COMMUNICATION FROM THE COMMISSION TO THE COUNCIL Fiscal policy guidance for 2024
Date: 2023-03-08
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: budget deficit, economic consequence, economic forecasting, economic governance (EU), economic policy, economic situation, energy crisis, fiscal policy, stability pact, stability programme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 8.3.2023  COM(2023) 141 final  COMMUNICATION FROM THE COMMISSION TO THE COUNCIL Fiscal policy guidance for 2024  
 
 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 

Fiscal policy guidance for 2024 

1.  Introduction 

The European economy entered 2023 on a healthier footing than projected in autumn. 
The European gas benchmark price has fallen below levels that prevailed before the Russian 
invasion of Ukraine, helped by demand restraint and the continued diversification of supply. 
Labour markets have also continued to perform strongly, with the unemployment rate in the 
EU remaining at an all-time low in December 2022. Three months of falling inflation rates 
suggest  that  the  peak  is  now  behind  us,  while  core  inflationary  pressures  remain  high  and 
risks are to the upside. Economic sentiment has also continued to improve, indicating that EU 
economic activity may avoid a contraction in the first quarter of 2023 and narrowly avoid the 
recession that was previously expected.  

At the same time, the European economy continues to face headwinds and high levels of 
uncertainty.  With  inflationary  pressures  persisting,  monetary  policy  tightening  is  set  to 
continue,  dampening  demand.  Growth  is  thus  expected  to  remain  subdued  in  2023,  though 
the  Commission  2023  winter  forecast  has  lifted  the  growth  outlook  for  this  year.  In  the 
context of the current geopolitical landscape, uncertainty remains high. 

In  2023-24,  fiscal  policies  should  aim  at  ensuring  medium-term  debt  sustainability  as 
well as raising potential growth in a sustainable manner. Fiscal measures have mitigated 
the  impact  of  the  energy  crisis  on  businesses  and  consumers.  However,  broad-based  fiscal 
stimulus  to  aggregate  demand  is  unwarranted  and  costly  support  measures  cannot  continue 
indefinitely:  the  focus  must  now  be  on  strengthening  fiscal  sustainability  through  gradual 
fiscal  consolidation  and,  where  still  needed,  on  targeted  fiscal  measures  that  support 
vulnerable  households  and  firms  affected  by  high  energy  prices.  Prudent  fiscal  policy  will 
help to ensure the stability of the European economy and facilitate the effective transmission 
of monetary policy in a high inflation environment, while raising potential growth.  

This  Communication  sets  out  guidance  for  Member  States  on  the  conduct  and 
coordination  of  fiscal  policy,  in  light  of  the  challenges  facing  public  finances  and  the 
economy  and  the  discussions  on  the  future  economic  governance  framework.  The 
Commission  Communication  of  9  November  2022  on  orientations  for  a  reform  of  the  EU 
the 
economic  governance  framework  (hereafter  “reform  orientations”)  stated 
Commission will provide Member States with fiscal guidance for 2024 in the first quarter of 
2023. (1)  The  EU  fiscal  framework  is  currently  in  a  transitionary  phase.  The  economic 
governance  review  was  initially  launched  in  February  2020,  recognising  areas  of  the 
framework that needed improvement. A return to the sole implementation of the rules of the 
existing legal framework would also fail to acknowledge the new post-pandemic reality. As a 

that 

(1)  European  Commission  ‘Communication  on  orientations  for  a  reform  of  the  EU  economic  governance 
framework,’ COM(2022) 583 final of 9 November 2022. 

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new legal framework, based on the outcome of the ongoing economic governance review, is 
not yet in place, the current legal framework continues to apply. At the same time, to allow 
for  an  effective  bridge  to  the  operation  of  the  future  set  of  EU  fiscal  rules  and  to  take  into 
account the current challenges, some elements of the Commission’s reform orientations could 
be incorporated into the fiscal surveillance cycle that will start in spring 2023. Therefore, as 
indicated in the Commission Communication of 9 November 2022, the guidance reflects the 
economic situation and the specific situation of each Member State as well as those elements 
of the Commission reform orientations that are consistent with the spirit of the existing legal 
framework.  It  will  be  crucial  to  reach  agreement  on  the  future  economic  governance 
framework as quickly as possible to have a set of EU fiscal rules that fully takes into account 
the new post-pandemic reality.   

