Maastricht 2.0: Updating EU economic governance for the challenges ahead

Finance Watch included seven main ways to reform the EU economic governance framework.

Key reform proposals

1. Move the arbitrary debt anchor from 60 to 90 or 100% debt-to-GDP value, and reform its scope of application to cover only the share of the debt stock exposed to market scrutiny – i.e. the debt stock net of debt held by the Eurosystem and the European Stability Mechanism.
2. Expand and improve the monitoring of debt unsustainability drivers by, first, increasing the role of country-specific debt sustainability analyses in the Stability and Growth Pact (SGP) and, second, by including a debt sustainability section in the Macroeconomic Imbalances Procedure (MIP). Crucially, climate-related fiscal risks and resilience-related fiscal risks must be better understood and monitored.
3. Replace impracticable debt reduction rules with country-specific debt pathways.
4. Move from two deficit rules to a unique expenditure rule that caps expenditures net of interest, one-off and cyclical expenditures and net investment (up to a certain threshold). Building on private accounting best practices, investment costs are spread over the investment lifetime.
5. Create unique National Reform and Investment Plans (NRIPs) and allow newly-formed governments to submit a list of strategic expenditures (and investment exceeding aforementioned threshold) to be excluded from their expenditure ceilings.
6. Improve the mandate and expand the tasks of Independent Fiscal Institutions (IFIs). A particular emphasis should be put on producing country-specific debt sustainability analysis and monitoring spending quality. Crucially, their governance arrangements should ensure balanced composition and minority views.
7. Create at EU level, first, a stabilisation fiscal capacity activated alongside the general escape clause and, second, a permanent investment facility for important projects of common European interest.