On the evening of Monday 11 December, in Strasbourg, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) adopted its negotiating position on the reform of the Stability and Growth Pact, while the Member States are still trying to finalise their position by the end of 2023 (see EUROPE 13310/2).
According to the compromise amendments dated Wednesday 6 December, of which EUROPE has a copy and which were voted on after our deadline, MEPs have agreed to introduce a quantitative criterion aimed at reducing excessive public debt. Following the example of the solution adopted by the Member States (see EUROPE 13308/1), a distinction will be made according to the level of public debt: countries whose debt exceeds 90% of GDP will have to reduce their debt by 1% per year on average over the adjustment period (between 4 and 7 years covering the duration of the national macro-budget plan plus 10 years), while those whose debt is between 60 and 90% of GDP will have to reduce it by 0.5% per year on average.
While the EU Council advocates a lower level of public debt at the end of the macro-budgetary plan than at the start of the plan, MEPs are in favour of debt stabilisation over the same period. However, on reading the compromise amendments, the Greens/EFA Group is critical of the fact that, in the event of simple stabilisation, the debt reduction not achieved when the plan is implemented will be carried over to the next ten years.
Deficit. The parliamentary committee should not include any quantitative criteria for the public deficit, whereas the European finance ministers have introduced a safety margin, below the Maastricht threshold of 3% of GDP, towards which the Member States will have to converge their deficit (-1.5% when the debt exceeds 90% of GDP or -1% when the debt is between 60 and 90% of GDP).
‘Control account’. The European Commission will create a ‘control account’ mechanism to monitor downward/upward deviations from the set trajectory for net budget expenditure. In the provisions dedicated to this mechanism (Article 21), MEPs stress that the EU institution will have to monitor the progress of reforms and investments made by a Member State in parallel.
On this basis, in the ‘preventive’ part of the Pact, MEPs should consider that a Member State is not respecting its net expenditure path if the cumulated balance of the control account over the adjustment period is higher than 1% of GDP in years of positive GDP growth. By way of derogation from this new provision, the Commission may exceptionally authorise a Member State to temporarily exceed the limit set for a maximum of 5 years in order to take account of certain strategic investments offering added value for the Union as a whole.
If the limit is exceeded, the Commission will have to present a report (based on Article 126(3) TFEU) when the deviations observed in a Member State’s control account exceed 0.5% of GDP annually or 0.75% of GDP cumulatively over several years.
Monitoring deviations from the spending trajectory may ultimately lead to the opening of an excessive deficit procedure based on public debt.
“We managed to put a concrete figure on the required yearly debt reduction of 1 per cent debt to GDP for high-debt Member States. We also added a concrete figure on the maximum that Member States are allowed to deviate from their net expenditure path. These kinds of concrete safeguards help to ensure debt sustainability and a common EU approach whilst taking into account the different starting positions between Member States”, said Esther De Lange (EPP, Dutch), Parliament’s co-rapporteur on this dossier, in a statement published before the vote.
The other co-rapporteur, Margarida Marques (S&D, Portuguese), insisted on Parliament’s priority of placing “investment on an equal footing with debt reduction”. She welcomed the S&D group’s ability to prevent “the inclusion of any deficit benchmark” and to give Member States “more fiscal space to implement social, climate, digital and defence priorities of the EU”, also in a statement issued before the vote.
In a recital defended by the Social Democrats, the parliamentary committee should also call for the creation of a European fiscal capacity (‘common investment instrument at EU level’) to take over from the post-Covid-19 European recovery plan, Next Generation EU.
MEPs stress the importance of involving the European Parliament in the implementation of the ‘European Semester’ budgetary process and of keeping it informed at all stages of this process, notably through regular dialogue at political level. However, Parliament should not be involved in decision-making on macro-budgetary plans or in the adoption of any sanctions against a country breaking the rules.
Finally, MEPs should strengthen the European Commission’s role in prudential supervision by authorising it to carry out ‘on-site missions’ in the Member States, during which it could invite any stakeholder involved.
Click on the links to see the ECON Commission’s compromise amendments on the ‘preventive’ – https://aeur.eu/f/a2x – and ‘corrective’ – https://aeur.eu/f/a2y – aspects of the Stability and Growth Pact and on national budgetary frameworks – https://aeur.eu/f/a2z (Original version in French by Mathieu Bion)