The European Union has found aagreement on the reform of the stability pact. On the night between 9 and 10 February a preliminary agreement between Parliament and the European Council on new budget rules after a negotiation that lasted over 16 hours.
The negotiations were tight, considering that the regulatory package will still have to be formally approved by the two institutions before the end of the legislature.
By the 20 September 2024, the member states of the European Union will have to present their first national plans which describe spending, reforms and investments. The new rules will require states to ensure that such plans include investments in EU priority areas, such as climate and digital transition, energy security and defence.
The plans will also need to provide information on public investment needs, i.e. where investment gaps exist.
First spending plans by September 20, 2024
The new rules will come into force immediately. States will therefore have to present the first spending plans for a project by 20 September this year four year period, extendable up to seven.
To encourage investment, the European Parliament obtained that national spending for the co-financing of financed projects come from the EU excluded from the overall count of public spending; this national expenditure it will not be considered in government spending, further encouraging investments.
- ongoing investments in priority areas of the EU, such as climate transition, digitalisation, energy security and defence, will be considered in the Commission's report on deviations from spending plans. This will give Member States the possibility to avoid the excessive deficit procedure. The Commission will take into account investments already made in these areas when drawing up its report on deviations from a Member State's spending path, allowing the Member State to present stronger arguments to avoid the excessive deficit procedure.
The European Chamber has obtained the possibility of request temporary diversions from agreed spending plans in the event of exceptional circumstances that have a significant impact on the accounts. These deviations may be extended up to one year, and even more if necessary.
Agreement reached after months of negotiations
After months of negotiations, a consensus was thus reached mediation between the positions of the 27 member states of the EU to the Council and the European Chamber with respect to the European Commission's legislative proposal last April to review the common understandings on European public finances after 25 years.
The final obstacle was the European Parliament's request to guarantee more space for public investment, even if the room for maneuver of the 27 was reduced after a hard balance achieved a month ago, after exhausting negotiations between the 'frugal' countries and the others.
The reform focuses on multi-year spending plans, with states enjoying autonomy, except with regard to the adjustment objective or “technical trajectory” which will be calculated by the Commission. Under pressure from the 'frugals', in particular from Germany, they were introduced "safeguards" to guarantee a certain reduction in debt (0,5% or 1% per year for those exceeding 60% and 90% of the debt/GDP ratio respectively) and in the public deficit (reduced to 1,5% of GDP, compared to 3 % set by the treaties).
