Proposal for a COUNCIL DIRECTIVE amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States
Date: 2023-04-26
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU Member State, budget deficit, budget estimate, budget policy, fiscal policy, national budget, national planning, stability pact

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   EUROPEAN COMMISSION  Brussels, 26.4.2023  COM(2023) 242 final 2023/0136 (NLE)  Proposal for a COUNCIL DIRECTIVE amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States   
 
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL  

The  proposed  amendments  to  Council  Directive  2011/85/EU  of  8 November  2011  on 
requirements  for  budgetary  frameworks  of  the  Member  States1  (hereafter  the  Directive)  are 
part of a package that includes also a proposal for a Regulation replacing Regulation (EC) No 
1466/972  (the  preventive  arm  of  the  Stability  and  Growth  Pact)  and  amendments  to 
Regulation  (EC)  No  1467/973  (the  corrective  arm  of  the  Stability  and  Growth  Pact).  The 
Directive and the preventive and corrective arms of the Stability and Growth Pact are part of 
the EU economic governance framework.  

Reasons for the proposal 

The  EU  economic  governance  framework  has  helped  to  create  conditions  for  economic 
stability, sustainable and inclusive economic growth and higher employment. This framework 
currently  consists  of  the  EU  fiscal  framework  (the  Stability  and  Growth  Pact  and  the 
Directive), the Macroeconomic  Imbalances  Procedure, the European Semester for  economic 
and  employment  policy  coordination,  and  the  framework  for  macroeconomic  financial 
assistance programmes.  

In  2011,  to  take  into  account  the  lessons  of  the  global  financial  crisis  and  the  euro  area 
sovereign debt  crisis, and as  part of the package known as the “Six-pack”, Regulation  (EC) 
No 1466/97 was amended by Regulation (EU) No 1175/20114, Regulation (EC) No 1467/97 
was amended by Regulation (EU) No 1177/20115, and Directive 2011/85/EU was adopted. 

They helped to ensure a close surveillance of national budgets while paying greater attention 
to debt levels. In seeking to remedy the root causes of the crisis, the fiscal framework at EU 
level was complemented by binding provisions at the national level to foster sound budgetary 
policies in all Member States. For that purpose, the Directive required Member States, among 
other  things,  to  have  in  place  national  fiscal  rules,  to  have  independent  monitoring  of 
compliance  with  fiscal  rules  at  the  national  level  and  to  introduce  multiannual  budgetary 
frameworks. These national provisions entered into force to comply with the Directive. 

In 2019, the European Court of Auditors (ECA) published a report on the ‘EU requirements 
on national budgetary frameworks: need to further strengthen them and to better monitor their 

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OJ L 306, 23.11.2011, p. 41. 
Council  Regulation  (EC)  No  1466/97  of  7  July  1997  on  the  strengthening  of  the  surveillance  of 
budgetary positions and the surveillance and coordination of economic policies (OJ L 209, 2.8.1997, p. 
1). 
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, 2.8.1997, p. 6). 
Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011 
amending Council Regulation (EC) No 1466/97 on the  strengthening of the surveillance of budgetary 
positions and the surveillance and coordination of economic policies (OJ L 306, 23.11.2011, p. 12).  
Council Regulation (EU) No 1177/2011 of 8 November 2011 amending Regulation (EC) No 1467/97 
on  speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L  306, 
23.11.2011, p. 33).  

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application’6.  In  the  report,  ECA  noted  weaknesses  regarding  the  efficacy  of  medium-term 
budgeting  and  independent  fiscal  institutions  (IFIs)  and  recommended  the  Commission  to 
reinforce  requirements  on  medium-term  budgetary  frameworks  and  IFIs  in  line  with 
international standards.  

In  2020,  the  Commission  published  a  Communication  reviewing  the  suitability  of  the 
Directive (hereafter the suitability review)7,  highlighting progress and room for improvement 
in  the  current  set-up  of  national  budgetary  frameworks.  The  suitability  review  pointed  to 
significant  improvements  in  the  number  and  strength  of  national  fiscal  rules,  a  widespread 
adoption  of  medium-term  fiscal  planning,  more  reliable  forecasts  and  higher  fiscal 
transparency,  also  encompassing  contingent  liabilities.  However,  the  review  noted  also  that 
medium-term  planning  remained  largely  subordinate  to  annual  budgeting,  it  questioned  the 
usefulness of reporting monthly cash-based fiscal data and underlined the high heterogeneity 
in the interpretation of provisions on forecast evaluation, tax expenditure and extra-budgetary 
bodies. Also, the use of public accounting was found to be constrained by the lack of a formal 
common EU framework. 

Finally,  in  its  Communication  of  9  November  2022  the  Commission  put  forward  its 
orientations for a reform of the EU economic governance framework8  aimed at ensuring debt 
sustainability  and  promoting  sustainable  and  inclusive  growth  in  all  Member  States.  The 
orientations  envisaged  a  stronger  national  ownership,  a  simplified  framework  and  a  move 
towards  a  greater  medium-term  focus,  combined  with  stronger  and  more  coherent 
enforcement.  They  also  envisaged  improving  the  set-up  and  performance  of  IFIs.  These 
orientations also reflected observations that emerged from the public consultation launched in 
October 2021, which invited other EU institutions and all key stakeholders to engage on the 
topic9.     

Objectives of the proposal 
This  proposal  presents  some  amendments  to  the  Directive.  In  line  with  the  Commission’s 
orientations  of  9  November  2022  for  a  reform  of  the  EU  economic  governance  framework, 
the amendments aim at strengthening national ownership and the medium-term orientation of 
budgetary planning. More specifically, they aim at the following: 

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Simplifying existing legislation: provisions on the submission of monthly cash-based 
fiscal  data  (Article  3(2))10  are  not  useful  for  strengthening  national  budgetary 
frameworks as highlighted in the suitability review. Article 8 on the United Kingdom 
is not necessary anymore. Provisions in Articles 4(4) and 4(5) will not be necessary 

to 

them  and 

further  strengthen 

to  better  monitor 

European  Court  of  Auditors  special  report  of  2019  on  the  ‘EU  requirements  on  national  budgetary 
frameworks:  need 
their  application’.  
https://www.eca.europa.eu/Lists/ECADocuments/SR19_22/SR_Fiscal_Stability_EN.pdf. 
Article 16 of the Directive required the Commission to publish a review of the Directive to assess the 
suitability of the statistical requirements, the design and effectiveness of numerical fiscal rules and the 
general level of transparency of public finances in the Member States. The suitability review is part of 
the  Communication  COM(2020)  55  final  of  5  February  2020  from  the  Commission  ‘Economic 
governance  review,  Report  on  the  application  of  Regulations  (EU)  No  1173/2011,  1174/2011, 
1175/2011, 1176/2011, 1177/2011, 472/2013 and 473/2013 and on the suitability of Council Directive 
2011/85/EU’. 
Communication COM(2022)583 final of 9 November 2022 from the Commission ‘on orientations for a 
reform of the EU economic governance framework’.  
Commission  Staff  Working  Document  SWD(2022)  104  final  of  28  March  2022  ‘Online  public 
consultation on the review of the EU economic governance framework - Summary of responses - Final 
Report’.  
Articles refer to the original numbering of the Directive, unless specified as ‘new’.  

