What changed

Follow-up to the European Parliament non-legislative resolution on the European Semester for economic policy coordination 2025

P10_TA(2025)0031

Rapporteur: Fernando Navarrete Rojas (EPP / ES)

European Semester for economic policy coordination 2025

References: 2024/2112(INI) / A10-0022/2025 / P10_TA(2025)0031

Committee on Economic and Monetary Affairs

Date of adoption of the resolution: 12 March 2025

PE766.678

Competent Parliamentary Committee: Committee on Economic and Monetary Affairs (ECON)

European Parliament resolution of 12 March 2025 on the European Semester for economic policy coordination 2025 (2024/2112(INI))

Brief analysis/ assessment of the resolution and requests made in it: The European Parliament calls on the Commission to strengthen the European Semester by ensuring better coordination between economic, social, and environmental policies. It urges the Commission to implement the reformed economic governance framework that balances fiscal responsibility with key investments, particularly in the green and digital transitions. The Parliament also emphasizes the need for stronger oversight of the Recovery and Resilience Facility (RRF) to ensure effective use of funds, while addressing macroeconomic imbalances and promoting inclusive growth. Additionally, it calls for integrating social objectives, such as fair wages and employment quality, into economic policymaking, aligning with the EU’s Green Deal and long-term sustainability goals.

The European Parliament,

Response to requests and overview of actions taken, or intended to be taken, by the Commission:

– having regard to the Treaty on the Functioning of the European Union (TFEU), in particular Articles 121, 126 and 136 thereof,

In paragraph 6, the European Parliament calls on the Commission to come up with initiatives, on the basis of the Budapest Declaration; to make the EU more competitive, productive, innovative and sustainable, by building on economic, social and territorial cohesion and ensuring convergence and a level playing field both within the EU and globally; notes the development of a new competitiveness coordination tool; expects the Commission to clarify how this tool will interact with the European Semester; stresses the importance of supporting micro, small and medium-sized enterprises as key drivers of economic growth and employment within the EU.

– having regard to Protocol No 1 to the Treaty on European Union (TEU) and the TFEU on the role of national parliaments in the European Union,

The European Commission has made competitiveness a core pillar of its new mandate, ensuring that economic resilience, innovation, and productivity drive EU policy. The launch of the Competitiveness Compass was a first step, translating the Draghi Report’s conclusions into concrete actions that strengthen Europe’s economy.

– having regard to Protocol No 2 to the TEU and the TFEU on the application of the principles of subsidiarity and proportionality,

To turn these priorities into reality, the Commission has made regulatory simplification and efficiency a cornerstone of its agenda. The “A Simpler and Faster Europe” initiative, introduced in the Commission Work Programme, focuses on cutting red tape and making EU laws clearer and more effective. In only three months of its mandate, the Commission has already delivered (in February) two Omnibus packages, focused on streamlining sustainability reporting and simplified investment procedures, to better achieve their policy objectives while reducing costs and enhancing legal certainty. The Commission has committed to reduce existing reporting requirements by at least 25% and at least 35% for SMEs and introduce a new SME and competitiveness check to better consider these dimensions in impact assessments for new legislation. The Commission is also committed to stress testing the whole stock of EU legislation during the current legislative mandate and to come forward regularly with proposals to simplify existing legislation. The 2025 Commission Work Programme outlines already several proposals in areas such as small mid-caps, agriculture, certain digital elements, or defence, while the Commission explores also other areas.

– having regard to Protocol No 12 to the TEU and the TFEU on the excessive debt procedure,

Beyond simplification, the Commission is also enhancing policy coordination to reinforce competitiveness across the EU. Focusing on EU competitiveness requires a set of commonly agreed funding priorities and multi-country investment projects, to be defined through a strengthened policy steering mechanism. The new Competitiveness Coordination Tool (CCT) will complement the European Semester and both will form an integral part of a steering mechanism aimed at ensuring that strategic competitiveness priorities are reflected in national reforms and investments while strengthening economic policy convergence among Member States.

– having regard to the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union,

The next Multi-annual Financial Framework will be an opportunity to go further and rethink the structure and allocation of the EU budget in support of competitiveness priorities. In the next MFF, a new European Competitiveness Fund should respond to these needs in a more integrated fashion. The Fund will establish an investment capacity that will support strategic technologies and manufacturing (from Artificial Intelligence to space, from clean tech to bio-tech sectors etc.), which are critical to European competitiveness, including research and innovation, and Important Projects of Common European Interest (IPCEIs). It will help to leverage investments.

– having regard to Regulation (EU) 2024/1263 of the European Parliament and of the Council of 29 April 2024 on the effective coordination of economic policies and on multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97,

This strategic focus on competitiveness was already evident in the European Semester Autumn Package published in December. The package was the first one since the introduction of the new economic governance framework. The medium-term fiscal-structural plans submitted by Member States under this framework are designed to strengthen debt sustainability while simultaneously fostering sustainable and inclusive growth through targeted reforms and investments. Moreover, the Euro Area Recommendations reinforced this commitment by emphasizing three key pillars—competitiveness, resilience, and macroeconomic stability—offering a structured approach to address urgent economic challenges.

– having regard to Council Regulation (EU) 2024/1264 of 29 April 2024 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure,

While competitiveness has now taken a more prominent role in EU policy, the Recovery and Resilience Facility, has already been supporting structural reforms and investments to boost long-term growth. Under the revised Economic Governance Framework, the Commission affirms its commitment to placing reforms and investments at the core of the EU’s economic framework, promoting both modernisation and growth.

