What changed between the plenary report and the adopted text

Removed:(18) Since Member States could face additional costs at the end of their medium-term fiscal-structural plan such as ageing costs or an unfavourable interest-growth differential, they should ensure that the headline balance at the end of the adjustment period will be sufficient to ensure that the deficit durably stays below the 3% of GDP reference value.

Removed:(19) In order to allow for a proper interaction between the common Union framework and national budgetary frameworks, the Commission should base its assessment only on nationally financed net primary expenditure developments. Member States should be able to set their national budgetary objectives in terms of a different indicator, such as the structural balance if this is required by their national budgetary framework.

Removed:▌

Removed:(21) In order to ensure the implementation of the medium-term fiscal-structural plans, the Commission and the Council should monitor the reform and investment commitments made in these plans under the European Semester, based on the annual progress reports submitted by the Member States, and in accordance with the provisions of Articles 121 and 148 TFEU. To that effect, they should engage in a European Semester dialogue with the European Parliament and a medium-term structural-fiscal plan dialogue with the competent committee of the European Parliament. The Commission should take into account elements arising from the views expressed through those dialogues.

Removed:(21a) The European Parliament should be duly involved in a regular and structured way in the European Semester. The Council and the Commission should regularly report to the European Parliament on the application of this Regulation and include in their reports the results of the multilateral surveillance carried out pursuant to this Regulation. In order to ensure transparency and accountability in the application of this Regulation, the Commission should transmit, subject to appropriate confidentiality arrangements where necessary, relevant documents and information simultaneously and on equal terms to the European Parliament and to the Council, such as the medium-term fiscal-structural plans submitted by Member States and the proposed net expenditure path, the debt sustainability assessments and an overview of the Commission's preliminary findings concerning the progress in the implementation of the plans.

Removed:(22) To ensure a more gradual debt reduction, the adjustment period can be extended by a maximum of 3 years if the Member State underpins its medium-term fiscal-structural plan with a set of verifiable and time-bound reforms and investment that, taken altogether as a rule: are growth and resilience-enhancing, support fiscal sustainability, address the common priorities of the Union, address relevant country-specific recommendations addressed to the Member State under the European Semester, and address the country-specific investment priorities ▌. If duly justified, a Member State may be allowed to address several but not all of those criteria with regard to its set of reforms and investments underpinning an extension of the adjustment period.

Removed:(23) With a view to ensuring an equitable and transparent process, the reform and investment commitments should be assessed using a common Union framework. During the lifetime of the Recovery and Resilience Facility, commitments in the national Recovery and Resilience Plans should be consistent with the set of reforms and investments for an extension of the adjustment period, where applicable. The set of reforms and investments underpinning an extension of the fiscal adjustment path period should be commensurate with the degree of public debt challenges as established in the most recent update of the Debt Sustainability Monitor and challenges to medium-term growth in the Member State, including demographic challenges. For Member States where public debt challenges are linked to significant challenges to medium-term growth, the set of reforms and investments is expected to also address bottlenecks to medium-term growth.

Removed:(24) The set of reform and investment commitments put forward in the national medium-term fiscal-structural plans should actively contribute to the common priorities of the Union. The Commission should pay particular attention to that contribution when assessing the net expenditure path proposed by the Member State. That set of reform and investment commitments should also be consistent with the implementation of the national strategies put forward by the Member State concerned to address the relevant Union priorities and with the Recovery and Resilience Plans, during the lifetime of the Recovery and Resilience Facility, and with any Union investment instruments that address the common priorities of the Union or serve the same purpose as the Recovery and Resilience Facility.

Removed:(25) Where the verifiable and time-bound set of reform and investment commitments underpinning the more gradual net expenditure path is not met within the specified deadline, the Council, on a recommendation from the Commission, can recommend that adjustment be steepened, that is to say by shortening the extension of the net expenditure path.