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anymore  if  these  requirements  feature  in  the  proposal  for  a  Regulation  XXX 
(preventive arm). 

Clarifying  provisions:  it  is  proposed  that  Article  4(6)  now  specifically  refers  to 
independent bodies as those in charge of ex-post evaluation of forecasts, to eliminate 
an ambiguity detected in the suitability review. It is also proposed that Articles 14(1), 
14(2) and 14(3) better specify reporting requirements on general government bodies 
and  funds  that  are  not  part  of  the  regular  national  budgets,  requirements  on  tax 
expenditure  and  contingent  liabilities.  These  requirements  have  been  interpreted  in 
very  diverse  ways  by  the  Member  States  and  some  of  these  interpretations  did  not 
fully reflect the original rationale of the Directive. 

Strengthening  national  ownership:  it  is  proposed  to  add  or  clarify  requirements  on 
IFIs.  In  some  cases,  the  proposed  new  provisions  already  applied  to  the  euro  area 
Member States and also to Denmark, Bulgaria and Romania, as contracting parties to 
the Treaty on Stability, Coordination and Governance in the Economic and Monetary 
Union (hereby the TSCG)11 (new Article 8). Other proposed provisions aim at adding 
tasks  that  would  allow  IFIs  to  play  a  role  in  the  surveillance  of  the  EU  fiscal 
framework  at  the  national  level  as  proposed  in  the  proposal  for  a  Regulation  XXX 
(preventive  arm)  and  also  in  the  proposal  for  amending  Regulation  1467/97 
(corrective  arm).  These  include  the  preparation  or  endorsement  of  budgetary 
forecasts  as  well  as  assessing  sustainability  analyses  and  the  impact  of  policies. 
Finally,  some  proposed  provisions  ensure  the  independence  and  accountability  of 
IFIs to reflect standards identified by international organisations, as recommended in 
the report of 2019 of ECA. 

Promoting a medium-term orientation: it is proposed that the multiannual budgetary 
dimension in the forecasts is more systematically specified (Article 4) and so would 
be the link between the annual budget and medium-term planning (Article 10), which 
had  been  found  to  be  weak  in  the  report  of  of  2019  of  ECA  and  in  the  suitability 
review. 

Improving  the  quality  of  public  finance:  a  few  provisions  are  proposed  to  promote 
the accountability of public budgets and increase the transparency of fiscal risks vis-
à-vis  climate  change.  Article  9(2),  point  d  would  now  require  assessing  the  risks 
deriving  from  climate  change  and  the  implications  of  climate  policies  on  public 
finances. Similarly, Article 14(3) would require Member States to publish data to the 
extent  possible  on  disaster  and  climate-related  contingent  liabilities  as  well  as  on 
economic losses incurred from natural disasters and climate-related shocks. For these 
shocks,  the  fiscal  costs  borne  by  the  public  sector  and  the  instruments  used  to 
mitigate or cover the shocks would also be reported.   

•     Consistency with existing provisions in the policy area 

The  proposal  is  part  of  a  broader  package  of  proposals  following  the  Commission’s 
orientations  of  9  November  2022  for  a  reform  of  the  EU  economic  governance  framework. 
This  package  includes  also  a  proposal  for  a  Regulation  replacing  the  preventive  arm  of  the 
Stability and Growth Pact (SGP) and amendments to the corrective arm of the SGP and aims 
at  establishing  a  reformed  framework  that  relies  on  medium-term  orientation  and  national 
ownership aiming at a credible and substantial reduction of high debt levels and at promoting 

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Treaty  on  Stability,  Coordination  and  Governance  in  the  Economic  and  Monetary  Union  of  2  March 
2012.  

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sustainable  and  inclusive  growth.  The  reformed  economic  governance  framework,  thus, 
retains the fundamental objectives of budgetary discipline and growth promotion of the SGP 
and its founding provisions in the Treaty on the Functioning of the European Union (TFEU).  

At the same time, by aiming at sound and sustainable public finances as well as the promotion 
of sustainable and inclusive growth, the reformed framework also meets the main objectives 
of the Fiscal Compact which forms Title III of the TSCG12. In addition, other elements of the 
proposed  legislation  retain  the  substance  of  the  Fiscal  Compact.  With  a  medium-term 
orientation  anchored  on  country-specific  debt  challenges,  the  proposal  for  a  Regulation 
replacing the preventive arm of the SGP reflects in part the Fiscal Compact’s requirement of 
convergence to  medium-term  positions  and that the time frame of this  convergence is  to  be 
proposed taking into account country-specific sustainability risks (Article 3(1), point b, of the 
TSCG).  While  emphasising  the  structural  balance,  the  Fiscal  Compact  also  requires  an 
analysis  of  expenditure  net  of  discretionary  revenue  measures  for  the  overall  assessment  of 
compliance (Article 3(1), point b, of the TSCG), and this analysis is upheld in the proposal for 
a  Regulation  replacing  the  preventive  arm  of  the  SGP.  The  Fiscal  Compact  allows  for 
temporary deviations from the medium-term objective or adjustment path towards it only in 
exceptional circumstances (Article 3(1), point c, of the TSCG), as envisaged in the proposal 
for a Regulation replacing the preventive arm of the SGP. The Fiscal Compact stipulates that 
in case of significant observed deviations from the medium-term objective or the adjustment 
path  towards  it,  measures  have  to  be  implemented  to  correct  the  deviations  over  a  defined 
period of time (Article 3(1), point e, of the TSCG). In the same vein, the reformed framework 
requires corrections of deviations from the net expenditure path set by the Council. Moreover, 
when deviations result in a deficit in excess of 3% of GDP, the Member State could be placed 
under  the  excessive  deficit  procedure  (EDP).  For  a  Member  State  with  debt  above  60%  of 
GDP, the debt-based EDP would be strengthened: it would focus on departures from the net 
expenditure  path,  replacing  the  current  debt  reduction  benchmark  (the  so-called  “1/20th 
rule”),  which  imposed  a  too  demanding  fiscal  effort  for  some  Member  States.  The  Fiscal 
Compact  assigns  a  monitoring  role  of  the  compliances  with  its  rules  to  IFIs,  and  the 
provisions  on  the  role  and  independence  of  those  monitoring  institutions,  which  had  to  be 
detailed in common principles proposed by the Commission13 in accordance with Article 3(2) 
of  the  TSCG,  are  now  fully  integrated  in  the  proposal  amending  the  Directive.  The  Fiscal 
Compact  provides  that  the  Commission  and  the  Council  play  a  role  in  the  enforcement 
process (Article 5 of the TSCG), as stated in the proposed amendments to the corrective arm 
of the SGP.  

