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Thirty years ago, the Maastricht Treaty recognised the need for sound public finances and coordinated fiscal policies.
The intention was to complement the single monetary policy and avoid economic spill-over effects between countries.
And to benefit Europe's economy as a whole.
These objectives have stayed valid over time.
But a lot has changed since the 1990s.
Different contexts and circumstances required several revisions of our economic governance framework over the years, especially following the global financial and economic crisis.
After a slow recovery from that crisis, we were confronted with the severe economic shock caused by the COVID-19 pandemic.
Today, our economies face another test with Russia's protracted aggression against Ukraine.
Interest rates are rising. Inflation is hitting record highs – so questions of a proper and coordinated economic policy response are very much valid.
If we look at the functioning of the economic governance framework over the past decades, there are several issues to address.
Public debt has remained stubbornly high in some Member States. Good economic times were often not used to build buffers. Almost every Member State has broken the rules at one time or another.
And the rules have also become very complex.
Since fiscal adjustment was largely achieved by reducing investment, the composition of public finances did not become more growth-friendly.
Overall, debt and deficit levels are now significantly higher than a decade ago. Some countries have public debt ratios well above 100% of their GDP.
At the same time, the challenges of the green and digital transitions, strengthening our economic and social resilience and the need to ensure our energy security, compel us to undertake major investments and reforms for years to come.
This is why we created powerful EU instruments such as the Recovery and Resilience Facility.
The orientations we are presenting today to reform the EU's system of economic governance address these new realities and challenges.
We are aiming for a simpler system of fiscal rules, with greater country ownership and more latitude for debt reduction – but combined with stronger enforcement.
The reference values enshrined in the Treaty remain in place: 3% of GDP for the public deficit and 60% of GDP for public debt.
Above all, we aim to ensure public debt sustainability.
This will require fiscal adjustment as well as growth-enhancing reforms and investments.
Each Member State should combine these elements in a four-year fiscal structural plan, to be presented to the Commission.
It should be designed to achieve a gradual and sustained reduction in public debt ratios, or to keep debt at prudent levels for low-debt countries.
In effect, countries will ‘own' their plans by being directly involved in their design.
That is a real departure from today's situation.
Since there are very different fiscal sustainability situations across Member States, this combination of elements can differ according to national circumstances.
So it is not a question of whether to put debt onto a reduction path towards 60% of GDP. It is more a question of how each country gets there – and especially, how fast.
Member States would set out their paths in a more realistic way than the current 1/20th debt rule would require.
Nevertheless, countries with substantial public debt challenges would still need to reduce their debt faster than those with less pressing concerns.
The Commission will also evaluate whether it is credibly ensured that the deficit is maintained below 3% of GDP over a 10-year period.
Then, to improve the quality of public finances, countries could request a longer, more gradual adjustment path.
This would be in exchange for additional structural reforms and investments to boost fiscal sustainability and sustainable growth.
To guarantee transparency and equal treatment, the plans will need to adhere to clear and common EU requirements that we will publish.
This applies both to slower debt reduction and selecting the appropriate reforms and investments.
Each national plan must secure approval by both the European Commission and Council.
I mentioned the need for enforcement.
Once agreed, each Member State must comply with its plan for its entire period. This means full implementation. It goes hand in hand with the greater leeway allowed in designing the plan.
Here, the Commission will carry out continuous monitoring, to be made easier by using a single indicator: net primary expenditure.
If a Member State does not comply on this basis, it will become subject to stronger enforcement mechanisms.
For example, if a country with a substantial public debt challenge fails to adhere to its agreed plan, the Excessive Deficit Procedure would be triggered by default.
It would also be triggered – as the case now – if it fails to adhere to the Treaty's deficit reference value.
The Commission would keep track of deviations so as to avoid small deviations eventually adding up to a large divergence.
We are also proposing a new way to make sure that a Member State carries out the reforms and investments to which it commits in exchange for a more gradual adjustment path.
If we see that a country does not live up to its commitments, we will be able to request a revised plan, with a more stringent fiscal path - and impose financial sanctions too.
We will lower the amounts involved – concerning financial sanctions - to make sure that they can be effectively used.
Today's orientations go beyond fiscal rules.
They also aim to make the macroeconomic imbalances procedure more effective.
Here, the Commission will have a closer dialogue with Member States to identify challenges and policy needs.
At the same time, we will strengthen monitoring and enforcement, using the excessive imbalances procedure to enforce action in countries with excessive imbalances.
Ladies and gentlemen: we started discussing reforming the EU's fiscal rules in early 2020.
We knew that it was not going to be easy. So we had to take the time to debate this - and we have consulted a great deal.
Although we do not want to predetermine the final outcome, we believe that we have found a good balance that all Member States could start working with. Thank you.