Legal provisions of COM(2017)824 - Provisions for strengthening fiscal responsibility and the medium-term budgetary orientation in the Member States

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dossier COM(2017)824 - Provisions for strengthening fiscal responsibility and the medium-term budgetary orientation in the Member States.
document COM(2017)824 EN
date December  6, 2017

Contents

Article 1 - Subject matter and scope

1. This Directive lays down provisions for strengthening fiscal responsibility and the medium-term budgetary orientation in the Member States to ensure compliance with obligations relating to the avoidance of excessive government deficits.

2. This Directive applies to the Member States whose currency is the euro and other Member States in accordance with Article 4.

Article 2 - Definitions

For the purposes of this Directive, the definitions of government, deficit and debt set out in Article 2 of Protocol No 12 on the excessive deficit procedure annexed to the TEU and to the TFEU shall apply.

In addition, the following definitions shall also apply:

a) exceptional circumstances means an unusual event outside the control of the Member State concerned and which has a major impact on the financial position of the general government, or a severe economic downturn for the euro area or the Union as a whole;

b) independent bodies means bodies that are structurally independent or bodies endowed with functional autonomy vis-à-vis the budgetary authorities of the Member State, and which are underpinned by national legal provisions ensuring a high degree of functional autonomy and accountability.

(c)'structural balance' means the cyclically-adjusted balance of the general government, net of one-off and temporary measures.

Article 3 - Fiscal responsibility and medium-term budgetary orientation

1. Each Member State shall set up a framework of binding and permanent numerical fiscal rules which are specific to it, strengthen its responsible conduct of fiscal policy and effectively promote compliance with its obligations deriving from the TFEU in the area of budgetary policy over a multiannual horizon for the general government as a whole. That framework shall include in particular the following rules:

(a)a medium-term objective in terms of structural balance shall be set in order to ensure that the ratio of government debt to gross domestic product at market prices does not exceed the reference value set out in Article 1 of Protocol No 12 on the excessive deficit procedure or approaches it at a satisfactory pace.

(b)fiscal planning shall include a medium-term growth path of government expenditure net of discretionary revenue measures and consistent with the medium-term objective or the time-frame for convergence towards it. That path shall be set as soon as a new government takes office in the Member State, for the term of the legislature as established by the constitutional legal order of that Member State, and shall be respected by the annual budgets throughout that period.

2. The framework referred to in paragraph 1 shall include the following specifications:

(a)annual budgets shall ensure compliance with the medium-term objective referred to in point (a) of paragraph 1 or convergence towards it, specifically by ensuring adherence to the government expenditure path referred to in point (b) of that paragraph. When defining the adjustment path towards the medium-term objective and acting in line with the procedural requirements of the Union framework, Member States may take into account the implementation of major structural reforms which have direct long-term positive budgetary effects, including by increasing potential sustainable growth, and therefore a verifiable impact on the long-term sustainability of public finances.

(b)a correction mechanism shall be automatically activated in the event of a significant observed deviation from the medium-term objective or the adjustment path towards it. That mechanism shall include the obligation to implement measures to correct the deviation over a defined period of time and taking account of the nature and size of the deviation, in particular by compensating for deviations from the government expenditure path referred to in point (b) of paragraph 1.

3. Member States shall ensure that a temporary deviation from the medium-term objective or the adjustment path towards it, with the corresponding adjustment of the government expenditure path referred to in point (b) of paragraph 1, is allowed only in case of exceptional circumstances and provided that any such deviation does not endanger fiscal sustainability in the medium-term. A temporary deviation resulting from exceptional circumstances shall not be deemed significant for the purposes of point (b) of paragraph 2 and shall not have the effect of activating the correction mechanism referred to in point (b) of that paragraph.

4. Member States shall designate independent bodies for monitoring compliance with the provisions in paragraphs 1 and 2. The independent bodies shall provide public assessments to ascertain:

(a)adequacy of the medium-term objective under point (a) of paragraph 1 and of the government expenditure path referred to in point (b) of paragraph 1. That assessment shall take into account in particular the plausibility of the underlying macroeconomic forecast, the degree of specification of the planned government expenditure and revenue and the potential direct long-term positive budgetary effects of major structural reforms;

(b)compliance with the medium-term objective and the government expenditure path, including the existence of a serious risk of occurrence of a significant deviation from the medium-term objective or the adjustment path towards it;

(c)occurrence or cessation of any exceptional circumstances as referred to under paragraph 3.

5. Member States shall ensure that, in the event of a significant observed deviation as referred to in point (b) of paragraph 2, the independent bodies shall call upon the budgetary authorities to activate the correction mechanism. After the correction mechanism is activated, the independent bodies shall provide public assessments to ascertain:

(a)    consistency of the planned measures with the established correction mechanism, having regard in particular to whether deviations from the government expenditure path set in accordance with point (b) of paragraph 1 are adequately compensated for;

(b)    the progress of the correction over the defined time-frame;

(c)    occurrence or cessation of any exceptional circumstances which may allow a temporary deviation from the correction path.

6. Member States shall ensure that the budgetary authorities of the Member State concerned comply with the recommendations of the independent bodies made in the assessments required under paragraphs 4 and 5 or publicly justify the decision not to comply with those recommendations.

7. Member States shall ensure that the independent bodies referred to in paragraph 4:

(a)are established by a statutory regime grounded in national laws, regulations or binding administrative provisions;

(b)do not take instructions from the budgetary authorities of the Member State concerned or from any other public or private body;

(c)have the capacity to communicate publicly in a timely manner;

(d)are made up of members who are nominated and appointed on the basis of their experience and competence in public finances, macroeconomics and budgetary management, and by means of transparent procedures;

(e)have adequate and stable own resources to carry out their mandate in an effective manner;

(f)have extensive and timely access to information to fulfil their given tasks.

Article 4 - Participation by Member States whose currency is not the euro

1. Any Member State whose currency is not the euro shall be bound by this Directive provided that it notifies the Commission of its decision to that effect. That notification shall include the date as of which the Member State concerned requests to be bound by this Directive.

2. The notification referred to in paragraph 1 shall be published by the Commission in the Official Journal of the European Union. It shall take effect as from the date notified thereof by the Member State concerned or the date of adopting the euro as the single currency of that Member State, whichever is the earlier.

Article 5 - Reports

By 30 June 2024, and every five years thereafter, the Commission shall present a report to the European Parliament and to the Council on the implementation of this Directive, which shall be prepared on the basis of relevant information from the Member States.

Article 6 - Final provisions

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 30 June 2019. They shall immediately inform the Commission thereof.

2. When Member States adopt those measures, they shall contain a reference to this Directive or be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States.

3. Member States shall communicate to the Commission the text of the main measures of national law which they adopt in the field covered by this Directive.

Article 7 - Entry into force

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 8 - Addressees

This Directive is addressed to the Member States in accordance with the Treaties.