Commonalities  between  the  Fiscal  Compact  and  the  reformed  economic  governance 
framework also stem from the implementation of the Fiscal Compact into the national legal 

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With the aim of strengthening budgetary discipline throughout the economic cycle, on 2 March 2012, 
25 Member States ratified the inter-governmental TSCG. In its first paragraph, Article 2 of the TSCG 
recalls  that  it  ‘shall  be  applied  and  interpreted  by  the  Contracting  Parties  in  conformity  with  the 
Treaties on which the EU is founded, in particular Article 4(3) TEU, and with European law, including 
procedural  law  whenever  the  adoption  of  secondary  legislation  is  required’.  In  its  second  paragraph, 
Article 2 of the TSCG recalls that it ‘shall apply insofar as it is compatible with the Treaties on which 
the EU is founded and with EU law. It shall not encroach upon the competence of the Union to act in 
the area of the economic union’. Title III of the TSCG, the "Fiscal Compact", is binding on the Member 
States whose currency is the euro and, on a voluntary basis, on other Member States (TSCG, art. 1(2) 
and  14(5)).  Article  16  of  the  TSCG  provides  that  ‘within  five  years  at  most,  of  the date  of  entry  into 
force  of  this  Treaty,  on  the  basis  of  an  assessment  of  the  experience  with  its  implementation,  the 
necessary  steps  shall  be  taken,  in  accordance  with  the  TEU  and  the  TFEU,  with  the  aim  of 
incorporating the substance of this Treaty into the legal framework of the EU’ 
See Communication COM(2012) 342 final of 20 June 2012 from the Commission ‘Common principles 
on national fiscal correction mechanisms’.  

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orders.  Most  Contracting  Parties  have  transposed  the  TSCG  provisions  into  national  laws 
inserting  a  direct  link  with  corresponding  EU  laws14.  This  applies  to  the  medium-term 
objective  and  convergence  path  as  well  as  the  assessment  of  a  significant  deviation  or 
provisions requiring to follow the recommendations adopted by the Council (all drawn from 
Regulation No 1466/97). 

Considering  these  commonalities,  the  proposed  reformed  economic  governance  framework 
can be considered as incorporating the substance of the fiscal provisions of the TSCG into the 
legal framework of the EU, as per Article 16 of the TSCG.  

• 

Consistency with other Union policies 

By  inserting  requirements  on  the  implications  of  climate-change  on  national  budgetary 
policies  and  fiscal  risks,  the  proposal  ensures  consistency  with  other  Union  policies  that 
support  actions  for  climate  change  mitigation  and  adaptation  in  line  with  the  objective  of 
ensuring a fair transition towards climate neutrality. For some Member States, as part of their 
Recovery and Resilience Plans, several  reforms are being implemented that will  conduce to 
improving  the  budgetary  frameworks,  for  instance  through  improving  the  independence  of 
some fiscal institutions, in line with the proposed amendments. 

2. 

RESULTS OF CONSULTATIONS WITH INTERESTED PARTIES 

As  part  of  the  economic  governance  review,  the  Commission  conducted  manifold  outreach 
activities  inter  alia  by  organising  conferences  and  engaging  in  more  targeted  stakeholder 
exchange.  Most  prominently,  in  October  2021  the  Commission  launched  a  public 
consultation15  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, expressed their views on how to reform the EU economic 
governance. Many stakeholders favoured a strengthening of national budgetary frameworks, 
including through a greater involvement of IFIs in the surveillance of the EU framework. In 
some  cases,  the  IFIs’  involvement  was  seen  as  a  way  to  increase  the  reputational  costs  of 
breaking budgetary commitments.  

Besides a role in EU surveillance, some stakeholders also advocated for a stronger monitoring 
role of national fiscal rules for IFIs, to be enforced through an obligation for governments to 
systematically  take  into  account  IFIs’  assessments,  along  with  a  more  structured  dialogue 
between IFIs and EU institutions. An expansion of tasks was in some cases proposed covering 
the  production  of  inputs  for  debt  sustainability  analyses,  the  production  of  macroeconomic 
forecasts  (including  those  for  medium-term  plans)  that  could  serve  as  a  starting  point  for 
national governments to plan their fiscal policy, and the production or validation of budgetary 
plans. An advisory role on fiscal policy was also suggested, together with a more prominent 
role in the public debate. 

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Report C(2017) 1201 final of 22 February 2017 from the Commission presented under Article 8 of the 
TSCG. 
Commission  Staff  Working  Document  SWD(2022)  104  final  of  28  March  2022  ‘Online  public 
consultation on the review of the EU economic governance framework: summary of responses’. 

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3. 

LEGAL ELEMENTS OF THE PROPOSAL 

•   Legal basis  

The legal basis for the amended Directive is the third subparagraph of Article 126(14) TFEU. 
Strengthening requirements for national budgetary frameworks in the Member States aims to 
complement  and  reinforce  the  Union  policy  framework  to  avoid  excessive  deficits  as 
established under Article 126 TFEU. The proposal applies to all Member States.  

•   Subsidiarity and proportionality  

The  proposal  is  in  conformity  with  the  subsidiarity  and  proportionality  principles  set  out  in 
Article 5 of the Treaty on the European Union. Its objective, namely uniform compliance with 
budgetary discipline as required by the TFEU, cannot be sufficiently achieved by the Member 
States  and  can  be  better  achieved  at  Union  level.  In  addition,  given  that  the  proposed 
amendments mainly aim at addressing some shortcomings of the Directive or at clarifying its 
provisions, or at updating them, taking into account in particular the proposal for a Regulation 
replacing  the  preventive  arm  of  the  SGP  and  the  amendments  to  the  corrective  arm  of  the 
SGP, they can be best achieved at EU level rather than by different national initiatives.  

The  proposed  amended  Directive  does  not  go  beyond  what  is  necessary  in  order  to  achieve 
that objective. With a view to reduce the administrative burden for the Member States, some 
amendments propose simplification of the requirements of the Directive, and coherence with 
the proposal for a Regulation replacing the preventive arm of the SGP and the amendments to 
the corrective arm of the SGP is ensured. Proportionality is also ensured by those amendments 
aiming at clarifying concepts and definitions which ease the implementation of the Directive. 
Similarly, many IFI-related provisions are drawn from existing rules applying to some but not 
all Member States, i.e. the TSCG or Regulation No 473/2013. As a result, in many Member 
States, these provisions are already implemented. In addition, reporting climate-related risks 
and losses is required taking into account ongoing national efforts and the need to adapt these 
practices  to  country  specific  needs  and  preferences.  Finally,  by  allowing  Member  States  to 
transpose  these  provisions  in  their  national  legal  order,  the  proposed  amended  Directive  is 
also  a  suitable  tool  to  achieve  its  objective,  as  it  enables  Member  States  to  adapt  the 
requirements to their own specificities.  

