The Public Finances Of The European Union
Presented by: Dr. TELEKI
Date: 11 – 13 January 2025
The Maastricht Treaty and the Stability and Growth Pact
- The Maastricht convergence criteria:
• Price stability;
• Sound and sustainable public finances;
3% for the ratio of the planned or actual government deficit to gross
domestic product at market prices
60% for the ratio of government debt to gross domestic product at
market prices
• Exchange-rate stability;
• Rules related to long-term interest rates.
- The Stability and Growth Pact (1997):
• The concept of excessive deficits" and the excessive deficit procedure (EDP)
• Preventive Arm and Corrective Arm
Political commitment
Preventive elements
Dissuasive elements
o EDP
• Reform of the SGP (2005)
'Should we just forget the Pact?'
The Impact Of The 2008 Crisis And The Eurocrisis
- DISCIPLINE AND FISCAL HARMONIZATION
• 01. Ensuring the balanced or surplus character of national budgets
• 02. Increasing the impact of the recommendations made by the European
Commission
• 03. Better coordination of national economic policies
- Sovereign-debt crisis + Eurocrisis (2011)
- Bail-out packages
- European Stability Mechanism
- Fiscal Compact
- Six-Pack and Two-Pack
- Institutional innovation (ESA, Banking Union)
What about the EMU 2.0?
- Complete Banking Union and Capital Markets Union
- Financial Union
• Diversified banks' sovereign exposures
• European safe asset
- Economic and Fiscal Union
• Economic and social convergence
• Common fiscal stabilization capacity
- Institutions and governance
• Accountable institutions and effective governance
- Serious doubts about the current system characterized by the convergence criteria and
the rules of the SGP...
- The Five Presidents' Report (2015)
- The 10 Points of the Commission (2022)
- Commission's country-specific recommendations (2024)
The 10 Points of the Commission (2022)
- Moving towards a more risk-based surveillance framework focusing on debt
sustainability and differentiating between countries based on their public debt
challenges.
- Retaining the current reference values for deficit and debt criteria (3% and 60% rules)
but adapting the "debt reduction benchmark" to country-specific debt ratios.
- Introducing national medium-term fiscal-structural plans integrating fiscal, reform, and
investment objectives, merging stability and convergence programs.
- Allowing Member States greater flexibility in setting their fiscal adjustment paths based
on the Commission's reference budgetary adjustment path.
- Establishing a common EU framework for assessing Member States' medium-term
fiscal-structural plans, with the Council adopting the plans based on Commission
assessments.
- Monitoring the implementation of the plans through annual progress reports and
allowing for plan revisions under certain circumstances.
- Maintaining escape clauses for severe economic downturns and exceptional
circumstances.
- Strengthening EU enforcement through various available sanctions, including financial,
reputational, and macroeconomic conditionality measures.
- Increasing the role of independent fiscal institutions (IFIs) in monitoring and
implementing fiscal rules and improving the setup and performance of IFIs.
- Addressing the relationship between fiscal rules and the Macroeconomic Imbalances
Procedure (MIP)
Contemporary challenges...
- EU = Green and Digital
- Covid-19 aftermath
...and their impact on the EU budget.
- Financial support to public investments and reforms
• €672.5 billion
€312.5 billion in grants
€360 billion in loans
- Twin Transitions: Green and Digital
• 37% for investments and reforms
• 20% to foster the DIGITAL transition
• The Commission will assess national plans against these targets
- "Transforming the resilience of Europe"
• Next Generation EU
• Recovery and Resilience Facility
• LIFE + Just Transition Mechanism
• Green finances
• Horizontalization of green and digital requirements
