Changes from plenary report to adopted text

RemovedDRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

AddedP9_TA(2024)0313

Changedon the proposal for a Council directive amending Directive 2011/85/EU on requirementsRequirements for budgetary frameworks of the Member States – amending Directive

Removed(COM(2023)0242 – C90171/2023 – 2023/0136(NLE))

AddedCommittee on Economic and Monetary Affairs

AddedPE757.278

AddedEuropean Parliament legislative resolution of 23 April 2024 on the proposal for a Council directive amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States (15396/2023 – C9-0006/2024 – 2023/0136(NLE))

(Consultation)

The European Parliament,

Changed– having regard to the Commission proposal to the Council (COM(2023)0242),draft (15396/2023),

Changed– having regard to Article 126(14), third subparagraph, of the Treaty on the Functioning of the European Union, pursuant to which the Council consulted Parliament (C90171/2023),(C90006/2024),

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

– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0440/2023),

Change 1

Changed1. Approves the CommissionCouncil proposaldraft as amended;

Change 2

Removed2. 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

Changed4.3. 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 and the Commission.

Change 4

RemovedAMENDMENTS BY THE EUROPEAN PARLIAMENT*

Removedto the Commission proposal

Removed---------------------------------------------------------

Removed2023/0136 (NLE)

RemovedCOUNCIL DIRECTIVE

Removedamending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States

▸8 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), third subparagraph, thereof,

Having regard to the proposal from the European Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the European Central Bank,

Whereas:

(1) In order to ensure Member States' compliance with the obligations under the Treaty on the Functioning of the European Union (TFEU) in the area of budgetary policy, and in particular with regard to avoiding excessive government deficits, Council Directive 2011/85/EU laid down detailed rules concerning the characteristics of the budgetary frameworks of the Member States.

(2) Building upon the experience gained with the economic and monetary union since Directive 2011/85/EU came into force, it is necessary to amend its requirements regarding the rules and procedures forming the budgetary frameworks of the Member States.

Change 5

Changed(3) In 2019, the European Court of Auditors published a report examining the Union requirements on national budgetary frameworks and recommending the Commission to review those requirements, taking into account international standards and best practice.practices. The European Court of Auditors proposed specific actions to improve the scope and effectiveness of national budgetary frameworks, particularly as regards medium-term budgetary frameworks and independent fiscal institutions.

(4) Commission Communication of 5 February 2020 pointed to substantial but uneven progress in the development of national budgetary frameworks considering that Union law only sets minimum requirements and that implementation and compliance with national provisions had been very diverse. That Communication also considered the extent to which the framework would support economic, environmental and social policy needs related to the transition towards a climate-neutral, resource-efficient and digital European economy, complementing the key role of the regulatory environment and structural reforms.

Change 6

Changed(5) Commission Communication of 11 December 2019 on the European Green Deal calledDealcalled for a greater use of green budgeting tools to redirect public investment, consumption and taxation to green priorities and away from harmful subsidies. The European Climate Law sets a Union-wide climate neutrality objective by 2050 and requires Union institutions and Member States to progress in enhancing adaptive capacity. The Commission committed to working with the Member States to screen and benchmark green budgeting practices. Commission Communication of 24 February 2021 on the new EU strategy on adaptation to climate change pointed to the macro-fiscal relevance of climate change and highlighted the need to increase the Union’s resilience to the impacts of climate change. The European Semester provides an additional framework to support such efforts and the Technical Support Instrument offers practical assistance for their implementation.

Change 7

Changed(6) Commission Communication of 9 November 2022 on orientations for a reform of the EU economic governance framework highlighted the need to strengthen debt sustainability and reduce high public debt ratios while promoting sustainable and inclusive growth and resilience in all Member States. The key objectives of the orientations are to improve national ownership, simplify the framework and move towards a greater medium-term focus, combined with stronger and more coherent enforcement.

Change 8

Changed(7) In order to enhance compliance with the provisions of the TFEU, and to avoidprevent in particular the procedureoccurrence forof excessive government deficitdeficits laidin downthe insense of Article 126 TFEU, there should be specific provisions in the law of the Member States to strengthen national ownership, in accordance with the Commission Communication of 9 November 2022 on orientations for a reform of the EU economic governance framework, beyond those currently required by Directive 2011/85/EU. Building on the evidence of implementation of that Directive, amendments should also cover provisions on transparency and statistics, forecasts and medium-term budgeting to address weaknesses identified during implementation.

Change 9

Changed(8) This Directive is part of a package together with Regulation (EU) [XXX] of the Parliament and of the Council replacing Regulation (EC) No 1466/97 (the preventive arm of the Stability and Growth Pact) and Council Regulation [XXX] amending Council Regulation (EC) No 1467/97 (the corrective arm of the Stability and Growth Pact). Together, they establish a reformed Union economic governance framework that incorporates into Union law the substance of Title III ‘Fiscal Compact’ of the inter-governmental Treaty on Stability, Coordination and Governance (TSCG) in the Economic and Monetary Union, in accordance with Article 16 thereof. Title III is binding on the Member States whose currency is the euro and, on a voluntary basis, on Bulgaria, Denmark and Romania. By building on the experience with the implementation of the TSCG by the Member States, the 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 apreserving strongerthe role for independent fiscal institutions, which draws 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 Regulation [XXX] replacing Regulation (EC) No 1466/97. As in the Fiscal Compact, temporary deviations from the medium-term plan are allowed only in exceptional circumstances in Regulation [XXX]replacing Regulation (EC) No 1466/97. Similarly, 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.