4. 

BUDGETARY IMPLICATIONS 

The proposal does not have implications for the Union budget. 

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2023/0136 (NLE) 

Proposal for a 

COUNCIL DIRECTIVE 

amending Directive 2011/85/EU on requirements for budgetary frameworks of the 
Member States 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 126(14), third subparagraph, thereof, 

Having regard to the proposal from the European Commission, 

Having regard to the opinion of the European Parliament,  

Having regard to the opinion of the European Central Bank,  

Whereas: 

(1) 

(2) 

(3) 

(4) 

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In order to ensure Member States' compliance with the obligations under the Treaty 
on the Functioning of the European Union (TFEU) in the area of budgetary policy, 
and  in  particular  with  regard  to  avoiding  excessive  government  deficits,  Council 
Directive 2011/85/EU16 laid down detailed rules concerning the characteristics of the 
budgetary frameworks of the Member States.  

Building  upon  the  experience  gained  with  the  economic  and  monetary  union  since 
Directive  2011/85/EU  came  into  force,  it  is  necessary  to  amend  its  requirements 
regarding the rules and procedures forming the budgetary frameworks of the Member 
States. 

In  2019,  the  European  Court  of  Auditors  published  a  report  examining  the  Union 
requirements on national budgetary frameworks and recommending the Commission 
to  review  those  requirements,  taking  into  account  international  standards  and  best 
practice.  The  European  Court  of  Auditors  proposed  specific  actions  to  improve  the 
scope  and  effectiveness  of  national  budgetary  frameworks,  particularly  as  regards 
medium-term budgetary frameworks and independent fiscal institutions17.    
Commission Communication of 5 February 202018 pointed to substantial but uneven 
progress  in  the  development  of  national  budgetary  frameworks  considering  that 
Union law only sets minimum requirements and that implementation and compliance 

Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks  of the 
Member States (OJ L 306, 23.11.2011, p. 41). 
European  Court  of  Auditors  special  report  of  2019  on  the  ‘EU  requirements  on  national  budgetary 
frameworks: need to further strengthen them and to better monitor their application’.   
Communication COM(2020) 55 final of 5 February 2020 from the Commission ‘Economic governance 
review,  Report  on  the  application  of  Regulations  (EU)  No  1173/2011,  1174/2011,  1175/2011, 
1176/2011,  1177/2011,  472/2013  and  473/2013  and  on  the  suitability  of  Council  Directive 
2011/85/EU’.    

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with national provisions had been very diverse. That Communication also considered 
the  extent  to  which  the  framework  would  support  economic,  environmental  and 
social  policy  needs  related  to  the  transition  towards  a  climate-neutral,  resource-
efficient  and  digital  European  economy,  complementing  the  key  role  of  the 
regulatory environment and structural reforms. 
Commission  Communication  of  11  December  2019  on  the  European  Green  Deal19  
called  for  a  greater  use  of  green  budgeting  tools  to  redirect  public  investment, 
consumption and taxation to green priorities and away from harmful subsidies.  The 
European Climate  Law sets  a Union-wide  climate neutrality objective by 2050  and 
requires  Union  institutions  and  Member  States  to  progress  in  enhancing  adaptive 
capacity. The Commission committed to working with the Member States to screen 
and  benchmark  green  budgeting  practices.  Commission  Communication  of  24 
February 2021 on the new EU strategy on adaptation to climate change20 pointed to 
the  macro-fiscal  relevance  of  climate  change  and  highlighted  the  need  to  increase 
Union’s  resilience  to  the  impacts  of  climate  change.  The  European  Semester 
provides an additional framework to support such efforts and the Technical Support 
Instrument offers practical assistance for their implementation. 

Commission Communication of 9 November 2022 on orientations for a reform of the 
EU  economic  governance  framework21  highlighted  the  need  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 orientations are to 
improve  national  ownership,  simplify  the  framework  and  move  towards  a  greater 
medium-term focus, combined with stronger and more coherent enforcement. 

In  order  to  enhance  compliance  with  the  provisions  of  the  TFEU,  and  to  avoid  in 
particular  the  procedure  for  excessive  government  deficit  laid  down  in  Article  126 
TFEU,  there  should  be  specific  provisions  in  the  law  of  the  Member  States  to 
strengthen national ownership, in accordance with the Commission Communication 
of  9  November  2022  on  orientations  for  a  reform  of  the  EU  economic  governance 
framework,  beyond  those  currently  required  by  Directive  2011/85/EU.  Building  on 
the  evidence  of  implementation  of  that  Directive,  amendments  should  also  cover 
provisions  on  transparency  and  statistics,  forecasts  and  medium-term  budgeting  to 
address weaknesses identified during implementation. 
This  Directive  is  part  of  a  package  together  with  Regulation  (EU)  [XXX]22  of  the 
Parliament  and  of  the  Council  replacing  Regulation  (EC)  No  1466/9723  (the 
preventive  arm  of  the  Stability  and  Growth  Pact)  and  Council  Regulation  [XXX]24 
amending Council Regulation (EC) No 1467/9725 (the corrective arm of the Stability 
and Growth Pact). Together, they establish a reformed Union economic governance 

Communication COM(2019) 640 final from the Commission ‘The European Green Deal’. 
Communication  COM(2021)  82  final  from  the  Commission  ‘Forging  a  climate-resilient  Europe  -  the 
new EU Strategy on Adaptation to Climate Change’. 
Communication  COM(2022) 583  final  from  the  Commission  ‘on  orientations  for  a  reform  of  the  EU 
economic governance framework’. 
Regulation (EU) of the European Parliament and of the Council of [insert date] [insert full title] (OJ L 
..). 
Council  Regulation  (EC)  No  1466/97  of  7  July  1997  on  the  strengthening  of  the  surveillance  of 
budgetary positions and the surveillance and coordination of economic policies (OJ L 209, 2.8.1997, p. 
1). 
Regulation (EU) of the Council of [insert date] [insert full title] (OJ L ..). 
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, 2.8.1997, p. 6). 