– having regard to Council Directive (EU) 2024/1265 of 29 April 2024 amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States,

In paragraph 22, the European Parliament highlights that the debt sustainability analysis (DSA) plays a key role in the reformed EU fiscal rules; is of the opinion that the discretionary role of the Commission in the DSA requires the relevant assessments to be fully transparent, predictable, replicable and stable; calls on the Commission to address possible methodological improvements, such as assessing spillover effects between Member States, and to duly inform Parliament in this regard;

– having regard to Regulation (EU) No 1173/2011 of the European Parliament and of the Council of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area,

The European Commission notes that as provided for by Regulation 2024/1263, a working group on debt sustainability analysis has been established to explore possible methodological improvements.

– having regard to Regulation (EU) No 1174/2011 of the European Parliament and of the Council of 16 November 2011 on enforcement measures to correct excessive macroeconomic imbalances in the euro area,

Possible spill-over impacts could be factored in the plans submitted by EU Member States and, in any case, are considered in the Commission economic forecasts. It is also worth noting that, under the new EU fiscal framework, fiscal policies will be more differentiated by taking into account the public debt and economic challenges of each Member State. This risk-based differentiation reduces the aggregate consolidation requirements compared to the previous framework, thanks to a better articulation of fiscal policies with investment and reform policies, increasing the scope for positive spillover effects.

– having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances,

The Commission is committed to making public any change in the methodology in a timely manner, to preserve its transparency and replicability. The current DSA methodology is already well-documented and transparently communicated to the European Parliament and Council. The Debt Sustainability Monitor also provides an overview of fiscal sustainability challenges faced by EU Member States over the short, medium and long term, based on the DSA methodology.

– having regard to Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability,

In paragraph 28 the European Parliament acknowledges that 21 of the 22 national medium-term fiscal-structural plans that have been reviewed so far received a positive evaluation; notes that the new framework allows Member States to use assumptions that differ from the Commission’s DSA if these differences are explained and duly justified in a transparent manner and are based on sound economic arguments in the technical dialogue with the Member States; observes, however, that in the plans submitted by five Member States, the Commission found insufficiently justified inconsistencies and deviations from the DSA framework in macroeconomic assumptions related to potential GDP and/or the GDP deflator; stresses that such deviations and risks of backloading could potentially threaten future fiscal sustainability; notes that in the plans submitted by three Member States, the Commission acknowledges a concentration of the fiscal adjustment towards the end of the period; calls on the Commission to ensure that any such concentration of the adjustment meets the requirements set out in the regulation and calls on it to prevent procyclical policies;

– having regard to Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013 on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area,

In the European Commission’s respective recommendations on the medium-term plans, the Commission found insufficiently justified differences in macroeconomic assumptions. However, this assessment took into consideration that these differences were balanced by other, more cautious, assumptions. Thus, these insufficiently justified differences in the macroeconomic assumptions did not lead to a higher net expenditure growth compared to the prior guidance.

– having regard to Regulation (EU, Euratom) 2020/2092 of the European Parliament and of the Council of 16 December 2020 on a general regime of conditionality for the protection of the Union budget (the Rule of Law Conditionality Regulation),

The net expenditure paths put forward in the three plans, for which some degree of backloading was observed, were found to be consistent with the no-backloading safeguard clause set out in Article 6, point (c), either justified by the transitional provision in Article 36(1), point (e), of Regulation (EU) 2024/1263, and/or explained by pattern of defence spending. The compliance with the net expenditure paths will be annually monitored in the context of the European Semester.

– having regard to Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the Recovery and Resilience Facility (the RRF Regulation),

In paragraph 30 the European Parliament calls on the Commission to “effectively evaluate ex post the impact of agreed reforms and investments” underpinning an extension of the adjustment period.

– having regard to the Commission’s Spring 2024 Economic Forecast of 15 May 2024,

The Commission has assessed the investments and reforms proposals submitted in the medium-term fiscal-structural plans and evaluated them according to the criteria set out in Regulation EU 2024/1263 [in articles 13, 14 and 36(d)].

– having regard to the Commission’s Autumn 2024 Economic Forecast of 15 November 2024,

The assessment was included in the Council Recommendation endorsing the national medium-term fiscal-structural plans. Implementation of the reforms and investments will be monitored by the Commission via the “key steps” and the “monitoring indicators” spelled out in Annex II of the Council Recommendation endorsing the national medium-term fiscal-structural plans.

– having regard to the Commission’s Debt Sustainability Monitor 2023 of 22 March 2024,

Member States will report on their progress in the implementation of reforms and investments in the Annual Progress Report, as foreseen in Regulation EU 2024/1263. The assessment of reform implementation in the broader context of economic surveillance will take place within the European Semester exercise. The Commission would like to underline that the effect of reforms takes generally a long time to materialise, and such an assessment would be difficult to foresee at an early stage of implementation of the plans

– having regard to the Commission communication of 17 December 2024 entitled ‘Alert Mechanism Report 2025’ (COM(2024)0702) and to the Commission recommendation of 17 December 2024 for a Council recommendation on the economic policy of the euro area (COM(2024)0704),

In paragraph 33 the European Parliament considers that the effective implementation of the fiscal rules, although necessary, is not in itself sufficient to achieve the optimal fiscal stance at all times and ensure a high standard of living for all Europeans; notes that the fiscal stance is still projected to differ greatly from one Member State to another in 2025; calls on the Commission to explore ideas for a mechanism that helps ensure that the cyclical position of the EU as a whole is appropriate for the macroeconomic outlook at all times

– having regard to the Commission proposal of 17 December 2024 for a joint employment report from the Commission and the Council (COM(2024)0701),

The European Commission notes that automatic stabilisers at national level (e.g. tax and benefit systems) are the first line of defence to cushion economic shocks. They act immediately and counter-cyclically. In the EU, they are expected to be sufficient for cushioning normal economic fluctuations, if sufficient fiscal buffer is created in good times. The new EU fiscal framework enables automatic stabilisers to operate in full as it is based on a single operational indicator, which is not affected by the operation of automatic stabilisers and other expenditure fluctuations outside the direct control of the government. There is also scope to enhance automatic stabilisers at national level, e.g. by modifying the composition and structure of the tax-benefit system in favour of more cyclical tax categories.

