Changes from report parliamentary committee draft to plenary report

Added(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 endangered for the application of both the general and country-specific escape clauses should be based on a quantitative and qualitative analysis by the Commission. The triggering and extension of general and country-specific escape clauses are subject to a Council recommendation.

RemovedArticle 8 – paragraph 1 b (new): By … [12 months after the entry into force of this Regulation], the Commission shall adopt a delegated act in accordance with Article 33 to supplement this Regulation by defining the methodology for debt sustainability analysis and the methodology for the assessment of plausibility referred to in paragraph 1.

Added(32) This Regulation is part of a package together with Council Directive [XXX amending 2011/85/EU] and Council Regulation [XXX amending Council Regulation (EC) No 1467/97]. Together, they establish a reformed Union economic governance framework that incorporates into Union law the substance of Title III ‘Fiscal Compact’ of the Treaty on Stability, Coordination and Governance (TSCG) in the Economic and Monetary Union, in accordance with Article 16 thereof. By building on the experience with the implementation of the TSCG by the Member States, the proposed legislative 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 a stronger role for Independent Fiscal Institutions, which draws essentially 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 this Regulation. As in the Fiscal Compact, temporary deviations from the medium-term plan are allowed only in exceptional circumstances in this Regulation. In a similar vein to the Fiscal Compact, 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.

RemovedArticle 8 – paragraph 1 c (new): For the purpose of the delegated act on debt sustainability analysis, the Commission shall identify the relevant factors to assess the sustainability of debt, taking into consideration, in particular the future evolution of sustainable growth; interest rates; the level of inflation; liquidity risks; the structure of the debt; contingent liabilities; the potential growth impact of the reforms and investments underpinning the implemented national medium-term fiscal-structural plans, as well as climate risks.

Added(33) In order to ensure effective implementation and appropriate monitoring of this Regulation, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of: the information to be provided by Member States in their medium-term fiscal-structural plans, the information to be provided by Member States in their annual progress reports, the methodology for debt sustainability analysis, the methodology to assess plausibility that the projected public debt ratio is on a downward path leading to sustainable debt reduction or remains at a prudent level, the implementation of a scoreboard and the assessment framework for the set of reform and investment commitments underpinning an extension of the fiscal adjustment period. It is of particular importance that the Commission carries out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

Change 2

ChangedArticle 9 – paragraph 1:(33a) EachA Membermethodology Statefor shalldebt submitsustainability toanalysis theshould Councilbe andadopted toby themeans Commissionof a nationaldelegated medium-termact fiscal-structuralno planlater beforethan end-April12 followingmonths after the entry into force of this Regulation. The Member StateFor concernedthat andpurpose, the Commission mayshould agreeidentify factors that are relevant to extendassessing thisthe deadlinesustainability byof adebt. reasonableFor periodthe iffirst necessary.year Thein Europeanwhich Parliamentthe shall,Member withoutStates undueare delayrequired beto informedsubmit intheir writingmedium-term aboutfiscal-structural eachplans, extensionthe andbasis itsfor the underlying reasons.medium-term public debt projection framework should be the 2022 Debt Sustainability Monitor.

Change 3

RemovedArticle 9 – paragraph 1 a (new): Prior to the submission to the Council and Commission, each Member State shall establish a structured cooperation mechanism to receive contributions to their national medium term fiscal plans from civil society, social partners and other relevant stakeholders. The recommendations and suggestions of the consultation and cooperation shall be included as an Annex in the medium term fiscal-structural plans.

Added(34) The multilateral surveillance should be based on high quality and independent statistics produced in accordance with the principles laid down in Regulation (EC) No 223/2009 of the European Parliament and of the Council,

RemovedArticle 9 – paragraph 1 b (new): Prior to submission Member States shall discuss the draft national medium term fiscal structural plans with respective parliaments.

AddedSUBJECT-MATTER AND DEFINITIONS

RemovedArticle 9 – paragraph 2: The Member State shall make its national medium-term fiscal-structural plan public, including all the data and documents related to the negotiations and assumptions used for the reference trajectory.

AddedSubject-matter

RemovedArticle 10 – paragraph 1: Prior to the submission of its national medium-term fiscal-structural plan, the Member State concerned shall hold with the Commission a technical dialogue, with the objective of ensuring that the national medium-term fiscal-structural plan complies with Articles 11, 12, 13 and 14. To ensure transparency and accountability, the Commission shall retain the minutes and all the related documents prepared ahead, during and after each technical dialogue until at least the end of the second intended adjustment period. After the submission of the national medium-term fiscal structural plan to the Commission, the European Parliament shall have access to these documents upon request, subject to any confidentiality arrangements, if they are necessary.

AddedThis Regulation sets out rules ensuring effective coordination of economic policies of the Member States, thereby supporting the achievement of the Union’s objectives for sustainable and inclusive growth, quality employment and competitiveness.