(5) 

(6) 

(7) 

(8) 

19 
20 

21 

22 

23 

24 
25 

EN 

8 

  EN 

 
                                                 
the 

framework  that  incorporates  into  Union  law  the  substance  of  Title  III  ‘Fiscal 
inter-governmental  Treaty  on  Stability,  Coordination  and 
Compact’  of 
Governance  (TSCG)  in  the  Economic  and  Monetary  Union26,  in  accordance  with 
Article 16 thereof. Title III is  binding on the Member States whose currency is  the 
euro and, on a voluntary basis, on Bulgaria, Denmark and Romania. By building on 
the  experience  with  the  implementation  of  the  TSCG  by  the  Member  States,  the 
package  retains  the  Fiscal  Compact’s  medium-term  orientation  as  a  tool  to  achieve 
budgetary  discipline  and  growth  promotion.  The  package  includes  a  strengthened 
country-specific  dimension  aimed  at  enhancing  national  ownership,  including  by 
means  of  a  stronger  role  for  independent  fiscal  institutions,  which  draws  on  the 
Fiscal  Compact’s  common  principles  proposed  by  the  Commission27  in  accordance 
with  Article  3(2)  of  the  TSCG.  The  analysis  of  expenditure  net  of  discretionary 
revenue  measures  for  the  overall  assessment  of  compliance  required  by  the  Fiscal 
Compact is set out in Regulation [XXX] replacing Regulation (EC) No 1466/97. As 
in the Fiscal Compact, temporary deviations from the medium-term plan are allowed 
only  in  exceptional  circumstances  in  Regulation  [XXX]replacing  Regulation  (EC) 
No 1466/97. Similarly, in case of significant deviations from the medium-term plan, 
measures  should be implemented to  correct  the deviations  over a defined period of 
time.  The  package  strengthens  fiscal  surveillance  and  enforcement  procedures  to 
deliver on the commitment of promoting sound and sustainable public finances and 
sustainable  growth.  The  economic  governance  framework  reform,  thus,  retains  the 
fundamental objectives of budgetary discipline and debt sustainability set out in the 
TSCG. 

Complete and reliable public sector accounting practices for all subsectors of general 
government  are  a  precondition  for  the  production  of  high-quality  statistics  that  are 
comparable  across  Member  States.  The  availability  and  quality  of  the  European 
System  of  Accounts  (ESA  2010)  based  statistics  is  crucial  to  ensure  the  proper 
functioning  of  the  Union’s  fiscal  surveillance  framework.  ESA  2010  relies  on 
information  provided  on  an  accrual  basis.  It  is  therefore  necessary  to  improve  the 
collection of accrual data and information needed to generate accrual-based statistics 
in  a  way  that  is  integrated,  comprehensive  and  harmonised  across  all  subsectors  of 
general government. 

The  availability  of  high  frequency  data  can  reveal  patterns  warranting  closer 
surveillance and improve the quality of budgetary forecasts. Member States and the 
Commission  (Eurostat)  should  publish  cash-based  data,  quarterly  deficit  and  debt 
data  applying  the  definitions  set  out  in  Article  2  of  the  Protocol  (No  12)  on  the 
excessive deficit procedure annexed to the Treaty on European Union (TEU) and to 
the  TFEU.  Publication  of  budgetary  data  with  higher  frequency  that  are  tailored  to 
national  budgetary  definitions  should  be  determined  on  the  basis  of  national 
transparency requirements and user needs, to improve national ownership. 

(9) 

(10) 

(11) 

Biased  and  unrealistic  macroeconomic  and  budgetary  forecasts  for  the  annual  and 
multiannual  budget  legislations  can  considerably  hamper  the  effectiveness  of  fiscal 
planning and consequently impair commitment to budgetary discipline. To improve 
baseline  assumptions  and  provide  unbiased  assessments  of  the  fiscal  impact  of 

26 

27 

Treaty  on  Stability,  Coordination  and  Governance  in  the  Economic  and  Monetary  Union  of  2  March 
2012.  
Communication COM(2012) 342 final of 20 June 2012 from the Commission ‘Common principles on 
national fiscal correction mechanisms’.  

EN 

9 

  EN 

 
                                                 
various policy measures, the macroeconomic and budgetary forecasts of the Member 
States should be endorsed or produced by an independent fiscal institution. 

(12)  Macroeconomic and budgetary forecasts  should be subject to regular, objective and 
comprehensive  evaluations  performed  by  an  independent  body  in  order  to  enhance 
the  economic 
their  quality.  Those  evaluations  should 
assumptions,  comparison  with  forecasts  prepared  by  other  institutions,  and 
evaluation of past forecast performance. 

include  scrutiny  of 

(13) 

(14) 

(15) 

(16) 

(17) 

Independent  bodies  charged  with  monitoring  public  finances  in  the  Member  States 
are an essential building block of effective budgetary frameworks. Regulation (EU) 
No  473/2013  of  the  European  Parliament  and  of  the  Council28  requires  Member 
States whose currency is the euro to have independent fiscal institutions tasked with 
the endorsement or production of macroeconomic forecasts and establishes specific 
safeguards  regarding  their  independence  and  technical  capacity.  Given  the  positive 
contribution  to  public  finance  of  independent  bodies,  those  requirements  should  be 
extended to all Member States. In order to foster fiscal discipline and strengthen the 
credibility of fiscal policy, such bodies should also contribute to budgetary planning 
by  either  producing  or  endorsing  the  forecasts  and  debt  analyses  used  by  the 
government,  and  by  carrying  out  independent  assessments  of  fiscal  policies  and 
monitoring compliance with the fiscal framework.  

In  order  to  achieve  strengthened  responsibility  in  fiscal  policy,  fiscal  institutions 
should  have  a  high  degree  of  operational  independence,  the  necessary  resources  to 
perform their tasks and extensive and timely access to necessary information.  

To improve budgetary planning, due attention should be paid to the macrofiscal risks 
from  climate  change  and  to  the  implications  of  climate-related  policies  on  public 
finance over the medium and long term. Understanding the channels through which 
climate-related  shocks  affect  the  economy  and  public  finance  is  key  to  national 
strategies to limit and manage the fiscal risk stemming from climate change and from 
related disasters. 

A single-year perspective for budgetary planning provides a limited basis for sound 
fiscal  policies,  as  most  measures  have  implications  that  go  well  beyond  the  annual 
budgetary  cycle.  As  such,  effective  multiannual  fiscal  planning  strengthens  the 
credibility  of  fiscal  policy  while  taking  into  account  debt  sustainability.  Effective 
medium-term  planning  rests  on  a  clear  and  consistent  definition  of  national 
budgetary  objectives  over  the  medium  term,  which  are  presented  in  national 
medium-term  plans.  In  order  to  enhance  a  multiannual  budgetary  perspective, 
planning  of  annual  budget  legislation  should  be  consistent  with  the  multiannual 
objectives established in medium-term budgetary frameworks. 