– having regard to the Commission communication of 8 March 2023 entitled ‘Fiscal policy guidance for 2024’ (COM(2023)0141),

Beyond automatic stabilisation, discretionary measures can supplement the support provided by automatic stabilisers, both at the national and at the EU level. Europe has weathered three major economic shocks in the last 15 years (global financial crisis, Covid-19, and the fallout of Russia’s aggression of Ukraine on energy prices). These crises prompted policy responses in the EU such as the Banking Union, the European Stability Mechanism, the European instrument for temporary support to mitigate unemployment risks in an emergency instrument (SURE), Next Generation EU and the Recovery and Resilience Facility (RRF) as well as REPowerEU. These policy responses have all strengthened the resilience of the EU, and sent a clear message to markets that European countries stand together in solidarity in times of crisis.

– having regard to the Commission report of 19 June 2024 prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union (COM(2024)0598),

More recently, on 19 March 2025, as a response to heightened security concerns, the Commission put forward a proposal for a Council Regulation to establish an emergency instrument “Security Action for Europe” (SAFE) (COM/2025/122 final). Once adopted by the Council, SAFE will provide financial assistance (loans) to help Member States to invest in key defence areas.

– having regard to the Council Recommendation of 12 April 2024 on the economic policy of the euro area,

Building on the gradual progress achieves in the integration and deepening of financial markets, on 19 March 2025, the Commission also adopted a comprehensive strategy on the Saving and Investment Union, aiming to ensure that all Member States benefit from strong, integrated financial markets. This is expected to facilitate private risk sharing and has a potential to smooth income and consumption shocks.

– having regard to the European Fiscal Board assessment of 3 July 2024 on the fiscal stance appropriate for the euro area in 2025,

As announced by President von der Leyen in her political guidelines, the Commission will also propose a European Competitiveness Fund, as part of the next Multiannual Financial Framework, establishing an investment capacity that will support strategic sectors critical to the EU competitiveness, including research and innovation, and Important Projects of Common European Interest.

– having regard to the Eurogroup statement of 15 July 2024 on the fiscal stance for the euro area in 2025,

The EU budget, within its limited size, provides a central fiscal capacity. It supports long-term investments in line with EU priorities and it has shown, especially in recent years, that it can play a significant role in addressing crises affecting the EU and its Member States.

– having regard to the European Fiscal Board’s 2024 annual report, published on 2 October 2024,

In paragraph 35 the European Parliament calls on the Commission to initiate discussions on addressing the significant investment gap in the EU and to reduce borrowing costs, strengthen financial stability and enable strategic investments in line with the EU’s objectives and for the provision of European public goods, such as defence capabilities to match needs in a context of growing threats and security challenges; calls for full use to be made of the efficiency gains that may stem from the provision of European public goods at EU scale through the effective coordination of investment priorities among Member States; believes that this framework, where appropriate, should be strengthened by EU-level investment instruments and tools designed to minimise the cost for EU taxpayers and maximise efficiency in the provision of European public goods;

– having regard to the Commission communication of 19 June 2024 entitled ‘2024 European Semester – Spring Package’ (COM(2024)0600),

The Commission recognises that boosting investment and reinforcing financial stability are essential for Europe's long-term growth and resilience. A key priority of the new mandate has been completing the Capital Markets Union (CMU) to deepen financial integration, ensuring that fast-growing companies —particularly in strategic sectors— can access the capital they need to scale up and compete globally. To further mobilize private capital, the Commission has worked on the Savings and Investments Union (SIU), an initiative designed to channel Europe’s private savings into productive investments, reducing borrowing costs and strengthening financial markets. The Savings and Investments Union is a horizontal enabler that should create a financing ecosystem to benefit investments in the EU’s strategic objectives. A Communication on SIU was delivered in March 2025 and its implementation is ongoing.

– having regard to the Commission communication of 17 December 2024 entitled ‘2025 European Semester – Autumn package’ (COM(2024)0700),

The EU financial instruments are also fundamental in contributing to address the investment gap. The Recovery and Resilience Facility (RRF) has played a crucial role in fostering sustainable growth based on the combination of , national reforms and investments responding both to national-specific challenges and common EU priorities. At the same time, the revised Economic Governance Framework strengthened this focus on investment by asking Member States to detail their investment needs in their medium-term fiscal plans. These efforts are complemented by InvestEU, which continues to unlock private capital for key sectors such as innovation, infrastructure, and the green and digital transitions. As part of the Clean Industrial Deal, the Commission will also mobilise InvestEU and work closely with the EIB on new initiatives. This will include a targeted amendment of the InvestEU Regulation, as well as a new initiative to support clean-tech start-ups and scale-ups.

– having regard to the Commission communication of 11 December 2019 entitled ‘The European Green Deal’ (COM(2019)0640), to the Paris Agreement adopted on 12 December 2015 in the context of the United Nations Framework Convention on Climate Change and to the UN Sustainable Development Goals,

In light of increasing geopolitical uncertainty, the Commission has promptly replied to the need to increase Europe’s defence capabilities. On March 19, a White Paper on Defence was published launching a framework to operationalize the ReArm Europe initiative, address critical capability gaps, and coordinate defence investments across Member States. To facilitate increased defence spending while maintaining economic stability, the Commission has proposed a coordinated activation of the national escape clause. This measure allows Member States to temporarily deviate from the net expenditure paths set out in their medium-term fiscal plans to accommodate additional defence spending.

