(Finance) – Final green light for the EU Council to theInitiation of excessive deficit procedures against Italy and six other member countries: Belgium, France, Hungary, Malta, Poland and Slovakia. The EU Council itself announced this after adopting the decisions through a written procedure. It was also established that Romania, which has been under the excessive deficit procedure since 2020, has not taken effective measures to correct its deficit and therefore the procedure should remain open.
There excessive deficit procedure deficit-based budgetary discipline aims to ensure that all Member States restore or maintain discipline in their government budgets and avoid running excessive deficits. Ultimately, the aim is to maintain low public debt or reduce high debt to sustainable levels. Member States must respect budgetary discipline based on criteria and benchmarks set out in the EU Treaties: their deficit must not exceed 3% of their gross domestic product (GDP) and their debt must not exceed 60% of their GDP. All Member States must respect these Treaty benchmarks. If an excessive deficit occurs in a Member State, the deficit-based budgetary discipline objective excessive deficit procedure is to urge its correction by subjecting the Member States to a stricter control and providing them with recommendations to take effective measures to correct the deficit.
Towards the end of the year, the Council will be invited to adopt, on a recommendation from the Commission, recommendations addressed to Member States to take effective measures to correct their deficit within a given period of time. The recommendations may contain a corrective budget pathexpressed in numerical terms, and a deadline. The Commission is expected to present recommendations for the Council recommendations around November, at the same time as it intends to present the autumn package of the European Semester.
This year, exceptionally, the timing of recommendations to Member States in the excessive deficit procedure to take effective action will be aligned with the provisions of the reformed EU economic governance framework. Under the new rules, in force since 30 April, Member States will prepare medium-term fiscal structural plans in the autumn, setting out their spending paths and priority reforms and investments for the next 4-7 years. The aim is to align the Council’s recommendations under the excessive deficit procedures with those under the medium-term fiscal structural plans.
Based on reported and confirmed data for the year 2023, all Member States that are now subject to an excessive deficit procedure recorded a general government deficit above the Treaty reference value in 2023: Italy (-7.4%) Hungary (-6.7%) Romania (-6.6%) France (-5.5%) Poland (-5.1%) Malta (-4.9%) Slovakia (-4.9%) Belgium (-4.4%).
After a four-year hiatus due to the activation of the general escape clause between 2020 and 2023 following the Covid-19 pandemic, on 19 June the Commission had prepared a report under Article 126 of the Treaty on the Functioning of the EU (TFEU). The report identified 12 Member States that had a public deficit above the Treaty reference value of 3% or were at risk of exceeding it in 2023. The report proposed theopening of a deficit-based excessive deficit procedure for seven Member States. The Economic and Financial Committee provided its opinion within the following two weeks. On 8 July 2024, the Commission proposed to the Council decisions establishing the existence of excessive deficits for seven Member States and a decision stating that Romania, which has been subject to the excessive deficit procedure since 2019, has not taken effective measures to correct the situation. Today’s adoption means that the excessive deficit procedures are now formally opened.
(Photo: © Iaroslav Danylchenko /123RF)