Change 10

Removed▌

Added(9) Complete and reliable public accounting practices for all subsectors of general government are a precondition for the production of high-quality statistics that are comparable across Member States. The availability and quality of the European System of National and Regional Accounts (ESA) based statistics is crucial to ensure the proper functioning of the Union’s fiscal surveillance framework. ESA 2010 relies on information provided on an accrual basis. It is therefore desirable to improve the collection of accrual data and information needed to generate accrual-based statistics in a way that is comprehensive and consistent across all subsectors of general government.

Change 11

Changed(10) The availability of high frequency data can reveal patterns warranting closer surveillance and improve the quality of budgetary forecasts. Member States and the Commission (Eurostat) should publish cash-based data, quarterly deficit and debt data applying the definitions set out in Article 2 of the Protocol (No 12) on the excessive deficit procedure annexed to the Treaty on European Union (TEU) and to the TFEU. Publication of budgetary data with higher frequency that are tailored to national budgetary definitions should be determined on the basis of national transparency requirements and user needs, to improve national ownership.

Change 12

Changed(11) Biased and unrealistic macroeconomic and budgetary forecasts for the annual and multiannual budget legislations can considerably hamper the effectiveness of fiscal planning and consequently impair commitment to budgetary discipline. To improve baseline assumptions and provide unbiased assessments of the fiscal impactassumptions, ofMember variousStates policyshould measures,compare thetheir macroeconomic and budgetary forecasts ofwith the Member States should be produced,most supportedupdated or,ones whereof applicablethe accordingCommission toand, nationalif rules,appropriate, endorsedthose byof another independent fiscal institution.bodies.

Change 13

Changed(12) Macroeconomic and budgetary forecasts for annual and multiannual fiscal planning for the general government should be subject to regular, objective and comprehensive ex post evaluations performed by an independent body or other bodies with functional autonomy vis-à-vis the fiscal authorities of the Member States different from the one producing the forecast in order to enhance their quality. Those evaluations should include scrutiny of the economic assumptions, comparison with forecasts prepared by other institutions, and evaluation of past forecast performance.

Change 14

Changed(13) Independent bodies charged with monitoring public finances in the Member States can beare aan supporteffective tobuilding developblock effectiveof budgetary frameworks. Regulation (EU) No 473/2013 of the European Parliament and of the Council requires Member States whose currency is the euro to have independent fiscal institutions tasked with the production, support,endorsement or where applicable according to national rules, endorsementproduction of macroeconomic forecasts and establishes specific safeguards regarding their independence and technical capacity. Given the positiveWithout contributionprejudice to public finance of independent bodies, thosethe requirements should be extended to all Member States. In order to improveunder fiscalRegulation sustainability(EU) andNo strengthen473/2013, the credibilitytask of fiscal policy, such bodiesthe shouldindependent alsofiscal contributeinstitutions to budgetary planning by either producing,produce, supporting,assess or where applicableendorse tomacroeconomic nationalforecasts, rules,in endorsingaccordance thewith forecastsArticle and8(4), debtshould analysestake usedinto byaccount the government,established national procedures and bypractices carryingin outMember independentStates, assessmentsincluding ofthose fiscalconcerning policiesat andwhich monitoringpoint compliancein withtime the fiscaltask framework.is undertaken.

Change 15

Changed(14) In order to achieve strengthened responsibility in fiscal policy, independent fiscal institutions should have a high degree of operational independence, the necessary resources to perform their tasks, including adequate staff and funding,tasks and extensive and timely access to necessary information. Member States shouldmay ensureestablish more than one independent fiscal institution and each of them may discharge one or several of the tasks laid down in this directive, as long as there is a diversityclear allocation of viewsresponsibility and backgroundsthere inis theno compositionremit overlap between them. Excessive institutional fragmentation of monitoring tasks should be avoided. The design of those institutions.monitoring bodies should take into account the existing institutional setting and the administrative structure of the Member State concerned.

Change 16

Changed(15) To improve budgetary planning, due attention should be paidpaid, to the macrofiscal risks from climate changeextent andpossible, to the implications of climate-relatedmacrofiscal policiesrisks onfrom publicclimate financechange, overincluding theits mediumenvironmental and longdistributional term.impacts. Understanding the potential channels through which climate-related shocks affect the economy and public finance is key to national strategies to limit and manage the fiscal riskrisks stemming from climate change and from related disasters.

