The European Commission has today issued guidance to EU countries on fiscal policy for next year. The timing of this announcement is important because the suspension of EU fiscal rules under the General Escape Clause will come to an end this year. Finance Watch is concerned by the Commission’s opening to relaunch Excessive Deficit Procedures in Spring 2024 but commends its dedication to reform of the EU fiscal rules.
Under today’s guidance, the potential to launch Excessive Deficit Procedures would be reintroduced in Spring 2024 based on data from 2023, meaning that countries would need to start reducing deficits now to avoid being penalised. Excessive Deficit Procedures are also known to impact financial market sentiment, increasing yield spreads between member states.
Deficits are currently very high, mostly due to energy relief measures. While Finance Watch agrees that countries need to phase-out these relief measures where they are not needed anymore, there must now be a shift to long-term public investments in energy security and to reduce dependence on fossil fuels. Countries should not be penalised for deficits resulting from quality investments in a sustainable and secure energy future.
However, Finance Watch commends the Commission’s continued commitment to reforming the EU fiscal rules. Today’s proposal is based on current rules, but with some elements that are expected in the Commission’s legislative proposals in April, such as country-specific debt pathways and an increased focus on quality reforms and investments.
Ludovic Suttor-Sorel, Senior Research & Advocacy Officer at Finance Watch, said: “In the midst of a heated debate between EU capitals on the future of EU economic governance, the Commission took a balanced approach with this guidance. While concerned by the possible return of Excessive Deficit Procedures, I hope that today’s fiscal guidance will reassure some member states about how forthcoming EU fiscal rules would work in practice.”
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About Finance Watch
Finance Watch is an independently funded public interest association dedicated to making finance work for the good of society. Its mission is to strengthen the voice of society in the reform of financial regulation by conducting advocacy and presenting public interest arguments to lawmakers and the public. Finance Watch’s members include consumer groups, housing associations, trade unions, NGOs, financial experts, academics and other civil society groups that collectively represent a large number of European citizens. Finance Watch’s founding principles state that finance is essential for society in bringing capital to productive use in a transparent and sustainable manner, but that the legitimate pursuit of private interests by the financial industry should not be conducted to the detriment of society.
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