European Commission adopts reformed EU economic governance framework

The orientations seek to ensure that the framework is simpler, more transparent and effective, with greater national ownership and better enforcement, while allowing for reform and investment and reducing high public debt ratios in a realistic, gradual and sustained manner, an official release said.

In this way, the reformed framework should help build the green, digital and resilient economy of the future, while ensuring the sustainability of public finances in all member states, in line with President Ursula von der Leyen's 2022 State of the Union address.

It is proposed to move to a transparent risk-based EU surveillance framework that differentiates between countries by taking into account their public debt challenges. National medium-term fiscal-structural plans are the cornerstone of the commission's proposed framework.

They would integrate fiscal, reform and investment objectives, including those to address macroeconomic imbalances where necessary, into a single holistic medium-term plan, thus creating a coherent and streamlined process.

Member states would have greater leeway in setting their fiscal adjustment path, strengthening the national ownership of their fiscal trajectories, the release said.

The Commission would present a reference fiscal adjustment path, covering four years, based on its debt sustainability analysis methodology. This reference adjustment path should ensure that debt of member states with substantial or medium debt challenges would be put on a plausible downward path, and that the deficit would remain credibly below the 3 per cent of gross domestic product (GDP) reference value set out in the Treaty.

Member states would then submit plans setting out their medium-term fiscal path, and priority reform and public investment commitments. They could propose a longer adjustment period, extending the fiscal adjustment path by up to three years when the path is underpinned by a set of reform and investment commitments that support debt sustainability and respond to common EU priorities and targets.

As a third step, the Commission would assess the plans, providing a positive assessment if debt is placed on a downward path or stays at prudent levels, and the budget deficit remains credibly below the 3 per cent of GDP reference value over the medium term. The Council would endorse the plans following a positive assessment from the Commission.

Finally, the Commission would continuously monitor the implementation of the plans. More scope would be given to member states for the design of their fiscal trajectories.

ALCHEMPro News Desk (DS)