– having regard to the Eighth Environment Action Programme to 2030,

Finally, the Commission recognises the importance of the provision of so-called European Public Goods and is committed to giving them a prominent role within the next Multiannual Financial Framework (MFF). In response to today’s geopolitical and economic challenges, the EU needs to provide a unified approach to address investment needs in key sectors. The next MFF will ensure more efficient resource allocation, maximising impact while working to minimise financial strain on national budgets and taxpayers.

– having regard to the Interinstitutional Proclamation of 17 November 2017 on the European Pillar of Social Rights and to the Commission communication of 4 March 2021 entitled ‘The European Pillar of Social Rights Action Plan’ (COM(2021)0102),

In paragraph 38 the European Parliament notes that the share of ‘fully implemented’ CSRs has dropped from 18,1 % (in the period 2011-2018) to 13,9 % (in the period 2019-2023); recalls that implementing CSRs, including with regard to the efficiency of public spending, is a key part of ensuring fiscal sustainability and addressing macroeconomic imbalances; advocates a more efficient implementation of the CSRs and the relevant reforms; calls for ways of increasing the share of ‘fully implemented’ CSRs to be explored; calls on the Commission to link the CSRs more closely to the respective country reports; calls for the impact of reforms and the progress towards reducing identified investment gaps to be evaluated; calls for greater transparency in the preparation of CSRs;

– having regard to its resolution of 21 January 2021 on access to decent and affordable housing for all,

The European Commission would firstly like to note that the period compared in this statement vary significantly: 2011-2018 (8 years) to 2019-2023 (5 years). Country Specific Recommendations require long term action to be fully implemented. Hence, the Commission considers that a multiannual assessment focused on progress rather than full implementation is fairer and more accurate. The multiannual assessment evaluates implementation at a specific point in time, starting from the year a CSR was adopted, considering all actions taken since then. Therefore, it is expected that the earlier a CSR was adopted in relation to the assessment year, the more progress will have been made, particularly for those requiring long or complex reforms.

– having regard to the document by Ursula von der Leyen, candidate for President of the European Commission, of 18 July 2024 entitled ‘Europe’s choice – Political guidelines for the next European Commission 2024-2029’, and to the statement made by Valdis Dombrovskis, Commissioner for Economy and Productivity, Implementation and Simplification, at his confirmation hearing on 7 November 2024,

The comparable time frame to 2019-2023 would be 2014-2018. For 2019-2023 we reported 68% of CSRs showcasing at least some progress. In comparison, for the period 2014-2018, this corresponded to only 61%. Since its launch, the Recovery and Resilience Facility (RRF) has played a key role in accelerating the implementation of Country-Specific Recommendations (CSRs). The Recovery and Resilience Plans (RRPs) submitted by Member States serve as important vehicles for implementing CSRs and aligning national reforms and investments with the EU's priorities. The Commission has conducted a rigorous assessment of these plans, and closely monitors the implementation of their milestones and targets through the assessment of payment requests, ensuring full transparency in its reporting to the Council and the European Parliament.

– having regard to International Monetary Fund working paper 24/181 of August 2024 entitled ‘Taming Public Debt in Europe: Outlook, Challenges, and Policy Response’,

The European Commission has consistently emphasised the importance of Country-Specific Recommendations as key tools within the European Semester, guiding Member States in addressing pressing economic and social challenges.

– having regard to the International Monetary Fund’s Fiscal Monitor entitled ‘Putting a Lid on Public Debt’ of October 2024,

To enhance the effectiveness of CSRs, the Commission has prioritised delivering evidence-based recommendations that tackle the most urgent issues faced by Member States. The evidence and underlying analyses underpinning these recommendations are integrated into the Country Reports, which provide detailed overviews of national challenges, outlining a path for effective national policy action to address those challenges.

– having regard to Special Report 13/2024 of the European Court of Auditors entitled ‘Absorption of funds from the Recovery and Resilience Facility – Progressing with delays and risks remain regarding the completion of measures and therefore the achievement of RRF objectives’,

The key findings section of Country Reports summarise the main challenges identified, including those to be addressed by CSRs to be suggested by the Commission. To increase transparency in the preparation of CSRs, draft Country Reports are shared with Member States for comments before adoption. In 2025, bilateral meetings with Member States will also be organised after sharing draft Country Reports, including to discuss CSR implementation.

– having regard to the in-depth analysis entitled ‘The new economic governance framework: implications for monetary policy’, published by its Directorate-General for Internal Policies on 20 November 2024,

The reform of the economic governance framework further increases the role of CSRs. Member States are encouraged to design reforms and investments that directly address the challenges identified in their respective CSRs. In the regulations and guidance for preparing these plans, the Commission has emphasized the necessity of linking investments and reforms to CSRs. Notably, for countries requesting an extension of their fiscal adjustment path, such requests must be underpinned by reforms and investments that respond to CSRs, ensuring a coherent and strategic approach to economic governance.

