European fiscal framework reform – a compromise, for better or worse

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Eisl A. “European fiscal framework reform – a compromise, for better or worse“, Policy brief, Paris: Jacques Delors Institute, January 2024

In this Policy Brief, I discuss the recent advancements on the long-awaited reform of the European fiscal framework, with the Stability and Growth Pact (SGP) at its centre. Following a short overview of the reform process, this brief presents key modifications introduced by the Council position adopted in late December 2023. These modifications include new or reinforced common safeguards for deficit and debt reduction, a more specified control account and transitory features that temporarily soften some of the fiscal consolidation requirements. I subsequently discuss whether the reform will be fit for the next quarter of a century, focusing on three aspects:

  1. the hybrid logic of the new SGP,
  2. the question of formal vs. actual fiscal consolidation requirements,
  3. the reform implications for public investment

The concluding section of this policy brief reflects on what to expect from the upcoming trilogue meetings, what the European Parliament can potentially still achieve in the negotiations, and on the future of the European fiscal framework.