The  guidance  seeks  to  inform  Member  States’  preparations  of  their  Stability  and 
Convergence  Programmes.  It  will  be  followed  in  spring  with  fiscal  country-specific 
recommendations (CSRs) for 2024 that will also guide the preparation and assessment of the 
Draft Budgetary Plans in autumn.  

The  remainder  of  the  Communication  consists  of  six  sections.  Section  2  outlines  the 
economic  outlook  for  this  year  and  next,  based  on  the  Commission  2023  winter  forecast. 
Section  3  provides  a  state  of  play  on  the  ongoing  economic  governance  review.  Section  4 
discusses the fiscal policy response to the energy crisis. Section 5 discusses the implications 
for fiscal guidance in 2024 of deactivation of the general escape clause. Section 6 discusses 
the  opening  of  Excessive  Deficit  Procedures  (EDPs).  Finally,  Section  7  outlines  the  next 
steps. 

2.  Economic situation and outlook 

The  Commission  2023  winter  forecast  lifted  the  growth  outlook  for  2023.  The  energy 
crisis  and  resulting  terms  of  trade  loss  have  impacted  production  and  eroded  households’ 
purchasing power, weighing on economic confidence. However,  households and firms have 
shown remarkable resilience and inflation now appears to have peaked, which should allow 
growth  to  pick  up  in  spring.  Labour  markets  are  expected  to  remain  strong  despite  the 
challenging  environment,  although  inflation  continues  to  outpace  wage  growth,  weakening 
consumption.  Expenditure  under  the  Recovery  and  Resilience  Facility  (RRF)  and  the 
implementation  of  Cohesion  Policy  programmes  are  set  to  continue  increasing,  supporting 
public investment. After a broad stagnation in the last quarter of 2022, rather than falling as 
expected, real GDP growth is forecast at 0.8% in the EU in 2023, alongside inflation of 6.4%. 
In 2024, EU GDP growth is expected to reach 1.6% and inflation would moderate to 2.8%. 
The  combination  of  slow  economic  growth  and  high  inflation  in  the  short  term  calls  for 
strong  EU  and  euro  area  fiscal  policy  coordination,  based  on  clear  guidance  that  can  be 
monitored in a transparent manner. This will also help ensure a consistent policy mix. 

Uncertainty surrounding the European economic outlook remains high, although risks 
to  growth  are  broadly  balanced.  Risks  to  the  growth  outlook  are  no  longer  tilted  to  the 
downside. Domestic demand could surprise positively, particularly if recent falls in wholesale 
gas prices  are passed on more strongly to  consumers, and while the  threat of  gas shortages 

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remains  significant,  it  appears  less  serious  than  previously.  Nonetheless,  adjustment  to  the 
high interest  rate environment could  prove challenging and uncertainty  remains high, given 
Russia’s  ongoing  war  against  Ukraine.  Upside  risks  to  inflation  remain  largely  linked  to 
developments  in  energy  markets  –  whereby  we  must  remain  vigilant  as  regards  the  future 
evolution  of  energy  prices.  In  2024  in  particular,  upside  risks  to  inflation  prevail,  as  wage 
growth could settle at above-average rates for a sustained period. 

The medium-term challenges facing the European economy have not abated. Economic 
challenges that were evident prior to the pandemic, including the need to strengthen potential 
growth, to accelerate the twin transition in a fair way and to improve resilience, coupled with 
demographic  developments,  will  increase  the  demands  on  public  finances  in  the  medium 
term. These challenges have highlighted the importance of social cohesion and resilience, as 
targeted by the European Pillar of Social Rights. In this context, fiscal policies should aim at 
preserving  debt  sustainability  as  well  as  raising  growth  potential  in  a  sustainable  and 
inclusive manner, thus also facilitating the task of monetary policy. Maintaining a high level 
of public investment, while reducing debt-to-GDP ratios in a sustained manner, reinforces the 
need  to  prioritise  expenditure  and  build  fiscal  buffers.  Taking  a  longer  perspective,  the  last 
decade has been characterised by major shocks, notably the economic and financial crisis, the 
COVID-19 crisis, the Russian invasion of Ukraine and the ensuing energy crisis and surge in 
inflation. This uncertainty means that fiscal policy will need to remain agile going forward. 

