The EU economic governance review - a BusinessEurope position paper

Key messages

• Agreement on new fiscal rules is urgently needed ahead of Member States setting their 2024 budgets. Given high debt and deficit levels in some countries, a credible and respected framework is essential to maintain public finance sustainability in the EU.
• We welcome the focus in the Commission’s April 2023 legislative proposal on reference values in accordance with the European Treaties. The Commission’s legislative package, focussing on Member States’ net primary expenditure can potentially simplify the rules and help Member States construct medium-term adjustment paths that are less sensitive to cyclical conditions, thus more credible. But the rules must not provide excessive flexibility in their interpretation. It is important that, as the Commission proposes, the reference values of 3% of GDP for government deficits and 60% for government debt continue to be at the basis of the Economic Governance Framework.
• We welcome the proposal to support Member States undertaking growth enhancing reforms and public investment through a longer fiscal adjustment path. But proper implementation needs to be ensured with flexibility only granted if Member States present credible reform and investment programs that support sustainable growth and debt sustainability.
• The Commission’s simplified proposals, including greater ownership by Member States, can potentially enhance the enforceability of the rules. Greater flexibility must go hand in hand with a stronger and more credible enforcement framework, linked to the possible withdrawal of Commission funding.
• Deepening Economic and Monetary Union goes hand in hand with strengthening economic governance, including completing the banking and capital markets unions and reinforcing the European Semester’s role in increasing growth, competitiveness and convergence. We look forward to further proposals in these areas.