CELEX ID: 12016E126

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Document:
7.6.2016
EN
Official Journal of the European Union
C 202/99
Article 126
(ex Article 104 TEC)
1.   Member States shall avoid excessive government deficits.
2.   The Commission shall monitor the development of the budgetary situation and of the stock of government debt in the Member States with a view to identifying gross errors. In particular it shall examine compliance with budgetary discipline on the basis of the following two criteria:
(a)
whether the ratio of the planned or actual government deficit to gross domestic product exceeds a reference value, unless:
—
either the ratio has declined substantially and continuously and reached a level that comes close to the reference value,
—
or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value;
(b)
whether the ratio of government debt to gross domestic product exceeds a reference value, unless the ratio is sufficiently diminishing and approaching the reference value at a satisfactory pace.
The reference values are specified in the Protocol on the excessive deficit procedure annexed to the Treaties.
3.   If a Member State does not fulfil the requirements under one or both of these criteria, the Commission shall prepare a report. The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors, including the medium-term economic and budgetary position of the Member State.
The Commission may also prepare a report if, notwithstanding the fulfilment of the requirements under the criteria, it is of the opinion that there is a risk of an excessive deficit in a Member State.
4.   The Economic and Financial Committee shall formulate an opinion on the report of the Commission.
5.   If the Commission considers that an excessive deficit in a Member State exists or may occur, it shall address an opinion to the Member State concerned and shall inform the Council accordingly.
6.   The Council shall, on a proposal from the Commission, and having considered any observations which the Member State concerned may wish to make, decide after an overall assessment whether an excessive deficit exists.
7.   Where the Council decides, in accordance with paragraph 6, that an excessive deficit exists, it shall adopt, without undue delay, on a recommendation from the Commission, recommendations addressed to the Member State concerned with a view to bringing that situation to an end within a given period. Subject to the provisions of paragraph 8, these recommendations shall not be made public.
8.   Where it establishes that there has been no effective action in response to its recommendations within the period laid down, the Council may make its recommendations public.
9.   If a Member State persists in failing to put into practice the recommendations of the Council, the Council may decide to give notice to the Member State to take, within a specified time limit, measures for the deficit reduction which is judged necessary by the Council in order to remedy the situation.
In such a case, the Council may request the Member State concerned to submit reports in accordance with a specific timetable in order to examine the adjustment efforts of that Member State.
10.   The rights to bring actions provided for in Articles 258 and 259 may not be exercised within the framework of paragraphs 1 to 9 of this Article.
11.   As long as a Member State fails to comply with a decision taken in accordance with paragraph 9, the Council may decide to apply or, as the case may be, intensify one or more of the following measures:
—
to require the Member State concerned to publish additional information, to be specified by the Council, before issuing bonds and securities,
—
to invite the European Investment Bank to reconsider its lending policy towards the Member State concerned,
—
to require the Member State concerned to make a non-interest-bearing deposit of an appropriate size with the Union until the excessive deficit has, in the view of the Council, been corrected,
—
to impose fines of an appropriate size.
The President of the Council shall inform the European Parliament of the decisions taken.
12.   The Council shall abrogate some or all of its decisions or recommendations referred to in paragraphs 6 to 9 and 11 to the extent that the excessive deficit in the Member State concerned has, in the view of the Council, been corrected. If the Council has previously made public recommendations, it shall, as soon as the decision under paragraph 8 has been abrogated, make a public statement that an excessive deficit in the Member State concerned no longer exists.
13.   When taking the decisions or recommendations referred to in paragraphs 8, 9, 11 and 12, the Council shall act on a recommendation from the Commission.
When the Council adopts the measures referred to in paragraphs 6 to 9, 11 and 12, it shall act without taking into account the vote of the member of the Council representing the Member State concerned.
A qualified majority of the other members of the Council shall be defined in accordance with Article 238(3)(a).
14.   Further provisions relating to the implementation of the procedure described in this Article are set out in the Protocol on the excessive deficit procedure annexed to the Treaties.
The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the European Central Bank, adopt the appropriate provisions which shall then replace the said Protocol.
Subject to the other provisions of this paragraph, the Council shall, on a proposal from the Commission and after consulting the European Parliament, lay down detailed rules and definitions for the application of the provisions of the said Protocol.

