COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Communication on orientations for a reform of the EU economic governance framework
Date: 2022-11-09
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU Member State, economic disparity, economic governance (EU), economic reform, euro area, fiscal policy, investment, macroeconomics, national planning, public debt, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 9.11.2022  COM(2022) 583 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Communication on orientations for a reform of the EU economic governance framework  
 
 
1.  Introduction 

In  October  2021,  the  Commission  relaunched  the  public  debate  on  the  review  of  the 
EU's  economic  governance  framework,  inviting  other  EU  institutions  and  all  key 
stakeholders to engage. Through various fora, including dedicated meetings, workshops and 
an online survey, citizens and a wide range of participants, including national governments, 
parliaments,  social  partners,  academia  and  other  EU  institutions,  have  debated  how  today’s 
and  tomorrow’s  economic  challenges  require  reforms  of  the  EU  economic  governance 
framework. (1)  Discussions  in  the  Council  (ECOFIN),  the  Eurogroup,  the  Economic  and 
Financial  Committee  and  the  Economic  Policy  Committee  have  provided  Member  States 
with an opportunity to reflect and express their views on the key objectives of the governance 
framework, its functioning, and new challenges to be addressed.  

It  is  now  time  to  move  from  debate  to  decisions.  This  Communication  outlines  the 
Commission’s  orientations  for  a  reform  of  the  economic  governance  framework, 
addressing the key economic and policy issues that will shape the EU’s economic policy 
coordination and surveillance for the next decade.  Taking into account the key concerns 
over  the  current  framework,  these  orientations  aim  to  strengthen  debt  sustainability  and 
promote  sustainable  and  inclusive  growth  in  all  Member  States  (see  Figure  1),  thus 
“rediscovering the Maastricht spirit whereby stability and growth can only go hand in hand”, 
as indicated by President Von der Leyen in her State of the Union address. (2) Prudent fiscal 
strategies and investment and reforms that enhance sustainable growth are both indispensable 
and mutually reinforcing in ensuring fiscal sustainability and in enabling the green and digital 
transition towards a resilient economy. The reformed framework should tackle the prevailing 
challenges and contribute to making Europe more resilient, by sustaining strategic investment 
for years to come and by reducing high public debt ratios in a realistic, gradual and sustained 
manner.  Improving  national  ownership,  simplifying  the  framework  and  moving  towards  a 
greater medium-term focus, combined with stronger and more coherent enforcement, are key 
elements in the Commission’s orientations.  

The objective of the reform is to facilitate effective economic surveillance, anchored in a 
common framework that ensures equal treatment and multilateral policy coordination. 
The framework should be robust to changing economic conditions and uncertainty, requiring 
a solid and predictable rule book and escape clauses for exceptional circumstances. It should 
also pursue an integrated approach whereby surveillance tools complement each other, in the 
context  of  the  European  Semester.  Effectively  preventing  and  correcting  macroeconomic 
imbalances  will  require  better  detection  of  emerging  risks  and  maintenance  of  reform 
momentum, while placing more emphasis on EU and euro area developments, and on policy 
implementation. These orientations will feed into the further debate, in particular within the 
Council and with the European Parliament, with a view to reaching a broad consensus on the 
future design of the economic governance framework. 

(1) In March 2022, the Commission published a summary report on the replies to the online survey.  European 
Commission  (2022),  ‘Online  public  consultation  on  the  review  of  the  EU  economic  governance  framework: 
summary of responses’, SWD(2022) 104 final of 28 March 2022. 
(2) State of the Union address by the President of the European Commission, 14 September 2022.  

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The  Communication  is  set  out  as  follows.  Section  2  recalls  the  need  for  an  effective 
governance framework, integrating the fiscal, reform and investment dimensions in order to 
address  the  challenges  prevailing  now  and  over  the  foreseeable  future.  Against  this 
background,  the  key  elements  of  the  Commission’s  reform  orientations  are  presented  in 
Section 3.  Section  4  develops  these  key  elements  by  providing  more  detail  on  practical 
aspects of the proposed reforms to fiscal and macroeconomic surveillance. Section 5 outlines 
the next steps and concludes.  

Figure 1: A new governance architecture 

Debt Sustainability AND Sustainable Growth 

Fiscal prudence 

Reforms and 
investment 

Macroeconomic 
balance 

A revised EU fiscal 
framework 

Based on a medium-
term net expenditure 
path anchored on debt 
sustainability  

A new tool for 
enforcing reforms 
and investment  

Ensuring the 
enforcement of reforms 
and investment 
underpinning the 
agreed expenditure 
path  

A revised MIP 

More focused and 
forward-looking 
perspective 

Strengthen 
effectiveness and 
enforcement based on 
policy commitments 

2.  The need for an effective economic governance framework   

2.1  Towards  a  framework  that  guides  Member  States  in  addressing  identified  challenges 
and common policy priorities 

The  EU’s  economic  governance  framework  has  guided  Member  States  in  achieving 
their  economic  and  fiscal  policy  objectives.  Since  the  Treaty  of  Maastricht  of  1992,  the 
framework has helped achieve macroeconomic convergence, safeguard sound public finances 
and  address  macroeconomic  imbalances.  Together  with  a  common  monetary  policy  and  a 
common  currency  in  the  euro  area,  the  framework  has  created  conditions  for  economic 
stability, sustainable economic growth and higher employment for EU citizens.  

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The EU economic governance framework has evolved over time. Reforms have generally 
been  made  in  reaction  to  weaknesses  in  the  framework  that  have  been  exposed  mostly  in 
moments of economic crisis. In particular, the legislative packages known as the six-pack and 
two-pack responded to the lessons of the  global financial crisis and the  euro area sovereign 
debt  crisis  by  revamping  fiscal  surveillance,  strengthening  national  budgetary  frameworks, 
reinforcing  budgetary  coordination  in  the  euro  area  and  broadening  the  scope  of  economic 
surveillance to include macroeconomic imbalances. (3) 

While the framework filled surveillance gaps and became more adaptable to economic 
conditions,  it  has  also  become  more  complex  and  not  all  instruments  and  procedures 
have  stood  the  test  of  time.  The  February  2020  Communication  on  the  economic 
governance review and the ensuing public debate (see Annex 1) noted the mixed success of 
the  fiscal  surveillance  framework  and  the  growing  heterogeneity  of  fiscal  positions  across 
Member  States.  The  framework  had  not  differentiated  sufficiently  between  Member  States 
despite different fiscal positions, sustainability risks and other vulnerabilities. National fiscal 
policies  had  often  remained  pro-cyclical  and  Member  States  had  not  used  good  economic 
times to build fiscal buffers. The ability to steer the euro area fiscal stance was hampered by 
the lack of prudent  policies in  good times and remained limited in  the absence of a  central 
fiscal capacity with stabilisation features. The composition of public finances had not become 
more  growth-friendly  and  national  governments  had  not  prioritised  spending  that  enhances 
growth and economic and social resilience. The  EU fiscal  rules had become complex,  with 
multiple  indicators  and  reliance  on  unobservable  variables,  undermining  transparency  and 
hampering  ownership  and  predictability.  Despite 
in  national  fiscal 
frameworks, their effectiveness  varied markedly  across Member States.  With respect  to  the 
surveillance  of  macroeconomic  imbalances,  the  framework  had  been  successful  in  raising 
awareness of broader risks to macroeconomic stability but did not generate sufficient policy 
responses.  The  Excessive  Imbalance  Procedure  (EIP)  had  never  been  activated.  Since  the 
creation  of  the  Macroeconomic  Imbalances  Procedure  (MIP),  the  Union  had  been  more 
successful  in  reducing current  account  deficits than in  reducing persistent  and large current 
account surpluses. Surveillance had remained untested in preventing the accumulation of new 
vulnerabilities  and  risks  and  in  fostering  the  adequate  preventive  policy  action.  Links 
between various surveillance strands had not always been fully exploited.  

improvements 

2.2 Lessons from the recent crises 

Lessons from the policy response to recent economic shocks, in particular the COVID-
19  crisis,  have  implications  for  the  economic  governance  review.  In  March  2020,  the 
general  escape  clause  of  the  Stability  and  Growth  Pact  (SGP)  was  activated.  This  allowed 
Member States to react to the COVID-19 crisis by providing sizeable fiscal support to their 

(3)  A  full  description  of  the  six-pack  and  two-pack  reforms  can  be  found  in  Box  1  of  European  Commission 
(2020), ‘Economic governance review’, COM(2020) 55 final of 5 February 2020. A full list of the underlying 
secondary legislation can be found in Footnote 1 (Page 1) of  the Staff Working Document accompanying that 
communication  (European  Commission  (2020),  'Economic  governance  review’,  SWD(2020)  210  final  of  5 
February 2020).  

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economies,  temporarily  departing  from  the  SGP  budgetary  requirements. (4)  This  strong 
countercyclical  response,  together  with  new  EU-level  measures  and  instruments,  and  social 
safety nets and health systems at the national level, proved highly effective in mitigating the 
economic and social damage of the crisis. Lessons from the successful EU policy response to 
the  crisis,  including  the  positive  interaction  between  reforms  and  investment  under  the 
Recovery  and  Resilience  Facility  (RRF),  have  also  been  useful  for  the  review  of  the 
economic  governance  framework.  At  the  same  time,  the  crisis  resulted  in  a  significant 
increase  in  public-  and  private-sector  debt  ratios,  underscoring  the  importance  of  reducing 
debt  ratios  to  prudent  levels  in  a  gradual,  sustained  and  growth-friendly  manner.  Fiscal 
prudence in times of sustained growth helps build fiscal buffers that governments can use to 
provide counter-cyclical fiscal support in times of crisis, when discretionary fiscal policy can 
be  particularly  effective.  Investment  in  preparedness  and  resilience  can  also  reduce  the 
adverse  economic  impact  of  crises.  Moreover,  the  experience  before  and  during  crisis 
confirmed the difficulties associated with designing policy recommendations on the basis of 
unobservable indicators  that are subject  to  frequent  revisions (such as the  “output gap” and 
the “structural balance”).  

