The European Fiscal Council (COE), an independent consultative body of the European Commission, today criticized the “hasty and fragmented reform” of the European Union (EU) budgetary rules, with ceilings for deficit and public debt, defending a “more restrictive” approach.
“Implementation of the 2024 reform was rushed and fragmented, with delays in national submissions, persistent ambiguity over implementation details and deviations from the Commission’s comprehensive assessments,” states the COE in its annual report released today.
“Instead of the multilateral scrutiny provided for by the Treaties, the process was dominated by confidential bilateral exchanges, which paved the way for greater tolerance in the face of optimistic medium-term national assumptions, when compared to the Commission’s previous guidelines”, adds the organization in the document to which Lusa had access.
Specifically, according to the report, the new budgetary framework was implemented within a tight timetable, the European Commission did not publish reports by country, the institution’s previous guidelines were confidential until the Member States presented their plans, these plans were prepared in bilateral interactions between the community executive and national governments and based on “overly optimistic medium-term macroeconomic and budgetary assumptions” and, furthermore, threats of excessive deficit procedures were not realized.
For the COE, “a more restrictive budgetary impulse for the euro area would have been appropriate in 2024, as recommended” by the entity itself in last year’s report, mainly because “economic activity fell short of initial expectations” last year.
In 2024, the EU and euro area economies grew by 1.1% and 0.9%, respectively, but worsened economic uncertainty due to ongoing wars and the residual impact of previous shocks limited growth.
Criticized in the report is that “governments did not take advantage of surplus revenue and the gradual elimination of remaining energy support measures to reduce imbalances accumulated during the covid-19 pandemic”, using it instead to “further increase current expenditure”.
The reform of the European Union’s fiscal rules in 2024 represented one of the most significant changes in European economic governance, the set of rules and mechanisms that guide the fiscal policies of member states.
These rules define limits on the deficit (3% of GDP) and public debt (60% of GDP), requiring the presentation of budgetary plans to the European Commission and the Council, which supervise their implementation through the European Semester and, in cases of non-compliance, can trigger the Excessive Deficit Procedure.
In addition to budgetary control, the framework also includes macroeconomic surveillance and support mechanisms for Member States in financial difficulties.
Last year, this system underwent a comprehensive reform to simplify the rules, make them more transparent and flexible, while strengthening budgetary discipline and the ability to respond to crises.
Precisely due to crises – such as the covid-19 pandemic and the war in Ukraine – EU budgetary rules were suspended and were resumed last year, becoming fully in force in 2025.
Despite maintaining the usual ceilings for public debt and deficit, national plans were created taking into account the reality of each country for downward trajectories, as well as annual public spending ceilings for maximum deviation.
The new budgetary framework is more oriented towards debt sustainability.