11.01.2012 - The report concludes that although Belgium, Cyprus, Malta and Poland have taken effective action to correct their deficits, Hungary has not. It recommends the drafting of a Council Recommendation that no effective action has been taken to correct the excessive deficit under the Excessive Deficit Procedure (EDP).
This is the first time the European Commission has applied the new rules of the strengthened Stability and Growth Pact (SGP), the so-called "six-pack" rules, which entered into force on 13 December 2011.
The Excessive Deficit Procedure (EDP) is a mechanism established in the EU treaties (Article 126) with the aim to ensure that Member States correct gross fiscal policy errors. There are two key reference values: one for the general government deficit (3% of GDP) and one for gross government debt (60% of GDP). The various steps under the EDP are listed in the Treaty and further specified in the Stability and Growth Pact (SGP) legislation, which was recently in the center of a substantial reform reinforcing economic surveillance including the EU fiscal framework: On 13 December 2011 a new set of rules entered into force. It is often referred to as "six-pack", as it consists of five regulations and one directive (see MEMO/11/898 for more details).
The new rules affect both the preventive arm of the SGP - the procedures to promote surveillance and coordination of economic policies and ensure that excessive deficits are avoided - and the corrective arm of the pact, the EDP. New enforcement mechanisms, including in particular financial disincentives and fines, were drawn up for non-compliant euro-area Member States in order to render the SGP more dissuasive.
Currently, 23 out of the 27 EU Member States (all but Estonia, Finland, Luxemburg and Sweden) are subject to an EDP. Thus the new rules on the corrective arm of the SGP are of particular importance.