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EU economic governance

The EU and its Member States have taken a series of important decisions that will strengthen economic and budgetary coordination for the EU as a whole and for the euro area in particular. As a result, the EU’s interdependent economies will be better placed to chart a path to growth and job creation.

Surveillance of economic and fiscal policies

The economic and financial crisis has revealed a number of weaknesses in the economic governance of the EU's economic and monetary union. The cornerstone of the EU response is the new set of rules on enhanced EU economic governance which entered into force on 13 December 2011. It has four main components:

  • Stronger preventive action through a reinforced Stability and Growth Pact (SGP) and deeper fiscal coordination: Member States are required to make significant progress towards medium-term budgetary objectives (MTO) for their budgetary balances. Expenditure benchmarks will now be used alongside the structural budget balance to assess adjustments towards the MTO. An interest-bearing deposit of 0.2% of GDP will be imposed on non-compliant euro-area countries.
  • Stronger corrective action through a reinforced SGP: The launch of an Excessive Deficit Procedure (EDP) can now result from government debt developments as well as from government deficit. Member States with debt in excess of 60% of GDP should reduce their debt in line with a numerical benchmark. Progressive financial sanctions kick in at an earlier stage of the EDP. A non-interest bearing deposit of 0.2% of GDP may be requested from a euro-area country which is placed in EDP on the basis of its deficit or its debt. Failure of a euro-area country to comply with recommendations for corrective action will result in a fine.
  • Minimum requirements for national budgetary frameworks: Member States should ensure that their fiscal frameworks are in line with minimum quality standards and cover all administrative levels. National fiscal planning should adopt a multi-annual perspective, so as to attain the MTO. Numerical fiscal rules should also promote compliance with the Treaty reference values for deficit and debt.
  • Preventing and correcting macroeconomic and competitiveness imbalances:The new Macroeconomic Imbalance Procedure (MIP) broadens the EU economic governance framework to include the surveillance of macroeconomic trends. The aim of the MIP is to identify potential risks early on, prevent the emergence of harmful imbalances and correct the imbalances that are already in place. In this respect the objective of the MIP is to ensure that appropriate policy responses are adopted in Member States in a timely manner to address the pressing issues raised by macroeconomic imbalances. In doing so, the MIP relies on a graduated approach that reflects the gravity of imbalances and can eventually lead to the imposition of sanctions on euro area Member States should they repeatedly fail to meet their obligations under the corrective arm of the MIP.

Enforcement is strengthened by the expanded use of 'reverse qualified majority' voting. Under this voting system, a Commission recommendation or proposal to the Council is considered adopted unless a qualified majority of Member States votes against it.


  • Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013 on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area
  • Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability
  • Council Regulation (EU) No 1177/2011 of 8 November 2011 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure
  • Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances
  • Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011 amending Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
  • Regulation (EU) No 1174/2011 of the European Parliament and of the Council of 16 November 2011 on enforcement measures to correct excessive macroeconomic imbalances in the euro area
  • Regulation (EU) No 1173/2011 of the European Parliament and of the Council of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area


Commission Green Paper on Stability Bonds

The Commission Green Paper on Stability Bonds, published on 23 November 2011, sets out three main options: the full substitution by Stability Bond issuance of national issuance, with joint and several guarantees; the partial substitution by Stability Bond issuance of national issuance, with joint and several guarantees; and the partial substitution by Stability Bond issuance of national issuance, with several but not joint guarantees. The objective of the Green Paper is to have a broad debate on the issues raised.

>> 23/11/2011. Green paper on stability bonds

Commission Communication on common principles for national fiscal correction mechanisms

Member States that are Contracting Parties to the Treaty on Stability, Coordination and Governance in EMU (TSCG), in force since 1 January 2013, will introduce in their national rules a correction mechanism to be triggered automatically in the event of significant observed deviations from the medium-term objective or the adjustment path towards it. With this Communication the European Commission puts forward seven common principles for designing the national correction mechanisms, covering legal status, consistency with the EU framework, activation, nature of the correction in terms of size and timeline, operational instruments, escape clauses, and the role and independence of monitoring institutions.

Coordination of economic and fiscal policy planning - The European semester

Developed in 2010, the European Semester represents a new approach towards economic surveillance, including a new policy-making timetable. First put into practice during the first half of 2011, it ensures that EU-level economic policies are analysed and assessed together and are suitably covered by economic surveillance.

To read more about the coordination of economic and fiscal policy planning in the EU go to our Economic Semester page.

Setting of economic priorities - The Euro+ Pact

To give further impetus to the governance reforms, 23 Member States, including six outside the euro-area (Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania), signed the Euro Plus Pact in March 2011. The Pact commits signatories to even stronger economic coordination for competitiveness and convergence, also in areas of national competence, with concrete goals agreed on and reviewed on a yearly basis by Heads of State or Government. The Euro Plus Pact is integrated into the European semester and the Commission monitors implementation of the commitments.

>> Conclusions of the Heads of State or Government of the euro area of 11 March 2011. A Pact for the euro. Stronger economic policy coordination for competitiveness and convergence.pdf

Europe 2020

The Euro Plus Pact builds on the existing framework of economic priorities agreed at EU level under the Europe 2020 strategy for 'smart, sustainable and inclusive' growth. The strategy sets targets in the fields of employment, innovation, climate/energy, education and social inclusion.

>> Europe 2020 - The EU strategy for smart, sustainable and inclusive growth

Repair and safeguard measures - Financial sector repair

Getting Europe back on track also requires a healthy financial sector. The EU, therefore, established a new financial supervision architecture in January 2011. It includes a European Systemic Risk Board (ESRB) for macro-prudential oversight of the financial system, and three European supervisory authorities: the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority. Rules have also been tightened on capital requirements for banks, investment firms and insurance companies, and new rules on remuneration and bonuses will reduce incentives for short-term risk-taking. Bank stress tests have been conducted and the Commission will propose a framework to allow banks to fail in an orderly manner, thus ensuring that taxpayers don’t have to pay for bailouts.

>> European Systemic Risk Board (ESRB)
>> European Financial Stability Facility EFSF
>> European Banking Authority (EBA)
>> European Securities and Markets Authority (ESMA)
>> European Insurance and Occupational Pensions Authority (EIOPA)
>> Directorate-General Internal Market. Information on financial services (banking, insurance, securities, etc.