2.

Article 2 is amended as follows: (a) in paragraph 1, the first subparagraph is replaced by the following: "The excess of a government deficit over the reference value shall be considered exceptional, in accordance with the second indent of Article 126 (2) (a) of the Treaty, when resulting from an unusual event outside the control of the Member State concerned and with a major impact on the financial position of general government, or when resulting from a severe economic downturn."; (b) the following paragraph ▐ is inserted: "1a. When it exceeds the reference value, the ratio of the government debt to gross domestic product (GDP) is to be considered sufficiently diminishing and approaching the reference value at a satisfactory pace in accordance with Article 126 (2) (b) of the Treaty if the differential with respect to the reference value has decreased over the previous three years at an average rate of ▐ one-twentieth per year as a benchmark, based on the changes over the last three years for which the data is available. The requirement under the debt criterion shall also be considered to be fulfilled if the budgetary forecasts as provided by the Commission indicate that the required reduction in the differential will occur over the three-year period encompassing the two years following the final year for which the data is available. For a Member State that is subject to an excessive deficit procedure at [date of adoption of this Regulation - to be inserted] and for a period of three years from the correction of the excessive deficit, the requirement under the debt criterion shall be considered fulfilled if the Member State concerned makes sufficient progress towards compliance as assessed in the Opinion adopted by the Council on its Stability or Convergence Programme. In implementing the debt adjustment benchmark, account should be taken of the influence of the cycle on the pace of debt reduction."; (c) paragraph 3 is replaced by the following: "3. The Commission, when preparing a report under Article 126(3) of the Treaty shall take into account all relevant factors as indicated in that Article, insofar as they significantly affect the assessment of compliance with the deficit and debt criteria by the concerned Member State . The report shall appropriately reflect: — The developments in the medium-term economic position in particular potential growth, including the different contributions provided by labour, capital accumulation and total factor productivity, cyclical developments and the private sector net savings position; — The developments in the medium term budgetary positions (in particular, the record of adjustment towards the medium-term budgetary objective, the level of the primary balance and developments in primary expenditure, both current and capital , the implementation of policies in the context of the prevention and correction of excessive macroeconomic imbalances, the implementation of policies in the context of common growth strategy of the Union and the overall quality of public finances, in particular the effectiveness of national budgetary frameworks) ▐; — The report shall also analyse developments in the medium-term government debt position , its dynamics and sustainability (in particular, ▐ risk factors including the maturity structure and currency denomination of the debt, stock-flow adjustment and its composition , accumulated reserves and other financial assets; guarantees, notably linked to the financial sector; and any implicit liabilities ▐ related to ageing and private debt to the extent that it may represent a contingent implicit liability for the government); — Furthermore, the Commission shall give due and explicit consideration to any other factors which, in the opinion of the Member State concerned, are relevant in order to comprehensively assess compliance with deficit and debt criteria and which the Member State has put forward to the Council and the Commission. In that context, particular consideration shall be given to : financial contributions to fostering international solidarity and to achieving the Union policy goals ; the debt incurred in the form of bilateral and multilateral support between Member States in the context of safeguarding financial stability ; the debt related to financial stabilisation operations during major financial disturbances ."; (d) paragraph 4 is replaced by the following: "4. The Commission and the Council shall make a balanced overall assessment of all the relevant factors, specifically, the extent to which they affect the assessment of compliance with the deficit and/or the debt criteria as aggravating or mitigating factors. When assessing compliance on the basis of the deficit criterion, if the ratio of the government debt to GDP exceeds the reference value, these factors shall be taken into account in the steps leading to the decision on the existence of an excessive deficit provided for in paragraphs 4, 5 and 6 of Article 126 of the Treaty only if the double condition of the overarching principle — that, before these relevant factors are taken into account, the general government deficit remains close to the reference value and its excess over the reference value is temporary — is fully met. However, these factors shall be taken into account in the steps leading to the decision on the existence of an excessive deficit when assessing compliance on the basis of the debt criterion. "; (da) paragraph 5 is replaced by the following: "5. The Commission and the Council, when assessing compliance with the deficit and debt criterion and in the subsequent steps of the excessive deficit procedure, shall give due consideration to the implementation of pension reforms introducing a multi-pillar system that includes a mandatory, fully funded pillar and the net cost of the publicly managed pillar. In particular, consideration shall be given to the features of the overall pension system created by the reform, namely whether it promotes long-term sustainability while not increasing risks for the medium-term budgetary position."; (db) paragraph 6 is replaced by the following: "6. If the Council, on the basis of the proposal of the Commission, has decided, on the basis of Article 126(6) TFEU, that an excessive deficit exists in a Member State, the Council and the Commission shall take into account the relevant factors referred to in paragraph 3, as they affect the situation of the concerned Member State, also in the subsequent procedural steps of Article 126 TFEU, including as specified in Articles 3(5) and 5(2) of this Regulation, in particular in establishing a deadline for the correction of the excessive deficit and eventually extending it. However, those relevant factors shall not be taken into account for the decision of the Council under Article 126(12) TFEU on the abrogation of some or all of its decisions under paragraphs 6 to 9 and 11 of Article 126 TFEU."; (e) paragraph 7 is replaced by the following: "7. In the case of Member States where the excess of the deficit over the reference value reflects the implementation of a pension reform introducing a multi-pillar system that includes a mandatory, fully funded pillar, the Commission and the Council shall also consider the cost of the reform ▐ when assessing developments of deficit ▐ figures in excessive deficit procedure as long as the deficit does not significantly exceed a level that can be considered ▐ close to the reference value and the debt ratio does not exceed the reference value on condition that overall fiscal sustainability is maintained . ▐ The net cost ▐ shall be taken into account also for the decision of the Council under Article 126(12) TFEU on the abrogation of some or all of its decisions under paragraphs 6 to 9 and 11 of Article 126 TFEU, if the deficit has declined substantially and continuously and has reached a level that comes close to the reference value ▐. ".