Summary:
The role of the European Commission’s Directorate General for Economic and Financial Affairs — DG ECFIN
SUMMARY OF:
Article 121 of the Treaty on the Functioning of the European Union (TFEU)
Article 126 of the Treaty on the Functioning of the European Union (TFEU)
WHAT IS THE AIM OF ARTICLES 121 AND 126 OF THE TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION?
Articles 
121
 and 
126
 of the TFEU provide for the surveillance of the economic policies and performances of 
European Union
 (EU) 
Member States
, involving the 
European Commission
.
Member States must provide the Commission with information on their economic policies.
Where an EU country’s policies risk jeopardising 
economic and monetary union
, the Commission may issue a warning and propose recommendations to the 
Council
 (Art. 121).
The Commission must monitor the development of the budgetary situation in EU countries and in the case of gross policy errors may propose recommendations to the Council to open a procedure against the country in question.
The Directorate-General for Economic and Financial Affairs (DG ECFIN) is a Commission department which aims to contribute to raising the economic welfare of citizens in the EU and beyond by promoting the development of competitive, employment-rich economies.
KEY POINTS
Role
The department contributes to the development of policies that are geared towards sustainable and inclusive economic growth while preserving macroeconomic and financial stability. Among other things, it:
implements necessary structural reforms;
aims to achieve and maintain sound public finances and an appropriate policy mix (finding the right combination of policies to maximise growth and employment);
promotes investment in 
productive capital
 (goods and infrastructure that help to generate growth) and in 
human capital
 (training and educating people).
Key objectives
Its efforts are focused on achieving 2 of the Commission’s general objectives:
a new boost for jobs, growth and investment;
a deeper and fairer economic and monetary union.
In order to do so, it has established a strategy consisting of the pursuit of 5 specific objectives:
promoting growth- and employment-enhancing policies in the 
euro area
 and the EU,
promoting macro-economic and fiscal stability in the euro area and the EU,
promoting investment in the EU,
promoting prosperity beyond the EU,
improving the efficient functioning of the economic and monetary union.
European Semester
The 
European Semester
 has been established to coordinate economic policies across the EU throughout the year and to address the EU’s economic challenges. ECFIN plays a key role by:
undertaking a detailed analysis of each country’s budgetary and economic challenges and policy plans;
providing policy guidance tailored to each EU country with country-specific recommendations to be implemented within the following 12-18 months; and then
monitoring of economic developments and reform implementation.
Launching procedures
ECFIN plays an important role in launching procedures against EU countries under the 
Stability and Growth Pact (SGP)
 and the 
Macroeconomic Imbalance Procedure (MIP)
:
In situations where an EU country's budget deficit or public debt is considered excessive in relation to certain established reference values, the Commission may prepare a report to launch an 
Excessive Deficit Procedure (EDP)
 and recommend the Council to open an EDP. The Commission may also address a warning to countries that do not adhere to their medium-term budgetary objective.
DG ECFIN is the main provider of the analysis in the 
Alert Mechanism Report (AMR)
 and for large part of the 
in-depth reviews (IDRs)
 and plays a coordination role in certain aspects of MIP surveillance. In cases of more serious imbalances, the Commission may propose to launch an 
Excessive Imbalance Procedure (EIP)
 as part of the corrective arm of the MIP. Afterwards, DG ECFIN monitors the correction of the excessive imbalances.
BACKGROUND
For more information, see:
Economic and Financial Affairs
 (
European Commission
).
MAIN DOCUMENTS
Consolidated version of the Treaty on the Functioning of the European Union — Part Three — Union policies and internal actions — Title VIII — Economic and monetary policy — Chapter 1 — Economic policy — 
Article 121
 (ex Article 99 TEC) (OJ C 202, 
7.6.2016
, 
pp. 97-98
)
Consolidated version of the Treaty on the Functioning of the European Union — Part Three — Union policies and internal actions — Title VIII — Economic and monetary policy — Chapter 1 — Economic policy — 
Article 126
 (ex Article 104 TEC) (OJ C 202, 
7.6.2016
, 
pp. 99-102
)
last update 
3.9.2021

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