To  be  effective  in  promoting  budgetary  discipline  and  the  sustainability  of  public 
finance,  budgetary  frameworks  should  comprehensively  cover  public  finances.  For 
that  reason,  particular  attention  should  be  given  to  operations  of  those  general 
government  bodies  and  funds  which  do  not  form  part  of  the  regular  budgets  at 
subsector  level  and  that  have  an  immediate  or  medium-term  impact  on  Member 
States’  budgetary  positions.  The  values  of  the  combined  impact  on  general 
government  balances  and  debts  of  those  operations  should  be  presented  in  the 

28 

Regulation  (EU)  No  473/2013  of  the  European  Parliament  and  of  the  Council  of  21  May  2013  on 
common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of 
excessive deficit of the Member States in the euro area (OJ L 140, 27.5.2013, p. 11). 

EN 

10 

  EN 

 
                                                 
 
(18) 

(19) 

(20) 

(21) 

framework  of  the  annual  budgetary  processes  and  in  the  medium-term  budgetary 
plans,  capturing  impacts  stemming  from  future  operations  and  outstanding  and 
expected new liabilities. 

Similarly, transparency regarding the type and size of tax expenditures and resulting 
revenue losses is necessary to provide a more profound understanding of the extent 
to which fiscal policy and budgetary planning are aligned with government priorities. 

Green  budgeting  tools  can  help  redirect  public  revenue  and  expenditure  to  green 
priorities. In that respect, reliable and regular reporting of comprehensive, useful, and 
accessible information improves budget deliberations. This means reporting data on 
how revenues reflect the need to ensure that the “polluter-pays” principle is reflected, 
and  in  turn  on  how  expenditure  reflects  both  favourably  and  unfavourably  green 
priorities.  Member  States  should  publish  the  information  on  how  the  relevant 
elements of their budgets contribute to achieving climate and environmental national 
and  international  commitments  and  the  methodology  used.  Member  States  should 
publish data and descriptive information separately for expenditure, tax expenditure 
and  revenue  items.  Member  States  are  invited  to  publish  information  on  the 
distributional impact of budgetary policies and take into account employment, social 
and distributional aspects in the development of green budgeting29. 

Due  attention  should  be  paid  to  the  existence  of  contingent  liabilities.  More 
specifically,  contingent  liabilities  encompass  possible  obligations  depending  on  the 
occurrence of an uncertain future event, or present obligations where payment is not 
probable or the amount of the probable payment cannot be measured  reliably. They 
comprise,  for  instance,  government  guarantees,  non-performing  loans,  liabilities 
stemming  from  the  operation  of  public  corporations,  and  potential  expenses  and 
obligations arising from court cases and disaster-related contingent liabilities.  

Natural disasters and extreme weather events have affected most Member States and 
climate  change  is  expected  to  amplify  the  frequency  and  intensity  of  such  events. 
Governments  invest  in  climate  adaptation  measures  and  step  in  to  cover  disaster 
costs for  emergency relief, recovery and reconstruction and to  act  as insurer of last 
resort  in  some  cases.  Considering  the  existing  and  future  challenges  for  the 
sustainability  of  public  finances,  particular  attention  should  be  paid  to  government 
obligations  and  risks  to  government  finances  stemming  from  natural  disasters  and 
climate-related  events,  starting  with  collecting  and  publishing  information  on  the 
economic  losses  and  fiscal  cost  of  past  events  as  well  as  information  on  the 
budgetary arrangements and financial instruments used for that matter. 

(22) 

The  Commission  should  continue  to  regularly  monitor  the  implementation  of 
Directive  2011/85/EU.  Best  practices  concerning  the  implementation  of  the 
provisions of that Directive should be identified and shared. 

(23) 

Directive 2011/85/EU should therefore be amended accordingly, 

29 

Communication  COM(2022)494  final  of  28  September  2022  from  the  Commission  ‘Better  assessing 
the distributional impact of Member States’ policies’ and Article 6(3), point (d), of Regulation (EU) No 
473/2013 of the European Parliament and of the  Council of 21 May 2013 on common provisions  for 
monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the 
Member States in the euro area (OJ L 140, 27.5.2013, p. 11). 

EN 

11 

  EN 

 
 
                                                 
HAS ADOPTED THIS DIRECTIVE: 

Directive 2011/85/EU is amended as follows: 

(1) Article 2 is amended as follows: 

(a) 

in the first paragraph, the second sentence is replaced by the following: 

 ‘The definition of subsectors of general government set out in Annex A to 
Regulation (EU) No 549/2013 of the European Parliament and of the 
Council shall apply.*   

___________ 

*OJ L 174, 26.6.2013, p.1.’ 

(b) 

the second paragraph is amended as follows: 

(i) 

point (a) is replaced by the following: 

‘(a) systems of public sector accounting and statistical reporting;’  

(ii)  point (c) is replaced by the following: 

‘(c) country-specific numerical fiscal rules that contribute to the 
consistency of Member States’ conduct of fiscal policy with their 
respective obligations under the TFEU, expressed in terms of a summary 
indicator of budgetary performance, such as the government budget deficit, 
borrowing, debt, or a major component thereof;’ 

(iii)  point (e) is replaced by the following: 

‘(e)  medium-term  budgetary  frameworks  as  a  specific  set  of  national 
budgetary  procedures  that  extend  the  horizon  for  fiscal  policy-making 
beyond  the  annual  budgetary  calendar,  including  the  setting  of  policy 
priorities and of national budgetary objectives over the medium-term;’ 

(iv) 

the following point (h) is added:  

EN 

12 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
‘(h) independent  fiscal  institutions  as bodies structurally  independent  or 
bodies  endowed  with  functional  autonomy  as  regards  the  budgetary 
authorities  of  the  Member  States  established  in  accordance  with  Article 
8.’   

 (2) Article 3 is replaced by the following: 

‘1.  As  concerns  national  systems  of  public  accounting,  Member  States  shall  have,  by  2030, 
integrated,  comprehensive  and  nationally  harmonised  accrual  financial  accounting  systems 
covering  all  subsectors  of  general  government  and  containing  the  cash  and  accrual 
information  needed  to  prepare  data  based  on  ESA  2010.  Those  public  sector  financial 
accounting systems shall be subject to internal control and independent audits.  

2.  Member  States  shall  ensure  timely  and  regular  public  availability  of  fiscal  data  for  all 
subsectors of general government as set out by Regulation (EU) No 549/2013 of the European 
Parliament and of the Council*. In particular, Member States shall publish quarterly debt and 
deficit data separately for central government, state government, local government and social 
security funds, before the end of the following quarter or after publication of the relevant data 
by the Commission (Eurostat). 

3. The Commission (Eurostat) shall publish the quarterly government finance statistics data in 
accordance with tables 25, 27 and 28 of Annex B to Regulation (EU) No 549/2013, every 3 
months. 

