All EU countries are expected to reach their medium-term budgetary objectives (MTOs), or to be heading towards them by adjusting their structural budgetary positions at a rate of 0.5% of GDP per year as a benchmark.
MTOs are set to ensure sound fiscal health. They take into account the need to achieve sustainable debt levels while ensuring governments have enough room to manoeuvre and a safety margin against breaching the EU’s fiscal rules.
Due consideration is given to a country's economic situation as well as its sustainability conditions. EU countries with excessive and potentially risky debt burdens are expected to make faster progress. All countries are generally required to do more when economic conditions are favourable, so they can have more flexibility when conditions are tough. At the same time, the required pace of adjustment is reduced when economic conditions are unfavourable.
Budget deficit (or surplus) targets are defined in structural terms. This means that they take into consideration business cycle swings and filter out the effects of one-off and other temporary measures.
MTOs are updated every 3 years, or more frequently in the case of a country that has undergone a structural reform which significantly impacted its public finances.
If the fiscal policies of a Member State result in a significant deviation from their MTO or the adjustment path towards it, the Commission shall recommend the Council to open a so-called Significant Deviation Procedure. This gives national authorities the opportunity to return to a more prudent fiscal policy, and avoid the opening of an Excessive Deficit Procedure under the corrective arm of the Stability and Growth Pact.