At its plenary session on 24 February, the EESC adopted an opinion on the Commission’s Communication outlining orientations for a reform of the economic governance framework. While the EESC agrees on the need for a swift agreement ahead of the Member States’ budgetary processes for 2024, it also stresses that many details are yet to be finalised. Fiscal structural plans have to ensure that debt-to-GDP ratios are put on a downward path or stay at prudent levels. At the same time, the rules must leave enough fiscal space for green and digital transition investments. Most importantly, for a reformed framework to be successful, enhanced ownership of the rules is key.
Since the Maastricht Treaty in 1992, the EU’s economic governance framework has helped to create conditions conducive to economic stability, growth and higher employment in Europe. However, while it has evolved over time, the framework has also grown increasingly complex and not all of its instruments and procedures have stood the test of time. In November 2022, the Commission adopted a Communication setting out orientations for a reform, with the aim of strengthening debt sustainability and stimulating sustainable and inclusive growth. The EESC supports the ambition of improving national ownership, simplifying the framework and moving towards a greater medium-term focus, combined with stronger and more consistent enforcement.
“It is urgent to reform the fiscal framework. Many Member States have not consolidated their public finances enough during good times”, comments EESC rapporteur Krister Andersson. “The lack of prudent policies hurts the most vulnerable in society. Reduced debt levels and debt sustainability are key. We agree on the need for a swift agreement ahead of the Member State’s budgetary processes for 2024.”
Debt-to-GDP ratio
The EESC stresses that fiscal structural plans have to ensure that debt-to-GDP ratios are put on a downward path or stay at prudent levels. Short-term deviations from the 3% GDP deficit threshold may be required under special circumstances in order to allow for an adjustment path that does not jeopardise growth.
The Committee supports the Commission’s proposal to no longer apply the rigid 1/20th rule since it could overburden high-debt Member States, with a negative impact on growth and debt sustainability itself. The mid-term four-year evaluation period for reference fiscal adjustments, extendable for three additional years where necessary, also seems proportionate.
Finally, the EESC welcomes the focus on net primary expenditure as the main criteria for evaluating the new economic governance.
“The proposal is an important step in the right direction. We need more flexibility and more country-specific differentiation to make sure that we have enough fiscal space to manage the socio-ecological transformation and to prevent austerity in the coming years. At the same time, the proposals need to be complemented with concrete measures to strengthen democratic control in future EU economic governance”, adds EESC co-rapporteur Dominika Biegon.
Enhanced ownership
The EESC insists that, for a reformed framework to be successful, ownership of the process is key. It is paramount that the forthcoming legislative proposals establish minimum standards of national parliamentary oversight and organised civil society involvement with regard to the drafting of national medium-term fiscal-structural plans. Parliaments and organised civil society as well as regional and local authorities should be properly involved, since strong ownership of the medium-term fiscal-structural reform plans depends on all relevant stakeholders being adequately engaged. National parliaments should hold governments accountable for the fiscal and reform policies they pursue.
Enforcement
The EESC underlines the need for proper rules ensuring strong enforcement. In exceptional cases when sanctions are considered, they must be effective and implemented in a transparent manner. The rules must be applied equally to all Member States in order to maintain credibility. Possible social consequences and effects on debt sustainability should be part of the enforcement analysis.
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