– having regard to the in-depth analysis entitled ‘Economic Dialogue with the European Commission on EU Fiscal Surveillance’, published by its Directorate-General for Internal Policies on 1 December 2024,

– having regard to Mario Draghi’s report of 9 September 2024 entitled ‘The future of European Competitiveness’ (the Draghi report),

– having regard to Rule 55 of its Rules of Procedure,

– having regard to the report of the Committee on Economic and Monetary Affairs (A10-0022/2025),

A. whereas the European Semester plays an essential role in coordinating economic and budgetary policies in the Member States, and thus preserves the macroeconomic stability of the economic and monetary union;

B. whereas the European Semester aims to promote sustainable, inclusive and competitive growth, employment, macroeconomic stability and sound public finances throughout the entire EU, with a view to ensuring the sustained upward convergence of the economic, social and environmental performance of the Member States;

C. whereas the 2024 European Semester marked the first implementation cycle of the new economic governance framework, which came into force on 30 April 2024, guiding the EU and its Member States through a transitional phase;

D. whereas the 2024 Council Recommendation on the economic policy of the euro area calls on the Member States to take action, both individually and collectively, to strengthen competitiveness, boost economic and social resilience, preserve macro-financial stability and sustain a high level of public investment to support the green and digital transitions; whereas fiscal stability is a basis for both sustainable high social standards in the EU and the competitiveness of the EU;

E. whereas the main objectives of the new economic governance framework are to strengthen debt sustainability and sustainable and inclusive growth in all Member States, as well as enabling all Member States to undertake the necessary reforms and investments in the EU’s common priorities, which include (i) a fair green and digital transition, (ii) social and economic resilience including the European pillar of social rights, (iii) energy security, and (iv) the build-up of defence capabilities; whereas disparities in fiscal capacity among Member States hinder equitable investment in strategic priorities and weaken cohesion within the single market;

F. whereas reference values of up to 3 % of government deficit to GDP and 60 % of public debt to GDP are defined by the TFEU; whereas the EU’s headline deficit and government debt-to-GDP ratio remain above the reference values; whereas both the headline deficit and government debt-to-GDP ratio vary across the EU, with significantly divergent situations in different Member States;

G. whereas excessive deficit procedures were opened, or kept open, for eight Member States in 2024; whereas some Member States were not subject to an excessive deficit procedure, despite having a deficit above 3 % of GDP in 2023, as decided by the Council and the Commission after a balanced assessment of all the relevant factors;

H. whereas no procedure concerning macroeconomic imbalances has been opened by the Council since the establishment of this procedure in 2011; whereas, in accordance with its Alert Mechanism Report, the Commission will conduct an in-depth review of 10 countries identified as experiencing macroeconomic imbalances or excessive imbalances in 2025;

I. whereas the success of a framework relies heavily on its proper, transparent and effective implementation from the outset, while taking into account the Member States’ starting points and the individual challenges they face;

J. whereas the timely submission of the national medium-term fiscal-structural and draft budgetary plans is a precondition for the effective implementation and credibility of the new rules; whereas the first national fiscal and budgetary plans have already been assessed by the Council; whereas the equal treatment of the Member States and compliance with the requirements outlined in Regulation (EU) 2024/1263 as regards the fiscal plans are necessary for the effective implementation of the framework;

K. whereas the economic outlook for the EU remains highly uncertain and there is a growing risk of future events or situations that will negatively affect the economy; whereas Russia’s aggression in Ukraine and the conflicts in the Middle East are aggravating geopolitical risks and highlighting Europe’s energy vulnerability; whereas a rise in protectionist measures by trading partners may affect world trade, with negative repercussions for the EU economy; whereas current geopolitical tensions have demonstrated the need for the EU to further strengthen its open strategic autonomy and remain competitive in the global market, while ensuring that no one is left behind;

L. whereas the implementation of the revised economic governance framework is expected to lead to a restrictive fiscal stance for the euro area, as a whole, of 0,5 % of GDP in 2024 and 0,25 % of GDP in 2025; whereas political discussion is needed to ensure appropriate public investment levels following the expiry of the Recovery and Resilience Facility (RRF) in 2026;

M. whereas the Draghi report points out that the gap between the EU and the United States in the level of GDP at 2015 prices has gradually widened, from slightly more than 15 % in 2002 to 30 % in 2023, and estimates the necessary additional annual investment by the EU at EUR 800 billion, including EUR 450 billion for the energy transition;

N. whereas the new Commission has set the goal of being an ‘investment Commission’; whereas discussions on addressing the significant investment gap and reducing borrowing costs are needed in the EU; whereas the framework, where appropriate, should be strengthened by EU-level investment instruments and tools designed to minimise the cost for EU taxpayers and maximise efficiency in the provision of European public goods;

O. whereas the Member States need to have the necessary control and audit mechanisms to ensure respect for the rule of law and to protect the EU’s financial interests, in particular to prevent fraud, corruption and conflicts of interest and to ensure transparency;

P. whereas it is important to increase the share of ‘fully implemented’ country-specific recommendations (CSRs) and to link them more closely to the respective country reports in order to contribute to more effective economic governance;

1. Notes that in the last few years, the EU has demonstrated a high degree of resilience and unity in the face of major shocks, thanks, among other things, to a coordinated policy response involving all the EU institutions, including a flexible approach to the use of new and existing instruments; further recalls that promoting long-term sustainable growth means promoting a balance between responsible fiscal policies, structural reforms and investments that together increase efficiency, productivity, employment and prosperity, and also entails boosting competitiveness, fostering the single market, developing economic growth policies and revising the regulatory framework to attract investments; stresses the fundamental need for sustainable, inclusive and competitive economic growth;

2. Notes that economic policy coordination is fundamentally necessary for a successful economic and monetary union; recalls that the European Semester is the well-established framework for coordinating fiscal, economic, employment and social policies across the EU, in line with the Treaties, while respecting the defined national competences;

