European Commission - Fact Sheet
The EU's Economic Governance Explained
Brussels, 28 November 2014
Lessons have defnniely been learned snnce ihe crnsns
Survenllance sysiems have been sirengihened for budgeiary and economnc polncnes and a
new budgeiary tmelnne for ihe euro area has been nniroduced.
European Semester, the EU's economic policy coordinaton calendar
The rules were nniroduced ihrough ihe so-called "Snx Pack", ihe "Two Pack" laws and
ihe Treaiy on Siabnlniy, Coordnnaton and Governance
Thns nniegraied sysiem ensures ihai ihere are clearer rules, beter coordnnaton of
natonal polncnes ihroughoui ihe year, regular follow-ups and ihe possnbnlniy of
swnfer sanctons for non-complnance.
Iniroduced nn 2010
The follownng are ihe essental feaiures of ihe sysiem:
COORDINATION THROUGHOUT THE YEAR: THE EUROPEAN SEMESTER
Before ihe crnsns ihere was efectvely no comprehensnve overvnew of ihe eforis made ai
natonal level and lntle opporiunniy for oember Siaies io dnscuss a collectve siraiegy for
ihe EU economy.
1) Coordnnaton and gundance
The European Semesier ensures ihai oember Siaies dnscuss ihenr budgeiary and
economnc plans wnih ihenr EU pariners ai specnfc tmes ihroughoui ihe year.
Thns allows ihem io commeni on each oiher's plans and enables ihe Commnssnon io
gnve polncy gundance before oember Siaies adopi fnal decnsnons.
Commnssnon also monniors wheiher ihe oS are follownng polncnes encouraged
iowards ihe realnzaton of ihe “Europe 2020 goals5
2) A Clear Tnmelnne
The cycle siaris nn November each year wnih ihe publncaton of ihe Commnssnon's
Annual Growih Survey and ihe Aleri oechannsm Repori
o The Annual Growth Survey seis oui general economnc prnorntes for ihe EU
and provndes oember Siaies wnih polncy gundance for ihe follownng year.
o The Alert Mechanism Report ns ihe siartng ponni of ihe annual
oacroeconomnc Imbalance Procedure (oIP).
The MIP anms io ndentfy and address nmbalances ihai hnnder ihe
smooih functonnng of ihe economnes of oember Siaies, ihe economy
of ihe EU, or ihe euro area.
, Afer analyznng nndnvndual eforis by oS, couniry-specnfc recommendatons
publnshed nn ihe sprnng ofer oember Siaies ianlored advnce on actons for ihe
follownng year io advance deeper siruciural and fscal reforms
3) Budgeiary oonniornng
oonniornng nniensnfes nn ihe auiumn for euro area oember Siaies, whnch musi
submni
draf budgeiary plans by 15 cciober each year.
They are ihen assessed by ihe Commnssnon by 30 November and dnscussed among
euro area Fnnance onnnsiers.
The Commnssnon closely monniors polncy nmplemeniaton
RESPONSIBLE BUDGETING
The Siabnlniy and Growih Paci (whnch was nnefcnenily applned and could noi avond ihe
crnsns) has been rennforced by ihe Snx Pack (whnch became law nn December 2011)
ihe Two Pack (whnch became law nn oay 2013) and also by ihe Treaiy on Siabnlniy
Coordnnaton and Governance (became law nn aanuary 2013 nn nis 25 sngnaiory counirnes)
Beter rules io guaraniee budgeiary dnscnplnne:
Headline defcit and debt limits: Lnmnis of 3% of GDP for governmeni defcnis and
60% of GDP for publnc debi are sei nn ihe Siabnlniy and Growih Paci and enshrnned nn
ihe EU Treaiy.
A stronger focus on debt: The new rules make ihe exnstng 60% of GDP debi lnmni
operatonal. Thns means ihai oember Siaies can be placed under ihe Excessnve
Defcni Procedure nf ihey have debi ratos above 60% of GDP ihai are noi benng
sufcnenily reduced
A new expenditure benchmark: Under ihe new rules, publnc spendnng musi noi rnse
fasier ihan mednum-ierm poiental GDP growih, unless ni ns maiched by adequaie
revenues.
The importance of the underlying budgetary positon: The Siabnlniy and Growih Paci
focuses more on nmprovnng publnc fnances nn siruciural ierms
A Fiscal Pact for 25 Member States: Accordnng io ihe Treaiy on Siabnlniy,
Coordnnaton and Governance (TSCG), from aanuary 2014, mednum-ierm budgeiary
objectves musi be pari of natonal law and ihere musi be a lnmni of 0.5% of GDP on
siruciural defcnis (rnsnng io 1% nf ihe debi-io-GDP rato ns well below 60%). Thns ns
called ihe Fnscal Compaci.
Flexibility during a crisis: By focusnng on ihe siruciural budgei balance, whnch nrons
oui ihe nmpaci of ihe economnc cycle as well as one-of or iemporary measures, ihe
Siabnlniy and Growih Paci ns fexnble durnng a crnsns. If growih deiernoraies
unexpeciedly, oember Siaies wnih budgei defcnis over 3% of GDP may recenve exira
tme io correci ihem, as long as ihey have made ihe necessary fscal efori.