___________ 

*OJ L 174, 26.6.2013, p. 1.’ 

(3) Article 4 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

‘1.  Member  States  shall  ensure  that  annual  and  multiannual  fiscal  planning  is 
based on realistic macroeconomic and budgetary forecasts using the most up-to-
date  information.  Budgetary  planning  shall  be  based  on  the  most  likely 
macrofiscal  scenario  or  on  a  more  prudent  scenario.  The  macroeconomic  and 
budgetary  forecasts  shall  be  either  produced  or  endorsed  by  independent  fiscal 
institutions  established  in  accordance  with  Article  8.  They  shall  be  compared 
with  the  most  updated  forecasts  of  the  Commission.  Significant  differences 
between  the  macroeconomic  and  budgetary  forecasts  of  the  Member  State  and 
the  Commission’s  forecasts  shall  be  explained,  including  where  the  level  or 
growth of variables in external assumptions departs significantly from the values 
contained in the Commission’s forecasts.’ 

(b) 

(c) 

paragraph 4 is deleted. 

paragraphs 5 and 6 are replaced by the following:  

EN 

13 

  EN 

 
 
 
 
 
 
 
 
‘5.  Member  States  shall  specify  which  institution  is  responsible  for  producing 
macroeconomic  and  budgetary  forecasts.  At  least  annually,  the  Member  States 
and  the  Commission  shall  engage  in  a  technical  dialogue  concerning  the 
assumptions  underpinning  the  preparation  of  macroeconomic  and  budgetary 
forecasts.  

6. The macroeconomic and budgetary forecasts for annual and multiannual fiscal 
planning  produced  by  the  national  institutions  shall  be  subject  to  regular, 
objective  and  comprehensive  evaluation  by  an  independent  body,  including ex 
post evaluation. The result of that evaluation shall be made public and taken into 
account  appropriately  in  future  macroeconomic  and  budgetary  forecasts.  If  the 
evaluation  detects  a  significant  bias  affecting  macroeconomic  forecasts  over  a 
period of at least 4 consecutive years, the Member State concerned shall take the 
necessary action and make it public.’ 

(d) 

paragraph 7 is deleted.  

(4) Article 5 is replaced by the following: 

‘Article 5  

Each  Member  State  shall  establish  its  specific  numerical  fiscal  rules  to  effectively 
promote compliance with its obligations deriving from the TFEU in the area of fiscal 
planning  over  a  multiannual  period  for  the  general  government  as  a  whole.  Such 
rules shall promote in particular: 

(a) 

(b) 

 compliance with the reference values and provisions on deficit and debt 
set in accordance with the TFEU;  

 the adoption of a multiannual fiscal planning period, consistent with the 
provisions of Regulation [XXX preventive arm of the SGP].* 

__________________ 

* Regulation (EU) of the European Parliament and of the Council of [insert date] 
[insert full title] (OJ L ..).’ 

(5) Article 6 is amended as follows: 

(a) in paragraph 1, point (b) is replaced by the following: 

‘(b)  The  effective  and  timely  monitoring  of  compliance  with  the  rules,  based  on 
reliable  and  independent  analysis  carried  out  by  independent  fiscal  institutions 
established in accordance with Article 8.’; 

EN 

14 

  EN 

 
 
 
 
 
 
 
(b) paragraph 2 is replaced by the following: 

‘If  numerical  fiscal  rules  contain  escape  clauses,  such  clauses  shall  set  out  a  limited 
number  of  specific  circumstances,  consistent  with  the  Member  States’  obligations 
deriving  from  the  TFEU  and  Regulation  [XXX  preventive  arm  of  the  SGP],  and 
stringent  procedures in  which temporary non-compliance with  the rules is  permitted. 
Escape clauses shall have clear time limits.’  

(6) Article 7 is replaced by the following: 

The  annual  budget  legislation  of  the  Member  States  be  consistent  with  the  country-specific 
numerical fiscal rules in force.’ 

‘Article 7 

(7) In Chapter V, the title is replaced by ‘INDEPENDENT FISCAL INSTITUTIONS’ 

(8) Article 8 is replaced by the following: 

‘Article 8  

1.  Member  States  shall  ensure  that  independent  fiscal  institutions,  such  as  structurally 
independent  bodies  or  bodies  endowed  with  functional  autonomy  as  regards  the  budgetary 
authorities  of  the  Member  States,  are  established  by  national  laws,  regulations  or  binding 
administrative provisions.   

2. The institutions referred to in paragraph 1 shall be composed of members nominated and 
in  public  finances, 
appointed  on 
macroeconomics or budgetary management, and by means of transparent procedures. 

their  experience  and  competence 

the  basis  of 

3. The institutions referred to in paragraph 1 shall: 

(a)  

not  take  instructions  from  the  budgetary  authorities  of  the  Member  State 

concerned or from any other public or private body; 

(b)  

have  the  capacity  to  communicate  publicly  about  their  assessments  and 

opinions in a timely manner; 

(c)  

have  adequate  and  stable  own  resources  to  carry  out  their  mandate  in  an 

effective manner, including any type of analysis within their mandate;  

(d)  
mandate;  

have  adequate  and  timely  access  to  the  information  needed  to  fulfil  their 

(e)  

be subject to regular external evaluations by independent evaluators. 

4.  Member  States  shall  ensure  that  the  institutions  referred  to  in  paragraph  1  have  the 
following tasks: 

(a) 

producing the annual and multiannual macroeconomic and budgetary forecasts 
underlying the government’s medium-term planning or endorsing those used by the budgetary 
authorities; 

EN 

15 

  EN 

 
 
 
 
 
 
 
(b) 

producing  debt  sustainability  assessments  underlying  the  government’s 

medium-term planning or endorsing those provided by the budgetary authorities; 

(c) 

producing  assessments  on  the  impacts  of  policies  on  fiscal  sustainability  and 

sustainable and inclusive growth or endorsing those provided by the budgetary authorities; 

(d) 

monitoring  compliance  with  country-specific  numerical  fiscal  rules  in 

accordance with Article 6; 

(e) 

monitoring  compliance  with  the  Union  fiscal  framework  in  accordance  with 

Regulations [XXX preventive arm of the SGP] and [XXX corrective arm of the SGP] *;   

(f) 

conducting, on a regular basis, reviews of the national budgetary framework, in 
order  to  assess  the  consistency,  coherence  and  effectiveness  of  the  framework,  including 
mechanisms and rules that regulate fiscal relationships between public authorities across sub-
sectors of general government; 

(g)  

participate in regular hearings and discussions at the national Parliament.   