RemovedArticle 11 – paragraph 1 – subparagraph 1: A national medium-term fiscal-structural plan shall provide the information listed in Annex II. In particular, it shall present a net expenditure path, set in the form of nominal targets, covering a period of at least 4 years, as well as the underlying macroeconomic assumptions and the planned fiscal-structural measures in order to demonstrate compliance with the requirements of Article 12.

AddedIt lays down detailed rules concerning the content, submission, assessment and monitoring of national medium-term fiscal-structural plans as part of multilateral budgetary surveillance by the Council and the Commission, with the involvement of the European Parliament, so as to promote debt sustainability, investments and reforms, common priorities of the Union, and sustainable and inclusive growth and resilience in the Member States and to prevent the occurrence of excessive government deficits, by medium-term planning ensuring consistency within the Union, including the euro area.

RemovedArticle 11 – paragraph 1 – subparagraph 2: deleted

AddedDefinitions

RemovedArticle 11 – paragraph 2: deleted

AddedFor the purposes of this Regulation, the following definitions apply:

RemovedArticle 12 – title: Requirements of the national medium-term fiscal-structural plans

Added(1) ‘country-specific recommendation’ means the annual guidance by the Council to a Member State on economic, budgetary, employment and structural policies in accordance with Articles 121 and 148 of the Treaty on the Functioning of the European Union (TFEU);

RemovedArticle 12 – paragraph 1 – point a: (a) ensure the fiscal adjustment necessary to put or keep public debt on a plausibly downward path leading to sustainable debt reduction, by the end of the adjustment period at the latest, or remain at prudent levels, and to bring and maintain the government deficit below the 3% of GDP reference value over the medium term;

Added(2) ‘net expenditure’ means 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 at 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;

RemovedArticle 12 – paragraph 1 – point b: (b) explain how it will ensure the delivery of investment and reforms responding to the main challenges identified within the European Semester, in the country-specific recommendations and correct, if applicable, the identified macroeconomic imbalances under the Macroeconomic Imbalances Procedure, the warnings by the Commission or the recommendations by the Council made pursuant to Article 121(4) TFEU;

Added(3) ‘reference trajectory’ means for each Member State with public debt above the 60% of gross domestic product (GDP) reference value or government deficit above the 3% of GDP reference value, the net expenditure trajectory put forward by the Commission, following an optional presentation of a proposal by each Member State concerned and the dialogue referred to in Article 7(1a);

RemovedArticle 12 – paragraph 1 – point b a (new): (ba) explain how it will address the following common priorities of the Union: / (a) The European Green Deal1a, including the transition to climate neutrality by 20501b and the translation at national level through the National Energy and Climate Plans; / (b) The European Pillar of Social Rights1c including the related targets on employment, skills and poverty reduction by 2030; / (c) The Digital Decade Policy Programme 20301d , and reflected at national level through the National Digital Decade Strategic Roadmaps; / (d) A Strategic Compass for Security and Defence - For a European Union that protects its citizens, values and interests and contributes to international peace and security1e. / 1a Communication COM(2019) 640 final of 11 December 2019 from the Commission ‘The European Green Deal’ and Decision (EU) 2022/591 of the European Parliament and of the Council of 6 April 2022 on a General Union Environment Action Programme to 2030 (OJ L 114, 12.4.2022, p.22). / 1b Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’). / 1c (2017/C 428/09) Interinstitutional Proclamation on the European Pillar of Social Rights (OJ C 428, 13.12.2017, p. 10) / 1d Decision (EU) 2022/2481 of the European Parliament and of the Council of 14 December 2022 establishing the Digital Decade Policy Programme 2030 (OJ L 323,…

Added(4) ‘net expenditure path’ means the multi-annual trajectory for net expenditure of a Member State as set by the Council;

RemovedArticle 12 – paragraph 1 – point b b (new): (bb) explain how it will ensure consistency with the updated National Energy and Climate Plans and the National Digital Decade Roadmaps;

Added(5) ‘national medium-term fiscal-structural plan’ means the document containing the fiscal, reform and investment commitments of a Member State;

RemovedArticle 12 – paragraph 1 – point d: (d) explain how it will ensure consistency, and, where appropriate, complementarity, with the Recovery and Resilience Plan of the Member State concerned during the period of availability of the Recovery and Resilience Facility in accordance with Regulation (EU) 2021/241 and with any Union investment instruments that address the Union’s common priorities or serve the same purpose as the Recovery and Resilience Facility;

Added(6) ‘annual progress report’ means the document of a Member State reporting on the implementation of the ▌national medium-term fiscal-structural plan, including its net expenditure path and the reform and investment commitments;

RemovedArticle 12 – paragraph 1 – point d a (new): (da) explain how it will ensure consistency and, where appropriate, complementarity with Union funds, namely the cohesion policy funds the Member State concerned benefits from;

Added(7) ‘adjustment period’ means the period of time over which the fiscal adjustment of a Member State takes place, covering a minimum adjustment period of 4 years of the national medium-term fiscal-structural plan and its possible extension;

RemovedArticle 12 – paragraph 1 – point d b (new): (db) provide the information listed in Annex II.