The  green  and  digital  transitions,  the  need  to  ensure  energy  security,  as  well  as  social 
and  economic  resilience, (5)  and  to  build  up  defence  capabilities  will  require  sustained 
high  levels  of  investment  in  the  years  to  come.  The  COVID-19  crisis  and  the  Russian 
invasion of Ukraine have also made these common priorities more visible and urgent. High 
levels  of  investment  will  be  needed  to  achieve  a  fair  twin  transition  (green  and  digital), 
increase social and economic resilience (including through upskilling and reskilling), increase 
territorial  cohesion,  reduce  energy  dependencies,  and  increase  defence  capabilities,  both  at 
the national level and in support of Europe’s common priorities. Within its limited capacity, 
the  EU  budget  has  supported  these  efforts  given  that  the  twin  transition,  resilience,  energy 
security  and  defence  are  common  objectives  for  all  Member  States  and  made  even  more 
pressing  by  the  current  crisis.  These  objectives  call  for  investment  by  corporations  and 
households, but also for higher public investment, backed by a good composition and quality 
of  public  finances.  These  policies  boost  potential  growth,  strengthen  resilience  and  help 
counter  the  negative  shocks  of  the  war.  Finally,  they  reflect  strategic  EU  priorities  and  are 
supported by  common  EU-financed programmes,  such as the RRF financing provided until 
2026 and cohesion policy funding.  

Effective policy coordination is critical for responding to crises. The policy responses to 
the  COVID-19  crisis,  the  Russian  invasion  of  Ukraine  and  the  ensuing  energy  crisis  have 
underscored the value of strong policy coordination, including between different policy and 
funding tools, and between the EU and national levels. The activation of the general escape 

(4) A more in-depth discussion of the response to the COVID-19 crisis and the implications of that crisis on the 
economic governance review can be found in European Commission (2021), ‘The EU economy after COVID-
19: implications for economic governance’, COM(2021) 662 final of 19 October 2021. 
(5)  Guidance  for  Member  States  on  how  best  to  conduct  distributional  impact  assessments  of  new  policies, 
which  are  important  in  order  to  avoid  an  exacerbation  of  existing  inequalities,  can  be  found  in  European 
Commission  (2022),  ‘Better  assessing  the  distributional  impact  of  Member  States’  policies’,  COM(2022)  494 
final of 23 September 2022. 

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clause facilitated national fiscal responses. The interplay between fiscal policy and monetary 
policy was and continues to be critical for the effective macroeconomic response to the crisis. 
Monetary policy, created space for undertaking the necessary national fiscal policies which, 
in  turn,  helped  to  cushion  the  effects  on  economic  growth  and  social  cohesion.  Some 
framework conditions, such as financial market prudential regulations and the EU State Aid 
framework,  were  temporarily  adjusted.  Flexibilities,  including  those  within  the  EU  budget, 
were  fully  applied.  New  EU-level  tools  also  helped,  in  particular  the  temporary  Support  to 
mitigate  Unemployment  Risks  in  an  Emergency  (SURE),  the  Coronavirus  Response 
Investment  Initiatives  (CRII)  under  Cohesion  Policy  and  NextGenerationEU,  including  the 
Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU) and the RRF. 
The  effective  implementation  of  reforms  and  investment  in  the  Recovery  and  Resilience 
Plans (RRPs) provides a unique opportunity for Member States to reach a higher growth path, 
address  economic  and  social  vulnerabilities,  improve  public  and  private  debt  sustainability, 
strengthen  resilience  and  accelerate  the  green  and  digital  transitions,  while  delivering  on 
Union objectives. More recently, in response to the energy market disruption triggered by the 
Russian  invasion  of  Ukraine  and  Russia’s  weaponisation  of  energy,  the  Commission  put 
forward a number of measures addressing high energy prices and ensuring security of supply. 
The Commission has also launched a series of initiatives, including the REPowerEU plan, to 
end dependence on Russian fossil  fuels, by diversifying energy supplies, saving energy and 
accelerating the green transition. (6) 

The  reformed  framework  must  also  help  Member  States  to  address  the  long-term 
challenges  facing  the  EU.  Long  term  structural  trends  pose  a  significant  challenge  for  the 
sustainability of public finances and sustainable growth in EU Member States. These trends 
include demographic challenges and the climate crisis, with the latter becoming increasingly 
apparent in the form of increasing severity and frequency of extreme weather events. Coping 
with  these  challenges  will  require  Member  States  to  take  further  action,  including  public 
investment to facilitate a green and digital transition and policies focused on ensuring sound 
public finances, including through reform of pension systems. 

3.  Towards a simpler and more effective framework with greater ownership 

This section presents the main contours of the Commission’s orientations for reform of 
the  economic  governance  framework  (see  Figure  2).  Specific  issues  related  to  the  set-up 
and  implementation  of  the  proposed  reformed  framework  are  discussed  in  more  detail  in 
Section  4,  which  also  discusses  the  framework  for  dealing  with  euro  area  Member  States 
experiencing, or threatened with, financial stability difficulties. 

3.1 A revised governance architecture with a greater focus on the medium term 

The Commission’s orientations seek to define a simpler and integrated architecture for 
macro-fiscal  surveillance  to  ensure  debt  sustainability  and  promote  sustainable  and 

(6)  European  Commission  (2022),  ‘REPowerEU:  Joint  European  Action  for  more  affordable,  secure  and 

sustainable energy,’ COM (2022) 108 final of 8 March 2022. 

5 

 
 
 
                                                 
inclusive  growth.  In  order  for  the  framework  to  be  consistent  across  its  components  and 
deliver  effective  economic  surveillance,  there  is  a  need  to  clarify  the  objectives  of  each 
surveillance  strand,  to  better  integrate  macroeconomic  and  fiscal  policies,  and  to  add 
instruments to monitor progress and meet new objectives. Therefore, in addition to revising 
the EU fiscal  framework and the MIP, notably by integrating fiscal, reform  and investment 
objectives into a single holistic medium-term plan, the Commission’s orientations call for the 
establishment  of  a  new  EU  enforcement  tool  for  reforms  and  investment.  This  tool  would 
ensure the enforcement of Member States’ reform and investment commitments underpinning 
a more gradual fiscal adjustment (see Section 4.1).  

The Treaty reference values of 3% of GDP budget deficit and 60% debt-to-GDP ratio 
remain unchanged.  These values  are  established in  a Treaty  Protocol and the focus of the 
review  is  on  making  sure  that  those  values  are  adhered  to  in  a  more  effective  manner, 
especially  by  focusing  on  an  appropriate  and  credible  debt  reduction  path  towards  60%  of 
GDP, while at the same time ensuring that the economic governance framework is conducive 
to sustainable and inclusive growth. 

Figure 2: A suggested revised fiscal framework 

3.2 National medium-term fiscal-structural plans as the centrepiece of the new governance 
architecture  

National medium-term fiscal-structural plans that bring together the fiscal, reform and 
investment  commitments  of  each  Member  State,  within  a  common  EU  framework, 
would  be  the  cornerstone  of  the  proposed  revised  framework. (7)  This  would  ensure 
consistency  and  streamline  processes  and  deliverables,  while  recognising  that  reforms  and 
investments  can  have  a  positive  impact  on  fiscal  sustainability.  The  revised  EU  fiscal 

(7) The fiscal-structural plans would merge the current Stability and Convergence Programmes with the National 
Reform Programmes.  

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framework would set the requirements to ensure that the debt ratio is put on a downward path 
or stays at prudent levels and the budget deficit is maintained below the 3% of GDP reference 
value over the medium term. Member States would present medium-term plans that set out 
country-specific  fiscal  trajectories  as  well  as  priority  public  investment  and  reform 
commitments that together ensure sustained and gradual debt reduction and sustainable  and 
inclusive growth. All Member States would be required to address the priorities identified in 
country-specific  recommendations  (CSRs)  issued  in  the  context  of  the  European  Semester. 
The medium-term plans should also put forward initiatives that are in line with strategic EU 
priorities derived directly from agreed EU guidance and targets that require policy action by 
Member  States.  Therefore,  plans  should  also  be  consistent  with  the  National  Energy  and 
Climate Plans (which are to  be aligned with  the targets  of the EU Climate  Law) as  well as 
with the National Digital Decade Roadmaps. During the lifetime of the RRF, cross references 
to the RRPs would be needed to ensure policy consistency.  

This  medium-term  approach  would  allow  for  differentiation  between  Member  States, 
within a revised common EU framework that has sustainable growth and risks to debt 
sustainability as a common basis. Such a common EU framework would be instrumental in 
transparently ensuring equal treatment between Member States. Taking the objective of debt 
sustainability as the starting point for EU fiscal surveillance reflects the core Treaty objective 
of fiscal rules in Economic and Monetary Union, which is to prevent so-called “gross errors” 
in the conduct of fiscal policy, as those can have negative spillovers to other Member States 
and to the currency union as a whole. The existing EU framework requires all Member States 
to make similar adjustment efforts, in particular in the preventive arm, regardless of their debt 
position and fiscal risks. However, debt-to-GDP ratios and debt developments differ widely 
across  Member  States.  Some  of  them  have  a  very  high  debt  exceeding  90%  of  GDP  (and 
exceeding 150% of GDP in two cases). Others have a debt lower than 60% of GDP. Lastly, 
many are in an intermediate situation, with debt between 60% and 90% of GDP.  