3.  State of play of the economic governance review 

The  Commission  published  its  orientations  for  a  reform  of  the  economic  governance 
framework  in  November  2022  after  an  extensive  consultation  process.  The  reform 
orientations build on the Commission’s experience with and analysis of the implementation 
of the framework before the pandemic, as well the lessons drawn from the EU’s response to 
the  pandemic.  It  also  takes  account  of  the  outcome  of  a  public  consultation  that  was 
relaunched  in  October  2021,  involving  a  wide  range  of  stakeholders  including  Member 
States, the other EU institutions, social partners, citizens, and academia, amongst others. The 
proposed  revised  framework  seeks  to  strengthen  debt  sustainability  and  reduce  high  public 
debt ratios while promoting sustainable and inclusive growth in all Member States. The key 
objectives  of  the  proposal  are  to  improve  national  ownership,  simplify  the  framework  and 
move  towards  a  greater  medium-term  focus,  combined  with  stronger  and  more  coherent 
enforcement.  National  medium-term  fiscal-structural  plans  that  integrate  fiscal,  reform  and 
investment  objectives  are  the  cornerstone  of  the  revised  framework.  This  will  provide 
Member States with greater leeway in setting their fiscal adjustment path, within a common 
EU framework that would go hand-in-hand with stronger enforcement. 

Discussions  on  the  revised  fiscal framework  are  progressing.  The  fiscal  elements  of  the 
proposal  have  been  discussed  at  the  Economic  and  Financial  Committee,  as  well  as  at 
ministerial level at the ECOFIN Council and, for issues specifically relevant to the euro area, 
at  the  Eurogroup.  The  Commission  has  also  discussed  its  orientations  with  the  European 
Parliament, the European Economic and Social Committee, the European Committee of the 
Regions,  and  other  stakeholders.  The  exchanges  have  focused  on  various  issues,  including: 

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the  differentiation  of  fiscal  requirements  across  Member  States  based  on  the  assessment  of 
debt challenges (using the Commission debt sustainability analysis);  a stronger focus on the 
medium  to  long  term  through  Member  States  committing  to  country-specific  medium-term 
fiscal-structural  plans based on the Commission’s guidance;  the assessment  and monitoring 
of  those  plans;  the  need  to  retain  deficit-based  EDP  while  reinforcing  the  debt-based  EDP; 
the  use  of  efficient  monitoring  and  enforcement  instruments,  including  a  control  account, 
smaller  but  more  credible  financial  sanctions,  and  reputational  sanctions;  the  role  of 
independent  fiscal  institutions;  and  the  role  of  investment  and  reforms  in  extending 
adjustment paths and a new tool to enforce these commitments.  

A  convergence  of  views  is  emerging  on  several  key  issues,  while  others  remain  to  be 
clarified. There is agreement that the 3% and 60% of GDP reference values of Protocol No 
12  to  the  Treaties  should  remain  unchanged.  Views  are  converging  on  a  number  of  issues: 
that  the  proposed  medium-term  approach,  while  maintaining  annual  surveillance,  is 
appropriate  to  ensure  a  sustained  reduction  in  high  debt  ratios  and  that  medium-term  fiscal 
structural  plans  prepared  by  Member  States  would  be  the  cornerstone  of  the  revised 
framework; the need for greater incentives for investment and reforms, reflecting the lessons 
learned  from  the  impact  of  the  global  financial  crisis  on  investment  and  the  significant 
investment needs for the green and digital transitions; that more effective enforcement of the 
rules is needed, including by retaining financial sanctions but lowering their amounts, while 
enhancing their reputational  impact;  that the existing rules  for the opening  and closing of a 
deficit-based  EDP  would  remain  unchanged,  while  the  debt-based  EDP  would  need  to  be 
reinforced; respecting the key principles of ensuring national ownership and equal treatment; 
and the need for an appropriate differentiation of fiscal efforts. Further discussions are needed 
on the operationalisation of these principles.  

