Stability and Growth Pact

Eurogroup statement on Greece of 11 June 2020

Retrieved on: 
Friday, June 12, 2020
Eurozone, Economy of Greece, Economy of the European Union, European Union, Stability and Growth Pact, Political debates about the United States federal budget

Based on the Commission 2020 spring forecast, the Greek economy is expected to be among the hardest hit in the EU in 2020, although a fairly strong recovery is projected for 2021.

Key Points: 
  • Based on the Commission 2020 spring forecast, the Greek economy is expected to be among the hardest hit in the EU in 2020, although a fairly strong recovery is projected for 2021.
  • We recall that Greece maintained strong fiscal performance, reaching the primary surplus targets in the past five years and a headline surplus of 1.5% of GDP in 2019.
  • The updated forecast of the European institutions expects the primary balance to turn to a deficit in 2020, before returning to a surplus in 2021.
  • Our next discussion on Greece will be based on the seventh enhanced surveillance report expected to be issued in September 2020.

Press release - MEPs: Focus on crisis response when coordinating economic and budgetary policies

Retrieved on: 
Thursday, May 28, 2020
European Parliament, European Union, Economy of the European Union, Eurozone, Econ, Stability and Growth Pact, Member of the European Parliament, Psychological resilience, Articles

Executive Vice-President Dombrovskis pointed to the resilience facility, the new recovery instrument designed to improve the implementation of the CSR.

Key Points: 
  • Executive Vice-President Dombrovskis pointed to the resilience facility, the new recovery instrument designed to improve the implementation of the CSR.
  • Fiscal policy in times of crisis Other ECON MEPs were concerned about the general escape clause, which allows the excessive deficit procedure against a member state to be put on hold in times of a severe economic downturn.
  • MEPs wanted to know when the procedure will kick in again and how to keep the right balance between debt sustainability and much-needed investments.
  • Mr Dombrovskis stressed that the Stability and Growth Pact has been put on hold until the economy is growing again; then the rules start to reapply.
  • Background The European Semester is the annual cycle for coordinating the economic and budgetary policies of the EU member states.
  • In the medium-term, the focus should be on investing in sustainable and inclusive growth that facilitates the green transition and the digital transformation.
  • Committee on Economic and Monetary Affairs on twitter Committee on Employment and Social Affairs on twitter Sign up to our news subscription services

Press release - MEPs: Focus on crisis response when coordinating economic and budgetary policies

Retrieved on: 
Thursday, May 28, 2020
European Parliament, European Union, Economy of the European Union, Eurozone, Econ, Stability and Growth Pact, Member of the European Parliament, Psychological resilience, Articles

Executive Vice-President Dombrovskis pointed to the resilience facility, the new recovery instrument designed to improve the implementation of the CSR.

Key Points: 
  • Executive Vice-President Dombrovskis pointed to the resilience facility, the new recovery instrument designed to improve the implementation of the CSR.
  • Fiscal policy in times of crisis Other ECON MEPs were concerned about the general escape clause, which allows the excessive deficit procedure against a member state to be put on hold in times of a severe economic downturn.
  • MEPs wanted to know when the procedure will kick in again and how to keep the right balance between debt sustainability and much-needed investments.
  • Mr Dombrovskis stressed that the Stability and Growth Pact has been put on hold until the economy is growing again; then the rules start to reapply.
  • Background The European Semester is the annual cycle for coordinating the economic and budgetary policies of the EU member states.
  • In the medium-term, the focus should be on investing in sustainable and inclusive growth that facilitates the green transition and the digital transformation.
  • Committee on Economic and Monetary Affairs on twitter Committee on Employment and Social Affairs on twitter Sign up to our news subscription services

The review of draft budgetary plans for 2020 – some implications for a reform of fiscal governance

Retrieved on: 
Saturday, December 28, 2019
Eurozone, European Union, Economy of the European Union, Europe, Economy, Euro, Sixpack, Stability and Growth Pact

On 21 November 2019 the European Commission released its opinions on the draft budgetary plans of euro area governments for 2020, together with an analysis of the budgetary situation in the euro area as a whole.

