An overhaul of the European fiscal framework? An analysis of the Commission proposal and key issues for the negotiations on a reformed Stability and Growth Pact

Abstract

This policy brief has two main objectives. First, it analyses the key elements of the recent European Commission proposal to reform the European fiscal framework. It highlights a switch in the overall logic of the Stability and Growth pact (SGP), an attempt to increase national ownership of European fiscal rule requirements, and the inclusion of an incentive structure for public invest- ment and reforms. Second, the blogpost raises several issues of particular relevance for the forthcoming political negotiations on a reformed SGP. Due to the European fiscal framework’s high degree of complexity and technicality, if focuses on three key aspects of the Commission’s reform proposal. This includes (1) open questions regarding the actual minimum fiscal consolidation require- ments imposed on member states, (2) challenges of the new fiscal-structural plans for democratic choice, and (3) the poten- tial inadequacy of the incentive structure to ensure sufficient public investment in light of the climate crisis. The blogpost will conclude with some final remarks on the forthcoming negotiations.