A risk-based surveillance framework would allow to  adapt the existing debt reduction 
benchmark to the country-specific debt ratio, while the requirement to maintain budget 
deficits  credibly  below  3%  of  GDP  would  be  preserved.  The  current  debt  reduction 
benchmark (the so-called 1/20th rule) implies, in the current circumstances of high debt ratios 
post-COVID, a too demanding frontloaded fiscal effort that risks jeopardising growth and is 
pro-cyclical. (8)  It  should  be  recognised  that  high-debt  Member  States  cannot  abide  by  the 
existing 1/20th debt reduction benchmark, since reducing their debt ratios at this speed would 
have a very negative impact on growth and thereby on debt sustainability itself. Therefore, it 
is proposed to move to a more risk-based surveillance framework that puts debt sustainability 
at its core and differentiates more between countries by taking into account their public debt 
challenges, while adhering to a transparent and common EU framework consistent with the 
3% of GDP and 60% of GDP reference values of the Treaty.  

(8) For this benchmark, see Article 2(1a) of Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up 
and clarifying the implementation of the excessive deficit procedure (OJ L 209 of 2.8.1997, p.6). 

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National medium-term plans should ensure a sustainable debt reduction path through a 
gradual  consolidation  and  reforms  and  investments.  Member  States  should  present 
medium-term  fiscal-structural  plans  that  ensure  debt  is  kept  or  brought  onto  a  sustainable 
path  by  the  end  of  the  adjustment  period  as  well  as  priority  public  investment  and  reform 
commitments.  The  framework  reflects  that  there  is  no  trade-off  between  reforms  and 
investment  and  fiscal  adjustment.  Improving  the  quality  of  public  finances  and  protecting 
public investment should be central elements of medium-term fiscal-structural plans, in light 
of  the  essential  role  of  public  investment  and  reforms  in  enhancing  potential  growth  and 
addressing major systemic challenges such as the green and digital transition.  

Moreover, Member States would be able to commit to a set of reforms and investment 
that  help  bring  debt  on  a  sustainable  path  and  therefore  could  underpin  a  longer 
adjustment period and a more gradual adjustment path. The adjustment path, the reforms 
and investments will be discussed with the Commission and, once positively assessed, will be 
adopted  by  the  Council.  The  plans  would  need  to  be  translated  in  national  budgets  for  the 
whole adjustment period, with the possibility for Member States to revise the plan only after 
a  minimum  period  of  four  years.  This  minimum  adjustment  period  could  be  lengthened  to 
match the national legislature, if Member States so wish. The plan could be revised earlier in 
case of objective circumstances making the implementation of the plan infeasible, but would 
have  to  undergo  the  same  validation  process.  Frequent  revisions  would  undermine  the 
credibility of the plans as an anchor for prudent policies.  

A single operational indicator anchored on debt sustainability would serve as a basis for 
setting  the  fiscal  adjustment  path  and  carrying  out  annual  fiscal  surveillance,  thus 
significantly  simplifying  the  fiscal  framework  and  increasing  transparency.  The  use  of 
nationally-financed  net  primary  expenditure,  i.e.  expenditure  net  of  discretionary  revenue 
measures and excluding interest expenditure as well as cyclical unemployment expenditure, 
as the single operational indicator for surveillance would allow for the operation of automatic 
stabilisers,  including  revenue  and  expenditure  fluctuations  outside  the  direct  control  of  the 
government.  This  would  ensure  a  higher  degree  of  macroeconomic  stabilisation.  While 
Member  States  could  use  alternative  indicators  for  national  budgetary  purposes  (e.g.,  a 
structural balance), the annual fiscal surveillance at the EU level would be conducted solely 
using this single operational indicator and thus the expenditure path. This single operational 
indicator  should  be  defined  so  as  to  ensure  debt  sustainability.  The  agreed  multiannual  net 
primary expenditure path should ensure that debt  is  put  or kept  on a downward path  at  the 
latest by the end of the adjustment period or stays at prudent levels, while ensuring that the 
budget deficit is maintained below 3% of GDP over the medium term. (9) 

3.3 Agreement on the national medium-term fiscal-structural plans 

The national medium-term fiscal-structural plan would be at the centre of the reformed 
Stability and Growth Pact and would be proposed by the Member State on the basis of 
a common EU framework. The revised common EU framework would set the requirements 

(9)  The  Commission  will  use  its  debt  sustainability  analysis  framework  given  that  it  is  a  well-established 
analytical toolkit for assessing debt sustainability risks (see Box 1).   

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that ensures that public debt is put onto a downward path, or remains at prudent levels, and 
that  the  deficit  is  maintained  below  3%  of  GDP.  The  common  EU  framework  would  also 
establish  the  criteria  for  assessing  the  reforms  and  investment  that  underpin  a  possible 
extension of the adjustment path. Member States’ medium-term plans would have to comply 
with the common revised EU framework.  

On the basis of a positive assessment by the Commission, the Council would adopt the 
medium-term  fiscal-structural  plan,  including  its  fiscal  trajectory.  The  Commission 
would assess the plan against the revised common EU framework and could only provide a 
positive  assessment  of  fiscal-structural  plans  if  debt  is  put  on  a  downward  path  or  stays  at 
prudent  levels,  and  the  budget  deficit  is  maintained  below  the  3%  of  GDP  reference  value 
over  the  medium  term.  Multilateral  discussions  in  the  relevant  committees  of  the  Council 
would  ensure  transparency  and  accountability,  with  the  Council  endorsing  the  adequacy  of 
the plan. This  model  would strengthen national  ownership. Based on a better integration of 
the requirements of the revised common EU framework in domestic policy debates, it would 
strengthen multilateral fiscal surveillance.  

3.4 Implementation of the national medium-term plan and annual monitoring 

To ensure transparency and facilitate the effective monitoring of the implementation of 
the medium-term fiscal-structural plans, Member States would submit annual progress 
reports.  In  addition  to  fiscal  reporting,  the  implementation  of  reforms  and  investments 
covered by the medium-term plans would be detailed in these reports. (10) They would be the 
basis for annual surveillance by the Commission and Council, including possible enforcement 
decisions.  

While  more  scope  would  be  given  to  Member  States  for  the  design  of  their  fiscal 
trajectories,  a  more  stringent  EU  enforcement  would  underpin  multilateral 
surveillance.  Enforcement  would  be  enhanced  compared  to  the  current  framework.  The 
excessive deficit procedure (EDP) would remain unchanged for breaches of the 3% of GDP 
deficit reference value (the so-called ‘deficit-based EDP’). It is a well-established element of 
EU  fiscal  surveillance  that  has  been  effective  in  influencing  fiscal  behaviour  and  is  well 
understood  by  policy  makers  and  the  general  public,  thanks  to  its  simplicity.  The  EDP  for 
breaches  of  the  debt  criterion  (the  so-called  ‘debt-based  EDP’)  would  be  strengthened  for 
both  activation  and  abrogation.  It  would  focus  on  departures  from  the  agreed  fiscal  path, 
which the Member State has committed itself to and endorsed by the Council. For Member 
States  with  a  substantial  public  debt  challenge, departures  from  the  agreed  path  would  by 
default  lead  to  the  opening  of  an  EDP.  For  Member  States  with  a  moderate  public  debt 
challenge, departures could lead to the opening of an EDP, if assessed as giving rise to “gross 
errors”.  The  range  of  sanctions  would  be  broadened,  for  instance  by  adding  reputational 
sanctions (see Section 4.2). 

A  new  tool  would  be  created  to  ensure  the  implementation  of  reform  and  investment 
commitments.  Under  the  proposed  reform,  Member  States  could  request  a  more  gradual 

(10) Relevant interactions with the RRPs will be taken into account during the lifetime of the RRF. 

9 

 
 
                                                 
adjustment  path  by  putting  forward  a  specific  set  of  priority  reforms  and  investments  that 
foster long-term sustainable growth and, therefore, help improve debt dynamics (see Section 
4.1).  In  case  of  non-implementation  of  those  commitments,  a  new  enforcement  tool  would 
lead to a revision of the adjustment path towards a stricter path. (11) Due to the particular risk 
of  negative  spillovers  within  a  monetary  union,  it  would  be  possible  to  apply  financial 
sanctions for euro area countries in case of non-implementation. 

National  frameworks  and  processes  would  help  achieve  the  objectives  of  the  medium-
term structural-fiscal plan. Independent fiscal institutions would play an important role in 
each  Member  State  in  assessing  the  assumptions  underlying  the  plans,  providing  an 
assessment  on  the  adequacy  of  the  plans  with  respect  to  debt  sustainability  and  country-
specific  medium-term  goals,  and  monitoring  compliance  with  the  plan.  This  would  entail 
improving the set-up and performance of independent fiscal institutions. The outcome would 
be  a  greater  debate  at  national  level  and  thus  a  higher  degree  of  political  buy-in  and 
ownership of the medium-term plan. The Commission will reconsider the mandate and role 
of the European Fiscal Board in this context. 

3.5 A more effective framework to detect and correct macroeconomic imbalances 

The  cornerstone  of  the  Commission’s  orientations  for  the  MIP  would  be  an  enhanced 
dialogue with Member States to achieve better implementation through ownership and 
commitment.  Greater  ownership  by  Member  States  would  be  achieved  by  reaching  a 
common  understanding  between  Members  States  and  the  Commission  of  the  challenges 
identified  under  the  MIP  and  the  policies  needed  to  address  them.  This  would  entail  a 
dialogue,  leading  to  a  commitment  from  Member  States  to  include  the  reforms  and 
investments  needed  to  prevent  or  correct  macroeconomic  imbalances  in  their  medium-term 
fiscal-structural plan.  