Key Points: 
  • On 21 November 2019 the European Commission released its opinions on the draft budgetary plans of euro area governments for 2020, together with an analysis of the budgetary situation in the euro area as a whole.
  • The review of the draft budgetary plans identifies weaknesses in the follow-up to the recommendations.
  • The draft budgetary plans for 2020 result in a slightly expansionary fiscal stance for the euro area as a whole while reflecting very different fiscal developments across countries.
  • These countries are projected to record sound fiscal positions in 2020 as defined by their medium-term budgetary objectives (MTOs).
  • In addition, the Commission considers that the draft budgetary plans of Estonia and Latvia are broadly compliant with the SGP.
  • Chart A Government debt and the gap between structural balances and MTOs in 2020 (percentages of GDP)
  • The draft budgetary plans of a sizeable number of euro area countries are assessed to pose risks of non-compliance with the SGP, which is a matter of particular concern for countries with high government debt ratios.
  • Among them, Belgium, Spain and Portugal submitted plans on a no-policy-change basis, reflecting the election of new governments in the latter two countries and the ongoing process for the formation of a federal government in Belgium.
  • This applies notably to Belgium, Spain, France and Italy, which continue to record very high debt ratios that are yet to commence a steady downward trend.
  • Chart B Government debt in 2020 and gaps vis--vis the SGPs structural adjustment requirements in Member States whose draft budgetary plans are assessed as being at risk of non-compliance with the SGP (percentages of GDP)

Priorities for fiscal policies under the 2019 European Semester

Retrieved on: 
Friday, August 9, 2019
Fiscal policy, Eurozone, European Union, Economy of the European Union, Government debt, Economy of Europe, Stability and Growth Pact, Government, Fiscal adjustment, Sixpack, European Fiscal Compact

On 5June the European Commission issued its 2019 European Semester Spring Package of policy recommendations for EU Member States.

Key Points: 
  • On 5June the European Commission issued its 2019 European Semester Spring Package of policy recommendations for EU Member States.
  • The package includes country-specific recommendations (CSRs) for economic and fiscal policies in 2020 for all Member States.
  • [1] It also contains recommendations regarding the implementation of the European Unions Stability and Growth Pact (SGP) for some countries.
  • At the same time, countries that have achieved sound fiscal positions could utilise some fiscal space for measures to support economic growth.
  • The 2019 Spring Package confirms the pattern of a significant divergence of fiscal positions across countries.
  • As shown in ChartB, most euro area countries with government debt above 90% of GDP implemented large fiscal adjustments in 2012-13, as measured by the change in the structural balance.
  • This indicator comprises headline budget balances net of the impact of the economic cycle and one-off measures.
  • For some countries with high levels of government debt, the adjustments exceeded the requirements under the SGP, in part reflecting financial market pressures.
  • Moreover, the overall limited improvement in structural balances in recent years tends to overstate the efforts actually undertaken by governments.
  • Chart B Change in structural balances of countries not at their MTOs and with debt above 90% of GDP (percentages of GDP)
  • While the CSRs set fiscal policy priorities for 2020 that differ across countries, they all emphasise the need to achieve a more growth-friendly composition of public finances.
  • Countries that have not yet achieved their MTOs are advised to align their fiscal adjustment efforts with the requirements of the SGP.
  • This is consistent with the need for countries with high debt and remaining fiscal gaps to build fiscal buffers that would ensure their resilience if downside risks to the economy materialise.
  • However, it would require sizeable additional fiscal adjustment measures on the part of such countries (see ChartC).
  • Germany is recommended, while respecting the MTO, to use fiscal and structural policies to achieve a sustained upward trend in private and public investment which is in line with government plans.
  • On 5June 2019 the European Commission also issued recommendations for some euro area countries regarding the implementation of the SGP.
  • On 3July 2019 the Commission concluded that an EDP was no longer warranted for Italy at this stage.