for whatever reason Council deems appropriate, rather than only if specific criteria were met, as initially proposed.
Improving dialogue and ownership
At the request of MEPs, countries with an excessive deficit or debt may request a discussion process with the Commission before it provides guidance on the expenditure path This would give more opportunity for a government to make its case, especially at this crucial point in the process. A member state may request that a revised national plan be submitted if there are objective circumstances preventing its implementation, for example a change in government.
The role of the national independent fiscal institutions -tasked with vetting the suitability of their government’s budgets and fiscal projections- was considerably strengthened by MEPs, the aim being that this greater role will help build national buy-in to the plans further.
Quotes by the co-rapporteurs
Markus Ferber (EPP, DE) said:
“This reform constitutes a fresh start and a return to fiscal responsibility. The new framework will be simpler, more predictable and more pragmatic. However, the new rules can only become a success if properly implemented by the Commission.”
Margarida Marques (S&D, PT) said:
“These rules provide more room for investment, flexibility for member states to smooth their adjustments, and, for the first time, they ensure a “real” social dimension. Exempting co-financing from the expenditure rule will allow new and innovative policymaking in the EU. We now need a permanent investment tool at the European level to complement these rules.”
The texts were adopted as follows:
- Regulation establishing the new preventive arm of the Stability and Growth Pact (SGP): 367 votes in favour, 161 votes against, 69 abstentions;
- Regulation amending the corrective arm of the SGP: 368 votes in favour, 166 votes against, 64 abstentions, and
- Directive amending the requirements for budgetary frameworks of the Member States: 359 votes in favour, 166 votes against, 61 abstentions.
Next steps
The Council must now give its formal approval to the rules. Once adopted, they will enter into force 20 days after publication in the EU’s Official Journal. Member states will have to submit their first national plans by 20 September 2024.
Background – how the new rules will work
All countries will provide medium-term plans outlining their expenditure targets and how investments and reforms will be undertaken. Member states with high deficit or debt levels will receive pre-plan guidance on expenditure targets. To ensure sustainable expenditure, numerical benchmark safeguards have been introduced for countries with excessive debt or deficit. The rules will also add a new focus, namely fostering public investment in priority areas. Finally, the system will be more tailored to each country on a case-by-case basis rather than applying a one-size-fits-all approach, and will better factor in social concerns.
Further information
EVP/CSU-Statement zur Reform des Stabilitäts- und Wachstumspakets
Das Europäische Parlament hat heute die Reform des Stabilitäts- und Wachstumspakts final bestätigt. Dazu erklärt Markus Ferber (CSU), wirtschaftspolitischer Sprecher der EVP-Fraktion und Berichterstatter des Europaparlaments:
„Mit den neue EU-Schuldenregeln kehren wir zu einer verantwortungsvollen EU-Haushaltspolitik zurück. Es ist an der Zeit, dass die Schuldenregeln endlich wieder zur Anwendung kommen. Der alte Stabilitäts- und Wachstumspakt hatte zu viele Schlupflöcher und wurde nie richtig umgesetzt. Das neue Regelwerk schafft mehr Klarheit und stellt die Wirtschafts- und Währungsunion auf ein solides Fundament.
Wir haben die Lektionen aus dem Scheitern des alten Stabilitäts- und Wachstumspakts gelernt: Das neue Regelwerk ist pragmatisch, transparanter und ermöglicht im Krisenfall eine antizyklische Fiskalpolitik.
Es muss klar sein, dass eine normale Haushaltsplanung bedeutet, dass man auf eine ‚schwarze Null‘ hinarbeitet und nicht auf drei Prozent Defizit. Das Ausreizen der 3%-Defizit-Grenze muss der absolute Ausnahmefall bleiben. Man ist Staaten wie Frankreich und Italien mit diesem Regelwerk weit entgegengekommen. Jetzt kann man auch erwarten, das Paris und Rom sich ernsthaft mit dem Defizitabbau beschäftigen.
Die Staatsverschuldung in der EU hat sich auf sehr hohem Niveau eingependelt. Die Zeiten, in denen man zehnjährige Staatsanleihen zu unter einem Prozent platzieren konnte, sind vorbei. Schuldenmachen kostet wieder richtig Geld – das zeigt sich heute schon im Bundeshaushalt. Jetzt rächt sich, dass man das Dach nicht repariert hat, als noch die Sonne schien. Wir müssen zum Prinzip der Haushaltsdisziplin zurückkehren. Die neuen Regeln senden ein klares Signal an die Märkte, dass Europa sich des Problems annimmt.
Das neue Regelwerk steht und fällt mit seiner Umsetzung – der Europäischen Kommission kommt dabei eine besondere Verantwortung zu. Die Europäische Kommission muss die neuen Schuldenregeln strikt und unparteiisch vollziehen. Wenn die Kommission den Vollzug der Regeln wieder so schleifen lässt, wie in den vergangenen Jahren, ist das neue Regelwerk zum Scheitern verurteilt.