Removed:(26) To inform enforcement actions, in particular a report under Article 126(3) TFEU, the Commission should set up a control account for each Member State to keep track of annual deviations of the net expenditure observed in the Member State from the net expenditure path set by the Council, summing those deviations over time. A Member State should be deemed not to be in compliance with its net expenditure path where the cumulated balance of the control account during the adjustment period is higher than 1% of GDP in the years of positive GDP growth. For certain strategic investments that address the common priorities of the Union, and that have added value for the Union as a whole, the Commission should be able to exceptionally allow Member States to exceed the reference value in the control account, for example in exceptional cases where investment costs increase due to unforeseen circumstances or where the need to make additional strategic investments arises during the adjustment period. Any deviation from the reference value can be granted by the Commission for a period of up to 5 years per request.

Removed:(26a) A dedicated scoreboard should be established by way of a delegated act to display the progress of the implementation of the medium-term fiscal-structural plans of the Member States. The scoreboard should be operational by June 2024 and should be updated by the Commission twice a year.

Removed:(27) Independent fiscal institutions have proven their capacity to foster fiscal discipline and strengthen the credibility of Member States’ public finances. In order to enhance national ownership, the role of independent fiscal institutions, traditionally mandated to monitor compliance with the national framework, should be expanded to the economic governance framework of the Union.

Removed:(27a) The Commission should establish a European Fiscal Board (EFB) as an independent expert group to advise on the Union’s economic policy coordination.

Removed:(28) When providing an opinion on the draft budgetary plans submitted pursuant to Article 6 of Regulation (EU) No 473/2013 of the European Parliament and of the Council, the Commission should assess if the draft budgetary plans are consistent with the net expenditure paths pursuant to this Regulation.

Removed:(29) Particular attention should be given to significant risks of divergences of budgetary positions from the net expenditure path set by the Council. Therefore it is appropriate to complement the multilateral surveillance procedure set out in Article 121(3) and (4) TFEU with an early warning system whereby the Commission pursuant to Article 121(4) TFEU alerts a Member State at an early stage about the need to take the necessary budgetary corrective action in order to prevent its government deficit becoming excessive. Moreover, in the event of persistent budgetary slippage the Council should reinforce its recommendation and make it public.

Removed:(30) In case of major shocks to the euro area or the Union as a whole, it is necessary to have a general escape clause to be able to deal with a severe economic downturn in the euro area or the Union as a whole by allowing for a deviation from the net expenditure path provided that it does not endanger fiscal sustainability in the medium term.

Removed:(31) There should also be a country-specific escape clause to allow a deviation from the net expenditure path provided that it does not endanger fiscal sustainability in the medium term in the case of exceptional circumstances, such as unpredictable exogenous events that could not have been prevented and that require counter-cyclical fiscal measures, outside the control of the Member State which have a major impact on the public finances of the Member State. Such major impact should result in an overall size of the shock that exceeds a ‘normal’ range▌. The assessment of whether fiscal sustainability is endangered for the application of both the general and country-specific escape clauses should be based on a quantitative and qualitative analysis by the Commission. The triggering and extension of general and country-specific escape clauses are subject to a Council recommendation.

Removed:(32) This Regulation is part of a package together with Council Directive [XXX amending 2011/85/EU] and Council Regulation [XXX amending Council Regulation (EC) No 1467/97]. Together, they establish a reformed Union economic governance framework that incorporates into Union law the substance of Title III ‘Fiscal Compact’ of the Treaty on Stability, Coordination and Governance (TSCG) in the Economic and Monetary Union, in accordance with Article 16 thereof. By building on the experience with the implementation of the TSCG by the Member States, the proposed legislative 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 essentially on the Fiscal Compact’s common principles proposed by the Commission 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 this Regulation. As in the Fiscal Compact, temporary deviations from the medium-term plan are allowed only in exceptional circumstances in this Regulation. In a similar vein to the Fiscal Compact, 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 and inclusive growth. The economic governance framework reform, thus, retains the fundamental objectives of budgetary discipline and debt sustainability set out in the TSCG.

