Without changing the ‘Maastricht’ thresholds enshrined in the treaties, the European Commission is expected to propose an expenditure trajectory that ensures the sustainability of public debt and to promote the contractualisation of commitments made with Member States, in the proposals to reform the European economic governance framework that it will unveil on Wednesday 9 November.
The EU institution is expected to propose to negotiate with each Member State a structural public expenditure trajectory over a period of four years, which could be extended by a further three years.
This trajectory will take into account the very different national situations and will be included in national medium-term macro-budget plans, thus reinforcing the principle of contractualisation, which has proved successful under the Next Generation EU Recovery Plan. The latter demonstrates the effectiveness of the method of gradually granting European financial assistance based on the fulfilment of contractual commitments to reform and investment.
In early September, at a Bruegel conference, the European Commissioner for the Economy, Paolo Gentiloni, had already raised the idea of national plans “setting multi-year net expenditure trajectories consistent with the convergence of debt to prudent levels” (see EUROPE 13016/11).
In his view, Member States would have more room for manoeuvre upstream to propose sustainable budgetary trajectories. In return, this increased national ownership would be compensated, downstream, by stronger enforcement of the rules at EU level, especially for the most highly indebted countries.
This is what the Dutch minister of finance, Sigrid Kaag, is asking for. In a letter to the European Commission, she wants the forthcoming reform to make enforcement mechanisms “more credible”, as no sanction against a State that has broken EU fiscal rules has ever been taken at EU level. Ms Kaag added: “Clear safeguards should be in place to ensure that steps are taken by the Commission and the Council when Member States fail to comply with the rules, including the implementation of excessive deficit procedures”.
See the letter from the Dutch minister: https://aeur.eu/f/3yg
However, in its proposals, which could lead to a legislative proposal next spring, the European Commission should remain silent on the creation of a European fiscal capacity.
In the European Parliament, MEPs are eager to get started and want to play their role as co-legislators. In July 2021, they adopted a resolution, led by Margarida Marques (S&D, Portuguese), calling for an ‘expenditure rule’ to be introduced when a country’s debt exceeds a certain threshold (see EUROPE 12758/4).
In an interview with EUROPE, the Portuguese socialist welcomed the Commission’s recognition of the limits of European fiscal rules that have hampered investment. “We want simpler, more democratic rules, more ownership on the part of the Member States, and clear indicators that allow us to abandon certain [obscure] indicators [such as] “the output gap”, she said. She called for “more flexibility” to be given to Member States to achieve the agreed objectives, in particular those aimed at promoting the climate and digital transitions. She advocated “differentiation” of obligations to take account of the starting position of Member States. (Original version in French by Mathieu Bion)