First European Semester Autumn Package under new economic governance framework sets out path for sound public finances and sustainable and inclusive growth

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The Commission has presented the first European Semester Autumn Package since the ambitious and comprehensive reform of the EU’s new economic governance framework entered into force in April 2024. It is an essential step in delivering on the objectives of the reform to make the framework simpler, more transparent and effective, with greater national ownership.

The new framework supports Member States in achieving macroeconomic stability, growth and fiscal sustainability, which are critical for the EU’s economic strength in today’s challenging global environment. It also encourages reforms and investments that will lay the foundations for long-term economic stability and sustainable growth. Ultimately, it helps build a more resilient, fair, competitive, and secure EU economy for the benefit of citizens.

The European Semester Autumn Package comes as the EU economy is returning to modest growth after a prolonged period of stagnation. Looking ahead, while Member States pursue fiscal adjustment where needed, public investment is expected to increase in 2025 in almost all Member States, with a significant contribution from NextGenerationEU’s Recovery and Resilience Facility and EU funds in several Member States.

Simpler rules taking account of different fiscal challenges

The new economic governance framework establishes simpler, and more transparent fiscal rules. It uses a single operational indicator, namely the Member State’s multi-annual net expenditure path, facilitating the tracking of compliance. The framework also introduces risk-based surveillance tailored to each Member State’s individual fiscal situation and allows for more gradual fiscal adjustment if underpinned by specific reforms and investments.

The new framework allows for a gradual and realistic reduction of public debt levels, which significantly increased following the COVID-19 pandemic and the subsequent energy crisis. Sound public finances are a prerequisite for macroeconomic stability and sustainable economic growth.

Promoting growth-enhancing reforms and investments

Under the new framework, all Member States include reforms and investments in their medium-term plans addressing common EU priorities and challenges identified in country-specific recommendations in the context of the European Semester. These include the green and digital transitions, social and economic resilience, energy security and the build-up of defence capabilities.

Assessing the medium-term plans

Medium-term plans are the cornerstone of the new economic governance framework. Integrating fiscal, reform and investment objectives into a single medium-term plan creates a coherent and streamlined process.

The Commission has concluded its assessment for 21 out of the 22 submitted plans.

Out of the 21 plans, the Commission assessed that 20 meet the requirements of the new framework and set out a credible fiscal path to ensure that the respective Member States’ debt level is put on a sustainable downward path or kept at prudent levels. This concerns the following Member States: Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Ireland, Greece, Italy, Latvia, Luxembourg, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. For these Member States, the Commission recommends that the Council endorses the net expenditure path included in these plans. In the case of the Netherlands, the Commission has proposed that the Council recommend a net expenditure path consistent with the technical information the Commission transmitted in June.   

The Commission is still assessing the medium-term plan of Hungary.

For five out of the 20 medium-term plans that have been assessed positively by the Commission, the net expenditure path is based on an extension of the adjustment period from four to seven years. The extension is underpinned by a set of reform and investment commitments included in the plans. In all five cases, the Commission assessed that the measures included in their plans met the criteria to justify an extension. This concerns the medium-term plans of Finland, France, Italy, Spain and Romania.

Assessing the draft budgetary plans for 2025

The Commission has also assessed the draft budgetary plans (DBPs) for 2025 presented by 17 euro area Member States and has examined whether they represent appropriate first steps to implement the respective medium-term plans.

The Commission’s assessment of the DBPs is focused on net expenditure growth in 2024-2025, assessing whether net expenditure is within the ceilings set out in the Member States’ medium-term plans, provided such a plan is available and considered to be compliant with the new framework.

Eight euro area Member States are considered to be in line with the fiscal recommendations,while seven are not fully in line, one is not in line, and one risks not to be in line:

• Greece, Cyprus, Latvia, Slovenia, Slovakia, Italy, Croatia and France are assessed to be in line with the recommendations, as their net expenditure is projected to be within the ceilings.
• Estonia, Germany, Finland, and Ireland are assessed to be not fully in line as their annual (Finland, Ireland) and/or cumulative (Estonia, Germany, Ireland) net expenditure is projected to be above the respective ceilings.
• Luxembourg, Malta, and Portugal are assessed to be not fully in line with the recommendation: while their net expenditure is projected within the ceilings, they do not phase out the energy emergency support measures by winter 2024-2025, as recommended by the Council.
• The Netherlands is assessed to be not in line with the recommendation, as the net expenditure is projected above the ceilings.
• Lithuania is assessed to risk being not in line with the recommendation, as the net expenditure is projected to exceed the rates that the Commission would consider as an appropriate first step in the implementation of the new economic governance framework.

Taking the next steps under the excessive deficit procedure

The Excessive Deficit Procedure (EDP) is the so-called “corrective arm” of the Stability and Growth Pact.

This Autumn Package presents the Commission’s recommendations for multi-year net expenditure paths to correct the excessive deficit for the eight Member States (Belgium, France, Hungary, Italy, Malta, Poland, Romania and Slovakia)that are currently subject to the EDP.

For most of these Member States, the corrective paths are based on the net expenditure paths that the Member State set out in their medium-term plans. This is in line with the strong emphasis placed on national ownership of fiscal commitments under the new economic governance framework.

In the absence of a plan or a recommendation on the medium-term plan, as is the case for Belgium and Hungary, the corrective path in the EDP recommendation is based on the Commission’s four-year reference trajectory, updated based on the most recent data.

The package also includes a report under Article 126(3) of the Treaty on the Functioning of the European Union for Austria and Finland which assesses the compliance of these Member States with the deficit criterion.

Austria has reported a planned deficit above the 3% of GDP reference value in 2024 and the Commission forecast does not project a reduction below the 3% of GDP reference value in 2025 or 2026 under a no policy change assumption. The Commission will therefore consider to propose to the Council to establish that an excessive deficit exists in Austria. The Austrian authorities have expressed their intention to take the necessary action to bring the deficit below 3% in 2025. The Commission stands ready to assess new measures as soon as formally agreed by the government and sufficiently detailed.

In the case of Finland, which also reported a planned deficit over 3% of GDP for 2024, the Commission does not intend to propose opening an excessive deficit procedure, since the deficit is no longer projected to exceed the reference value already as from 2025 without additional policy measures.

Post-programme surveillance reports

The post-programme surveillance reports assess the economic, fiscal and financial situation of Member States that have benefited from financial assistance programmes (Cyprus, Greece, Ireland, Portugal and Spain), focusing on their repayment capacity. The reports conclude that all five Member States retain the capacity to repay their debt.

Next steps

The Council and the Eurogroup will now discuss the elements presented in the European Semester Autumn Fiscal Package.

Once the medium-term plans have been endorsed by the Council, the Commission will monitor whether Member States respect the commitments contained within those plans for the whole period covered by the plan. Member States will present annual progress reports to facilitate the effective monitoring and enforcement.

The Commission will present the second part of the European Semester Autumn Package, including the Annual Sustainable Growth Strategy, the euro area recommendation, the Alert Mechanism Report and the proposal for a Joint Employment Report, in the coming weeks.

For more information

Questions and answers on the 2024 European Semester Autumn Fiscal Package

2024 European Semester Autumn package – Documents

Autumn 2024 Economic Forecast

The European Semester

Questions and Answers on the new economic governance framework

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