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Speeding up and clarifying the implementation of the excessive deficit procedure – amending Regulation

TA-9-2024-0312 · P9_TA(2024)0312 · PE757.279

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Parliament approves the Council's draft regulation amending Regulation (EC) No 1467/97 on the excessive deficit procedure, as amended by Parliament. The amended rules set a single net expenditure indicator, a control account tracking deviations, and deadlines for Council decisions and corrective paths. They add defence investment as a relevant factor, delete provisions on second pillar pensions and the United Kingdom, and change fines to accumulate until effective action is taken. Transitional rules let the Council revise existing recommendations and notices, and allow the Commission to adjust the structural adjustment benchmark for 2025, 2026 and 2027.

Key points

  1. The regulation lays down provisions to speed up and clarify the excessive deficit procedure, based on government deficit and debt criteria.
  2. An excess deficit is exceptional if it results from a severe economic downturn or exceptional circumstances outside the government's control, and temporary if forecasts show it falling below the reference value.
  3. The Commission prepares a report when debt exceeds the reference value, the budgetary position is not close to balance or in surplus, and control account deviations exceed 0,3 percentage points of GDP annually or 0,6 percentage points cumulatively.
  4. The Commission's report must consider public debt challenges, medium-term budgetary and economic positions, reform and investment progress, and increases in government defence investment.
  5. Substantial public debt challenges are a key aggravating factor; favourable cyclical developments are not mitigating factors, while unfavourable ones may be.
  6. The Council decides on the existence of an excessive deficit within four months of reporting dates and sets a maximum deadline of six months, or three months if warranted, for effective action.
  7. The corrective net expenditure path must bring the deficit below 3% of GDP, with a minimum annual structural adjustment of at least 0,5% of GDP for deficit-based procedures, and correct control account deviations for debt-based procedures.
  8. Member States must report on action taken, and the Council may adopt revised recommendations or notices extending the correction deadline by one year as a rule.
  9. Fines amount to up to 0,05% of the previous year's GDP for a 6-month period, paid every 6 months until effective action is taken, and constitute general revenue for the Union budget.
  10. The Council abrogates sanctions based on progress, and abrogates all outstanding sanctions if the excessive deficit decision is abrogated; fines are not reimbursed.
  11. The Commission reports on the regulation's application by 31 December 2030 and every five years thereafter.
  12. The Council adopts revised recommendations or notices for Member States under an excessive deficit procedure that have taken effective action, together with the net expenditure path.

Who is affected

  • Member States whose currency is the euro ('participating Member States') are subject to the excessive deficit procedure and fines.
  • Member States under an excessive deficit procedure must implement corrective net expenditure paths and report on action taken.
  • National independent fiscal institutions may produce non-binding reports and participate in dialogue.
  • The Council and the Commission are given new deadlines and assessment duties.

Figures and deadlines

  • 0,3 percentage points of GDP annually – control account deviation threshold for a Commission report.
  • 0,6 percentage points of GDP cumulatively – control account deviation threshold for a Commission report.
  • 0,5 percentage points of GDP – headline deficit considered close to balance.
  • 0,5% of GDP – minimum annual structural adjustment benchmark for deficit-based procedures.
  • 0,05% of the latest estimate of the previous year's GDP – amount of the fine for a 6-month period.
  • 31 December 2030 – deadline for the Commission's first report on the regulation's application.

Legal basis: Article 126(14), second subparagraph, of the Treaty on the Functioning of the European Union.