Changes from report parliamentary committee draft to plenary report

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

Changedon the proposal for a regulation of the European Parliament and of the Council on the effective coordination of economic policies and multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97

Changed(COM2023)0240(COM(2023)0240 – C90150/2023 – 2023/0138(COD))

(Ordinary legislative procedure: first reading)

The European Parliament,

Changed– having regard to the Commission proposal to Parliament and the Council (COM2023)0240),(COM(2023)0240),

▸4 unchanged paragraphs

– having regard to Article 294(2) and Article 121(6) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90150/2023),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

– having regard to the opinion of the European Central Bank of 5 July 2023,

– having regard to the opinion of the European Economic and Social Committee of 21 September 2023,

Added– having regard to the opinion of the European Committee of the Regions of 10 October 2023,

– having regard to Rule 59 of its Rules of Procedure,

– having regard to the opinion of the Committee on Employment and Social Affairs,

Changed– having regard to the report of the Committee on Economic and Monetary Affairs (A90000/2023),(A9-0439/2023),

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

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

Change 1

RemovedRecital 3: (3) The fiscal governance framework, which is the subject matter of this Regulation, is a part of the European Semester, which also comprises the coordination and surveillance of broader economic, employment and relevant social policies of the Member States, in accordance with Articles 121 and 148 TFEU, including the European Pillar of Social Rights, and the related country-specific recommendations.

AddedAMENDMENTS BY THE EUROPEAN PARLIAMENT*

RemovedRecital 6: (6) The economic governance framework of the Union should put debt sustainability, investments and reforms, the common priorities of the Union and sustainable and inclusive growth at its core and therefore differentiate between Member States by taking into account their public debt challenges and allowing country-specific fiscal trajectories, and ensure consistency within the Union as a whole, including the euro area.

Addedto the Commission proposal

RemovedRecital 8: (8) Detailed rules should therefore be laid down regarding the content, submission, assessment and monitoring of the national medium-term fiscal-structural plans, in order to promote debt sustainability, investments and reforms, the common priorities of the Union and sustainable and inclusive growth in the Member States and prevent the occurrence of excessive government deficits through medium-term planning.

Added---------------------------------------------------------

RemovedRecital 9: (9) National medium-term fiscal-structural plans should bring together the fiscal, structural reforms and investment commitments of each Member State and these plans should be the cornerstone of the economic governance framework of the Union. Each Member State should present a medium-term plan that sets out its net expenditure path as well as priority public investment and reform commitments that together ensure sustained and gradual debt reduction and sustainable and inclusive growth, avoiding a pro-cyclical fiscal policy, as well as broader reform and investment commitments, including in relation to the European Green Deal, the European Pillar of Social Rights, the Digital Decade Policy Programme 2030 and the Strategic Compass for Security and Defence. During the lifetime of the Recovery and Resilience Facility25, commitments undertaken in the national Recovery and Resilience Plans should be duly taken into account.

Added2023/0138 (COD)

RemovedRecital 10: (10) Cohesion policy funds are also synchronised with the European Semester process. As the long-term investment policy of the EU budget, cohesion policy investments and reforms should also be duly taken into account in the drawing of the national medium-term fiscal-structural plans. Each Member State should also explain how its national medium-term fiscal-structural plan will ensure consistency and, where appropriate, complementarity with the expenditure on EU programmes fully matched by EU funds revenue and the relevant national co-financing.

AddedProposal for a

RemovedRecital 11: (11) The presentation of the national medium-term fiscal-structural plan should be preceded by a technical dialogue with the Commission to ensure compliance with the provisions of this Regulation. The technical dialogue should be properly documented for the purpose of transparency and accountability towards the European Parliament. On the basis of a recommendation from the Commission accompanied by an evaluation of the European Advisory Fiscal Board (EFB) and the national independent fiscal institution of the Member State concerned, the Council should set the net expenditure path and endorse the reform and investment commitments, including those taken for the possible extension of the adjustment period, as appropriate.

AddedREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

RemovedRecital 12: (12) 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 fiscal path and carrying out annual fiscal surveillance for each Member State. That single operational indicator should be based on nationally financed net primary expenditure, that is to say 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 with 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. 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.

Addedon the effective coordination of economic policies and multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97

RemovedRecital 13: (13) To initiate the drafting of its national medium-term fiscal-structural plan, each Member State with a public debt above the 60% of GDP reference value or a government deficit above the 3% of GDP reference value should put forward a proposal for a reference trajectory to the Commission. The trajectory should be based on the minimum fiscal adjustment that brings the debt trajectory of the Member State on a plausibly downward path leading to sustainable debt reduction or maintains debt at a prudent level. It should also ensure that the public debt ratio stabilises over the adjustment period and is reduced by at least [x] p.p of debt to GDP on average over the projection period (i.e. the adjustment period plus 10 years). The sustainability of that debt reduction should result from appropriate fiscal policies.

AddedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

RemovedRecital 13 a (new): (13a) Following the submission of a Members State’s reference trajectory, a dialogue with the Commission should take place to assess compliance of its reference trajectory with the provisions of this Regulation. If as a result of the dialogue, the Commission and the Member State concerned disagree, the reference trajectory put forward by the Commission should apply.

AddedHaving regard to the Treaty on the Functioning of the European Union, and in particular Article 121(6) thereof,

RemovedRecital 14: (14) The reference trajectory should also ensure that the government deficit is brought and maintained below the 3% of gross domestic product (GDP) reference value.

AddedHaving regard to the proposal from the European Commission,

RemovedRecital 15: (15) In order to assess whether further adjustments are required towards the end of the four-year implementation period of the national medium-term fiscal-structural plan, a new reference trajectory should be put forward if the public debt of the Member State is still above 60% of GDP reference value or its government deficit is higher than 3% of GDP reference value.

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

RemovedRecital 16: (16) Prior to the submission of the national medium-term fiscal-structural plan, each Member State should consult relevant stakeholders and its national parliament and annex the result of that consultation to the plan. Each national medium-term fiscal-structural plan should also mention its status in the context of national procedures, notably whether there has been parliamentary approval of the plan and whether, if applicable, the national parliament had the opportunity to discuss the Council recommendation on the previous plan and any other Council recommendation or decision, or any Commission warning.

AddedHaving regard to the opinion of the European Central Bank (footnote)

RemovedRecital 16 a (new): (16a) A new government in a Member State may submit a new or revised national medium-term fiscal structural plan to the Commission. However, if there are objective circumstances preventing the implementation of the plan, a Member State may request to submit a revised plan to the Commission no later than 12 months before the end of the current plan.

AddedActing in accordance with the ordinary legislative procedure,

RemovedRecital 17: (17) When Member States use assumptions in their reference trajectory that differ from the Commission’s standard medium-term debt projection framework and macroeconomic forecast and assumptions, they should explain and duly justify the differences in a transparent manner and based on sound economic arguments, in the dialogue with the Commission on the reference trajectory.

AddedWhereas:

RemovedRecital 20: deleted

Added(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.

RemovedRecital 21: (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 these dialogues.

Added(2) 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 Stability and Growth Pact, 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 growth underpinned by financial stability, thereby supporting the achievement of the Union’s objectives for sustainable and inclusive growth, quality employment and competitiveness.

RemovedRecital 21 a (new): (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 if they are 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. 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.

Added(3) The fiscal governance framework, which is the subject matter of this Regulation, is a part of the European Semester, which also comprises the coordination and surveillance of broader economic, employment and relevant social policies of the Member States, in accordance with Articles 121 and 148 TFEU, including the European Pillar of Social Rights, and the related country-specific recommendations.

RemovedRecital 23: (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. 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.

Added(4) The involvement of social partners, civil society organisations and other relevant stakeholders in the European Semester is key to ensure ownership and transparent and inclusive policy-making.

RemovedRecital 24: (24) The set of reform and investment commitments put forward in the national medium-term fiscal-structural plans should be aligned with common priorities of the Union. 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.

Added(5) The economic governance framework of the Union should be adapted to better take into account the growing heterogeneity of fiscal positions, public debt 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 damage of the crisis, but the crisis resulted in a significant increase in public- and private-sector debt ratios, underscoring the importance of reducing debt ratios to prudent levels in a gradual, sustained and growth-friendly manner 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, open strategic autonomy, addressing demographic change, strengthening social and economic resilience 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.

RemovedRecital 26: (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 will be deemed not to be in compliance of its net expenditure path where the cumulated balance of the control account during the adjustment period is higher than [X% of GDP] in the years of positive GDP growth.

Added(6) The economic governance framework of the Union should put debt sustainability, investments and reforms, the common priorities of the Union and sustainable and inclusive growth and resilience, at its core and therefore differentiate between Member States by taking into account their public debt challenges and allowing country-specific fiscal trajectories, and ensure consistency within the Union as a whole, including the euro area.

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

Added(6a) Maintaining a high level of public investment is necessary in order to achieve the main objectives of the reform of the economic governance framework as laid down in this Regulation and addressing the current and future priorities of the Union. That framework could be strengthened by a common investment instrument at Union level. The lessons learned from the implementation of instruments such as SURE or NGEU could serve as inspiration for future instruments that aim to support the fiscal governance framework.

RemovedRecital 31: (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 not endangered for the application of both the general and country-specific escape clauses, should be based on a quantitative analysis by the Commission. The triggering and extension of general and country-specific escape clauses are subject to a Council recommendation.