The package is over. The specter of a deep recession fades away and the EU returns to its old rigor: from the spring of 2024 the procedures di excessive deficit with the end of the safeguard clause which suspended the Stability pact until the end of the year and which will not be extended in 2024. This is what emerges from the guidelines of the EU executive for 2024. States, the executive points out, should take them into account in the execution of the 2023 budgets, in the preparation of stability programs and in the budget planning documents. This means that what countries achieve this year will count towards the European surveillance of budgets, even with all the "flexibilities and diversities" of national situations, specified the EU commissioner for the economy, Paolo Gentiloni. "It is a subtle game of balances, but necessary, because it is important to move towards a credible and solid framework right now". Therefore, the Commission calls on the States "to define budget objectives for 2024 that ensure a plausible continuous reduction of the debt" in a medium-term logic. A reminder that also concerns our country.
The economic forecasts for 2023 and 2024 are much better than those for the two-year period 2020-2021, when the EU was in the midst of the Covid-19 pandemic. For this reason, the European Commission also reviews its programmes economic governance. And as we know, the Stability and Growth Pact is suspended until the end of 2023 and will come back into force next year. And the 27 member states have also reached an agreement to reform it which will be on the table at the next Ecofin council, scheduled for Tuesday 14 March. The main points of the agreement: multi-year tax plans created ad hoc for each country, more time to reduce debt for those who make reforms and investments in line with EU objectives, more effective sanctions (albeit reduced) for those who violate budget rules. "I'm confident," said European Economy Commissioner Paolo Gentiloni. So the game closes on Tuesday? “It is a wish, but it is a well-founded wish”.
What is the Excessive Deficit Procedure?
The excessive deficit infringement procedure is the process followed by the European Union to correct excessive levels of a Member State's budget deficit or public debt. When the State corrects the "error", the Council, on a proposal from the Commission, repeals the decisions and recommendations previously adopted. This ends the infringement procedure. The course of the procedure is governed by Article 126 of the Treaty on the Functioning of the European Union. But when is it activated in detail? In two cases:
- il budget deficit exceeds 3% of GDP;
- il debt exceeds 60% of GDP and does not decrease by 1/20 a year (on the average of the three previous years).
The Commission prepares a report, on which the Economic and Financial Committee subsequently gives an opinion. At this point, the Council, having also heard the member state, if it believes that there is an excessive deviation from the Union criteria, adopts recommendations. And the State has 3 to 6 months to demonstrate that it is making the necessary efforts to correct the shot. If this is not the case, then the Council may:
- request additional information;
- call on the European Investment Bank to reconsider its lending policy to the state;
- request the State to set up a non-interest bearing deposit with the EU until the excessive deficit is corrected;
- impose fines.
The country for which the most reports have been approved is theItaly (well 9). But only in three cases (in 2005, 2009 and 2018) did the Council then follow up the procedure, approving a decision on the presence of an excessive deficit.
European Commission: "Excessive deficit procedures return from spring 2024"
As a high degree of uncertainty regarding the macroeconomic and fiscal outlook persists at this stage, the Commission considers that it is not appropriate to decide this spring to subject Member States to the excessive deficit procedure. At the same time, the Commission will propose to the Council to launch deficit-based excessive deficit procedures in spring 2024 on the basis of 2023 outturn data, in line with existing legal provisions.
Towards debt sustainability in 2024
Le budgetary policies of EU states in 2024 will have to guarantee sustainability of the debt medium-term and promote sustainable and inclusive growth, state the guidelines of the Commission, which in May will give specific recommendations for next year to the 27 countries in line with the budgetary objectives in the individual stability and convergence programmes, provided they are consistent with a prudent level of public debt/GDP ratio and with a deficit below the reference value of 3% of GDP in the medium term. They will be formulated on the basis of the net primary expenditure (expenditure excluding discretionary revenue measures and excluding interest expenditure as well as cyclical unemployment expenditure), as in the reform guidelines of the future Pact.
The centrality of net primary expenditure
Country-specific EU recommendations will be formulated on the basis of net primary expenditure. What does it mean? Simply put, the focus of European surveillance is shifting to focus on nationally funded net primary current expenditure and the preservation of nationally funded investment.
On tax measures for thethe energy, Brussels indicates that if prices remain stable and lower costs are passed through to retail prices as currently envisaged, le support measures should be phased out and the associated savings should contribute to reducing public deficits. If, on the other hand, energy prices rise again and the support cannot be completely stopped, as "targeted measures should protect vulnerable households and businesses".
The Commission reiterates that public measures to support households and businesses have mitigated the social and economic impact of soaring energy prices (especially gas and electricity), but most were not targeted enough and may even have reduced incentives to contain energy consumption and increase energy efficiency.
