EU fiscal policy for 2024 to focus on future growth and debt sustainability

(BRUSSELS) - EU states' fiscal policies in 2024 should ensure medium-term debt sustainability and promote sustainable and inclusive growth, the Commission said Wednesday in its guidance on fiscal policy for next year.

The guidance, issued to EU Member States on the conduct and coordination of fiscal policy for next year, comes as discussions on the future economic governance framework are ongoing.

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. Quantified and differentiated country-specific recommendations on fiscal policy will then be resumed.

For the moment, says the EU executive, the current legal framework continues to apply. The Commission says it 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, it says, 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.

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 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.

In addition, the Commission will continue to emphasise public investment in its country-specific recommendations on fiscal policy. It says all Member States should continue to protect nationally financed investment and ensure the effective use of funds under the Recovery and Resilience Facility and other EU funds, in particular for the green and digital transitions and resilience objectives.

The country-specific recommendations will also provide guidance regarding the fiscal cost of energy measures.

Given current high uncertainty for the macroeconomic and budgetary outlook, the Commission considers that a decision on whether to place Member States under the excessive deficit procedure should not be taken this spring. The Commission will propose to the Council to open deficit-based excessive deficit procedures in spring 2024 on the basis of the outturn data for 2023, in line with existing legal provisions.

The EU executive says Member States should take account of this in the execution of their 2023 budgets and in preparing their stability and convergence programmes this spring and the draft budgetary plans for 2024 this autumn.

"We want Member States to set ambitious fiscal targets for 2024, outline credible paths for reducing debt and identify how they will use reforms and investments to achieve sustainable and inclusive growth," said EC vice-president Valdis Dombrovskis: "We should start to phase out the sizeable support that people and businesses needed to cope with last year's energy price surge, starting with the least targeted measures."

Commission fiscal policy guidance for 2024 - guide

Communication on fiscal policy guidance for 2024

Communication on orientations for a reform of the EU economic governance framework