The EU's Economic Governance Explained
Brussels, 28 November 2014
Lessons have defnniely been learned snnce ihe crnsns
Survenllance sysiems have been sirengihened for budgeiary and economnc polncnes and a
new budgeiary tmelnne for ihe euro area has been nniroduced.
European Semester, the EU's economic policy coordinaton calendar
The rules were nniroduced ihrough ihe so-called "Snx Pack", ihe "Two Pack" laws and
ihe Treaiy on Siabnlniy, Coordnnaton and Governance
Thns nniegraied sysiem ensures ihai ihere are clearer rules, beter coordnnaton of
natonal polncnes ihroughoui ihe year, regular follow-ups and ihe possnbnlniy of
swnfer sanctons for non-complnance.
Iniroduced nn 2010
The follownng are ihe essental feaiures of ihe sysiem:
COORDINATION THROUGHOUT THE YEAR: THE EUROPEAN SEMESTER
Before ihe crnsns ihere was efectvely no comprehensnve overvnew of ihe eforis made ai
natonal level and lntle opporiunniy for oember Siaies io dnscuss a collectve siraiegy for
ihe EU economy.
1) Coordnnaton and gundance
The European Semesier ensures ihai oember Siaies dnscuss ihenr budgeiary and
economnc plans wnih ihenr EU pariners ai specnfc tmes ihroughoui ihe year.
Thns allows ihem io commeni on each oiher's plans and enables ihe Commnssnon io
gnve polncy gundance before oember Siaies adopi fnal decnsnons.
Commnssnon also monniors wheiher ihe oS are follownng polncnes encouraged
iowards ihe realnzaton of ihe “Europe 2020 goals5
2) A Clear Tnmelnne
The cycle siaris nn November each year wnih ihe publncaton of ihe Commnssnon's
Annual Growih Survey and ihe Aleri oechannsm Repori
o The Annual Growth Survey seis oui general economnc prnorntes for ihe EU
and provndes oember Siaies wnih polncy gundance for ihe follownng year.
o The Alert Mechanism Report ns ihe siartng ponni of ihe annual
oacroeconomnc Imbalance Procedure (oIP).
The MIP anms io ndentfy and address nmbalances ihai hnnder ihe
smooih functonnng of ihe economnes of oember Siaies, ihe economy
of ihe EU, or ihe euro area.
, Afer analyznng nndnvndual eforis by oS, couniry-specnfc recommendatons
publnshed nn ihe sprnng ofer oember Siaies ianlored advnce on actons for ihe
follownng year io advance deeper siruciural and fscal reforms
3) Budgeiary oonniornng
oonniornng nniensnfes nn ihe auiumn for euro area oember Siaies, whnch musi
submni
draf budgeiary plans by 15 cciober each year.
They are ihen assessed by ihe Commnssnon by 30 November and dnscussed among
euro area Fnnance onnnsiers.
The Commnssnon closely monniors polncy nmplemeniaton
RESPONSIBLE BUDGETING
The Siabnlniy and Growih Paci (whnch was nnefcnenily applned and could noi avond ihe
crnsns) has been rennforced by ihe Snx Pack (whnch became law nn December 2011)
ihe Two Pack (whnch became law nn oay 2013) and also by ihe Treaiy on Siabnlniy
Coordnnaton and Governance (became law nn aanuary 2013 nn nis 25 sngnaiory counirnes)
Beter rules io guaraniee budgeiary dnscnplnne:
Headline defcit and debt limits: Lnmnis of 3% of GDP for governmeni defcnis and
60% of GDP for publnc debi are sei nn ihe Siabnlniy and Growih Paci and enshrnned nn
ihe EU Treaiy.
A stronger focus on debt: The new rules make ihe exnstng 60% of GDP debi lnmni
operatonal. Thns means ihai oember Siaies can be placed under ihe Excessnve
Defcni Procedure nf ihey have debi ratos above 60% of GDP ihai are noi benng
sufcnenily reduced
A new expenditure benchmark: Under ihe new rules, publnc spendnng musi noi rnse
fasier ihan mednum-ierm poiental GDP growih, unless ni ns maiched by adequaie
revenues.
The importance of the underlying budgetary positon: The Siabnlniy and Growih Paci
focuses more on nmprovnng publnc fnances nn siruciural ierms
A Fiscal Pact for 25 Member States: Accordnng io ihe Treaiy on Siabnlniy,
Coordnnaton and Governance (TSCG), from aanuary 2014, mednum-ierm budgeiary
objectves musi be pari of natonal law and ihere musi be a lnmni of 0.5% of GDP on
siruciural defcnis (rnsnng io 1% nf ihe debi-io-GDP rato ns well below 60%). Thns ns
called ihe Fnscal Compaci.
Flexibility during a crisis: By focusnng on ihe siruciural budgei balance, whnch nrons
oui ihe nmpaci of ihe economnc cycle as well as one-of or iemporary measures, ihe
Siabnlniy and Growih Paci ns fexnble durnng a crnsns. If growih deiernoraies
unexpeciedly, oember Siaies wnih budgei defcnis over 3% of GDP may recenve exira
tme io correci ihem, as long as ihey have made ihe necessary fscal efori.