Change 17

Changed(16) AAlthough the approval of annual budget legislation is a key step in the budget process for democratic accountability, a single-year perspective for budgetary planning provides a limited basis for sound fiscal policies, as most measures have implications that go well beyond the annual budgetary cycle. As such, effective multiannualmedium-term fiscal planning strengthens the credibility of fiscal policy while taking into account debt sustainability. Effective medium-termIt planningshould restsrest on a clear and consistent definition of national budgetary objectives over the medium term,term for the general government, which are presented in national medium-term plans. In order to enhance a multiannual budgetary perspective, planning of annual budget legislation should be consistent with thenational multiannualbudgetary objectives establishedover the medium term referred to in medium-termArticle budgetary2, frameworks.point (e).

Change 18

Changed(17) To be effective in promoting budgetary discipline and the sustainability of public finance,finances, budgetary frameworks should comprehensively cover public finances. For that reason, particular attention should be given to operations of those general government bodies and funds which do not form part of the regular budgets atbut subsectorare levelpart of the general government, including subsectors, and that have an immediate or medium-term impact on Member States’ budgetary positions. TheMember States shall also publish values ofcorresponding to the combined impact on general government balances and debts of those operations should be presented in the framework of the annual budgetary processesbodies and in the medium-term budgetaryfunds. plans,Detailed capturinginformation impactson stemmingthe fromimpact futureof operationstax andexpenditures outstandingon andrevenues expectedshould newbe liabilities.published.

Change 19

Removed(18) Similarly, transparency regarding the type and size of tax expenditures and resulting revenue losses is necessary to provide a more profound understanding of the extent to which fiscal policy and budgetary planning are aligned with government priorities.

Added(19) Green budgeting tools can help redirect public revenue and expenditure to green priorities. In that respect, regular reporting of relevant information improves budget deliberations. Member States could publish the information on how the relevant elements of their budgets contribute to achieving climate and environmental national and international commitments and the methodology used. Member States should publish data and descriptive information separately for expenditure, tax expenditure and revenue items. Member States could publish information on the distributional impact of budgetary policies and take into account employment, social and distributional aspects in the development of green budgeting.

Removed(19) Green budgeting tools can help redirect public revenue and expenditure to green priorities. In that respect, reliable and regular reporting of comprehensive, useful, and accessible information improves budget deliberations. This means reporting data on how revenues reflect the need to ensure that the “polluter-pays” principle is reflected, and in turn on how expenditure reflects both favourably and unfavourably green priorities. Member States should publish the information on how the relevant elements of their budgets contribute to achieving climate and environmental national and international commitments and the methodology used. Member States should publish data and descriptive information separately for expenditure, tax expenditure and revenue items. Member States are invited to publish information on the distributional impact of budgetary policies and take into account employment, social and distributional aspects in the development of green budgeting.

Added(20) Due attention should be paid to the existence of contingent liabilities. More specifically, contingent liabilities encompass possible obligations depending on the occurrence of an uncertain future event, or present obligations where payment is not probable or the amount of the probable payment cannot be measured reliably. They comprise, for instance, government guarantees, non-performing loans, liabilities stemming from the operation of public corporations, and, to the extent possible, disaster- and climate-related contingent liabilities.

Removed(20) Due attention should be paid to the existence of contingent liabilities. More specifically, contingent liabilities encompass possible obligations depending on the occurrence of an uncertain future event, or present obligations where payment is not probable or the amount of the probable payment cannot be measured reliably. They comprise, for instance, government guarantees, non-performing loans, liabilities stemming from the operation of public corporations, and potential expenses and obligations arising from court cases and disaster-related contingent liabilities.

Added(21) Natural disasters and extreme weather events have affected most Member States and climate change is expected to amplify the frequency and intensity of such events. Governments invest in climate adaptation measures and step in to cover disaster costs for emergency relief, recovery and reconstruction and to act as insurer of last resort in some cases. Considering the existing and future challenges for the sustainability of public finances, particular attention should be paid to government obligations and risks to government finances stemming from natural disasters and climate-related shocks, starting with collecting and publishing information on the fiscal cost of past events to the extent possible.

Removed(21) Natural disasters and extreme weather events have affected most Member States and climate change is expected to amplify the frequency and intensity of such events. Governments invest in climate adaptation measures and step in to cover disaster costs for emergency relief, recovery and reconstruction and to act as insurer of last resort in some cases. Considering the existing and future challenges for the sustainability of public finances, particular attention should be paid to government obligations and risks to government finances stemming from natural disasters and climate-related events, starting with collecting and publishing information on the economic losses and fiscal cost of past events as well as information on the budgetary arrangements and financial instruments used for that matter.

Added(21a) Reporting on macrofiscal risks from climate change, climate-related contingent liabilities and fiscal costs of disasters is improving but still remains at an incipient stage, with methodologies and indicators for such reporting still being developed. The adaptation to this reporting will require significant efforts from public administrations. Taking into account these challenges, and to the extent possible, reporting in these areas should be carried out and evolve in parallel to such methodological advances.

▸4 unchanged paragraphs

(22) The Commission should continue to regularly monitor the implementation of Directive 2011/85/EU. Best practices concerning the implementation of the provisions of that Directive should be identified and shared.

(23) Directive 2011/85/EU should therefore be amended accordingly,

HAS ADOPTED THIS DIRECTIVE:

Directive 2011/85/EU is amended as follows: