Did not do well – well to apply nine months, and at the table of her own EU Its review is open. The reason for the new Stability consonant of the EU, which came into force on 1 January 2025.
As stated today (19.9.2025), Finance Minister Kyriakos Pierrakakis, going to today’s ECOFIN meeting, “in collaboration with central banks, will discuss the simplification of the European Financial Framework and will consider the conclusions of the Think Tank Tank. In Europe. ” But what does this report, which it published yesterday (18.9.2025), propose, Bruegel? Suggests or Reform of Stability Pact9 months after their entry into force, but also 6 months after an extraordinary mini – review by activating the escape clause to increase defense spending by 1.5% annually…
In particular, Bruegel points out that “the reform of the EU’s fiscal framework in 2024 was a big step in the right direction. It rightly requires countries with high debt and a high fiscal risk of rapidly reducing their deficits. But it also suffers from two important defects. The costs associated with these defects, to the extent that they guide national fiscal policies in the EU in the wrong direction, was perhaps manageable before accelerating the geopolitical challenges faced by the EU since the start of the second Trump government. But now they have proven prohibitive (…).
The defects of the stability pact and the proposals of new review of
According to the authors of this studies discussed by Europeans and central bankers:
1. “The first defect, which was evident even before the system was fully finalized (Darvas et al, 2023) was that investment costs approved by the EU were not sufficiently favored compared to other expenses. While debt sustainability must remain the primary objective of fiscal rules, there should be no quantitative limits in boosting debt -funded investments within a predetermined period (say, seven years), provided that:
- High quality public investment criteria are fulfilled in the current fiscal framework and
- Debt remains viable at the end of the period. The latter will generally require adaptation to the non -investment budget when executing the investment program. However, the adjustment required to cover even a large investment program – provided it is temporary – is limited.
2. “The second defect has become apparent only more recently. It is that the rules require the same fiscal adjustment standard – to put debt on a declining course with a high probability within four to seven years – regardless of whether the fiscal risks are high or low. The only exception is for countries with debt below 60% of GDP, which do not need to put their debt on a declining course as it is projected to remain below 60% in the medium term. Consistency is the serious restrictions on the budget policies of both countries, with debt below but close to 60% of GDP, and near but more than 60% of GDP, even when these countries could afford a prolonged period of debt growth without significant fiscal risks (because their debt will be required to be relatively low).
There may be several reasons why no one was concerned about this characteristic of new rules.
Firstis directly related to Article 126 of TFEU in conjunction with Protocol 12 of the Treaty, which defines public deficits as excessive if debt exceeds the reference price of 60% of GDP, unless “approaching the reference price at a satisfactory rate”.
Secondcountries that would benefit from greater flexibility without pose fiscal risks – including Germany and possibly the Netherlands – thought they did not need it. In Germany, a national budgetary rule has imposed even more stricter restrictions than the EU rule. This situation has now changed. As a result, EU rules impose restrictions on German policy and possibly the policies of other countries near the 60% of GDP, which are stricter than they are good for these countries or the EU as a whole.
A solution that gives more fiscal space to low -risk countries could receive one of the two forms:
First, to set much larger adjustment horizons for countries with debt but close to 60% of GDP and low budget risks. The latter could be identified using a risk assessment methodology (such as the risk sustainability and debt sustainability framework for IMF states, or using elements of current EU methodology), perhaps supported by market indicators, including risk premiums.
Alternatively, increase the debt reference value described in the Treaty Protocol from 60% to 90%. This would not require a change in the treaty, but would require unanimity to the Council.