This Wednesday, the European Commission presented a set of three legislative proposals for the “most comprehensive” reform of the EU’s economic governance rules since the post-economic and financial crisis.
Brussels intends to “strengthen debt sustainability”, at the same time enabling “reforms and key investments” and creating “a simpler and more transparent economic governance framework” for this purpose. Member States will play the most autonomous role in the decisions to be taken to achieve the objectives.
To ensure what it calls “a stronger national ownership with comprehensive medium-term plans”, Brussels reminds that these must be drawn up “on the basis of common EU rules”, with the national medium-term budgetary structure plans “the cornerstone” of the package of three proposals announced by Brussels this Wednesday, already consulted by the DN.
“Member States will design and present plans setting out their fiscal targets, measures to address macroeconomic imbalances and reforms, and priority investments over a period of at least four years,” the proposal states, noting that ” these plans will be evaluated by the Commission and approved by the Council on the basis of common EU criteria”.
Brussels believes that the integration of budgetary, reform and investment objectives “into a single medium-term plan will help to create a coherent and streamlined process”, which will contribute to “strengthening national ownership”. Member States will be given “greater flexibility to define their own fiscal adjustment paths and reform and investment commitments”.
Member States will submit annual progress reports to enable more effective monitoring and enforcement of the implementation of these commitments.
In a statement released in Brussels, the European Commission says that the future rules should “promote sustainable and inclusive growth in all Member States”, through “reforms and investments”.
“The proposals address the shortcomings of the current ones [e] take into account the need to reduce rising public debt, build on lessons learned from the EU’s policy response to the Covid-19 crisis, and prepare the EU for future challenges by supporting progress in towards a green, digital society, inclusive and resilient and will make the EU economy more competitive”, the European Commission announced.
It should be noted that the future budgetary surveillance process “will be integrated into the European Semester, which will remain the central framework for economic and employment policy coordination”.
Simplification
The European Commission intends to create a framework of “simpler rules” to deal with the budgetary differences between the different Member States.
“The fiscal situation, challenges and economic prospects vary widely between the 27 EU Member States,” says the Commission, moving away from the idea of a “one-size-fits-all approach” for the whole as it believes “it doesn’t work” .
“Member States’ plans will determine their budgetary adjustment trajectories. These will be formulated in terms of multiannual expenditure targets, which will be the only operational indicator for budgetary surveillance, simplifying the rules,” the European Commission said.
Regulations
Brussels proposes to issue a specific “technical trajectory” for each country, in the case of Member States “with a government deficit of more than 3% of GDP or a government debt of more than 60% of GDP. The aim will be to “ensure” that debt “goes down or remains at a prudent level” while “the deficit remains below 3% of GDP or is reduced over the medium term”.
In cases where Member States have a government deficit below 3% of GDP and a government debt below 60% of GDP, “the Commission will provide technical information (…) to ensure that the government deficit falls below the reference value of 3% of GDP also remains in the medium term”.
Brussels distinguishes between “technical pathways and technical information”, adding that the latter “will guide Member States in setting multiannual spending targets”.
guarantees
The European Commission states that “common safeguards will be applied to ensure debt sustainability, maintaining reference values of 3% of GDP for the deficit and 60% of GDP in the case of debt”.
“The government debt-to-GDP ratio will have to be lower at the end of the planning period than at the beginning of that period; and a minimum budgetary adjustment of 0.5% of GDP per year will have to be implemented as a reference. deficit remains above 3% of GDP”.
The European Commission hopes to ensure that in member states with “periods of extended fiscal adjustment”, fiscal efforts “are not delayed to the last years” of that period.
Brussels also allows “general and specific derogation clauses for each country”, which should introduce some flexibility, allowing “deviations from spending targets in the event of a severe economic downturn in the EU or in the eurozone as a whole or in exceptional circumstances beyond “. control by the Member States with major consequences for public finances”. The decision on the activation of the said clauses is up to the Council of the EU, based on a recommendation from the European Commission.
Term
The new rules must be approved by Parliament and the Council by the end of the year, to come into force in early 2024, when the so-called “general escape clause” is lifted. which suspended fiscal discipline after the covid-19 crisis.
Source: DN