Moreover, the preventive role of the MIP should be strengthened in a macroeconomic 
environment  characterised  by  new  risks.  Both  the  first  screening  for  imbalances  in  the 
Alert Mechanism Report (AMR) and the  assessment of whether imbalances exist in  the  in-
depth  reviews  (IDRs)  would  be  made  more  forward-looking  with  a  view  to  detecting  and 
addressing emerging imbalances early on. This could entail preparing more IDRs when flow-
related  variables  show  adverse  trends,  indicating  high  risks  of  a  build-up  of  imbalances.  It 
could also lead to IDRs concluding more frequently that no imbalances exist.  

The  reform  would  reduce  the  inertia  that  has  characterised  the  MIP,  by  basing  the 
assessment  of  imbalances  more  on  the  evolution  of  risks  and  policy  implementation.  
This implies putting more weight on trend developments that are expected to be sustained and 
on  the  policies  that  have  been  implemented  to  address  macroeconomic  imbalances,  when 
assessing  whether  imbalances  have  been  corrected.  This  approach  would  lead  to  the  de-
escalation of Member States from the MIP when policies to address imbalances are in place 
and stock imbalances are continuously being corrected. 

(11) The precise modalities and legal basis of this instrument will need to be elaborated. 

10 

 
 
                                                 
Finally,  the  reform  would strive  for  an  MIP  that  has  a  clear  focus  on  macroeconomic 
issues that affect Member States and, at the same time, would give more visibility to the 
EU  and  euro  area  dimensions  of  imbalances.  This  could  highlight  vulnerabilities  that 
possibly  affect  the  EU  and  the  euro  area  as  a  whole,  and  the  respective  contribution  of  the 
various  Members  States  to  those  vulnerabilities.  This  would  help  internalise  spillovers  and 
feed into euro area recommendations. 

To  fully  exploit  the  synergies  between  the  MIP  and  the  fiscal  framework,  the  review 
foresees  several  links. Firstly,  for  Member  States  identified  with  imbalances,  the  medium-
term  fiscal-structural  plans  would  also  have  to  include  reforms  and  investments  to  correct 
those imbalances. Secondly, in case of non-implementation of the MIP-relevant reforms and 
investment underpinning a longer adjustment period, for countries with excessive imbalances, 
launching  the  EIP  would  be  considered.  Finally,  if  an  EIP  is  launched,  the  Member  State 
would  be  asked  to  present  a  revised  fiscal-structural  plan,  which  would  thus  act  as  the 
corrective action plan currently provided for in EU law. (12) 

4.  How would the revised economic governance framework work in practice? 

Building  on  the  main  reform  contours  set  out  in  the  previous  section,  this  section 
addresses  some  specific  issues  related  to  the  functioning  of  the  revised  common  EU 
fiscal  framework.  These  issues  relate  to:  setting  up  and  agreeing  on  the  national  medium-
term  fiscal-structural  plans;  assessing  compliance  of  fiscal  outcomes  with  the  endorsed 
expenditure  path;  and  identifying  and  monitoring  the  correction  of  macroeconomic 
imbalances.  This  section  also  covers  the  framework  governing  financial  assistance,  i.e.,  the 
framework for euro area Member States experiencing, or threatened with, serious difficulties 
with respect to their financial stability. 

4.1 How to set up and agree on the plan?  

Submission,  assessment,  endorsement  and  revision  of  the  national  medium-term  fiscal-
structural plan 

As  part  of  the  common  framework,  the  Commission  would  put  forward  for  Member 
States  with  a  substantial  or  moderate  public  debt  challenge,  a  reference  multiannual 
adjustment  path  in  terms  of  net  primary  expenditure  covering  at  least  4  years.  The 
reference adjustment path would be anchored on debt sustainability meaning that for Member 
States  with  substantial  and  moderate  fiscal  challenges,  it  should  ensure  that,  even  in  the 
absence of further fiscal measures, debt would remain on a plausibly downward path after the 
fiscal  adjustment  period  and  that  the  deficit  would  be  maintained  below  the  3%  of  GDP 
threshold (see Box 1 for more details). For each Member State, the multiannual expenditure 
path  that  would  put  debt  on  a  downward  trajectory  could  thus  be  translated  into  the 
corresponding level of the structural primary balance to be achieved at the end of the 4-year 

(12) For the corrective action plan, see Article 8 of Regulation (EU) No 1176/2011 of the European Parliament 
and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances (OJ L 
306 of 23.11.2011, p.25). 

11 

 
 
 
                                                 
period. The debt  sustainability analysis (13), the  reference multiannual  adjustment path,  and 
the corresponding level of the structural primary balance at the end of the 4-year adjustment 
period would be made public by the Commission. These elements would provide a common 
reference for the assessment of the plans to be proposed by Member States.  

In  putting  forward  the  reference  adjustment  path  covering  at  least  4  years,  the 
Commission would apply the following common framework:  

  For  Member  States  with  a  substantial  public  debt  challenge,  the  reference  net 
expenditure path should ensure that by the horizon of the plan (4 years), i) the 10-year 
debt trajectory at unchanged policies is on a plausibly and continuously declining path 
and ii) the deficit is maintained below the 3% of GDP reference value at unchanged 
policies over the same 10-year period. 

  For  Member  States  with  a  moderate  public  debt  challenge,  the  reference  net 
expenditure path should ensure that, i) at most  3 years after the horizon of the plan, 
the  10-year  debt  trajectory  is  on  a  plausibly  and  continuously  declining  path  at 
unchanged policies; and ii) by the horizon of the plan, the deficit is maintained below 
the 3% of GDP reference value over the same 10-year period. 

To  assess  plausibility,  the  Commission  would  use  stress  tests  and  stochastic  analysis, 
simulating  common  shocks  related  to  short  and  long-term  interest  rates,  nominal  GDP 
growth,  the  primary  budget  balance  and  nominal  exchange  rates.  This  analysis  would  be 
made  public  together  with  the  reference  net  expenditure  path.  The  Commission  would  also 
make available the methodology and underlying data. 

When  assessing  the  plan,  the  Commission  will  also  evaluate  whether  it  is  credibly  ensured 
that the deficit is maintained below 3% of GDP over a 10-year period.  

For Member States with a low public debt challenge, the deficit should be maintained below 
that  reference  value  at  unchanged  policies  over  a  10-year  period  at  most  3  years  after  the 
horizon of the plan.  

As a following step, each Member State would submit a medium-term fiscal-structural 
plan  for  assessment  by  the  Commission  and  endorsement  by  the  Council.  The  plans 
would  outline  the  medium-term  fiscal  path,  and  reform  and  investment  commitments.  The 
fiscal adjustment path would be set in terms of net primary expenditure, i.e. expenditure net 
of  discretionary  revenue  measures  and  excluding  interest  expenditure  as  well  as  cyclical 
unemployment  expenditure.  The  medium-term  fiscal  path  would  be  translated  into 
corresponding annual spending ceilings. For Member States identified with imbalances under 
the MIP, the plans would also include reforms and investments to correct those imbalances. 
The  submission  of  the  plan  would  be  preceded  by  an  in-depth  technical  dialogue  with  the 
Commission. The Commission would assess the medium-term plan in an integrated manner, 
taking account of the interactions between the fiscal trajectory, and reforms and investments. 
The assessment would take place on the basis of  a common EU assessment framework and 

(13) The debt sustainability analysis would play a role as a risk-assessment tool only in the design and not in the 
implementation of the plans. 

12 

 
 
                                                 
transparent  methodologies,  retaining  the  possibility  of  seeking  additional  information  or 
requesting a revised plan.  

The Member State could request and be granted an extension of the adjustment period 
by  a  maximum  of  3  years,  provided  it  underpins  its  plan  with  a  set  of  reforms  and 
investments  that  supports  sustainable  growth  and  debt  sustainability.  Member  States 
could  propose  a  more  gradual  adjustment  path,  provided  that  this  more  gradual  path  is 
underpinned  by  a  set  of  priority  reform  and  investment  commitments.  These  commitments 
would be assessed using a common EU  assessment  framework (see  following sub-section). 
They  would  need  to  support  debt  sustainability  and  respond  to  common  EU  priorities  and 
targets, as well as ensuring that the national fiscal-structural plan addresses all or a significant 
subset of relevant CSRs. Relevant reforms and investment in the RRPs would duly be taken 
into account during the lifetime of the RRF.  

As  a  following  step,  the  plan  would  be  adopted  by  the  Council  on  the  basis  of  a 
Commission assessment. After the Commission has assessed the medium-term plan, on the 
basis  of  a  common  assessment  framework,  the  Council  would  either  adopt  the  plan  or 
recommend  that  the  Member  State  resubmit  a  modified  plan.  In  case  there  would  be  no 
agreement  between  the  Member  State  and  the  Commission,  the  reference  multiannual  net 
expenditure path would be used by the Commission and the Council for the purpose of fiscal 
surveillance and enforcement. 

As a last step, the Member State would implement the plan, with annual monitoring by 
the  Commission  and  the  Council  under  the  European  Semester.  The  national  plan  as 
endorsed by the Council should commit the annual national budgets for a period not inferior 
to four years. The agreed fiscal trajectory could be revised before this period only in the case 
of  objective  circumstances  making  the  implementation  of  the  plan  infeasible.  Any  revision 
proposed by the Member State would need to be assessed by the Commission and adopted by 
the Council, as is the case for the plan itself.  

