The annual report of the European Fiscal Board, which was published on Wednesday 10 October, flags up weaknesses in the current budgetary supervisory framework and suggests significant reforms of the Stability and Growth Pact, in order to cleanse the public finances of the eurozone countries.
This is the second annual report published by this entity, which was set up in 2016 to provide budgetary policy orientations at the level of the eurozone (see EUROPE 11649, 11905).
Confirming the European Commission's evaluation (see EUROPE 12014), the Board reports a notable improvement in the economic situation of the eurozone and the European Union as a whole, with growth of 2.4% of GDP in 2017, or the highest level for ten years. This growth has also been accompanied by a reduction in the average nominal deficit rate, which has dropped to 1% of GDP, structural deficits and government debt ratios.
However, the Board regrets the fact that in certain member states, the opportunities opened up by stronger growth than anticipated have not been used to build up fiscal buffers or to speed up the reduction of the government debt.
The experts consider that the Commission's recommendations in the framework of the budgetary process of the 'European Semester', particularly making use of the flexibilities offered by the Pact, have not necessarily helped to cleanse public finances, or done enough to bring the government debt ratio down. These observations echo those of the European Court of Auditors, set out in a report published in July (see EUROPE 12061).
The Board therefore proposes to reform the Stability and Growth Pact. This reform would be based around the long-term sustainability of public finances. Particular attention would be paid to significant deviations from the medium-term budgetary objectives (MTOs), and less to more modest discrepancies.
It is worth noting that the Board has also taken position in favour of conditional access to any fiscal capacity for the eurozone (see EUROPE 12092).
Finally, it recommends simplifying the governance rules of Economic and Monetary Union, with a clear distinction between the competences of the Commission and those of the Council of the EU. (Original version in French by Lucas Tripoteau)