Removed:(33) In order to ensure effective implementation and appropriate monitoring of this Regulation, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of: the information to be provided by Member States in their medium-term fiscal-structural plans, the information to be provided by Member States in their annual progress reports, the methodology for debt sustainability analysis, the methodology to assess plausibility that the projected public debt ratio is on a downward path leading to sustainable debt reduction or remains at a prudent level, the implementation of a scoreboard and the assessment framework for the set of reform and investment commitments underpinning an extension of the fiscal adjustment period. It is of particular importance that the Commission carries out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

Removed:(33a) A methodology for debt sustainability analysis should be adopted by means of a delegated act no later than 12 months after the entry into force of this Regulation. For that purpose, the Commission should identify factors that are relevant to assessing the sustainability of debt. For the first year in which the Member States are required to submit their medium-term fiscal-structural plans, the basis for the underlying medium-term public debt projection framework should be the 2022 Debt Sustainability Monitor.

Removed:(34) The multilateral surveillance should be based on high quality and independent statistics produced in accordance with the principles laid down in Regulation (EC) No 223/2009 of the European Parliament and of the Council,

Removed:SUBJECT-MATTER AND DEFINITIONS

Removed:Subject-matter

Removed:This Regulation sets out rules ensuring effective coordination of economic policies of the Member States, thereby supporting the achievement of the Union’s objectives for sustainable and inclusive growth, quality employment and competitiveness.

Removed:It lays down detailed rules concerning the content, submission, assessment and monitoring of national medium-term fiscal-structural plans as part of multilateral budgetary surveillance by the Council and the Commission, with the involvement of the European Parliament, so as to promote debt sustainability, investments and reforms, common priorities of the Union, and sustainable and inclusive growth and resilience in the Member States and to prevent the occurrence of excessive government deficits, by medium-term planning ensuring consistency within the Union, including the euro area.

Removed:Definitions

Removed:For the purposes of this Regulation, the following definitions apply:

Removed:(1) ‘country-specific recommendation’ means the annual guidance by the Council to a Member State on economic, budgetary, employment and structural policies in accordance with Articles 121 and 148 of the Treaty on the Functioning of the European Union (TFEU);

Removed:(2) ‘net expenditure’ means government expenditure net of interest expenditure, discretionary revenue measures, expenditure on programmes of the Union fully matched by Union funds revenue, national expenditure on co-financing of programmes funded by the Union capped at a limit of 0,25% of GDP, cyclical elements of unemployment benefit expenditure, and costs related to the borrowing of funds for the loans related to the national Recovery and Resilience Facility Plans;

Removed:(3) ‘reference trajectory’ means for each Member State with public debt above the 60% of gross domestic product (GDP) reference value or government deficit above the 3% of GDP reference value, the net expenditure trajectory put forward by the Commission, following an optional presentation of a proposal by each Member State concerned and the dialogue referred to in Article 7(1a);

Removed:(4) ‘net expenditure path’ means the multi-annual trajectory for net expenditure of a Member State as set by the Council;

Removed:(5) ‘national medium-term fiscal-structural plan’ means the document containing the fiscal, reform and investment commitments of a Member State;

Removed:(6) ‘annual progress report’ means the document of a Member State reporting on the implementation of the ▌national medium-term fiscal-structural plan, including its net expenditure path and the reform and investment commitments;

Removed:(7) ‘adjustment period’ means the period of time over which the fiscal adjustment of a Member State takes place, covering a minimum adjustment period of 4 years of the national medium-term fiscal-structural plan and its possible extension;

Removed:(8) ‘control account’ means a record of the cumulated deviations of the actual net expenditure in a Member State from the net expenditure path;

Removed:(9) ‘structural balance’ means the cyclically adjusted general government balance net of temporary measures;

Removed:(10) ‘structural primary balance’ means the cyclically adjusted general government balance net of temporary measures and net of interest expenditure.