The Commission intends to table legislative proposals following the upcoming ECOFIN 
Council and the European Council in March 2023, which will aim at reaching agreement 
on key elements of the future economic governance framework.  

4.  Fiscal policy reaction to the energy crisis  

The  surge  of  energy  prices  prompted  Member  States  to  implement  fiscal  policy 
measures,  with  sizeable  fiscal  costs.  These  measures  mitigated  the  social  and  economic 
impact of the sudden rise in energy prices, in particular gas and electricity, on households and 
firms. According to the Commission 2022 autumn forecast, the net cost of these measures in 
2022 amounted to 1.2% of annual EU GDP. Based on the available information in autumn, 
the  net  cost  of  energy  measures  was  projected  to  decrease  to  0.9%  of  EU  GDP  in  2023. 
However, this requires the planned phasing out of most support measures to be undertaken by 
Member States. In some cases, the phasing out is taking place, while in other cases Member 
States have since autumn extended some existing measures or adopted new ones. Extending 
existing  energy  measures  until  the  end  of  2023  would  entail  a  substantial  increase  in  the 
related budgetary costs.  

The outlook for energy prices has improved. Since January 2023, European wholesale gas 
spot  prices have  fallen back to  well-below pre-war levels,  albeit  still  more than three times 

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2019 prices. As the pass-through from wholesale gas and electricity prices to consumer prices 
is  typically slower than  for fuels,  the impact  of the recent  steep fall in  wholesale prices for 
gas and electricity inflation is yet to be seen in retail prices. Domestic demand could turn out 
higher than projected if the recent declines in wholesale gas prices pass through to consumer 
prices more strongly. At the same time, gas prices were exceptionally volatile in 2023 and a 
reversal of recent downward pressure cannot be ruled out ahead of next winter.  

Graph 1: The budgetary cost of energy measures has exceeded 
the increase in energy spending of vulnerable households 

Note:  The  chart  shows  the  estimated  increase  in  energy  spending  of  lower  income  households  (on  residential 
and transport fuel) compared to the total budgetary cost of energy measures in 2022, net of revenues from taxes 
and levies on windfall profits. Portugal and Sweden are omitted due to limited data availability. Malta is omitted 
as the energy component of inflation (HICP measure) shows no price increase. 
Source: Commission services 

The focus should now shift to the phasing out of national fiscal measures introduced to 
protect households and firms from the energy price shock. Member States should phase 
out energy support measures, starting with the least targeted ones. If an extension of support 
measures  would  be  necessary  because  of  renewed  energy  pressures,  Member  States  should 
target  their  measures  much  better  than  in  the  past,  refraining  from  generalised  support  and 
only  protecting those who need it, namely  vulnerable households and  firms. This  will limit 
fiscal costs and, importantly, also ensure incentives to limit energy consumption and increase 
energy  efficiency.  In  2022,  more  than  70%  of  the  amounts  dedicated  to  energy  support 
corresponded  to  measures  that  were  not  sufficiently  targeted  to  the  most  vulnerable 
households  and  firms. (2)  Furthermore,  two  thirds  of  the  measures  have  distorted  the  price 

(2)  The  Commission  uses  the  following  criteria  to  assess  the  quality  of  fiscal  measures  related  to  energy: 
measures should be fiscally affordable, targeted to the most vulnerable, preserve the price signal (i.e., encourage 
the reduction of energy consumption or improve energy efficiency) and be easily implementable across Member 
States  without  excessive  administrative  burden.  European  Commission,  ‘Communication  on  the  2023  Draft 
Budgetary Plans: Overall Assessment,’ COM(2022) 900 final of 22 November 2022. 

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0.00.51.01.52.02.53.0BGITELPLLVESATLTLUDECZNLHUBESIEEHRFRCYSKROIEFIDKper cent of GDPFirst Income QuintileSecond Income QuintileFirst + Second Quintiles (Average)Budgetary Cost of Energy Measures 
 
 
                                                 
signal and may have reduced incentives to contain energy consumption and increase energy 
efficiency. The design of measures has nonetheless been improving with time, based on the 
experience since the initial rapid response to the abrupt increase in energy prices. 

