Stability Pact, the new budget rules arrive –

The European Parliament has given the definitive green light to the reform of the Stability and Growth Pact. The new rules were provisionally agreed by Parliament with negotiators from member states in February. The reform proposal is made up of three different legislative acts. The regulation establishing the new preventive arm of the Stability and Growth Pact was approved with 367 votes in favour, 161 votes against, and 69 abstentions. The regulation amending the corrective arm of the PSC with 368 votes in favour, 166 votes against, 64 abstentions and the directive amending the requirements for Member States’ budgetary frameworks with 359 votes in favour, 166 votes against, 61 abstentions. MPs have strengthened rules to support a government’s ability to invest. It will now be more difficult for the Commission to subject a Member State to an excessive deficit procedure if essential investments are underway. All national expenditure for the co-financing of EU-funded programs will be excluded from the calculation of a government’s expenditure, thus creating incentives for investment.

Countries with excessive debt will be required to reduce it by an average of 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 should be reduced during periods of growth to reach 1.5% and create a spending buffer for periods of difficult economic conditions. The new rules contain various provisions to allow more room for maneuver. Specifically, they allow three additional years beyond the standard four to achieve the goals of a national plan. MEPs have ensured that this additional time can be granted for any reason the Council deems appropriate, rather than only under specific criteria, as initially proposed. At the request of MEPs, countries with an excessive deficit or excessive debt can request a discussion with the Commission before providing guidance on the spending path. A Member State may request the submission of a revised national plan if there are objective circumstances that prevent its implementation, for example a change of government.

The role of national independent budgetary institutions – charged with verifying the adequacy of their government’s budgets and budgetary projections – was consolidated by MPs with the aim of helping to further strengthen national plans. All countries will have to present medium-term plans that set out their spending targets and how investments and reforms will be undertaken. Member States with high levels of deficit or debt will receive guidance on spending targets. To ensure sustainable spending, the reform introduces numerical reference guarantees for countries with excessive debt or an excessive deficit. The rules also add a new orientation, namely the promotion of public investments in priority sectors. Ultimately, 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 social concerns will be better taken into account. The Council must now give its formal approval to the measures. Once adopted, they will enter into force 20 days after publication in the Official Journal of the EU. Member states will have to submit their first national plans by 20 September.