In order to meet this objective, Member States should present medium-term fiscal-structural plans that ensure that the debt ratio is kept or brought onto a sustainable path by the end of the adjustment period. The adjustment path will be discussed and agreed upon bilaterally with the Commission, before being adopted by the EU Council. These medium-term structural plans will incorporate public investment and reform commitments. Reform and investment plans should be focused on addressing the priorities identified in the country-specific recommendations approved by the European Council, in line with strategic EU priorities. The reform and investment commitments could underpin a longer fiscal adjustment period or a more gradual adjustment. The fiscal adjustment path is to be based on a long-term fiscal sustainability anchor, engineered through a so-called debt sustainability analysis framework and implemented through a simple expenditure rule. In addition, for major shocks, a general escape clause and an exceptional circumstances clause would be maintained, allowing for temporary deviations from the fiscal path. And independent fiscal institutions could be given a role in providing ex-ante and ex-post assessments of the adequacy and compliance of the plans at the national level. As for the enforcement mechanism, the effective use of financial sanctions would be deconstrained by lowering their amounts, reputational sanctions would be enhanced, and macroeconomic conditionality would be applied for structural funds and EU financing as an additional lever. The European Commission’s orientations also include proposals to reform the prevention and correction of harmful macroeconomic imbalances, strengthening the MIP with risk 4  European Commission (2022).

In Southeast Asia, some radical Muslim groups tried to turn the region into an Islamic caliphate through terrorist acts, including suicide bombings. This threat remains, despite recent successes by security agencies in foiling attacks in Indonesia and elsewhere. However, the extremists will not succeed in their political and religious goals. More importantly, although terrorist acts may disrupt our economy, its impact pales in comparison to the structural shifts in the international order led by the re-emergence of China and India. China’s reach is now global, in search of friends, influence, markets and resources. India is also seeking to expand its links and influence abroad. The US and Japan will try to co-opt India as a countervailing weight to China. But India, while seeking to balance its relations with all three, will preserve its own independence. Both China and India will compete but they will be careful not to collide. Both desire stability for their continued growth. Japan has adopted a more conciliatory foreign policy under Prime Minister Yasuo Fukuda. He has eschewed controversial issues such as visits to the Yasukuni shrine. He will endeavour to cultivate ties with China and India while staying steadfast with the US. Nonetheless, there are several potential wildcards in the region. First, the road to denuclearising the Korean Peninsula remains long and difficult. Second, cross-strait relations between Taiwan and Beijing are entering a critical phase.