The lasting solution to the energy crisis is to reduce dependence on imported fossil fuels. 
In  this  context,  efforts  should  focus  on  ensuring  the  timely  implementation  of  reforms  and 
investments  to  increase  energy  efficiency,  diversify  energy  supply  and  accelerate  the 
development of renewable energy sources, as outlined in the framework of the RRF and to be 
further strengthened under REPowerEU. (3) The Green Deal Industrial Plan will also help to 
enhance the competitiveness of Europe's net-zero manufacturing industry and support the fast 
transition to climate neutrality, including by the transformation of our energy systems. (4) 

5.  Moving out of the general escape clause: implications for fiscal guidance  

The  general  escape  clause  of  the  Stability  and  Growth  Pact  will  be  deactivated  at  the 
end of 2023. The Commission Communication on the 2022 European Semester in May 2022 
stated that the conditions to deactivate the general escape clause would be considered met as 
of  2024. (5, 6)  The  Annual  Sustainable  Growth  Survey  of  November  2022  confirmed  this 
assessment,  noting  that  the  European  economy  is  out  of  a  period  of  severe  economic 
downturn. (7)  It  has  recovered  beyond  its  pre-pandemic  level  and  has  now  weathered  the 
acute  phase  of  the  energy  price  shock  caused  by  Russia’s  aggression  against  Ukraine, 
although uncertainty remains high.   

Key  principles  to  guide  Member  States  in  the  preparation  of  their  Stability  and 
Convergence programmes  are needed  in the  context of the deactivation of the general 
escape clause as of 2024 and the need for prudent fiscal policies. As we move out of the 
period  during  which  the  general  escape  clause  was  in  force,  a  resumption  of  differentiated 
CSRs  formulated  in  quantitative  terms  as  well  as  qualitative  guidance  on  investment  and 
energy measures will help  to  provide the necessary clarity  for Member  States. At the same 
time, in the period until a new fiscal framework comes into operation and given the specific 
economic situation characterised by high uncertainty, it would not be appropriate to return to 

(3) See Regulation (EU) 2023/435 of the European Parliament and of the Council of 27 February 2023 amending 
Regulation  (EU)  2021/241  as  regards  REPowerEU  chapters  in  recovery  and  resilience  plans  (OJ  L  63  of 
28.2.2023, p. 1). 
(4) See European Commission ‘A Green Deal Industrial Plan for the Net-Zero Age’, COM(2023) 62 final of 1 
February 2023.  
(5) European Commission ‘2022 European Semester - Spring Package,’ COM(2022) 600 final of 23 May 2022. 
(6) Specific provisions in the EU fiscal rules allow for a coordinated and orderly temporary deviation from the 
normal  requirements  for  all  Member  States  in  a  situation  of  generalised  crisis  caused  by  a  severe  economic 
downturn of the euro area or the EU as a whole (see art. 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 
and art. 3(5) and 5(2) of Regulation (EC) 1467/97). 
(7)  European  Commission  (2022)  ‘Annual  Sustainable  Growth  Survey  2023,’  COM(2022)  780  final  of  22 
November 2022. 

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the ‘matrix of adjustment requirements’ that was used in the context of the preventive arm of 
the Stability and Growth Pact between 2015 and 2020. (8) 

The  fiscal  surveillance  cycle  would  reflect  the  spirit  of  the  Commission  reform 
orientations.  As  the  debate  on  reform  of  the  economic  governance  framework  is  still 
ongoing, the current legal framework continues to apply. The Commission does not propose 
to  shift  to  a  new  system  of  fiscal  surveillance  in  2024.  At  the  same  time,  to  allow  for  an 
effective bridge to the operation of the future set of EU fiscal rules and to take account of the 
post-pandemic  reality,  some  elements  of  the  Commission  reform  orientations  could  be 
incorporated into the fiscal surveillance cycle starting in spring 2023. Therefore, in the spirit 
of  the  Commission  reform  orientations,  Member  States  are  invited  to  submit  Stability  and 
Convergence  Programmes  that  include  their  medium-term  fiscal  and  structural  plans. 
Furthermore,  the  Commission  stands  ready  to  propose  fiscal  CSRs  for  2024  including  a 
quantitative requirement as well as qualitative guidance on investment and energy measures, 
consistent  with  the  criteria  proposed  in  its  reform  orientations,  while  also  remaining 
consistent  with  those  of  the  current  legislation  under  the  Stability  and  Growth  Pact.  This 
would  be  the  basis  for  the  Commission’s  monitoring  of  fiscal  outcomes  against  the  fiscal 
recommendations, starting with euro area Member States’ Draft Budgetary Plans for 2024 to 
be assessed by the Commission in the autumn.  