Removed:(10a) ‘projection period’ means the adjustment period plus 10 years.

Removed:EUROPEAN SEMESTER

Removed:The European Semester

Removed:In order to ensure closer coordination of economic and relevant social policies and sustained convergence of the economic and social performance of the Member States, the Council and the Commission, with the involvement of the European Parliament in accordance with Article 25a, shall conduct multilateral surveillance within the European Semester in accordance with the objectives and requirements set out in the TFEU. Multilateral surveillance shall rely on high quality and independent statistics, produced in accordance with the principles laid down in Regulation (EC) No 223/2009 of the European Parliament and of the Council.

Removed:In order to achieve its overarching aim of ensuring closer coordination of economic, social, budgetary and structural policies and for the purposes of the overall assessment of economic performance, the European Semester shall include:

Removed:(a) the formulation, and the surveillance of the implementation, of the broad guidelines for the economic policies of the Member States and of the Union in accordance with Article 121(2) TFEU, of country-specific recommendations and of the recommendation on the economic policy of the euro area;

Removed:(b) the formulation, and the surveillance of the implementation, of the employment guidelines that are to be taken into account by Member States in accordance with Article 148(2) TFEU, of the European Pillar of Social Rights and its headline targets, and of the related country-specific recommendations as well as the social scoreboard and its headline and secondary indicators and the Social Convergence Framework to prevent and identify social convergence risks;

Removed:(c) the submission, assessment and endorsement of Member States’ medium-term fiscal-structural plans, as well as their monitoring via the annual progress reports;

Removed:(d) the surveillance to prevent and correct macroeconomic imbalances pursuant to Regulation (EU) No 1176/2011;

Removed:(e) other multilateral surveillance procedures established by the European Parliament and the Council pursuant to Article 121(6) TFEU.

Removed:Implementation of the European Semester

Removed:1. Whenever necessary, following the assessment pursuant to this Regulation of the medium-term fiscal-structural plans, the annual progress reports and the socio-economic situation of the Member States concerned, the Council shall, on the basis of recommendations from the Commission, address recommendations to those Member States making full use of the legal instruments provided in Articles 121 and 148 TFEU and related secondary legislation.

Removed:2. Member States shall take due account of the broad guidelines for the economic policies of the Member States, of the employment guidelines and of the recommendations referred to in Article 3, second paragraph, points (a) and (b) before taking key decisions in the development of their economic, social, employment, structural and budgetary policies. Progress shall be monitored by the Commission.

Removed:3. Failure by a Member State to act upon the guidance received may result in:

Removed:(a) further country-specific recommendations;

Removed:(b) a warning by the Commission or a recommendation by the Council pursuant to Article 121(4) TFEU;

Removed:(ba) a recommendation by the Council in accordance with Article 148(4) TFEU;

Removed:(c) measures under this Regulation, Council Regulation (EC) No 1467/97 or Regulation (EU) No 1176/2011.

Removed:THE TECHNICAL TRAJECTORY

Removed:Reference trajectory

Removed:For each Member State having a public debt above the 60% of GDP reference value or a government deficit above the 3% of GDP reference value, the Commission shall put forward, in a report to the European Parliament and the Council, a reference trajectory. For the preparation of the report, the Commission shall consult the Member State concerned including, where applicable, on its proposed reference trajectory, as part of the dialogue referred to in Article 7(1a), while ensuring fair and equal treatment of all Member States.

Removed:The reference trajectory shall be set in levels of net expenditure and be based on the debt sustainability analysis methodology as referred to in Article 7(1), point (a), which is publicly available.

Removed:The reference trajectory shall cover a minimum adjustment period of 4 years of the national medium-term fiscal-structural plan, and its possible extension by a maximum of 3 years pursuant to Article 13. The Commission shall make the report public in accordance with Article 9.