New Stability Pact, agreement reached between the Council and the European Parliament

Stability Pact, agreement reached between EU institutions on the reform

The negotiators of the Council and the European Parliament reached after sixteen hours of negotiations (on the last day) a political agreement on the proposed reform of the EU economic governance framework. The main objective of the new Stability and Growth Pact – explains the Council – is to ensure healthy and sustainable public finances, while promoting sustainable and inclusive growth in all Member States through reforms and investments. The European Chamber gets a little more space for public investments and more margins to deviate spending paths in the event of exceptional circumstances.

THEThe Council and Parliament agreed to maintain the overall objective of the reform of reducing debt ratios and deficits gradually, realistic, sustainable and growth-friendly, while protecting reforms and investments in strategic sectors such as digital, green, social or defence. At the same time, the new framework will provide adequate space for countercyclical policies and address macroeconomic imbalances.

The agreement also maintains the obligation for Member States to submit medium-term national fiscal structural plans. The Commission will present a “reference trajectory” (the so-called “technical trajectory”) to Member States in which the public debt exceeds 60% of GDP or in which the public deficit exceeds 3% of GDP. The agreement provides for an optional and factual preliminary dialogue between Member States and the Commission in advance.

The reference trajectory indicates how Member States can ensure that by the end of a fiscal adjustment period four-year period, public debt is on a plausibly downward trajectory or remains at prudent levels in the medium term. The agreement contains two guarantees that the reference trajectory must respect, safeguarding debt sustainability, to ensure a decrease in debt levels, and safeguarding deficit resilience, to provide a safety margin below the reference value of the treaty deficit of 3% of GDP, in order to create fiscal space.