Enttäuscht bin ich davon, dass die Grünen das neue Regelwerk heute abgelehnt haben. Man kann nicht überall das hohe Lied der Nachhaltigkeit singen, nur bei den Staatsfinanzen alles schleifen lassen. Die Weigerung der Grünen die Notwendigkeit solider Staatsfinanzen überhaupt anzuerkennen, ist beschämend und einer Regierungspartei unwürdig.“
Quelle – EVP/CSU per E-Mail
S&Ds support new EU fiscal rules with strong social imprint, determined to fight for a permanent investment tool
The Socialists and Democrats recognise the importance of reforming EU fiscal rules – long overdue as a result of the shortcomings of the current economic governance framework. This is not only an essential step for the euro zone and the Union as a whole but also a key signal to the financial markets.
Margarida Marques, S&D MEP and European Parliament’s co-rapporteur on the reform of EU fiscal rules, said:
“The S&Ds have made significant improvements. Most importantly, we secured a strong social imprint in the new rules, especially with a historic new tool to monitor social progress and risks. We safeguarded social and climate priorities that the right-wing parties sought to eliminate, leading to more sustainable and inclusive investments.
“Furthermore, we ensured the exemption of national co-financing of EU projects – around 1% of EU GDP – from the calculation of net expenditure, which will free up significant space for public investment at national level and open up new options for ambitious EU policymaking.
“We secured several other solutions that allow for more flexibility and national ownership, making the whole process more democratic.
“Clearly, we wanted more. We put forward many progressive proposals that we fought for against the attacks from the conservatives and the liberals. Nevertheless, the agreement is a step in the right direction and it creates opportunities for further improvements. There is no doubt that this deal is much better than no deal and going back to the old rules or having no rules at all.
“What is key now is to focus on the future, seize the opportunities generated by this deal and put all our efforts into securing a permanent European investment tool. This is vital to complement the fiscal rules and to ensure the resources needed to realise the socially-just green and digital transitions as well as to tackle other challenges. This is a key priority for the next legislative cycle.”
Source – S&D Group (via e-mail)
Renew Europe: Boosting growth and competitiveness is not at odds with fiscal consolidation
Strasbourg 23 April 2024
The way in which the EU’s economic governance is articulated is crucial to maintain the balance between the bloc’s growth and competitiveness and the markets confidence in the Union’s debt sustainability. In that regard, today´s plenary backing of the trilogue deal reached on the Economic Governance Review (EGR) is a good sign. The final compromise enables an updated economic governance framework following the exceptional suspension of the EU´s fiscal rules in 2020, which gave Member States greater budgetary flexibility to cope with the aftermath of the pandemic, as well as the war in Ukraine and the ongoing conflicts in the Middle East.
With the reactivation of the Stability and Growth Pact in 2024, Renew Europe’s negotiating team made sure that the new framework, which can be tailored to the different economic realities of the Member States, strikes an adequate balance between the need to ensure effective debt reduction and enough flexibility to promote the strategic investments and reforms the EU needs to be able to compete with key geopolitical players such as China, the US and India in an increasingly volatile world.
MEP Billy Kelleher (Fianna Fáil, Ireland), Renew Europe shadow rapporteur on EGR, stated:
“By reaching this agreement we prevent a return to the rigid framework of the past and can avoid plunging some of our Member States into austerity. The last few years have been tumultuous, tough on our citizens, and a burden on our economy. This framework helps Member States determine a tailored made plan to return to sustainable debt levels, whilst having the necessary flexibility to make investments for our future, as well as the necessary tools to address the climate-related challenges we face. Contrary to what some political groups say, this new framework does not prohibit any investments but does help channel public money into much-needed reforms and investments. Unfortunately the framework does not produce an unlimited money tree for the EU economy, but it does assist Member States in using the fruits of their labour in an effective manner”
MEP Stéphanie Yon-Courtin (L’Europe Ensemble, France), Renew Europe coordinator on Economic and Monetary Affairs Committee (ECON), declared:
“Europe will only be able to strengthen its sovereignty if it is credible in budgetary terms. Credible in the eyes of future generations, credible in the eyes of our partners and credible so that we can continue to invest in Europe in our common priorities. This reform sets out the conditions that will enable Member States to reduce their debt levels, without putting the brakes on the investment that is essential to meet the climate, digital and security challenges of the future.
Our political group is satisfied with the adopted legislation as it includes decisive measures that we have been advocating for months. Thus, the new framework will address the existing investment gaps in the EU by providing enough fiscal space for strategic public spending that will strengthen the EU Single Market and help to deliver the twin transitions. This will be combined with safeguards that would ensure there is effective and sustainable debt reduction without dampening growth.
Moreover, thanks to Renew Europe’s fruitful contribution, national ownership will come together with accountability by independent fiscal institutions, and the European Fiscal Board will be provided with an adequate legal framework for conducting its activities. Lastly, beyond the oversight role played by the Commission and independent national authorities, our political group has succeeded in securing an improved economic governance with greater democratic scrutiny, in which the European Parliament plays a key role.
Source – Renew Europe (via e-mail)