For Member States  found to be  in a situation of macroeconomic  imbalances  when the 
medium-term  plan  is  already  in  place,  the  plan  would  not,  as  a  rule,  be  re-opened  to 
incorporate the policy approach to address those imbalances. A policy dialogue with the 
Member State would be initiated to identify the measures needed to address the imbalances. 
These  would  be  communicated  by  the  Member  State  in  a  letter  and  would  eventually  be 
incorporated  in  the  medium-term  plan  when  updated,  on  the  basis  of  the  assessment  and 
approval process described above (Box 2).  

13 

 
 
Figure 3: Overview of the process 

Common assessment framework for the medium-term plan 

In  the  design  phase,  the  Commission  would  assess  whether  the  multiannual  fiscal 
adjustment path put forward by Member States is consistent with ensuring that debt is 
put  or  kept  on  a  downward  path  by  the  end  of  the  adjustment  period  at  the  latest  or 
remains at prudent levels and that the deficit is maintained below 3% of GDP over the 
medium  term.  The  reference  adjustment  path  would  serve  as  a  common  basis  for  the 
discussion and for the assessment of the plans by the Commission. The reference adjustment 
path should also ensure that the deficit is maintained below the 3% of GDP reference value 
over  the  medium  term.  For  Member  States  that  are  already  in  EDP  when  the  plan  is 
submitted, the Commission would assess whether the plan is consistent with relevant Council 
recommendations and decisions.  

is  underpinned  by  appropriate  and  timebound  reform  and 

If a Member State has requested an extension of the adjustment period by a maximum 
of  3  years,  such  a  request  would  be  assessed  positively  in  case  the  longer  adjustment 
path 
investment 
commitments.  Member  States  would  be  expected  to  provide  in-depth  and  transparent 
documentation, providing quantitative analysis of the short-term  costs – if any – and of the 
medium-term  budgetary  and  potential  growth  impact  of  the  reform  and  investment 
commitments.  When  assessing  such  a  request,  the  Commission  would  use  the  following 
criteria  to  assess  the  set  of  reform  and  investment  commitments  put  forward  by  Member 
States. They should: 

  be growth enhancing and support fiscal sustainability. 

  address  common  EU  priorities,  including  the  National  Energy  and  Climate  Plans 
(aligned  with  the  targets  of  the  EU  Climate  Law),  the  National  Digital  Decade 
Roadmaps, (14)  and  the  implementation  of  the  European  Pillar  of  Social  Rights,  and 
ensure  that  the  fiscal-structural  plan  addresses  all  or  a  significant  subset  of  relevant 
CSRs, including, where applicable, recommendations issued under the MIP.  

(14)  Submitted,  in  accordance  with  Article  7  of  the  Decision  of  the  European  Parliament  and  the  Council 
establishing  the  Digital  Decade  Policy  Programme  2030,  nine  months  after  the  date  of  its  entry  into  force 
(expected in January 2023). 

14 

 
 
 
 
                                                 
  be sufficiently detailed, frontloaded, timebound and verifiable. 

  ensure that country-specific investment priorities can be addressed without leading to 

investment cuts elsewhere over the planning horizon.   

On  the  basis  of  a  positive  Commission  assessment,  the  Council  would  adopt  the  extended 
adjustment path and the reform and investment commitments underpinning this path.  

In  practice,  the  following  technical  specifications  would  be  important  for  the 
formulation  of  the  Member  State’s  medium-term  plan  and  the  Commission’s 
assessment of it:  

  The  plan  would  set  out  assumptions  and  projections  of  the  trajectory  of  relevant 
macro-fiscal  variables.  This  would  cover  the  macroeconomic  and  fiscal  path  for  the 
adjustment period covered by the plan and the subsequent no-policy-change extension 
of  the  projections  for  the  following  10  years.  The  debt  projections  at  unchanged 
policy  to  be  included  in  the  plan  should  be  consistent  with  the  comparable 
Commission projections (see Box 1 for more details). 

  The plan of a Member State that requests a longer adjustment period would need to 
include in-depth and transparent documentation, providing evidence of how the set of 
reform  and 
investment  commitments  support  sustainable  growth  and  fiscal 
sustainability as well as quantitative analysis of both the medium-term budgetary and 
potential growth impact of the set of reforms and investment underpinning the longer 
adjustment period.  

  The plan would include the projected expenditure financed by RRF  grants, cohesion 
policy funds and other EU transfers. Other data and reporting requirements, both for 
the medium-term plan itself and the annual progress report, would need to be further 
developed, starting from the current  requirements for  the  Stability and Convergence 
Programmes and National Reform Programmes, but with a longer horizon. 

  The agreed multiannual net primary expenditure path would be translated into annual 
expenditure  ceilings  over  the  adjustment  period  to  be  respected  in  relation  to 
nationally-financed expenditure, while the plan  would  include projected  expenditure 
financed by RRF, cohesion policy  funds  and other EU transfers.  The path  would  be 
set in a way to ensure that a significant part of consolidation needs are met within the 
adjustment  period  and  not  left  to  future  governments.  Annual  and  in-year  fiscal 
surveillance  would  monitor  expenditure  developments  in  order  to  avoid  that  small 
annual slippages cumulatively lead to large deviations from the path. 

4.2 How to assess compliance of fiscal-structural outcomes? 

Principles for assessing compliance 

The  implementation  of  the  medium-term  fiscal-structural  plans  would  be  monitored 
against  the  respect  of  the  agreed  multiannual  net  primary  expenditure  path  endorsed 
by  the  Council.  While  monitoring  and  enforcement  would  continue  to  be  based  on  the 
annual and in-year surveillance cycle, with a particular role for  annual  reports, the focus of 
surveillance  would  be  to  ensure  adherence  to  the  medium-term  plan.  Nationally-financed 

15 

 
 
expenditure would have to stay within the agreed multiannual net primary expenditure path. 
Given that the use of net primary expenditure as single operational indicator for surveillance 
would  allow  for  the  operation  of  automatic  stabilisers,  no  deviation  from  the  path  due  to 
cyclical  conditions  would  be  justified  (as  this  would  give  rise  to  the  risk  of  being  applied 
asymmetrically  in  bad  times  and  thus  undermine  adjustment  and  debt  sustainability). 
Likewise,  while  the  Member  States  would  remain  free  to  undertake  additional  reforms  or 
investments,  new  policy  initiatives  would  not  imply  a  reopening  of  the  agreed  multiannual 
net primary expenditure path.   

Robust escape clauses are needed to address exceptional situations where the endorsed 
adjustment  path  could  not  realistically  be  adhered  to.  Strict  adherence  to  the  agreed 
multiannual  net  primary  expenditure  path  would  allow  fiscal  policy  to  be  countercyclical, 
building fiscal  buffers  in good times  and  allowing for the necessary policy  response in  bad 
times.  (15)  However,  for  major  shocks  to  the  euro  area  or  EU  as  a  whole,  a  general  escape 
clause  would  be  maintained  to  deal  with  a  severe  economic  downturn  allowing  for  a 
temporary  deviation  from  the  fiscal  path.  In  addition,  an  exceptional  circumstances  clause 
would  allow  for  temporary  deviations  from  the  medium-term  fiscal  path  in  the  case  of 
exceptional circumstances outside the control of the government with a major impact on the 
public finances of an individual Member State. This would require that the overall size of the 
shock exceeds a ‘normal’ range (e.g., costs of natural disasters should be anticipated within 
bandwidths).  The  triggering  and  extension  of  general  and  country-specific  clauses  would 
require the consent of the Council.   

To  increase  ownership  and  transparency  at  the  national  level,  independent  fiscal 
institutions could play a role in the monitoring of compliance with the national medium-
term  fiscal-structural  plans  in  support  of  the  national  governments.  Independent  fiscal 
institutions  could  provide  an  ex-ante  assessment  of  adequacy  of  the  plans  and  their 
underlying forecasts, which would help national government in the design phase. This would 
increase the ownership of the plans at the national level and strengthen transparency before 
endorsement  of  the  plan  at  the  EU  level.  Moreover,  independent  fiscal  institutions  could 
strengthen enforcement at the national level by being responsible for providing an assessment 
of  ex-post  compliance  of  budgetary  outturns  with  the  agreed  multiannual  net  primary 
expenditure  path  and,  when  applicable,  an  assessment  of  the  validity  of  explanations 
regarding  deviations  from  the  path.  The  Commission  and  the  Council,  in  charge  of  EU 
surveillance,  could  take  into  account  the  assessment  of  independent  fiscal  institutions  but 
would necessarily retain the power to propose and adopt the final decision. 

Enforcement of compliance with the medium-term fiscal path and the opening of EDPs 

Stronger  ex-post  enforcement  would  be  the  necessary  counterpart  of  a  risk-based 
surveillance  framework  that  provides  more  leeway  to  Member  States  to  set  their 

(15) The complementarity between adherence to rule-based fiscal policy and the need for coordination to address 
exceptional  situations  has  been  acknowledged  in  the  eligibility  criteria  for  the  activation  of  the  ECB’s 
Transmission Protection Instrument (TPI),  as Member States’ compliance with the EU fiscal framework is one 
of the criteria to be considered by the Governing Council of the ECB when deciding whether to activate the TPI. 

16 

 
 
                                                 
adjustment  paths.  Assessment  of  compliance  and  enforcement  would  be  carried  out  on  a 
continuous  basis,  in  particular  based  on  the  annual  progress  reports  and  EDP  data 
notifications. For euro area Member States, the Commission would also assess compliance of 
the  draft  budgetary  plans  with  the  agreed  multiannual  net  primary  expenditure  path  in  the 
autumn.  There  would  no  longer  be  a  need  for  annual  fiscal  recommendations  for  Member 
States that comply with their medium-term plans. At the same time, the Commission/Council 
could issue recommendations with early warnings before the conditions for opening an EDP 
are reached, namely, if they see strong risks of breaching the 3% of GDP threshold or in case 
of deviations from the agreed multiannual net primary expenditure path that do not lead to the 
opening of an EDP. 

