Event Report: The Commission Legislative Proposal for the New Stability and Growth Pact: An Interdisciplinary Discussion

Ian Cooper (DCU Brexit Institute)

On Monday 12 June, the Jean Monnet Centre of Excellence REBUILD, in partnership with the Robert Schuman Centre for Advanced Studies, held an event on “The Commission Legislative Proposal for the New Stability & Growth Pact: An Interdisciplinary Discussion.” The purpose of this event was to bring together experts from all 4 EUI departments to provide a first comprehensive interdisciplinary analysis of the Commission’s legislative proposals and its consequences for European integration. Welcome remarks from Erik Jones (Director, RSCAS) were followed by a panel discussion featuring Marco Buti (Tommaso Padoa Schioppa Chair, RSCAS), Adrienne Héritier (Social and Political Science Department, EUI), Emmanuel Mourlon-Druol (Chair in History of European Integration, History Department), and Anna Peycheva (Max Weber Fellow, Law Department), chaired by Federico Fabbrini (Founding Director of the DCU Brexit Institute, and Fernand Braudel Fellow, EUI Law Department).

Marco Buti began the discussion by noting that new April 2023 proposals to revise the Stability and Growth Pact (SGP) are the product of a long process of deliberation and public consultation. Whereas previous reforms have focussed on the corrective arm of the SGP, these are more focussed on the preventive arm. The current framework suffers from a number of shortcomings, including overcomplexity, limited investment, and lack of national ownership. Buti identified a basic “trilemma” of the SGP – that it is difficult to achieve more than two of three important goals: investment and reforms for sustainable growth; national ownership and political stability; and the rapid reduction of public debt. Any successful reform of the SGP must deal with four policy challenges – inflation, financial fragmentation, the twin transition (also including green investment), and competitiveness. He maintained that fiscal rules are at the core of EU policymaking, and that without a shared framework overall progress cannot be made. Regarding the timing of the reforms, he warned that if progress on the legislation is not made in late 2023 under the Spanish Council presidency (complicated by Spanish elections in July), then it will be very difficult to agree before EP elections in early 2024.

Adrienne Héritier gave a political scientist’s assessment of the SGP proposals that focussed on the various actors’ interests and the likely policy and institutional outcomes. Who is likely to gain in power as a result of the changes? The EP as a whole wants more democratic scrutiny and parliamentary involvement, while different party groups have different policy preferences. There is an identifiable cleavage between one group of member states that prefers strict, uniform rules vs. another that wants flexible rules. Of particular importance will be the position of Germany, which has warned that the proposal is inadequate, and that simple and transparent rules are needed, with a system of multilateral surveillance rather than bilateral negotiations between the Commission and individual member states. This may set up a clash between Germany and its allies versus France and Italy and their allies; however, Germany might be content to rely on the fallback position of the retention of the old, stricter, rules. She also noted that the proposals end up giving much greater discretionary power to the Commission which, if it negotiates with each member state on a bilateral basis, could end up having de facto codecision power over economic policymaking in the member states.

Emmanuel Mourlon-Druol in turn gave an historical overview of the quest for a common approach to fiscal relations, which goes back to the early days of the EEC. This search has had to accommodate different national systems with the need for some kind of shared framework. This has evolved from moral suasion, to a legally binding framework, to a system of indicators, to the SGP of today. These have always reflected the need to balance respect for sovereignty with respect for the European interest. The essential compromise has not changed since Jacques Delors recognized in the 1980s that in EMU, member states would tolerate new institutions on the monetary side but not on the economic side. Finally he noted that the proposed new rules did not provide an adequate allowance for the green transition.

Finally, Anna Peycheva set out her opinions, warning that they might be seen as the usual grievances from lawyers, specifically on the subject of soft law, national ownership and the quantification of risk. She raised particular questions about the macroeconomic imbalances procedure, and how it would interact with the reformed SGP. The problem with soft law measures is that they are often not quantifiable and they raise problems of compliance and enforcement. She also raised concerns about bestowing oversight powers on national fiscal councils; while this might be done in the name of increasing national ownership, it would simply have the effect of bringing EU rules closer to the national level without obtaining buy-in from national governments. Finally, on the quantification of risk, she warned that this would result in a loss of legal certainty.

The presentations from the panellists were followed by a lively debate.

The views expressed in this blog reflect the position of the author and not necessarily that of the Brexit Institute Blog.

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The views expressed in this blog reflect the position of the author and not necessarily that of the REBUILD Centre Blog.