Highlights

Hungarian Minister for Economic Affairs
György Matolcsy (presidency)
© European Union

At its meeting on 15 March the Council agreed a general approach on six legislative proposals aimed at strengthening economic governance in the EU, and especially in the euro area. The main objective is the enhancement of budgetary discipline in the member states and broader surveillance of member states' economic policies. The proposals are part of the EU's response to the challenges highlighted by the recent economic and financial crisis.

Four of the six proposals deal with reform of the EU Stability and Growth Pact. Their aim is to enhance surveillance of fiscal policies, introducing provisions on national fiscal frameworks, and applying enforcement measures for those member states that fail to comply with the requirements. The other two proposals target the macroeconomic imbalances within the EU.

Strengthening of the Stability and Growth Pact

The reform would make the pact stricter by extending the use of sanctions. For example, member states could face sanctions in the event of a significant deviation from the adjustment path set for reaching their medium-term budgetary objectives. Sanctions would also be applied at an earlier stage in the excessive deficit procedure. For instance, the member states might be required to make a non-interest-bearing deposit of 0.2 % of GDP already when a decision is taken to apply the excessive deficit procedure.

To trigger the sanctions more automatically than at present, a so-called "reverse majority" rule would be introduced, which means that the Commission's proposal for imposing a sanction would be considered adopted, unless turned down by the Council via qualified majority.

The reform also sets out to ensure that the member states' budgetary frameworks reflect the objectives of EU budgetary coordination. This would be achieved, among other measures, by bringing into line accounting, statistical and forecasting practices and by member states adopting multi-annual fiscal planning to ensure the achievement of their medium-term objectives, set at EU level.

Surveillance of economic policies

Two draft regulations in the package are aimed at broadening the surveillance of the member states' economic policies by introducing a mechanism for the prevention and correction of excessive macroeconomic imbalances. They establish an "excessive imbalance procedure" and introduce the possibility of fines being imposed on member states found to be in an "excessive imbalance position".

More information:
Press release (pdf)
Press conference webcast
Public deliberations