The proposals issued by the European Commission on 27 April 2023 concerning the reform of the EU economic governance include:
A regulation to reform the preventive arm of the stability and growth pact (Proposal for a regulation on the effective coordination of economic policies and multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97), together with seven annexes.
Amendments to the regulation concerning the excessive deficit procedure (A proposal for amending Council Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure)
Amendments to the Directive concerning the requirements for member states’ budgets (Proposal for a Council Directive amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States)
This analysis will focus on the climate aspects of the proposals, focusing on the proposed regulation on the preventive arm and its annexes, as well as the amendments to the directive on requirements for Member States’ budgetary frameworks.
The proposals on the table offer some leeway to Member States with a debt or deficit above the Treaty reference values to reduce their debt to GDP and deficit to GDP ratio over a longer period of time than under current rules, which is welcome. However, the proposed reforms do not go far enough to effectively generate the fiscal space needed for Member States to be able to make their economies more resilient to upcoming shocks, including climate change impacts. It is also uncertain at this stage whether the provisions on the table will be sufficient to avoid a return of austerity and cuts in public spending for environmental and social issues in several Member States.