08 March 2023

Fiscal policy guidance for 2024: Promoting debt sustainability and sustainable and inclusive growth

The Commission is today providing guidance to Member States on the conduct and coordination of fiscal policy for next year. This guidance comes as discussions on the future economic governance framework are ongoing. Overall, fiscal policies in 2024 should ensure medium-term debt sustainability and promote sustainable and inclusive growth in all Member States.

Implications of deactivating the general escape clause and the ongoing economic governance review

The general escape clause of the Stability and Growth Pact, which provides for a temporary deviation from the budgetary requirements that normally apply in the event of a severe economic downturn, will be deactivated at the end of 2023. Moving out of the period during which the general escape clause was in force will see a resumption of quantified and differentiated country-specific recommendations on fiscal policy.

Discussions on a revised economic governance framework, based on the Commission's orientations presented in November 2022, are ongoing. Until a new economic governance framework comes into operation and in view of the new post-pandemic reality, it is not appropriate to return to the sole implementation of the rules of the Stability and Growth Pact in force prior to the activation of the general escape clause in 2020.

Given that a new legal framework, based on the outcome of the ongoing economic governance review, is not yet in place, the current legal framework continues to apply. At the same time, to allow for an effective bridge to the future fiscal rules and to take into account current challenges, some elements of the Commission's reform orientations that are consistent with the current legislation could already be incorporated into the fiscal surveillance cycle.

The Commission, therefore, stands ready to propose country-specific recommendations on fiscal policy for 2024 that include a quantitative requirement as well as qualitative guidance on investment and energy measures. These recommendations will be consistent with the criteria proposed in the Commission's orientations, while also remaining consistent with the current legislation under the Stability and Growth Pact.

Guidance on the preparation of stability and convergence plans

Member States are invited to set out fiscal targets in their stability and convergence programmes that comply with the fiscal adjustment criteria set out in the Commission's reform orientations. They are also invited to discuss how their reform and investment plans are expected to contribute to fiscal sustainability and sustainable and inclusive growth, including the green and digital transition and resilience objectives, in line with the criteria set out in the reform orientations.

The Commission, therefore, stands ready to propose country-specific recommendations on fiscal policy for 2024 that are:

• in line with the fiscal targets Member States set out in their stability and convergence programmes, so long as those targets are consistent with ensuring that the public debt ratio is put on a downward path or stays at a prudent level and that the budget deficit is below the 3% of GDP reference value over the medium term;
• quantified and differentiated on the basis of Member States' public debt challenges;
• formulated on the basis of net primary expenditure, as proposed in the Commission's reform orientations....

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