What changed between the plenary report and the adopted text

Removed:DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

Added:P9_TA(2024)0312

Changed:on the proposal for a Council regulation amending Regulation (EC) No 1467/97 on speedingSpeeding up and clarifying the implementation of the excessive deficit procedure – amending Regulation

Removed:(COM(2023)0241 – C90172/2023 – 2023/0137(CNS))

Added:Committee on Economic and Monetary Affairs

Added:PE757.279

Added:European Parliament legislative resolution of 23 April 2024 on the proposal for a Council regulation amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure (15876/2023 – C9-0005/2024 – 2023/0137(CNS))

(Special legislative procedure – consultation)

The European Parliament,

Changed:– having regard to the Commission proposal to the Council (COM(2023)0241),draft (15876/2023),

Changed:– having regard to Article 126(14), second subparagraph, of the Treaty on the Functioning of the European Union, pursuant to which the Council consulted Parliament (C90172/2023),(C90005/2024),

– having regard to Rule 82 of its Rules of Procedure,

– having regard to the letter from the Committee on Budgets,

– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0444/2023),

Change 1

Changed:1. Approves the CommissionCouncil proposaldraft as amended;

Change 2

Removed:2. Calls on the Commission to alter its proposal accordingly, in accordance with Article 293(2) of the Treaty on the Functioning of the European Union;

2. Calls on the Council to notify Parliament if it intends to depart from the text approved by Parliament;

Change 3

Changed:4.3. Asks the Council to consult Parliament again if it intends to substantially amend the Commissionits proposal;draft;

4. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 4

Removed:AMENDMENTS BY THE EUROPEAN PARLIAMENT*

Removed:to the Commission proposal

Removed:---------------------------------------------------------

Removed:2023/0137 (CNS)

Removed:Proposal for a

Removed:COUNCIL REGULATION

Removed:amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure

12 unchanged paragraphs

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 126(14), second subparagraph, thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the European Central Bank,

Acting in accordance with a special legislative procedure,

Whereas:

(1) The coordination of the economic policies of the Member States within the Union, as provided for by the Treaty on the Functioning of the European Union (TFEU), entails compliance with the guiding principles of stable prices, sound public finances and monetary conditions and a sustainable balance of payments.

(2) The economic governance framework of the Union, which comprises an elaborate system of policy coordination and surveillance of Member States’ economic policies, has guided Member States in achieving their economic and fiscal policy objectives. Since the Treaty of Maastricht of 1992, the framework has helped achieve macroeconomic convergence, safeguard sound public finances and address macroeconomic imbalances. Together with a common monetary policy and a common currency in the euro area, the framework has created conditions for economic stability, sustainable and inclusive economic growth and higher employment for citizens of the Union.

(3) The Stability and Growth Pact (SGP), which initially consisted of Council Regulation (EC) No 1466/97, Council Regulation (EC) No 1467/97 of 7 July 1997 and the Resolution of the European Council of 17 June 1997 on the SGP, is based on the objective of sound and sustainable government finances as a means of strengthening the conditions for price stability and for strong sustainable and inclusive growth underpinned by financial stability, thereby supporting the achievement of the Union’s objectives for sustainable growth and employment.

(4) In stage three of the Economic and Monetary Union (EMU), the Member States are, according to Article 126(1) TFEU, under the obligation to avoid excessive government deficits.

Change 5

Changed:(5) The economic governance framework of the Union should be adapted to better take into account the growingincreased heterogeneity of fiscal positions, sustainabilitypublic risksdebt, economic challenges and other vulnerabilities across Member States. The strong policy response to the COVID-19 pandemic proved highly effective in mitigating the economic and social damageconsequences of the crisis, but resulted in a significant increase in public- and private-sector debt ratios, underscoring the importance of reducing debt ratios and deficits to prudent levels in a gradual, realistic, sustained and growth-friendly mannermanner, allowing leeway for counter-cyclical policies and addressing macroeconomic imbalances, while paying due attention to employment and social objectives. At the same time, the economic governance framework of the Union should be adapted to help address the medium- and long-term challenges facing the Union, including achieving a fair digital and green transition, including the Climate Law, ensuring energy security, supporting open strategic autonomy, addressing demographic change, strengthening social and economic resilience,resilience and sustained convergence, and implementing the strategic compass for security and defence, all of which requires reforms and sustained high levels of investment in the years to come.

Change 6

Changed:(6) The economic governance framework of the Union should put debtpromote sustainabilitysound and sustainable growthpublic atfinances itsand coresustainable and inclusive growth and therefore differentiate between Member States by taking into account their public debt and economic challenges and allowing multi-annual country-specific fiscal trajectories.trajectories, while ensuring effective multilateral surveillance and respecting the principle of equal treatment.

Change 7

Changed:(7) At the same time, to ensure a transparent and common Union framework based on the reference values referred to in Article 126(2) TFEU and Protocol No 12 on the excessive deficit procedure annexed to the TFEU and the Treaty on the European Union (TUE),(TEU), stronger enforcement underpinning multilateral surveillance should be the necessary counterpart of a risk-based surveillance framework that allows for country-specific fiscal trajectories.