3. Notes the Commission’s commitment to ensure that the European Semester drives policy coordination for competitiveness, sustainability and social fairness, as well as the integration of the UN Sustainable Development Goals and the European pillar of social rights; notes that the European Green Deal remains a core deliverable for the Commission;

4. Highlights the fact that an integrated, coordinated, targeted and horizontal industrial policy is vital to increase investments in the EU’s innovation capacity, while bolstering competitiveness and the integrity of the single market;

5. Highlights that public and private investments are crucial for the EU’s ability to cope with existing challenges, including developing the EU’s innovation capacity and implementing the just green and digital transitions, and that they will increase the EU’s resilience, long-term competitiveness and open strategic autonomy; calls attention to the need for strategic investments in energy interconnections, low-carbon energies (such as renewables) and energy efficiency to, among other things, (i) make the EU independent from imported fossil fuels and prevent the possible inflationary effects of dependence on these, (ii) modernise production systems and (iii) promote social cohesion; recalls that the materialisation of climate-change-related physical risks can greatly affect public finances, as demonstrated by the floods in Valencia in October 2024 and the cyclone in Mayotte in December 2024; calls on the Member States to make the necessary investments to improve climate change mitigation and adaptation and enhance the resilience of the EU economy;

6. Calls on the Commission to come up with initiatives, on the basis of the Budapest Declaration; to make the EU more competitive, productive, innovative and sustainable, by building on economic, social and territorial cohesion and ensuring convergence and a level playing field both within the EU and globally; notes the development of a new competitiveness coordination tool; expects the Commission to clarify how this tool will interact with the European Semester; stresses the importance of supporting micro, small and medium-sized enterprises as key drivers of economic growth and employment within the EU;

7. Stresses the need to foster a dynamic entrepreneurial ecosystem that supports innovators, recognising their critical role in driving global competitiveness, economic resilience, job creation and open strategic autonomy;

8. Welcomes the Commission’s recommendations regarding the economic policy of the euro area, urging the Member States to enhance competitiveness and foster productivity through improved access to funding for businesses, reduced administrative burdens, and public and private investment in areas of EU common priorities, which include (i) a fair green and digital transition, (ii) social and economic resilience including the European pillar of social rights, (iii) energy security, and (iv) the build-up of defence capabilities;

9. Welcomes the Commission’s recommendation that, when defining fiscal strategies, euro area Member States should aim to improve the quality and efficiency of public expenditure and public revenue, which are essential for ensuring the sustainability of public finances, while minimising detrimental and distortive impacts on economic growth; stresses that this could be achieved by, among other things, increasing European coordination and reducing tax avoidance and tax evasion; welcomes the Draghi report’s conclusion that a coordinated reduction of labour income taxation for low- to middle-income workers is needed to promote EU competitiveness; recalls the Member States’ competence in tax policy; invites the Member States to redirect the tax burden from income to less distortive tax bases;

10. Highlights the need to create fiscal buffers to address fiscal sustainability challenges, ensuring sufficient resources for investment and for dealing with potential future shocks and crises; stresses the importance of promoting competitive, sustainable and inclusive growth in supporting long-term fiscal stability and resilience;

Economic prospects for the EU

11. Expresses concern that, according to the Commission’s autumn 2024 economic forecast, EU GDP is expected to grow by 0,9 % (0,8 % in the euro area) in 2024, by 1,5 % (1,3 % in the euro area) in 2025 and by 1,8% (1,6% in the euro area) in 2026; recalls that these figures reflect a gradual recovery, but also limited economic expansion compared to previous economic cycles; notes that the economic outlook for the EU remains highly uncertain, with risks more likely to negatively affect economic growth;

12. Notes that the public debt ratio is projected to increase to 83,0 % in the EU and 89,6 % in the euro area in 2025 and to 83,4 % in the EU and 90 % in the euro area in 2026, when the output gap will be virtually closed both in the EU and in the euro area, and that this is higher than the levels in 2024 (82,4 % for the EU and 89,1 % for the euro area);

13. Recalls that developments in public debt ratios vary from country to country; points out that policy uncertainty and geopolitical risks can contribute significantly to increasing the cost of borrowing on the financial markets for the Member States; notes that unsustainable debt levels could undermine economic stability and decrease the Member States’ economic resilience and capacity to respond to crises; highlights that in 2024 and 2025, 11 euro area Member States are expected to have debt ratios above the Treaty reference value of 60 %, with 5 remaining above 100 %;

14. Notes that according to the Commission’s 2024 autumn economic forecast, the general government deficit in the EU and the euro area is expected to decline to 3,1 % and 3 % of GDP, respectively, in 2024, and to decrease further to 3 % and 2,9 % of GDP in 2025 and 2,9 % and 2,8 % of GDP in 2026; stresses that 10 EU Member States are expected to post a deficit above the Treaty reference value of 3 % of GDP in 2024; points out that this number will remain stable in 2025, and that in 2026, most Member States are forecast to have weaker budgetary positions than before the pandemic (2019), with 9 of them still posting deficits of above 3 %;

15. Notes that eight Member States have excessive deficits; recalls that the Council has taken remedial action and calls on the Member States concerned to take steps to reduce excessive deficits while minimising the socio-economic impact; recalls the importance of consistency in applying the excessive deficit procedure to the Member States;

16. Notes that according to the Commission’s autumn 2024 economic forecast, inflation is projected to fall from 2,6 % in 2024 to 2,4 % in 2025 and 2 % in 2026 in the EU, and from 2,4 % in 2024 to 2,1 % in 2025 and 1,9 % in 2026 in the euro area; recalls that although this reduction is a positive development, core inflation remains relatively high, which points to persistent inflationary pressures; notes that fiscal policy, while safeguarding fiscal sustainability, can support monetary policy in reducing inflation, and should provide sufficient space for additional investments and support long-term growth;