Member  States  are  invited  to  set  out  in  their  Stability  and  Convergence  Programmes 
how their fiscal plans will ensure the respect of the 3% of GDP deficit reference value as 
well as plausible and continuous debt reduction, or for debt to be kept at prudent levels, 
in the medium term. Member States are invited to set fiscal targets in the 2023 Stability and 
Convergence  Programmes  that  comply  with  the  fiscal  adjustment  criteria  set  out  in  the 
Commission  reform  orientations.  More  precisely,  Member  States  with  substantial  or 
moderate  public  debt  challenges  are  invited  to  set  fiscal  targets  that  ensure  plausible  and 
continuous  debt  reduction  or  that  debt  is  kept  at  prudent  levels  in  the  medium  term. (9)  In 
addition, all Member States are invited to set fiscal targets that ensure that the deficit does not 
exceed 3% of GDP or is brought below 3% of GDP within the period covered by the Stability 
or Convergence Programme, and credibly ensure that the deficit is maintained below 3% of 
GDP at unchanged policies over the medium term. Member States are also invited to report in 
their  Stability  and  Convergence  Programmes  on  their  planned  energy  support  measures, 
including  their  budgetary  impact,  their  phasing-out,  and  the  underlying  assumptions  on 
energy  price  developments.  Finally,  Member  States  are  invited  to  discuss  in  their  Stability 
and  Convergence  Programmes  how  their  reform  and  investment  plans,  including  those 
outlined  in  their  Recovery  and  Resilience  Plans,  are  expected  to  contribute  to  fiscal 
sustainability  and  sustainable  and  inclusive  growth,  in  line  with  the  criteria  set  out  in  the 
Commission reform orientations. 

(8) See Box 1.6, p. 16, of the 2019 Edition of the Vade Mecum on the Stability and Growth Pact and European 
Commission ‘Making the best use of the flexibility within the existing rules of the Stability and Growth Pact’, 
COM(2015) 12 final of 13 January 2015. 
(9)  As  set  out  in  Box  1  of  the  Commission  Communication  on  orientations  for  a  reform  of  the  economic 
governance framework (see Footnote 1), the Commission proposes that the classification of Member States on 
the basis of their debt challenges would be done using the Commission’s debt sustainability analysis framework. 

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The  Commission  stands  ready  to  propose  fiscal  CSRs  for  2024  that  are  in  line  with 
Member States’ own targets, so long as those targets are consistent with ensuring that 
the  public  debt  ratio  is  put  on  a  downward  path  or  stays  at  a  prudent  level  and  the 
budget  deficit  is  below the  3%  of  GDP  reference  value  over  the  medium  term.  In  line 
with the medium-term approach and emphasis on national ownership, the Commission stands 
ready to base the fiscal CSRs on the fiscal targets set out in Member States’ own Stability and 
Convergence  Programmes.  Member  States  are  therefore  invited  to  ensure  that  the  fiscal 
targets  in  their  Stability  and  Convergence  Programmes  are  consistent  with  the  criteria 
proposed in  the Commission  reform  orientations. When a Member State’s  fiscal  targets  are 
not  sufficiently  ambitious,  the  Commission  would  propose  a  fiscal  CSR  that  is  consistent 
with the criteria proposed in its reform orientations, while remaining consistent with those of 
the  current  legislation  under  the  Stability  and  Growth  Pact.  At  this  juncture,  the  quantified 
requirement of the CSR will focus on 2024. 

