|
|
The EU is striving to update its economic governance framework, which is hampered by shortcomings that have been highlighted over the years. In a review published today, the European Court of Auditors analyses how the reform recently proposed by the European Commission addresses these shortcomings. While auditors commend the move and the efforts involved, they also point to challenges and risks to the effective coordination of economic policies in the EU.
The EU’s economic governance framework has yielded a picture of mixed success so far. Just before the COVID‐19 pandemic, 12 EU countries recorded public debt of over 60%, 10 experienced macroeconomic imbalances, and three had excessive imbalances. These figures reveal some significant shortcomings, as the ECA has been reporting for years, in the economic governance framework and the way it is implemented: the use of non‐observable indicators that are revised frequently and sometimes significantly, a lack of national ownership, an imbalance between transparency and discretion, non-enforcement in practical terms, complexity and overlaps in surveillance and monitoring. The European Commission itself acknowledged the need for a reformed framework, and presented a package of proposals in April 2023.
“The proposed reform strives to tackle many issues with the current economic governance framework that we, as the EU’s auditors, have highlighted over the years,” said François-Roger Cazala, the ECA member in charge of the review. “But the main challenge will be to ensure timely and effective fiscal adjustments that promote debt sustainability, while at the same time supporting investment and growth.”
Net expenditure would be used as the sole indicator when setting fiscal adjustment paths in member states’ medium‐term fiscal‐structural plans and carrying out annual fiscal surveillance. This addresses the EU auditors’ call for a simpler, more predictable and more observable indicator than the one used so far. In addition, the auditors welcome the aim of increasing the focus on debt sustainability by using a country-specific rather than a one-size-fits-all approach. However, they warn of the risk that EU countries may not make the necessary fiscal adjustments. For instance, if member states use more optimistic growth assumptions than the Commission, this would reduce the projected debt ratio and lead to insufficient fiscal adjustment....
more at ECA