The Economic Governance

In this page: European Semester, Stability and Growth Pact, Macroeconomic imbalance procedure

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The European Union’s economic governance framework aims to monitor, prevent, and correct problematic economic trends that could weaken national economies or negatively affect other EU countries.
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The European Union’s economic governance framework aims to:
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  1. Monitor the economic developments in the EU
  2. Prevent economic problems
  3. Correct excessive deficit and macroeconomic imbalances
  4. Implement corrective decisions 
Tools & procedures
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  • ​The European Semester (EU coordination dealing with economic policies and budget plans)
  • The Stability and Growth Pact (dealing with deficits and public debt: Six Pack, Two Pack, Treaty SCGEM)
  • ​The Macroeconomic imbalance procedure (for preventing & correcting imbalances)

1. ​Economic developments in the EU

​The European Commission monitors economic developments in the EU’s Member States and in the global economy in detail.
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The European Commission monitors for potential problems, such as risky or unsustainable policies or declining competitiveness, through:
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2. The European Semester

The European Semester is an annual process, where the European Union coordinates and monitors economic policy. The European Commission and Council analyse Member States' fiscal and structural policies, issue recommendations and monitor their implementation.
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Preparatory phase - November and December

The European Semester begins in the end of the year, when the Commission adopts the Annual Growth Survey and the Alert Mechanism Report. In March, the European Council defines the key challenges in economic policy.


Evaluation phase - January and February

The Council of the EU debates the annual growth survey, sets out overall policy guidelines and adopts Conclusions.
It also discusses, amends if necessary, and approves the draft Council recommendation on the economic policy of the euro area.

The Semester has implications for a range of policies. the Council of the EU discusses it in its various configurations.
The European Parliament also discusses the annual growth survey and may publish its own initiative report. It issues an opinion on employment guidelines.

The European Parliament may invite the President of the Council, the Commission and, where appropriate, the President of European Council or the President of the Eurogroup to discuss issues related to the European Semester. Individual member states may also be offered the opportunity to participate in an exchange of views.


Imbalance analysis - Spring

The Commission publishes country reports for all member states participating in the European Semester. The country reports include in-depth reviews of macroeconomic imbalances for those member states where the risk of such imbalances was estimated to be high. Based on these reviews, the Commission may draft recommendations to the member states to correct imbalances that are identified. These recommendations can be issued at the same time as the in-depth review is released or later, together with other country-specific recommendations.

The European Council provides policy orientations, based on the annual growth survey and the Council of the EU analysis and conclusions. The member states are invited to take into account these orientations and the findings of the country reports when preparing their national stability or convergence programmes and national reform programmes. The programmes outline member states' budgetary policies and policies for promoting growth and competitiveness.


In April, Member States report to the EU in their Stability/Convergence Programmes and National Reform Programmes (Europe 2020 Programmes) the measures planned and implemented that ensure compliance with the EU's fiscal policy rules, support growth and employment and prevent or correct macroeconomic imbalances.  These programmes must take into account the guidance given by the European Council.

The Commission assesses Member States' plans and makes proposals country-specific recommendations. Member States' ministers discuss these recommendations in June, after which they are adopted by the European Council. These recommendations should be taken into account in decision-making at the national level.

The European Semester is complemented by a common budgetary timeline for the euro area Member States, the framework within which, simultaneously to the Stability programme and the National Reform Programme in the spring, euro area Member States prepare a medium-term fiscal plan, and in the autumn, a Draft Budgetary Plan. The Commission assesses compliance with the Stability and Growth Pact on the basis of these plans. The Eurogroup discusses Member States' plans and the state of the public finances in the euro area.
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The European Commission produces two key economic reports that help to identify and address economic problems every year:
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  • Annual Growth Survey (2023) - Published towards the end of each year, the Annual Growth Survey analyses the progress that the EU has made towards its long-term, strategic priorities, and provides an in-depth assessment of employment and macroeconomic trends. In this way, the Annual Growth Survey sets the priorities of the EU for the year to come.
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  • Alert Mechanism Report (2023) - The Alert Mechanism Report identifies countries that may experience imbalances, such as declining competitiveness or asset bubbles, which could prove harmful to individual Member States or the EU’s Economic and Monetary Union if not corrected.
    These diagnoses are discussed among EU governments. Following that, an in-depth review is carried out for each of these Member States to analyse if an imbalance exists and to examine its origin, nature and severity.