The  deficit-based  EDP  would  be  maintained,  while  the  debt-based  EDP  would  be 
reinforced and become a key  tool  for enforcing continued compliance with the  agreed 
multiannual net primary expenditure path. The existing rules for the opening and closing 
of  a  deficit-based  EDP  would  remain  unchanged.  The  process  for  launching  a  debt-based 
EDP under the reformed rules would be activated when a Member State with debt above 60% 
of  GDP  deviates  from  the  agreed  multiannual  net  primary  expenditure  path  set  out  in  the 
medium-term  fiscal  plan  endorsed  by  the  Council.  In  such  a  case,  the  Commission  would 
prepare  a  so-called  ‘Article  126(3)  report’  that  assesses  relevant  factors,  as  foreseen  in  the 
Treaty.  For  a  Member  State  with  a  substantial  public  debt  challenge,  a  deviation  from  the 
agreed path would result by default in the opening of an EDP. The path under the EDP would 
in  principle  be  the  one  originally  endorsed  by  the  Council.  In  case  this  original  path  is  no 
longer feasible, due to objective circumstances, the Commission could propose to the Council 
an  amended  path  under  the  EDP.  Also,  in  case  of  non-implementation  of  the  reforms  and 
investment underpinning a more gradual adjustment path, a new enforcement tool would lead 
to a revision of the adjustment path in a more restrictive sense. The Commission would use 
notional  control  accounts  for  each  Member  State  to  keep  track  cumulative  deviations  from 
the  agreed  multiannual  net  primary  expenditure  path  over  time.  This  would  strengthen  the 
medium-term  memory  of  the  system  and  avoid  that  small  deviations  eventually  add  up  to 
large deviations. 

Enforcement mechanisms would be reinforced:  

  The  effective  use  of  financial  sanctions  would  be  de-constrained  by  lowering  their 

amounts.  

  Reputational sanctions would be enhanced. For example, Ministers of Member States 
in EDP could also be required to present in the European Parliament the measures to 
comply with the EDP recommendations.  

  Macroeconomic conditionality exists for structural funds and for the RRF and would 
be  applied  in  a  similar  spirit.  EU  financing  could  also  be  suspended  when  Member 
States have not taken effective action to correct their excessive deficit.  

Clear  conditions  would  need  to  be  fulfilled  for  abrogation  of  EDPs.  Abrogation  would 
require the deficit to remain credibly below 3% of GDP (in line with current provisions) and, 
for  debt-based  EDPs,  that  the  Member  State  demonstrates  durable  compliance  with  the 

17 

 
 
agreed  multiannual  net  primary  expenditure  path  for  3  years,  ensuring  that  debt  is  credibly 
put on a downward trajectory at the end of the adjustment period. 

Enforcement of compliance with reform and investment commitments  

Compliance  with  the  endorsed  reform  and  investment  commitments  that  underpin  a 
more gradual fiscal path  would be monitored annually in the context of the European 
Semester.  To  ensure  proper  monitoring,  the  national  medium-term  plan  should  include 
sufficient  detail  as  well  as  a  timeline  for  the  implementation  of  reform  and  investment 
commitments.  Member  States  would  report  on  progress  with  the  implementation  of  these 
commitments in their annual progress reports together with a report on the policy action taken 
to address CSRs. 

A  new  tool  would  be  created  to  enforce  the  reform  and  investment  commitments 
underpinning  a  more  gradual  adjustment  path.  If  a  Member  State  were  to  fail  to 
implement  its  reform  and  investment  commitments,  the  tool  would  empower  the  EU  to 
request a revised multiannual net primary expenditure path (in a more restrictive sense while 
ensuring a high quality of public finances) and (for euro area Member States) to also impose 
financial sanctions.  

4.3 How to better identify and assess the evolution of macroeconomic imbalances? 

The  cornerstone  of  the  reformed  MIP  would  be  the  joint  determination  of  a  policy 
strategy to address imbalances, through enhanced dialogue and commitment. 

  Similarly  to  the  fiscal  adjustment  path,  the  policy  approach  to  prevent  and  correct 
macroeconomic  imbalances  would  be  based  on  improved  ownership,  following  a 
dialogue  with  the  Commission  on  the  basis  of  the  Commission’s  IDR  and,  where 
applicable,  CSRs.  This  would  result  in  commitments  in  the  medium-term  fiscal-
structural plan, whose implementation will be taken into account in the analysis of the 
evolution of imbalances.  

  As  under  fiscal  surveillance,  a  strengthened  monitoring  and  enforcement  process 
would be envisaged for the MIP. Therefore, the EIP would remain the tool to enforce 
policy action in Member States with excessive macroeconomic imbalances, including 
imbalances that jeopardise or risk jeopardising the proper functioning of the economic 
and  monetary  union,  when  those  Member  States  are  not  taking  appropriate  policy 
action.  

  To ensure overall consistency with the commitments taken in the medium-term fiscal-
structural  plan,  if  an  EIP  were  launched,  this  would  lead  to  the  re-opening  of  the 
fiscal-structural  plan  on the basis of  a revised plan  submitted by the  Member  State, 
which  would  act  as  the  corrective  action  plan  under  the  EIP.  Such  a  single  plan 
would allow for a more coherent and integrated macro-fiscal monitoring process. 

  To  reinforce  the  macroeconomic  focus  and  the  EU/euro  area  dimension,  the  MIP 
scoreboard would be complemented with the inclusion of values for the EU and the 
euro  area  for  all  indicators.  Systemic  challenges,  notably  related  to  climate  change, 
environment and the energy transition, will be covered in the context of the European 

18 

 
 
Semester,  and  referred  to  in  the  AMR  and  IDR  when  they  have  a  clear  link  to 
macroeconomic imbalances.  

  To allow for a more forward looking and early risk detection, a reformed MIP needs 
to  pay  more  attention  to  flow-related  variables,  throughout  the  main  stages  of  MIP 
surveillance. The AMR would put more emphasis on whether trends are projected to 
continue  and  their  expected  impact  in  the  Member  States  selected  for  an  IDR.  This 
would allow for more frequent IDRs when adverse trend developments are observed, 
even if not fully reflected in stock imbalances. The assessment of whether imbalances 
exist  would  remain  based  on  the  three  criteria  of  gravity,  evolution  and  the  policy 
response. However, the criteria of evolution and the policy response by the Member 
State  concerned  would  be  given  more  weight  in  the  assessment.  That  could  help 
reduce the perceived inertia around the classification of imbalances. 

  To  increase  the  dynamics  of  the  MIP,  the  de-escalation  of  Member  States  in  MIP 
would  be  based  on  clear  criteria.  Such  criteria  could  include,  for  instance,  that 
imbalances  have  narrowed  for  at  least  two  years  and  that  flows  support  the 
expectation  of  sufficient  further  reduction;  forecasts  should  show  continued 
improvements and the policy commitments, including those specified in the national 
fiscal-structural plan, have to be implemented. Shorter IDRs could be prepared when 
imbalances are being corrected, while fully-fledged reports would be foreseen every 
three years, as a rule, unless the Commission sees a need for such an analysis in the 
meantime. 

4.4 Focused and streamlined post-programme surveillance 

The  economic  governance  review  also  comprised  an  assessment  of  post-programme 
surveillance.  The  February  2020  Communication  considered  that  the  framework  for 
surveillance  of  Member  States  experiencing,  or  threatened  with,  serious  difficulties  with 
financial  stability  had  led  to  a  number  of  improvements  and  generally  worked  well. 
Nonetheless,  the  importance  of  retaining  adequate  national  ownership  of  programmes  was 
highlighted, as well as that issues of transparency and accountability also persist. (16) 

The flexibility of enhanced surveillance as a crisis resolution tool should be preserved. 
Enhanced surveillance has proven itself to be a flexible instrument, having been successfully 
utilised at the end of a Macroeconomic Adjustment Programme for Greece, from 2018 until 
2022.  It  allowed  for  an  effective  follow-up  of  reform  commitments,  enabling  a  subsequent 
transition 
the  value  of  enhanced 
surveillance  as  an  early  intervention  measure  remains  equally  important  for  preventing  a 
situation  in  a  euro  area  Member  State  deteriorating  to  the  point  of  a  need  for  a 
Macroeconomic Adjustment Programme.  

towards  post-programme  surveillance.  However, 

(16)  Since  that  time,  the  European  Court  of  Auditors  found  that  while  post-programme  surveillance  was  an 
appropriate  tool,  its  efficiency  was  hampered  by  unclear  objectives  and  insufficient  streamlining  and  focus  in 
implementation,  and  it  made  several  recommendations  to  the  Commission  to  consider  addressing  such 
shortcomings in the context of the economic governance review. 

19 

 
 
                                                 
Post-programme surveillance should be given clear objectives with its intensity linked to 
those  objectives.  Post-programme  surveillance  would  focus  on:  (i)  assessing  repayment 
capacity through considering the economic, fiscal and financial situation; (ii) monitoring the 
implementation  of  unfinished  reforms  that  begun  under  the  adjustment  programme;  and 
(iii) assessing  whether  corrective  measures  are  needed  in  the  context  of  concerns  for 
repayment  capacity  or  continued  market  access.  The 
intensity  of  post-programme 
surveillance would evolve with time along with the change in focus and with the assessment 
of risks. Whilst the initial years would be more intense as there is also the monitoring of the 
implementation of unfinished reforms that begun under the adjustment programme, over time 
this element would decrease as reforms are implemented. As such, in “normal” times, post-
programme  surveillance  would  focus  on  assessing  repayment  capacity  through  considering 
the economic, fiscal and financial situation and could be streamlined where repayment risks 
are assessed to be low, also through a better integration with other surveillance tools. Should 
the  economic,  fiscal  or  financial  situation  deteriorate,  such  an  approach  would  allow  for  a 
renewed increase in the intensity of post-programme surveillance that would take up the work 
of assessing whether corrective measures are needed. 