Added(8) ‘control account’ means a record of the cumulated deviations of the actual net expenditure in a Member State from the net expenditure path;

RemovedArticle 13 – title: Requirements for an extension of the adjustment period

Added(9) ‘structural balance’ means the cyclically adjusted general government balance net of temporary measures;

RemovedArticle 13 – paragraph 2 – subparagraph 2 – point i: (i) be growth enhancing and boost resilience;

Added(10) ‘structural primary balance’ means the cyclically adjusted general government balance net of temporary measures and net of interest expenditure.

RemovedArticle 13 – paragraph 2 – subparagraph 2 – point iii: (iii) address the common priorities of the Union referred to in Article 12, first paragraph, point (ba);

Added(10a) ‘projection period’ means the adjustment period plus 10 years.

RemovedArticle 13 – paragraph 2 – subparagraph 2 – point v: deleted

AddedEUROPEAN SEMESTER

RemovedArticle 13 – paragraph 3: 3. Each of the reform and investment commitments underpinning an extension of the adjustment period shall be sufficiently detailed, time-bound and verifiable.

AddedThe European Semester

RemovedArticle 13 – paragraph 4: 4. Commitments included in the approved Recovery and Resilience Plan during the lifetime of the Recovery and Resilience Facility, in accordance with Regulation (EU) 2021/241, and the Partnership Agreement in Multiannual Financial Framework of the Member State concerned shall be consistent with the set of reforms and investments for an extension of the adjustment period.

AddedIn order to ensure closer coordination of economic and relevant social policies and sustained convergence of the economic and social performance of the Member States, the Council and the Commission, with the involvement of the European Parliament in accordance with Article 25a, shall conduct multilateral surveillance within the European Semester in accordance with the objectives and requirements set out in the TFEU. Multilateral surveillance shall rely on high quality and independent statistics, produced in accordance with the principles laid down in Regulation (EC) No 223/2009 of the European Parliament and of the Council.

RemovedArticle 14 – paragraph 1: 1. By no later than 12 months before the end of the current national medium-term fiscal structural plan, a Member State may request to submit a revised national medium-term fiscal-structural plan to the Commission before the end of its adjustment period if there are objective circumstances preventing the implementation of the original national medium-term fiscal-structural plan. The ambition of the reform and investments in the revised plan shall not be lower than the original plan.

AddedIn order to achieve its overarching aim of ensuring closer coordination of economic, social, budgetary and structural policies and for the purposes of the overall assessment of economic performance, the European Semester shall include:

RemovedArticle 14 – paragraph 1 a (new): 1a. A new government in a Member State may submit a new or revised national medium-term fiscal-structural plan to the Commission, taking into account the ambition level of the previous plan.

Added(a) the formulation, and the surveillance of the implementation, of the broad guidelines for the economic policies of the Member States and of the Union in accordance with Article 121(2) TFEU, of country-specific recommendations and of the recommendation on the economic policy of the euro area;

RemovedArticle 14 – paragraph 2: 2. Prior to the submission of the revised national medium-term fiscal-structural plan, a new reference trajectory shall be put forward in accordance with Article 5.

Added(b) the formulation, and the surveillance of the implementation, of the employment guidelines that are to be taken into account by Member States in accordance with Article 148(2) TFEU, of the European Pillar of Social Rights and its headline targets, and of the related country-specific recommendations as well as the social scoreboard and its headline and secondary indicators and the Social Convergence Framework to prevent and identify social convergence risks;

RemovedArticle 14 – paragraph 3: 3. Taking into account the past adjustment of the Member State concerned or the lack thereof, the new reference trajectory shall not allow backloading of the fiscal adjustment effort and shall not lead to a lower fiscal adjustment effort.

Added(c) the submission, assessment and endorsement of Member States’ medium-term fiscal-structural plans, as well as their monitoring via the annual progress reports;

RemovedArticle 15 – paragraph 1: 1. The Commission shall assess each national medium-term fiscal-structural plan within 2 months of its submission. The Member State concerned and the Commission may, if necessary, agree to extend the period of assessment by a reasonable period, not exceeding 2 months.

Added(d) the surveillance to prevent and correct macroeconomic imbalances pursuant to Regulation (EU) No 1176/2011;

RemovedArticle 15 – paragraph 2 – point a: (a) whether the national medium-term fiscal-structural plan ensures that public debt is put or kept on a plausibly downward path leading to sustainable debt reduction or stays at prudent levels;

Added(e) other multilateral surveillance procedures established by the European Parliament and the Council pursuant to Article 121(6) TFEU.