The European Commission’s proposal to reform the European framework for economic governance is a step in the right direction in terms of simplifying the rules and national compliance, but it may leave too much scope for political interpretation of the rules, according to the European Court of Auditors in an analysis published on Tuesday 7 November (see EUROPE 13170/1).
“The proposed reform aims to address many of the shortcomings of the current governance framework that we [...] have identified over the years”, said François-Roger Cazala, the member of the Court responsible for the document. “The main challenge will be to ensure fiscal adjustments that contribute to debt sustainability while encouraging investment and growth”, he added.
In particular, the European auditors support the future provisions for using only one indicator - net expenditure - to set adjustment paths in Member States’ multi-annual budgetary and structural plans and for annual budgetary surveillance. They also welcome the desire to place greater emphasis on debt sustainability, preferring a differentiated approach by country.
Similarly, the proposed reform strengthens transparency by requiring the Commission to publish the method and data used to define the reference adjustment path. However, according to the auditors, the criteria and method for assessing budgetary and structural plans are not clearly defined. In their view, the Commission’s margin for interpretation and discretionary power are likely to increase, with possible implications for equal treatment between EU countries and the risk that they will fail to make the necessary budgetary adjustments.
For example, invoking a more optimistic growth assumption, a Member State could set a less rigorous adjustment path for net reference expenditure than that established by the Commission. Thus, even if a Member State has to justify the difference between its spending trajectory and that recommended by the Commission, the risk of postponing the necessary budgetary adjustments persists, the Court points out.
The same risk weighs on the assessment of the reforms and investments undertaken by the Member States to justify an extension of the adjustment period.
In addition, the auditors welcome the European Commission’s proposal to strengthen and extend the role of independent national budgetary institutions, even if the practical arrangements have yet to be defined. And they approve the introduction of genuinely enforceable sanctions to have a real effect on compliance with future European fiscal rules.
To see the analysis by the European Court of Auditors, go to : https://aeur.eu/f/9ex (Original version in French by Mathieu Bion)