On the Reform of the EU Stability and Growth Pact

The institutional and regulatory framework on the economic governance in the European Union (EU) within the Economic and Monetary Union (EMU) is currently governed (mainly) by Articles 121 and 126 of the Treaty on the Functioning of the European Union (TFEU), on the basis of which secondary law was developed by the Council of the EU. The relevant Council Regulations (EC) 1466/97 and 1467/97 form, respectively, the “preventive part” and the “corrective part” of the Stability and Growth Pact (SGP). Of significant importance is also Council’s Directive 2011/85/EU on requirements for budgetary frameworks of the Member States. Based on the Commission’s legislative proposals of 2023 to reorganise the EU’s economic governance framework upon the consecutive crises in the financial system and in public health, the above secondary law was amended in April 2024. The reform’s objective is to reduce Member States' debt ratios and deficits in a gradual, realistic, sustained and growth-friendly manner, while protecting reforms and investments in strategic areas (e.g., digital, green or defence), and forming a framework that will provide appropriate room for counter-cyclical policies and will help address existing macroeconomic imbalances. This study briefly presents the current status of the EU’s economic governance framework and then attempts a critical analysis of its recent reform. The reforms presented are categorised in terms of monitoring compliance, criteria of monitoring progress and institutional amendments. The authors’ views regarding the legal questions arising in this context conclude the study.