The  Commission’s  proposals  for  fiscal  CSRs  for  2024  would  be  quantified  and 
differentiated on the basis of Member States’ public debt challenges. This will bring into 
focus the need for Member States with substantial or moderate public debt challenges to put 
public debt on a plausibly and continuously downward path. More precisely, Member States 
with  substantial  or  moderate  public  debt  challenges  (based  on  the  Commission  debt 
sustainability  analysis)  would  be  recommended  fiscal  targets  that  ensure  a  plausible  and 
continuous  debt  reduction  or  that  debt  is  kept  at  prudent  levels  in  the  medium  term,  while 
remaining  consistent  with  the  current  legislation  under  the  Stability  and  Growth  Pact. 
Member States with low public debt challenges would be recommended to maintain or bring 
their  deficit  below  3%  of  GDP  within  the  period  covered  by  the  Stability  or  Convergence 
Programme,  and  ensure  that  the  deficit  is  maintained  below  3%  of  GDP  at  unchanged 
policies over the medium term.  

The  fiscal  CSRs  would  be  formulated  on  the  basis  of  net  primary  expenditure  as 
proposed in the Commission reform orientations. (10) Moving towards this indicator will 
represent a shift in focus compared to the period when the general escape clause was in place, 
when fiscal surveillance was focused on net nationally financed primary current expenditure 
and the preservation of nationally financed investment.   

Given its essential role, the Commission will continue to emphasise public investment in 
its  fiscal  recommendations.  All  Member  States  should  continue  to  protect  nationally 
financed investment and ensure the effective use of the RRF and other EU funds, in particular 
in light of the green and digital transitions and resilience objectives. A high quality of public 
investment  should  be  ensured,  including  via  a  thorough  implementation  of  investment 
financed from the RRF. Fiscal policies should support the twin transition in order to achieve 
sustainable and inclusive growth. The fiscal adjustment of Member States with substantial or 
moderate  public  debt  challenges  should  not  weigh  on  investment  but  rather  be  delivered 
through  limiting  the  growth  of  nationally  financed  current  expenditure  relative  to  medium-

(10)  Net  primary  expenditure  is  defined  as  nationally  financed  expenditure  net  of  discretionary  revenues 
measures and excluding interest expenditure as well as cyclical unemployment expenditure. 

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term potential output growth. Member States should also factor in the temporary nature of the 
support provided by RRF non-repayable  financial  support (“grants”). The Commission  will 
take into account the need to sustain investment when monitoring fiscal outcomes against the 
fiscal recommendations. 

The  CSRs  for  2024  will  also  provide  guidance  regarding  the  fiscal  cost  of  energy 
measures. If wholesale energy prices remain stable and lower energy costs are passed on to 
retail  prices  as  currently  foreseen,  government  energy  support  measures  should  be  further 
phased out in 2024 and related savings should contribute to reducing government deficits. If 
energy  prices  increase  again  and  support  cannot  be  fully  discontinued,  targeted  measures 
should  only  protect  vulnerable  households  and  firms,  while  broader  measures,  such  as  the 
ones  implemented  in  2022,  should  be  avoided.  Such  a  move  would  reduce  fiscal  costs, 
incentivise energy savings and allow the economy to adjust in a gradual and sustainable way 
over a limited period.  

The Commission invites the Council to endorse this approach. 

6.  A consistent implementation of the Excessive Deficit Procedure (EDP)  

In spring 2022, the Commission committed to assess the relevance of proposing the opening 
of Excessive Deficit Procedures in spring 2023, in particular taking into account compliance 
with  the fiscal  CSRs  addressed to  the Member  States by the Council on 12 July 2022. The 
Commission is  continuously monitoring Member States’ economic and budgetary situation, 
recalling  also  the  Commission’s  Opinions  on  euro  area  Member  States’  Draft  Budgetary 
Plans, which called for taking the necessary measures within the national budgetary process 
to ensure that the 2023 budget is consistent with the CSRs adopted by the Council on 12 July 
2022. The Commission will assess compliance with the deficit and debt criteria in accordance 
with  Article  126(3)  of  the  TFEU  as  a  part  of  the  spring  surveillance  round.  Taking  into 
consideration the persistently high uncertainty for the macroeconomic and budgetary outlook 
at this juncture, the Commission considers that a decision on whether to place Member States 
under the Excessive Deficit Procedure should not be taken this spring. At the same time, the 
Commission will propose to the Council to open deficit-based Excessive Deficit Procedures 
in spring 2024 on the basis of the outturn data for 2023, in line with existing legal provisions. 
Member  States  should  take  account  of  this  in  the  execution  of  their  2023  budgets  and  in 
preparing their Stability  and Convergence Programmes this  spring and the Draft  Budgetary 
Plans for 2024 this autumn. 

