The EU economic governance review - a BusinessEurope position paper

Key messages

• Agreement on new fiscal rules is urgently needed ahead of Member Statessetting their 2024 budgets. Given high debt and deficit levels in some countries,a credible and respected framework is essential to maintain public financesustainability in the EU.
• The Commission’s November 2022 proposals, focussing on Member States’ netprimary expenditure can potentially simplify the rules and help Member Statesconstruct medium-term adjustment paths that are less sensitive to cyclicalconditions, thus more credible. But the rules must not provide excessive flexibilityin their interpretation. It is important that, as the Commission proposes, thereference values of 3% of GDP for government deficits and 60% for governmentdebt, continue to be at the basis of the Economic Governance Framework.
• We welcome the proposal to support Member States undertaking growthenhancing reforms and public investment through a longer fiscal adjustmentpath. But this needs to be carefully monitored to ensure proper implementationwith flexibility only granted if Member States present credible reform andinvestment programs that support sustainable growth and debt sustainability.
• The Commission’s simplified proposals, including greater ownership by MemberStates, can potentially enhance the enforceability of the rules. Greaterflexibility must go hand in hand with a stronger and more credible enforcementframework, linked to the possible withdrawal of Commission funding.
• Deepening Economic and Monetary Union goes hand in hand withstrengthening economic governance, including completing the banking andcapital markets unions and reinforcing the European Semester’s role inincreasing growth, competitiveness and convergence. We look forward to furtherproposals in these areas.