17. Notes that the Commission has not been able to present the Annual Sustainable Growth Survey, the Alert Mechanism Report, the draft euro area recommendation and the draft joint employment report at the same time;

18. Observes that according to the Commission’s 2025 Alert Mechanism Report, in-depth reviews will be prepared in 2025 for the nine countries that were identified as experiencing imbalances or excessive imbalances in 2024, while another in-depth review should be undertaken for another Member State, as it presents particular risks of newly emerging imbalances;

19. Underlines that housing is directly interconnected with the macroeconomic imbalances in the euro area, with damaging implications for economic resilience, dynamism and social progress and for regional and intra-EU mobility; is concerned that in some Member States, house prices are likely to increase and may become hard to curb in the absence of a holistic strategy;

Revised EU economic governance framework and its effective implementation

20. Recalls that the reform aims to make the framework simpler, more transparent and more effective, with greater national ownership and better enforcement, while differentiating between Member States on the basis of their individual starting points, representing a step forward in ending the ‘one-size-fits-all’ approach in view of the country-specific fiscal sustainability considerations embodied in the net expenditure path; recalls, furthermore, that the reform aims to strengthen fiscal sustainability through gradual and tailor-made adjustments complemented by reforms and investments and to promote countercyclical fiscal policies;

21. Acknowledges that the new fiscal rules provide greater flexibility and incentives linked to the investments and national reforms required to address the economic, social and geopolitical challenges facing the EU; acknowledges that financial resources and contributions from national budgets differ from one Member State to another; welcomes the fact that the net expenditure indicator excludes all national co-financing in EU-funded programmes, providing increased fiscal space for Member States to invest in the EU’s common priorities, as laid down in Regulation (EU) 2024/1263, thus helping to strengthen synergies between the EU and national budgets, thereby reducing fragmentation and increasing the overall efficiency of public spending in some areas, such as defence;

22. Highlights that the debt sustainability analysis (DSA) plays a key role in the reformed EU fiscal rules; is of the opinion that the discretionary role of the Commission in the DSA requires the relevant assessments to be fully transparent, predictable, replicable and stable; calls on the Commission to address possible methodological improvements, such as assessing spillover effects between Member States, and to duly inform Parliament in this regard;

23. Notes the Commission’s inconsistent application of the fiscal rules framework in the past, and the Member States’ uneven compliance with the rules; stresses that it is essential for the new framework to ensure the equal treatment of the Member States; affirms that a successful framework relies heavily on proper, transparent and effective implementation from the outset, while taking into account the Member States’ starting points and the individual challenges they face; takes note of the changes introduced in the new framework to improve the credibility of the financial sanctions regime;

24. Encourages the Member States to align the technical definition of their national operational indicator to the European primary net expenditure indicator;

25. Emphasises the role of Parliament and of independent fiscal authorities in the EU’s economic governance framework; underlines the discretionary power of the Commission in developing the medium-term fiscal-structural plans; emphasises the need for increased scrutiny of the Commission by Parliament and by the European Fiscal Board, as envisioned in Regulation (EU) 2024/1263, and for an increase in the flow of information towards Parliament to enable its effective oversight;

National medium-term fiscal-structural and budgetary plans

26. Notes that not all Member States were able to submit their national medium-term fiscal-structural and draft budgetary plans on time; notes that, as a result of general elections and the formation of new governments, five Member States have not yet submitted their national medium-term fiscal-structural plans and two Member States have not yet submitted their draft budgetary plans, while one Member State has not submitted its draft budgetary plan for other unspecified reasons; calls on these Member States to submit the relevant plans as soon as possible; underlines that the timely submission of these plans is a precondition for the effective implementation and credibility of the new rules; reaffirms the importance of the timely submission of draft budgetary plans to translate commitments outlined in fiscal plans into concrete policies following approval of the national medium-term fiscal-structural plans;

27. Recalls that the reforms and investments outlined in the national medium-term fiscal-structural plans should align with the EU’s common priorities as laid down in Regulation (EU) 2024/1263; emphasises that, under the new framework, the Commission should pay particular attention to these priorities when assessing the national medium-term fiscal-structural plans;

28. Acknowledges that 21 of the 22 national medium-term fiscal-structural plans that have been reviewed so far received a positive evaluation; notes that the new framework allows Member States to use assumptions that differ from the Commission’s DSA if these differences are explained and duly justified in a transparent manner and are based on sound economic arguments in the technical dialogue with the Member States; observes, however, that in the plans submitted by five Member States, the Commission found insufficiently justified inconsistencies and deviations from the DSA framework in macroeconomic assumptions related to potential GDP and/or the GDP deflator; stresses that such deviations and risks of backloading could potentially threaten future fiscal sustainability; notes that in the plans submitted by three Member States, the Commission acknowledges a concentration of the fiscal adjustment towards the end of the period; calls on the Commission to ensure that any such concentration of the adjustment meets the requirements set out in the regulation and calls on it to prevent procyclical policies;

29. Takes note of the fact that only seven Member States have sought an opinion from their relevant independent fiscal institution, which provides an important additional scrutiny dimension; notes with caution that some independent fiscal institutions gave a negative opinion on their Member State’s national fiscal plan; stresses that nine Member States did not meet their obligation to conduct political consultations with civil society, social partners, regional authorities and other relevant stakeholders prior to submitting their national plans; further regrets the fact that several Member States have not involved their national parliaments in the approval process for the plans and have not reported whether the required consultations with national parliaments took place as laid down in the new framework;

