While the European economic governance, and in particular the Stability and Growth Pact (SGP), is usually considered from an economical perspective, legal approaches to this key set of rules are less frequent. EZA’s seminar “The Reform of the Stability and Growth Pact: A legal Perspective” aimed to contribute to address this gap. To do so, we invited Frédéric Allemand, research fellow at the Law Faculty of the University of Luxembourg and one of the leading scholars in the field of Economic and Monetary Union Law, to provide a legal analysis of the Commission’s reform proposal of the Stability and Growth Pact. The event was funded by the European Union.
The seminar took place in Brussels and online on 28 June 2023, only two months after the publication of the Commission’s legislative proposal. It was therefore an excellent opportunity to draw the attention of unions and stakeholders involved in the upcoming legislative process on certain critical aspects of the reform at an early stage, that is before the European Parliament and the Council start discussing the texts.
More than twenty participants attended the event. Half of them came from Belgium (mainly from Brussels) and attended the seminar on site, while the other half was connected from Germany, Serbia and Portugal.
The seminar analysed the new features of the Commission’s proposal. It then focused on the impact of the reform on member states‘ social expenditure, the democratic legitimacy of this new mechanism and the future role of social partners therein.
While one of the objectives of the Commission’s proposal was to simplify the current SGP, the discussion pointed out the legal complexity of the reform. Absent any treaty modifications (and therefore any change of the EU’s competences), the speaker also questioned the effectiveness of the new SGP to reach its declared objective, namely to reduce member states’ public debt level. Most importantly for the workers’ organizations, the reformed SGP, with its focus on growth-enhancing investments, could continue to further curb social expenditure in member states where it is the most needed.
As regards the democratic legitimacy of the new construct, the proposed reform does not bring any significative change to the current situation. The only change in this regard is that the “economic dialogue” between the European Parliament’s ECON committee and the other EU institutions will be extended to the whole Parliament.
Finally, unions’ role will not be modified either. The proposal recognizes that the involvement of social partners in the European Semester is “key to ensure ownership and transparent and inclusive policymaking”. However, the text doesn’t include any provisions that would enable to increase their currently limited involvement.
The amendment proposals mentioned during the discussion included that of distinguishing between current expenditure and public investment. Another proposal is to set a golden rule of public investment, ensuring that public investment is excluded from deficit calculation. This in turn would enable member states to keep an adequate level of current spending. Another possibility to guarantee a sufficient level of social expenditure would be to include in the texts a “safeguard clause” similar to that of Regulation 472/2013. The provision requires that member states applying for financial assistance from the EU shall submit a reform programme ensuring “sufficient means for fundamental policies, such as education and health care”.