7 March 2022

Based on the ongoing public debate and discussions with Member States, the European Commission provides information on possible changes to the EU economic governance framework. The Fiscal Policy Guidance is a tool with the aim of reaching a broad consensus on fiscal policies by 2023 across the European Union. 

Fiscal guidelines of the current political situation.

Every April, EU Member States are required to lay out their fiscal plans for the next three years. This exercise is based on economic governance rules in the Stability and Growth Pact, which aim to prevent the emergence or exacerbation of fiscal difficulties. 

The European Commission has provided all member states with the necessary measures to conduct their fiscal policies in 2023 by:  

The 5 key principles for EU recommendations 

The guidance focusses on 5 key principles and their implications for fiscal recommendations. The Commission will propose these to EU Member States in May 2022 for their budgetary plans in 2023, and are based on: 

  1. Policy coordination and a consistent policy mix; 
  1. Debt sustainability through a gradual and high-quality fiscal adjustment and economic growth; 
  1. Faster investment and sustainable growth; 
  1. Fiscal strategies consistent with a medium-term approach to fiscal adjustment; 
  1. Different fiscal strategies that take into account the euro area dimension. 

Considering the COVID-19 pandemic, a coordinated fiscal response has had a postive impact on all EU Member States. Towards the future, Multi-year fiscal adjustment combined with investment and reforms to sustain growth potential is needed to safeguard debt sustainability.  

Guidance 2023: What is expected to change? 

For 2023, the Commission is starting a gradual fiscal adjustment to reduce high public debt. Financing this will happen for each Member State through: 

  • The Recovery and Resilience Facility 
  • Nationally financed high-quality public investment 

But a differentiation will made between Member States based on debt: 

  • High-debt: start a gradual debt reduction by delivering a fiscal adjustment in 2023, net of contributions from the RRF and other EU grants 
  • Low and medium-debt: strengthen the necessary investment for the green and digital transitions, aiming at achieving an overall neutral policy stance 

Each member States’ stability and convergence program should hold medium-term budgetary plans in a gradual downward trajectory of public debt. The key focus is sustainable growth and achieivng this through gradual investments and reforms. 

Future guidance, with a report to be released in May 2022, will continue to reflect the global economic situation, the specific situation of each Member State and the discussion on the economic governance framework. 

FI Group has 20 years of experience and wants to accompany you on the new NextGenerationEU path. Our experts are at your disposal to analyse how your project fits into NextGenerationEU and to take the next steps together with you.

Yvette Poumpalova

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