The Economic Governance Review
On 9 November 2022, the Commission adopted a Communication setting out orientations for a reformed EU economic governance framework.
Taking into account the key concerns over the current framework, these aim to strengthen debt sustainability and enhance sustainable and inclusive growth through investment and reforms.
The communication is based on an online public consultation with stakeholders and Member States launched in February 2020 on the future of the EU’s economic governance framework.
The orientations seek to ensure that the framework is simpler, more transparent and effective, with greater national ownership and better enforcement, while allowing for strategic investment and reducing high public debt ratios in a realistic, gradual and sustained manner.
National Plans: how they would change
National plans would integrate fiscal, reform and investment objectives, including those aimed at addressing macroeconomic imbalances where necessary, into a single holistic medium-term plan, thus creating a coherent and streamlined process. Member States would have more room for maneuver to define their fiscal adjustment path by strengthening national ownership of their budget trajectories.
A single operational indicator - net primary expenditure, i.e. expenditure that is under government control - would serve as the basis for defining the fiscal adjustment path and for carrying out annual budgetary surveillance, thus greatly simplifying the picture.
The Revision will improve at preventing and correcting harmful imbalances more effectively
The Macroeconomic Imbalance Procedure (MIP) aims to identify potential macroeconomic risks early on, prevent the emergence of harmful macroeconomic imbalances and correct the imbalances that already exist. The reform proposals for the MIP centre on an enhanced dialogue between the Commission and Member States to create a better common understanding of the challenges identified under the MIP and the policies needed to address them.
This would, in turn, lead to a commitment from Member States to include the reforms and investments needed to prevent or correct imbalances in their national medium-term fiscal-structural plan.
The preventive role of the MIP would be strengthened in a macroeconomic environment characterised by new and evolving risks. The assessment of whether imbalances exist would be made more forward-looking with a view to detecting and addressing emerging imbalances early on. More weight would be placed on trend developments and on whether policies have been implemented to address imbalances, when assessing whether imbalances have been corrected.
The new post-program surveillance framework
Post-programme surveillance assesses the repayment capacity of Member States that have benefited from financial assistance programmes. As part of the new framework, and while keeping the legislative text unchanged, the Commission proposes to apply it differently, by setting clearer objectives, with the intensity of the framework linked to these objectives.
In particular, post-programme surveillance would focus on assessing repayment capacity, monitoring the implementation of unfinished reforms, and assessing whether corrective measures are needed in the context of concerns for repayment capacity or continued market access.
The intensity of post-programme surveillance would evolve over time, along with the evolving risk assessment.