Change 8

Changed:(8) In order to simplify the Union fiscal framework and increase transparency, a single operational indicator anchored in debt sustainability should serve as a basis for setting the fiscalnet expenditure path and carrying out annual fiscal surveillance for each Member State. That single indicator should be based on nationally financed net primary expenditure, that is to saysay: government expenditure net of discretionary revenue measures and excluding interest expenditureexpenditure, asdiscretionary wellrevenue asmeasures, cyclicalexpenditure unemploymenton expenditure,programmes ▌expenditureof onthe Union programmes fully matched by revenue from Union funds,funds and national expenditure on co-financing of programmes funded by the UnionUnion, capas withwell aas limitcyclical elements of 0.25%unemployment ofbenefit GDP,expenditure. cyclicalIn elementsline ofwith unemployedthe benefitguiding expenditure,principles andthat costshave relatedbeen toused theby borrowingthe ofEuropean fundsCommission for theclassifying loanstransactions relatedas toone-offs, theone-offs nationaland Recoveryother andtemporary Resiliencemeasures Facilityshould Plans.also be excluded from net expenditure. This indicator allows for macro-economic stabilisation as it is not affected by the operation of automatic stabilisers, including revenue and expenditure fluctuations outside the direct control of the government.

(9) The excessive deficit procedure (EDP) for breaches of the deficit reference value of 3 % of gross domestic product (GDP) (‘deficit-based EDP’), referred to in Article 126(2) TFEU and Protocol No 12 is a well-established element of the Union’s fiscal surveillance framework that has been effective in influencing fiscal policy in the Member States.

Change 9

Changed:(10) To strengthen the EDP for breaches of the debt criterion of 60 % of GDP (‘debt-based EDP’), referred to in Article 126(2) TFEU and Protocol No 12 the focus should be on departures from the fiscalnet expenditure path set by the Council under Regulation (EU) […] of the European Parliament and of the Council.

Change 10

Changed:(11) On the basis(13) ofIn Articleaccordance 126(2)with TFEU,Articles the24 deficitand criterion25 isof alsoRegulation fulfilled(EU) where[on the excesspreventive overarm], the referenceCouncil, valuefollowing ofa 3recommendation %from ofthe GDPCommission, iscould onlyallow exceptionalMember andStates temporaryto anddeviate from the rationet remainsexpenditure closepath toset by the referenceCouncil value.under Therefore,that aRegulation temporaryin breachthe thatevent remainsof closea tosevere theeconomic referencedownturn valuein shouldthe noteuro leadarea toor the openingUnion ofas a deficit-basedwhole, EDPor ifin itthe resultsevent fromof exceptional circumstances outside the control of the government with a major impact on the public finances of the Member State concerned, whichprovided includesthat it does not endanger fiscal sustainability in the medium term. As a severeconsequence, economicsuch downturna deviation should not be registered in the Membercontrol Stateaccount concerned.nor lead to the opening of a debt-based EDP.

Change 11

Removed:(12) Moreover, in case of a severe economic downturn in the euro area or the Union as a whole, and following the application of Article 24 of Regulation (EU) [on the preventive arm], the Commission and the Council may decide not to conclude on the existence of an excessive deficit.

Added:(14) When assessing the existence of an excessive deficit in accordance with Article 126(3) TFEU, the Commission should take into account all relevant factors. Substantial public debt challenges in the Member State concerned should be considered a key aggravating factor.

Removed:(13) In accordance with Articles 24 and 25 of Regulation (EU) [on the preventive arm], the Council, following a recommendation from the Commission, can allow Member States to deviate from the net expenditure path set by the Council under that Regulation in the event of a severe economic downturn in the euro area or the Union as a whole, or in the event of exceptional circumstances outside the control of the government with a major impact on the public finances of the Member State concerned, provided that it does not endanger fiscal sustainability in the medium term. As a consequence, such a deviation should not lead to the opening of a debt-based EDP.

Added:(14a) Acknowledging the rising geopolitical tensions and security challenges and the corresponding need for Member States to build-up their capabilities, the increase of government investment in defence, where applicable, should be considered as a relevant factor when assessing the existence of an excessive deficit in accordance with Article 126(3) TFEU. This factor could be assessed against EU averages, medium-term trends or other relevant benchmarks, considering also the statistical rules concerning the time of recording of military equipment expenditure.

Removed:(14) When assessing the existence of an excessive deficit in accordance with Article 126(3) TFEU, the Commission should take into account, as a key relevant factor, the degree of debt challenge in the Member State concerned. A substantial public debt challenge established according to the most recent Debt Sustainability Monitor should be considered a key factor leading to the opening of an EDP as a rule. Since, in accordance with Article 126(3) TFEU, the Commission is to take into account all other relevant factors, in so far as they significantly affect the assessment of compliance with the deficit and debt criteria by the Member State concerned, that should include in particular the developments in the medium-term economic position and the developments in the medium-term budgetary position, and the delivery and commitment by the Member State on the implementation of the investments and reforms to address the common priorities of the Union as set out in Article 12 of Regulation (EU) [on the preventive arm], the reforms and investments committed in the national plans of the Recovery and Resilience Facility, Cohesion Funds and future EU investments instruments that serve the same purpose. In order to increase national ownership, the independent fiscal institutions referred to in Article 8 of Council Directive [on the national budgetary frameworks], should provide an opinion on the relevant factors.