5.  Conclusions 

This Communication sets out the main features of a reformed EU economic governance 
framework.  The  main  elements  outlined  in  this  Communication  respond  to  the  need  for  a 
reformed framework that is fit for the challenges of this decade. The necessary financing for 
the  just  transition  to  a  digital  and  green,  climate-neutral  economy  and  higher  debt-to-GDP 
ratios  call  for  fiscal  rules  that  allow  for  strategic  investment,  while  safeguarding  fiscal 
sustainability.   

Swift  agreement  on  revising  the  EU  fiscal  rules  and  other  elements  of  the  economic 
governance  framework  is  a  pressing  priority  at  the  current  critical  juncture  for  the 
European  economy.  Member  States  and  the  Commission  should  reach  a  consensus  on 
reform of the economic governance framework ahead of Member States’ budgetary processes 
for 2024. In light of the mounting challenges that the EU is facing, there is a need for strong 
budgetary and structural policy coordination and effective economic and fiscal surveillance. 
Sound public finances that can respond in a coordinated manner to the prevailing challenges 
and to the achievement of common EU priorities have become increasingly important in the 
face  of  recent  and  current  crises.  This  would  also  reassure  financial  markets  on  the 
institutional  robustness  of  the  euro  area,  which  rests  on  sustainable  public  finances  and  on 
preventing and addressing macroeconomic imbalances in all Member States. The operation of 
credible  fiscal  rules  and  surveillance  of  risks  to  macro-financial  stability  will  also  help  the 
ECB  attain  its  goals,  particularly  as  it  faces  the  challenge  of  delivering  on  its  mandate  to 
maintain price stability while avoiding financial fragmentation in the euro area.  

A  thorough  reform  of  the  EU  economic  governance  framework  would  require 
legislative  change.  Amending  the  underlying  legislation  would  allow  for  clarification  and 
simplification  of  the  framework.  It  would  provide  a  high  degree  of  legal  certainty  for  the 

20 

 
 
 
operation of a reformed framework, with the necessary involvement of the Council and the 
European  Parliament.  Agreeing  on  necessary  legislative  change  would  follow  the  ordinary 
legislative procedure, involving on most aspects the Council and the European Parliament on 
an equal footing.  

Most of the objectives of the proposed reform to the MIP could be pursued within the 
existing legal provisions. In particular, pursuing a more forward-looking approach to better 
assess  risks  and  the  adjustment  of  the  criteria  followed  to  decide  on  the  existence  and 
classification of imbalances and their  correction  could  be  accommodated within the current 
legal framework.  

On  the  basis  of  these  orientations  and  the  ensuing  discussion,  the  Commission  will 
consider tabling legislative proposals. It will again provide guidance for fiscal policy for 
the period ahead in the first quarter of 2023. This guidance will facilitate the coordination 
of  fiscal  policies  and  the  preparation  of  Member  States’  stability  and  convergence 
programmes  for  2024  and  beyond.  The  guidance  will  reflect  the  economic  situation,  the 
specific  situation  of  each  Member  State  and 
in  this 
Communication  provided  a  sufficient  degree  of  convergence  across  Member  States  is 
achieved by that time. In spring 2023, guidance will materialise through CSRs. 

the  orientations 

laid  down 

21 

 
 
 
 
 
Box 1: The debt sustainability criterion 

To  determine the reference  adjustment  path  ensuring  the  convergence of  debt  to  prudent levels,  the 
Commission  would  use  a  well-established  and  transparent  methodology,  drawing  from  its  debt 
sustainability  analysis  (DSA)  framework,  and  agreed  with  Member  States.  For  Member  States  with  a 
substantial public debt challenge, the Commission would put forward a reference adjustment path ensuring 
that in each Member State, after fully implementing  the plan, debt would remain on a plausibly downward 
path after the adjustment period, on the basis of a 10-year trajectory and assuming unchanged policies after 
the  adjustment  period.  This  reference  adjustment  path  is  associated  with  a  level  of  the  structural  primary 
balance  at  the  end  of  the  adjustment  period  that  ensures  that  debt  is  on  a  plausibly  downward  path.  For 
Member States with a moderate debt challenge, the reference path would be less demanding. 

The  Commission’s  DSA  framework  is  a  well-established  analytical  toolkit  for  assessing  debt 
sustainability  risks.  It  includes  a  baseline  projection  for  the  debt  trajectory  over  10  years,  along  with 
additional deterministic debt projections underpinned by alternative assumptions for fiscal, macroeconomic 
and financial variables, as well as stochastic analysis capturing broad macroeconomic uncertainty. The DSA 
baseline rests on a no-fiscal policy change assumption where no additional fiscal measures are incorporated 
beyond the horizon of the plan, and primary spending is only affected by changes in ageing-related costs as 
projected in the latest joint Commission-Council Ageing Report. Real GDP growth is in line with the latest 
Commission medium-term projections using the EU commonly agreed methodology, taking into account the 
impact of investment under the NextGenerationEU package. Inflation and interest rates converge to market-
based expectations. For the deterministic projections, the risk assessment relies on the projected debt level, 
the  debt  trajectory  and  the  plausibility  of  the  targeted  fiscal  position  (and  room  for  corrective  action  if 
needed).  For  the  stochastic  projections,  the  risk  assessment  is  based  on  the  probability  that  debt  will  not 
stabilise  over  five  years  and  on  the  size  of  macroeconomic  uncertainty. (1)  On  this  basis,  this  analysis 
classifies countries into three overall risk categories: low, medium and high. A high risk category indicates 
substantial  public  debt  (sustainability)  challenges  that  need  to  be  addressed  by  fiscal  and  macroeconomic 
policies. 

An adjustment path consistent with the convergence of debt to prudent levels should ensure that for a 
Member State with a substantial or moderate public debt challenge, debt would be put on a plausibly 
downward path on the basis of a 10-year trajectory beyond the plan’s horizon. For Member States with 
a substantial public debt challenge, this would be the case if the 10–year debt trajectory beyond the plan’s 
horizon were on a plausibly and continuously declining path. For Member States with a moderate public debt 
challenge, this would be the case if, at most 3 years after the horizon of the plan, the 10-year debt trajectory 
were on a plausibly and continuously declining path. These conditions should be met at unchanged policies 
after  implementing  the  medium-term  plan,  i.e.  in  the  absence  of  new  fiscal  policy  measures  beyond  the 
adjustment period, and, to account for realistic risks, under a standard set of adverse scenarios such as those 
considered in the Commission’s DSA framework. Finally, there should be a sufficiently low probability that 
debt increases in the five years following the plan’s horizon. 

Assumptions  and  projections  of  the  trajectory  of relevant macro-fiscal  variables would  be  set  out  in 
the  plan  for  a  period  of  10  years  after  the  period  covered  by  the  plan.  This  would  cover  the 
macroeconomic  and  fiscal  path  for  the  period  covered  by  the  plan  and  the  subsequent  no-policy-change 
extension of the projections for the following 10 years (see Table 1). 

Table 1: Time horizon of the projections and of the assessment criterion 

Time horizon 
Projections  and 
assessment 
criterion 

T 
Last outturn year 

T+[X] 
Plans’ projections 
(including binding 
period)  

Base year to run the 
DSA 

… 
Plans’ projections 
based on a no-fiscal 
policy change 
extension  

T+[X]+10 
DSA end date 

Note: The adjustment period of  4 years could be exceptionally extended up to 7 years in order to facilitate  major investments and 
reforms.  
(1) Further details on the methodology can be found in the 2021 Fiscal Sustainability Report. 

22 

 
 
 
 
Box 2: The policy response to new imbalances under the MIP 

Agreement of the national medium-term plan and the MIP  

Immediately  following  the  identification  of  imbalances  in  an  IDR  (and  possible  publication  of 
MIP-specific CSRs to serve as guidance), the reformed MIP would envisage  a dialogue with the 
Member  State.  This  would  take  place  over  the  summer  and  autumn.  The  aim  would  be  to  build  a 
common understanding of the challenges and to identify the reforms and investments that would lead to 
the correction of imbalances (Figure 1).  

On the basis of this dialogue, the Commission and the Member State would jointly agree a policy 
approach  to  correct  imbalances,  in  line  with  the  RRP  approach.  The  agreed  set  of  reforms  and 
investments  would  be  incorporated  in  the  national  medium-term  plan  when  the  plan  is  agreed.  The 
national medium-term plan could also include cross references to measures already included in the RRP 
as  well  as  relevant  investments  financed  by  Cohesion  Policy  programmes,  to  give  a  comprehensive 
overview of the policy commitments of the Member States. 

Figure 1: Timeline for the policy response to a finding of imbalance with new national medium-
term plan  

A new source of imbalance is found during the life of the national medium-term plan 

If  a  new  source  of  imbalances  is  found  while  the  national  medium-term  plan  is  already  in  place, 
following the identification of these vulnerabilities in an IDR under the European Semester cycle, the 
medium-term plan in place will, as a rule, not be reopened but a policy dialogue with Member States 
would  be  initiated  to  reach  a  common  understanding  of  imbalances  and  of  the  measures  needed  to 
address them. The agreed policy approach to address imbalances, including reforms and investments, 
will  be communicated  by  the  Member  State through  a  letter  to the  Commission  and the  Council and 
discussed  in  the  committees.  The  agreed  policy  agenda  may  subsequently  be  included:  (i)  in  a  new 
national medium-term plan (if not resolved in the lifetime of the original plan); OR (ii) in an amended 
medium-term  plan  (if  the  previous  plan  is  no  longer  feasible).    If  the  imbalances  are  excessive  and 
require an immediate change of fiscal policy and new crucial reforms, the EIP would be launched, the 
plan re-opened and act as a corrective action plan. 