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Countries submit their plans - Spring and Summer

in April, member states submit their policy plans:
  • stability and convergence programmes outlining the member states' medium-term budgetary strategy and
  • national reform programmes outlining member states' structural reform plans, focused on promoting growth and

In May, European Commission evaluates national policy plans and presents draft country-specific recommendations.

In June, the Council of the EU discusses the proposed country-specific recommendations and agrees on their final version andn endorses the final recommendations.

In July, the Council of the EU adopts the country-specific recommendations, and the member states are invited to implement them.


Implementation - July to end of the year

During this period, called "the national semester", the member states take into account the recommendations when drawing up national budgets for the following year. Euro area member states must submit their draft budgetary plans to the Commission and to the Eurogroup by mid-October.
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The member states adopt their national budgets at the end of the year.

3. ​Prevention of the economic problems


​To prevent economic problems from getting worse and affecting other EU members, EU governments have agreed on a wide range of rules to ensure the quality and appropriateness of their economic policies.
The measures agreed by EU are known as Stability and Growth Pact, which is a set of actions, documents and engagements and described by the Treaty on Stability, Coordination and Governance.
  • Medium-Term Objectives (MTO)
​​To keep national fiscal policies on track, EU Member States set budgetary targets, known as calibrated to ensure the long-term sustainability of public finances and the national debt burden. MTOs are updated every 3 years, or more frequently in the case of a country that has undergone a structural reform which significantly impacted its public finances.
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​In April, all EU Member States present to the Commission the budgetary measures that they intend to implement in order to fulfil their commitments. Those that use the euro as their currency do this through while the rest submit. Submitted in April, the EU Commission makes its  National specific policy recommendations. They are discussed by Governments and integrated into national policies with their Parliaments.
​EU Member States also submit details of the structural reforms they are planning to boost growth and jobs.
​Submitted in April, the EU Commission makes its  National specific policy recommendations. They are discussed by Governments and integrated into national policies with their Parliaments.
Member States present them for the following year to the Commission and to their partners in the euro area. In case these budgetary policies are unrealistic and/or pose serious threats, they can be asked to submit a revised draft budgetary plan.
The EU also has rules to encourage economic stability by preventing the development of risky macroeconomic imbalances. The MIP ensures that governments tackle any national economic trends that could pose a threat to other EU economies and discuss these with the Commission and other Member States.
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4. Correction to excessive deficit and imbalance procedure

​​​Member States which run excessive budget deficits of more than 3% of GDP, or which fail to reduce their excessive debts (above 60% of GDP) at a sufficient pace, must follow a particular set of rules.
Member States commit to targets to bring their excessive deficits or debts back to safe levels. They also face the possibility of warnings and ultimately sanctions, such as fines that can reach 0.2% of their GDP, if they persistently fail to take adequate action to address their deficits or debts. Regional subsidies from the EU’s ‘cohesion fund’ may also be withheld.
Recommendations to national governments can be made by the EU whenever they are warranted by the circumstances.
The European Commission may recommend to the Council that Member States experiencing excessive imbalances be required to submit Corrective Action Plans to address their situation. Euro area Member States that repeatedly fail to submit corrective plans considered sufficient by the Council or to implement them face the possibility of sanctions, including fines.
Implementation of the EU’s economic governance framework is organised in an annual cycle, which is divided into two parts, known as the European Semester and the National Semester.
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