Added:(15) To keep track of actual deviations from the net expenditure path as set out in Article 21 of Regulation (EU) [on the preventive arm], the Commission should set up a control account for each Member State summing annual deviations over time. The information in the control account should be the basis of enforcement actions. In particular, the Commission shall prepare a report in accordance with Article 126(3) TFEU when the ratio of the government debt to GDP exceeds the reference value, the budgetary position is not close to balance or in surplus and when the deviations recorded in the control account of the Member State exceed the established annual or cumulative thresholds. The budgetary position shall be considered close to balance if the headline deficit does not exceed 0,5 percentage points of GDP.

Removed:(15) To keep track of actual and planned annual deviations from the net expenditure path as set out in Annex IV to Regulation (EU) [on the preventive arm], the Commission should set up a control account for each Member State summing those deviations over time. The information in the control account should be the basis of enforcement actions, in particular of a report pursuant to Article 126(3) TFEU following a deviation from the net expenditure path. At the same time, the degree of ambition of the net expenditure path in the national medium-term fiscal-structural plan referred to in Regulation (EU) [on the preventive arm] should be considered when deciding on the opening of a debt-based EDP. In particular, if the Member State’s net expenditure path set by the Council is more ambitious than the medium-term reference trajectory ▌ in accordance with Regulation (EU) [on the preventive arm] and the deviation from the path is not significant when measured against this trajectory, the opening of an excessive deficit procedure should be avoided.

Added:(16) The corrective net expenditure path under the EDP should bring or keep the general government deficit below the reference value of 3 % of GDP referred to in Article 126(2) TFEU and Protocol No 12 by the deadline established by the Council. The corrective net expenditure path under the EDP would in principle be the one originally set by the Council, while taking into account the need to ensure a minimum structural adjustment of 0.5 % of GDP in case of a breach of the deficit criterion or the need to correct the deviation from that path as a rule in case of a breach of the debt criterion. In case the original path is no longer feasible, due to objective circumstances, the Council should be able to set a different path under the EDP.

Removed:(16) The corrective net expenditure path under the EDP should bring or keep the general government deficit durably below the reference value of 3 % of GDP referred to in Article 126(2) TFEU and Protocol No 12 by the deadline established by the Council. The corrective net expenditure path under the EDP should also ensure sufficient progress during the period covered by the recommendation regarding putting the projected debt ratio on a plausibly downward path or remaining at a prudent level. When setting the corrective net expenditure path under the EDP, the Council should also ensure that there is no back-loading of the required fiscal adjustment effort. The corrective net expenditure path under the EDP would in principle be the one originally set by the Council, while taking into account the need to correct the deviation from that path. In case the original path is no longer feasible, due to objective circumstances, the Council should be able to set a different path under the EDP.

Added:(17) For Member States under an EDP, the Council, on a recommendation from the Commission, should continue to be able to extend the deadline for the correction of the excessive deficit where it establishes the existence of a severe economic downturn in the euro area or in the Union as a whole in accordance with Article 24 of Regulation (EU) [on the preventive arm], or in the case of exceptional circumstances outside the control of the government with a major impact on the public finances of an individual Member State in accordance with Article 25 of Regulation (EU) [on the preventive arm], and provided that it does not endanger fiscal sustainability in the medium term.

Removed:(17) For Member States under an EDP, the Council, on a recommendation from the Commission, should continue to be able to extend the deadline for the correction of the excessive deficit where it establishes the existence of a severe economic downturn in the euro area or in the Union as a whole in accordance with Article 24 of Regulation (EU) [on the preventive arm], or in the case of exceptional circumstances outside the control of the government with a major impact on the public finances of an individual Member State and provided that it does not endanger fiscal sustainability in the medium term. Such extension should require that the overall size of the shock exceeds a normal range, for example costs of natural disasters should be anticipated within bandwidths.

(18) Specific provisions of Regulation (EC) No 1467/97 related to the contributions to second pillar pension systems should be deleted since the net expenditure path set by the Council should already take into account the revenue loss related to such contributions.

Change 12

Changed:(19) 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,institutions traditionallyshould mandatedbe tomaintained monitorin compliancethe withreformed economic governance framework of the nationalUnion, framework,with a view to gradually building up their capacities. A more independent European Fiscal Board should beplay expandeda tomore prominent advisory role in the economic governance framework of the Union.

(20) Clear conditions should be laid down for abrogation of excessive deficit procedures. Abrogation should require the deficit to remain credibly below the reference value of 3 % of GDP referred to in Article 126(2) TFEU and Protocol No 12 and, for a debt-based EDP, that the Member State demonstrates compliance with the net expenditure path under the EDP.

(21) The fines provided for in Article 126(11) TFEU should not provide for a minimum amount but they should accumulate until effective action is taken, in order to constitute a real incentive for compliance with the notices given to Member States under an EDP in accordance with Article 126(9) TFEU.