30. Observes that five Member States have requested an extension of the adjustment period; emphasises that any such extension should be based on a set of investment and reform commitments that, taken all together, improve the potential growth and resilience of the economy, support fiscal sustainability, address the EU’s common priorities and the relevant CSRs and have been assessed as meeting the conditions outlined in the regulation for such an extension; notes that the reforms and investments used to justify this extension rely considerably on reforms already approved under the RRF; highlights the importance of and need for reforms and investments that contribute positively to the potential GDP growth of the Member States; calls on the Commission to effectively evaluate ex post the impact of agreed investments and reforms in terms of supporting fiscal sustainability, enhancing the growth potential of the economy, addressing the EU’s common priorities and the CSRs and ensuring the required level of nationally financed public investment;

31. Notes the Commission’s assessment that only 8 of the 17 draft budgetary plans presented are in line with fiscal recommendations stemming from the national medium-term fiscal-structural plan; regrets the fact that 7 plans were assessed as not being fully in line with the recommendations, 1 as non-compliant and 1 as at risk of not being in line with the recommendations; is concerned that six Member States have presented draft budgetary plans with annual or cumulative expenditure growth above their prescribed ceilings;

Fiscal stance and the role of fiscal policy in the provision of European public goods

32. Notes the Commission’s projection that the implementation of the revised governance framework is expected to lead to a reduction of the primary structural balance for the euro area as a whole of 0,5 % of GDP in 2024 and 0,25 % of GDP in 2025; notes the Commission’s assessment that this is in line with the process of enhancing fiscal sustainability and support the ongoing disinflationary process as economic uncertainty remains high; notes that GDP growth will continue to support fiscal consolidation throughout the EU; calls for fiscal policies that restore stability while promoting innovation, industrial competitiveness and long-term economic growth; stresses the need to create additional fiscal space to tackle future challenges and potential crises while preserving a sufficient level of investment to support and foster sustainable and inclusive growth, industrialisation and prosperity for all;

33. Considers that the effective implementation of the fiscal rules, although necessary, is not in itself sufficient to achieve the optimal fiscal stance at all times and ensure a high standard of living for all Europeans; notes that the fiscal stance is still projected to differ greatly from one Member State to another in 2025; calls on the Commission to explore ideas for a mechanism that helps ensure that the cyclical position of the EU as a whole is appropriate for the macroeconomic outlook at all times;

34. Recalls that, according to the Commission, the fiscal drag in 2025 will be partly offset by a slight expansion in investment, financed both by national budgets and by RRF grants and other EU funds; emphasises the RRF’s role in addressing EU investment needs, noting that it will expire by the end of 2026, which might lead to a decrease in public investment in common European priorities;

35. Calls on the Commission to initiate discussions on addressing the significant investment gap in the EU and to reduce borrowing costs, strengthen financial stability and enable strategic investments in line with the EU’s objectives and for the provision of European public goods, such as defence capabilities to match needs in a context of growing threats and security challenges; calls for full use to be made of the efficiency gains that may stem from the provision of European public goods at EU scale through the effective coordination of investment priorities among Member States; believes that this framework, where appropriate, should be strengthened by EU-level investment instruments and tools designed to minimise the cost for EU taxpayers and maximise efficiency in the provision of European public goods;

36. Recalls that any EU funding must be accompanied by robust controls ensuring transparency, accountability and the efficient use of funds, so as to avoid unjustified increases in public spending;

37. Encourages the Member States to promote investment spending that produces a positive rate of return; acknowledges the Draghi report’s assessment that around four fifths of productive investments will be undertaken by the private sector in the EU, while public investment will also play a catalysing role; welcomes the Commission initiative to propose a competitiveness fund under the new multiannual financial framework and calls on it to make full use of financial guarantees to leverage private investment; stresses that the Member States must step up their efforts, in particular budgetary efforts, to accelerate innovation, digitalisation, education, training and decarbonisation, to strengthen European competitiveness and to reduce dependencies;

Country-specific recommendations

38. Notes that the share of ‘fully implemented’ CSRs has dropped from 18,1 % (in the period 2011-2018) to 13,9 % (in the period 2019-2023); recalls that implementing CSRs, including with regard to the efficiency of public spending, is a key part of ensuring fiscal sustainability and addressing macroeconomic imbalances; advocates a more efficient implementation of the CSRs and the relevant reforms; calls for ways of increasing the share of ‘fully implemented’ CSRs to be explored; calls on the Commission to link the CSRs more closely to the respective country reports; calls for the impact of reforms and the progress towards reducing identified investment gaps to be evaluated; calls for greater transparency in the preparation of CSRs;

39. Reiterates, in this regard, that CSRs should be enhanced by focusing on a limited set of challenges, in particular specific Member States’ structural challenges and the EU’s common priorities, with a view to promoting sound and inclusive economic growth, enhancing competitiveness and macroeconomic stability, promoting the green and digital transitions and ensuring social and intergenerational fairness;

40. Recalls the Member States’ commitment to address, in their national fiscal plans, the relevant CSRs in both their economic and social dimensions, as expressed under the European Semester; notes that the Commission has found unaddressed CSRs in the national fiscal plans;

41. Highlights the importance of the CSRs in tackling the longer-term drivers of fiscal sustainability, including the sustainability and proper provision of public pension systems, the healthcare and long-term care systems in the face of demographic challenges such as ageing populations, and preparedness for adverse developments, including climate-change-related physical risks; stresses the relevance of CSRs in addressing the stability of the housing market in order to contribute to the economic resilience of the EU;

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42. Instructs its President to forward this resolution to the Council and the Commission.