23 

Spring t-2: Identification of imbalances in IDRs•MIP-specific CSRs: recommendations to address the related to vulnerabilities identified in IDR can be proposed to frame discussionsSummer and Autumn t-2: Dialogue with MSs•Development of policy responses to imbalances•Approach based on RRP lessons: working with MSsenhances relevance and ownershipJan –April t-1: Policy commitments included in medium-term plan and plan submitted•Joint preparation of plan, to ensure prior agreement with MS on content•MS subsequently submits plan•Assessment through committees•If a plan in place: as a rule,  do not reopen•But if imbalances excessive and require change in fiscal and/or new crucial reforms: EIP.Spring t: IDRs•IDR reviews evolution of imbalances. •MIP specific CSR focused on implementation of plans or asks additional aspects•Assessment and follow up in the context of the European Semester. •Discussion in committees 
 
 
 
 
Annex 1: Timing of EU surveillance 

Note:  The  timetables  for  submission  of  new  plans  (after  the  initial  start  of  the  revised  SGP)  may  deviate 
depending on the Member States’ political cycles. 
*  In Autumn T, there will be an ex ante assessment of the Draft Budgetary Plan (DBP) for year T+1.  
** In Spring T, there cannot yet be a full ex post assessment of fiscal outcomes as year T marks the start of the 
implementation of the plan. 

24 

 
 
 
 
 
Annex 2 – Outcome of the public debate (17) 

Following  the  relaunch  of  the  economic  governance  review  in  October  2021, (18) 
stakeholders  contributed  to  the  debate  through  an  online  public  survey.  Stakeholders 
responded  to  eleven  open  questions  on  different  aspects  of  EU  economic  governance.  The 
survey received 225 valid contributions from respondents in 25 countries. The Commission 
summarised its main takeaways in a report published in March 2022. (19) The characteristics 
of the survey participants did not mirror those of the EU population and, as such, the replies 
cannot  be  interpreted  as  representative  of  the  prevailing  view  of  all  EU  citizens  and 
stakeholders.  However,  the  variety  and  depth  of  the  contributions  provide  valuable  input. 
Many  respondents  expressed the  view that  the  governance framework  should become more 
growth-friendly, more mindful of social issues, and that it should support the policy priorities 
for the green and digital transitions. Most respondents acknowledged the need for the fiscal 
framework to support the resilience of EU economies to shocks and that debt sustainability 
should remain a central  objective of the EU fiscal  rules, while the adjustment path  towards 
lower government debt should be realistic and gradual. Many respondents stressed the need 
to  incentivise  investment  as  a  necessary  feature  of  the  economic  governance  framework. 
Green  investment  was  identified  as  deserving  special  attention  due  to  global  climate  and 
environmental  challenges,  while  a  few  respondents  cautioned  against  giving  preferential 
treatment  to  investment  expenditure  in  fiscal  surveillance.  Participants  also  called  for 
simplification, transparency  and stronger national  ownership. Many  respondents  viewed the 
RRF  as  a  good  inspiration  for  the  governance  framework,  in  terms  of  fostering  national 
ownership  and  promoting  reforms  through  positive  incentives.  Several  respondents  support 
stronger  compliance  and  enforcement  of  the  surveillance  framework.  Several  respondents 
called  for  further  synergies  between  the  SGP  and  the  MIP,  as  it  could  help  improve  the 
growth-friendliness  of  public  finances  and  the  simultaneous  achievement  of  various  policy 
objectives.   

Several  contributors  to  the  public  debate  have  called  for  a  permanent  central  fiscal 
capacity. (20)  Such  a  tool  could  address  longer-term  challenges  through  the  provision  of 
common  public  goods  that  would  boost  sustainable  growth  and  help  stem  inflation  and/or 
improve  macroeconomic  stabilisation.  The  Five  Presidents  report  in  2015  identified  sound 

(17)  Other  EU  institutions  have  made  a  number  of  useful  contributions  to  the  public  debate  on  the  economic 
governance  framework.  For  example,  in  response  to  a  dedicated  request  from  former  Commission  President 
Jean-Claude Juncker, the European Fiscal Board in September 2019 published its ‘Assessment of the EU fiscal 
rules with a focus on the six- and two-pack legislation’. On 8 July 2021, the European Parliament (with MEP 
Margarida Marques acting as rapporteur) adopted a Resolution ‘on the review of the macroeconomic legislative 
framework  for a better impact on Europe’s real economy and improved transparency of decision-making and 
democratic accountability’. Both the European Economic and Social Committee and the European Committee 
of the Regions have published opinions on the economic governance review, in December 2020 and February 
2021 respectively. 
(18) European Commission (2021), ‘The EU economy after COVID-19: implications for economic governance’, 
COM(2021) 662 final of 19 October 2021. 
(19) European  Commission  (2022),  ‘Economic  Governance  Review  –  Summary  report  of  the  public 
consultation’, SWD(2022) 104 final of 28 March 2022. 
(20) European Fiscal Board 2020;  ECB Occasional Paper 273, September 2021; OECD Economic surveys Euro-
area, September 2021; IMF Departmental Paper No 2022/014, September 2022. 

25 

 
 
                                                 
guiding principles  for its design, notably  that  such a capacity should not  lead to  permanent 
transfers between countries, it should maintain the incentives for sound fiscal policy-making 
at  the  national  level,  and  it  should  be  developed  within  the  framework  of  the  European 
Union.  As  suggested  in  the  public  debate,  a  central  fiscal  capacity  for  the  EU  or  euro  area 
could take into account the examples of recent years’ successes (i.e., the European Fund for 
Strategic Investments, SURE, and the RRF).  

The  debate  also  included  a  series  of  thematic  discussions  with  Member  States  at  the 
Economic  and  Financial  Committee  and  the  Economic  Policy  Committee.  These 
discussions focused on the sustainability of public debt, the need to promote investment, the 
pro-cyclicality  of  fiscal  policy,  enforcement  and  governance  of  the  EU  fiscal  rules,  the 
interaction between EU and national fiscal frameworks, the relevance and effectiveness of the 
MIP and the need to maintain it focused on macroeconomic challenges, and the lessons to be 
learned  from  the  RRF.  The  potential  long-term  implications  of  the  Russian  invasion  of 
Ukraine  for  resilience  and  security  were  also  discussed.  The  euro  area  dimension  of  the 
economic  governance,  and  the  MIP  in  particular,  was  discussed  at  the  Eurogroup  Working 
Group.  

Discussions  have  centred  on  identifying  key  issues  to  be  addressed  in  a  reformed 
economic governance framework. Some elements of consensus have emerged, in particular 
in the discussions with Member States. Some of these, in particular those regarding the fiscal 
framework,  have  already  been  outlined  in  the  Commission  Communication  of  2  March 
2022. (21) They are as follows: 

•  Ensuring  public  debt  sustainability  and  promoting  sustainable  growth  through 
investment and reforms are two sides of the same coin and key to the success of the 
EU fiscal framework.  

•  More  attention  to  the  medium  term  in  the  EU  fiscal  surveillance  appears  as  a 

promising avenue.  

• 

Insights can be drawn from the design, governance and operation of the RRF. 

•  Simplification,  stronger  national  ownership  and  better  enforcement  are  key 

objectives. 

Discussions  have  also  highlighted  key  issues  that  could  be  addressed  in  a  reformed 
economic governance framework regarding the MIP: 

• 

Increasing the MIP’s effectiveness should be a key priority. This can be achieved 
by  increasing  the  focus  on  its  core  objective,  which  is  to  prevent  risks  to  macro-
financial stability from turning into imbalances and to foster policy action, taking into 
account the functioning of the EU and the euro area as a whole. A clearer focus would 
facilitate  communication  regarding  the  identification  of  macroeconomic  imbalances 
and the necessary policy response, and enhance the visibility of the procedure. 

(21) European Commission (2022), ‘Fiscal policy guidance for 2023’, COM(2022) 85 final of 2 March 2022. 

26 

 
 
                                                 
•  Recent  crises  and  the  heightened  level  of  uncertainty  highlight  the  need  to 
enhance the ability of the MIP to identify emerging risks. This could be achieved 
through  the  use  of  a  more  forward-looking  approach  that  is  able  to  trigger  policy 
response early on. 

•  Ensuring ownership is crucial to increase the traction  of the MIP. This calls for 
an enhanced dialogue with Member States, which may build on the experience of the 
RRF. Making the EIP more operational would also support increased traction.  

In  parallel,  the  Conference  on  the  Future  of  Europe  also  reflected  on  how  to  build  a 
stronger EU economy, social justice and jobs. (22) It proposed that the EU strengthens its 
competitiveness  and  resilience  and  promotes  future-oriented  investments  focused  on  the 
green  and  digital  transitions  with  a  strong  social  and  gender  dimension,  taking  also  into 
account the examples of the Next Generation EU and the SURE instrument. According to the 
Conference,  the  EU  needs  to  take  into  account  the  social  and  economic  impact  of  the  war 
against Ukraine and the link between the EU economic governance with the new geopolitical 
context. 

(22)  European  Commission  (2022),  ‘Conference  on  the  future  of  Europe’,  COM(2022)  404  final  of  17  June 
2022. 

27