Member  States  shall  ensure  that  the  budgetary  authorities  of  the  Member  State 
5. 
concerned comply with the assessments or opinions issued by the institutions in the context of 
the  tasks  referred  to  in  paragraph  4.  Where  such  budgetary  authorities  do  not  comply  with 
those assessments or opinions, they shall publicly justify the decision not to comply within a 
month from the issuance of such assessments or opinions. 

_________________ 

* Regulation (EU) of the Council of [insert date] [insert full title] (OJ L ..). 

(9) Article 9 is amended as follows: 

a) paragraph 1 is replaced by the following: 

‘1.  Member  States  shall  establish  a  credible,  effective  medium-term  budgetary 
framework providing for the adoption of a fiscal planning period of at least 4 years to 
ensure that national fiscal planning follows a multiannual fiscal planning perspective.’ 

b) paragraph 2 is amended as follows: 

(i)  point (a) is replaced by the following: 

‘(a)  comprehensive  and  transparent  multiannual  budgetary  objectives  as  referred  to 
in Article 2, point (e) in terms of the general government deficit, debt and any other 
summary fiscal indicator such as expenditure, ensuring that they are consistent with 
any  country-specific  numerical  fiscal  rules  as  provided  for  in  Chapter  IV  of  this 
Directive  and  the  relevant  provisions  of  Regulation  [XXX  preventive  arm  of  the 
SGP].’; 

(ii) point (c) is replaced by the following: 

EN 

16 

  EN 

 
 
 
 
 
‘(c)  a  description  of  medium-term  policies,  including  investment  and  reforms, 
envisaged  with  an  impact  on  general  government  finances  and  sustainable  and 
inclusive growth, broken down by major revenue and expenditure item, showing how 
the  adjustment  towards  the  national  budgetary  objectives  over  the  medium  term  as 
referred  to  in  Article  2,  point  (e),  is  achieved  compared  to  projections  under 
unchanged policies.’; 

(iii) point (d) is replaced by the following: 

‘(d) an assessment as to how in the light of their direct medium-term and long-term 
impact on general government finances, the policies envisaged are likely to affect the 
medium-term and long-term sustainability of the public finances and sustainable and 
inclusive  growth.  The  assessment  shall  specify,  to  the  extent  possible,  the 
macrofiscal  risks  from  climate  change  and  their  environmental  and  distributional 
impacts,  and  the  implications  on  public  finance  of  climate-related  mitigation  and 
adaptation policies over the medium-term and long-term.’; 

c) paragraph 3 is deleted; 

(10) Articles 10 and 11 are replaced by the following: 

Annual budget legislation shall be consistent with the national budgetary objectives over the 
medium term as referred to in Article 2, point (e). Any departure shall be duly explained.’; 

‘Article 10 

Article 11 

This Directive shall, in no way, prevent a Member State’s new government from updating its 
medium-term  budgetary  plan  to  reflect  its  new  policy  priorities.  In  such  case,  the  new 
government  shall  indicate  the  differences  between  the  previous  and  the  new  medium-term 
budgetary plan.’; 

(11) in Chapter VI, the title is replaced by the following: ‘TRANSPARENCY OF GENERAL 
GOVERNMENT FINANCES’ 

(12) Article 12 is replaced by the following: 

‘Article 12 

Member States shall ensure that any measures taken in compliance with Chapters II, III and 
IV  are  consistent  across,  all  subsectors  of  general  government  and  cover  comprehensively 
those subsectors. To that effect Members States shall, in particular, require consistent public 
sector  accounting  rules  and  procedures,  and  the  integrity  of  their  underlying  data  collection 
and processing systems.’; 

EN 

17 

  EN 

 
 
 
 
 
 
 
 
(13) Article 14 is replaced by the following: 

‘Article 14 

1.    Within  the  framework  of  the  annual  and  multiannual  budgetary  legislation  processes, 
Member States shall publish bodies and funds which do not form part of the regular budgets 
but are part of the general government, including subsectors of general government. Member 
States shall also publish values corresponding to the combined impact on general government 
balances  and  debts  of  those  bodies  and  funds  whereby  the  impact  on  the  balances  shall 
include past and expected future operations and the impact on debts shall include outstanding 
and expected new liabilities.  

2.      Member  States  shall  publish  detailed  information  on  the  impact  of  tax  expenditures  on 
revenues for the national budgetary objectives as referred to in Article 2, point (e), based on a 
transparent methodology. 

3.    For  all  subsectors  of  general  government,  Member  States  shall  publish  relevant 
information  on  contingent  liabilities  with  potentially  large  impact  on  public  budgets, 
including  government  guarantees,  non-performing  loans,  and  liabilities  stemming  from  the 
operation of public corporations, potential expenses and obligations arising from court cases, 
including  the  extent  thereof.  Member  States  shall  also  publish  information  on  disaster  and 
climate-related  contingent  liabilities  to  the  extent  possible.  Member  States  shall  publish 
information  on  past  calls  on  one-off  guarantees  and  expenditure  recorded  for  standardised 
guarantees. Published information shall include information on economic losses incurred due 
to  disasters  and  climate-related  shocks,  including  the  fiscal  costs  borne  by  the  public  sector 
and the instruments used to mitigate or cover them. Member States shall publish information 
on the participation of general government in the capital of private and public corporations in 
respect of economically significant amounts.’  

(14) Article 14a. is added as follows 

‘Article 14a. 

1.  By  14  December  20XX  the  Commission  shall  publish  a  review  of  the 
effectiveness of this Directive. 

2. By 31 December 2025, the Commission shall report on the state of play and future 
direction of public sector financial accounting in the Union, taking into account the 
progress made since its 2013 assessment of the suitability of the International Public 
Sector Accounting Standards for the Member States.’ 

(15) Article 15 is replaced by the following: 

 1.   Member  States  shall  bring  into  force  the  provisions  necessary  to  comply  with  this 
Directive by 31 December  202X. They shall forthwith  communicate to  the Commission the 

‘Article 15 

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text of those provisions. The Council encourages Member States to draw up, for themselves 
and in the interests of the Union, their own correlation tables which will, as far as possible, 
illustrate the correlation  between this Directive and the transposition measures, and to make 
them public. 

2.   When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive or be accompanied by such a reference on the occasion of their official publication. 
Member States shall determine how such reference is to be made. 

3.  The  Commission  shall  prepare  an  interim  progress  report  on  the  implementation  of  the 
main  provisions  of  this Directive  on  the  basis  of  relevant  information  from  Member  States, 
which  shall  be  submitted  to  the  European  Parliament  and  to  the  Council  by  14  December 
20XX. 

4.   Member  States  shall  communicate  to  the  Commission  the  text  of  the  main  provisions 
which they adopt in the field covered by this Directive.’ 

(16) Article 16 is deleted. 

Done at Brussels, 

For the Council 
The President 

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