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7.  Next steps 

This Communication sets out preliminary fiscal policy guidance for 2024, which will be 
updated  as  necessary  as  part  of  the  European  Semester  Spring  Package  in  May  2023. 
Updated guidance will continue to reflect the global economic situation, the specific situation 
of  each  Member  State,  progress  on  the  discussion  on  the  ongoing  economic  governance 
review and policy debates in the Council. The development of the economic and budgetary 
outlook  will  be  monitored  closely  and  duly  taken  into  consideration.  Member  States  are 
invited to reflect this guidance in their Stability and Convergence Programmes.  

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Appendix 

A. Additional tables to be included in the 2023 Stability and Convergence Programmes 

In addition to the required forecast budgetary data over the horizon of the Stability and Convergence 
Programme, the corresponding estimates for the current year should  also be included, together with 
the  outcomes  for  the  period  2020-2022  (consistent  with  the  EDP  notification  tables).  The  tables 
should preferably be submitted to the Commission by means of the dedicated web application. 

Table of the RRF impact on programme's projections - GRANTS  

Revenue from RRF grants (% of GDP) 

2020 

2021 

2022 

2023 

2024 

2025 

2026 

RRF grants as included in the revenue projections 
Cash disbursements of RRF grants from EU 

Expenditure financed by RRF grants (% of GDP) 

2020 

2021 

2022 

2023 

2024 

2025 

2026 

Compensation of employees D.1 
Intermediate consumption P.2 
Social payments D.62+D.632 
Interest expenditure D.41 
Subsidies, payable D.3 
Current transfers D.7 
TOTAL CURRENT EXPENDITURE 
Gross fixed capital formation P.51g 
Capital transfers D.9 
TOTAL CAPITAL EXPENDITURE 

Reduction in tax revenue 
Other costs with impact on revenue 
Financial transactions 

Other costs financed by RRF grants (% of GDP)1 

2020 

2021 

2022 

2023 

2024 

2025 

2026 

Table of the RRF impact on programme's projections - LOANS  

Cash flow from RRF loans projected in the programme (% of GDP) 

2020 

2021 

2022 

2023 

2024 

2025 

2026 

Disbursements of RRF loans from EU 
Repayments of RRF loans to EU 

Compensation of employees D.1 
Intermediate consumption P.2 
Social payments D.62+D.632 
Interest expenditure D.41 
Subsidies, payable D.3 
Current transfers D.7 
TOTAL CURRENT EXPENDITURE 
Gross fixed capital formation P.51g 
Capital transfers D.9 
TOTAL CAPITAL EXPENDITURE 

Reduction in tax revenue 
Other costs with impact on revenue 
Financial transactions 

Expenditure financed by RRF loans (% of GDP) 
2022 

2020 

2021 

Other costs financed by RRF loans (% of GDP)1 
2022 

2020 

2021 

2023 

2024 

2025 

2026 

2023 

2024 

2025 

2026 

Notes: Provision of data on variables in bold characters is required; provision of data on other variables is optional. 

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B. Additional information to be included in the 2023 Stability and Convergence Programmes 

Member States are invited to provide information on: (i) the annual budgetary costs related to persons 
fleeing  Ukraine,  spelled  out  in  terms  of  the  main  ESA  category(-ies)  that  is  (are)  directly  affected; 
and, (ii) the annual number of people hosted. These budgetary costs should be limited to those directly 
linked to and as the immediate consequence of the unprecedented influx of persons fleeing Ukraine. 
The provision of such information would enable the Commission to take these budgetary costs into 
account  in  its  assessment  of  the  2023  Stability  and  Convergence  Programmes,  as  well  as  of  the 
progress made in implementing the 2022 country-specific recommendations. 

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