Economy & public financesEuropean Union

In forceBoth regulations apply directly from 30 April 2024; Member States had until 31 December 2025 to transpose the directive.

EU economic governance reform of 2024: the new fiscal rules

Three acts of 29 April 2024, in force since 30 April 2024, rewrote the Stability and Growth Pact. Each Member State now commits to a four- or five-year medium-term fiscal-structural plan built around a single indicator, net expenditure, whose path is set by the Council. The 3% of GDP deficit and 60% debt reference values stay; adjustment can be spread over up to seven years in exchange for reforms and investment, and every Member State must have an independent fiscal institution.

Updated: November 5, 2026Next milestone: December 31, 2028 — Deadline for the Commission’s preliminary findings on the application of Regulation 2024/1263

At a glance

Reference text

Regulation (EU) 2024/1263 of the European Parliament and of the Council of 29 April 2024 on the effective coordination of economic policies and on multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 — with Council Regulation (EU) 2024/1264 and Council Directive (EU) 2024/1265[1][2][3]

No. (EU) 2024/1263 · April 29, 2024

Read the text ↗

Carried by

  • Paolo Gentiloni[5][4]European Commissioner for the Economy — lead Commissioner for the proposal of 26 April 2023 · 2023 · Initiator
  • European Commission[1][7]Issues prior guidance and reference trajectories, assesses national plans, monitors the control account · since 2024 · Implementation
  • Council of the European Union[1][6][10]Sets each Member State’s net expenditure path, decides on excessive deficits and activates escape clauses · since 2024 · Implementation

Implementation

Status

In force

since April 30, 2024[1][2][3]

Both regulations apply directly from 30 April 2024; Member States had until 31 December 2025 to transpose the directive.

Stated objective

Ensure sound and sustainable public finances and sustainable, inclusive growth: reduce debt ratios gradually and realistically where needed, keep deficits below 3% of GDP, give Member States ownership of multi-annual country-specific paths, and protect reforms and investment in common priorities — green and digital transition, social and economic resilience, energy security and, where necessary, defence capabilities.[1][7]

According to Regulation (EU) 2024/1263 (Article 1, recitals 5-6 and Article 13) and the Commission’s communication of 26 November 2024

  • Deficit reference value (Treaty)

    3% of GDP

    Every year · according to Regulation 2024/1263 and the TFEU[1]

  • Debt reference value (Treaty)

    60% of GDP

    Every year · according to Regulation 2024/1263 and the TFEU[1]

  • Structural deficit sought by the deficit resilience safeguard (1.5-point margin below 3%)

    1.5% of GDP

    Medium term · according to Regulation 2024/1263, Article 8[1]

Main measures

  • A single operational indicator, net expenditure (government spending net of interest, discretionary revenue measures, EU-funded programmes, national co-financing, cyclical unemployment benefits and one-offs), replaces the former set of indicators; its maximum growth path is set by the Council for four or five years.[1][2]
  • Each Member State submits a national medium-term fiscal-structural plan (four or five years, the length of its legislature), then an annual progress report by 30 April each year.[1]
  • Where debt exceeds 60% of GDP or the deficit 3%, the Commission sends a risk-based reference trajectory over a four-year adjustment period, extendable by up to three years if the Member State commits to reforms and investments.[1]
  • Two safeguards: the debt ratio must fall by at least 1 point of GDP a year on average above 90% (0.5 point between 60% and 90%), and adjustment continues until a structural deficit 1.5 points below the 3% threshold (0.4 point a year, 0.25 with an extension).[1]
  • A control account records deviations from the path; the Commission prepares an excessive deficit report when they exceed 0.3 point of GDP in a year or 0.6 point cumulatively (for debt above 60%). In a deficit-based procedure, the corrective path must deliver a structural adjustment of at least 0.5% of GDP a year as a benchmark.[1][2]
  • A general escape clause (severe downturn in the euro area or the EU) and a new national escape clause (exceptional circumstances outside a Member State’s control) let the Council allow deviations, for a set time, if medium-term sustainability is not endangered.[1][9]
  • The directive requires every Member State to have an independent fiscal institution (forecasts, monitoring of national fiscal rules, budgetary framework), whose assessments governments must follow or publicly explain within two months, and a fiscal planning horizon of at least three years.[3]

In data

Debt sustainability safeguard: minimum average yearly fall of the debt ratio[1]

Average over the adjustment period

Debt sustainability safeguard: minimum average yearly fall of the debt ratio — chart values
Debt ratioMinimum decline (points of GDP a year)
Above 90% of GDP1% of GDP
Between 60% and 90% of GDP0.5% of GDP

Scale starts at 0% of GDP · Legal minimum for the Commission’s reference trajectory, computed from the year before the trajectory starts (or the year the excessive deficit procedure is expected to close) to the end of the adjustment period.

Budget balance

-3.1% GDP

2024

CEPREMAPSee the card →

Key figures

Excessive deficit procedures opened in July 2024

7

26 July 2024 · Observed

according to the European Commission[7][6]

Belgium, France, Italy, Hungary, Malta, Poland, Slovakia; Romania already under procedure since 2020.

Member States with the defence escape clause activated

18

2025-2026 decisions · Observed

according to the European Commission and Council recommendations[9][10][11][12][13]

Cap on the defence deviation from the net expenditure path

1.5% of GDP

2025-2028 · Announced

according to the Council recommendations activating the national escape clause[10]

First plans granted a seven-year adjustment period

5

November 2024 · Observed

according to the European Commission[7]

Finland, France, Italy, Romania and Spain, out of 21 plans assessed.

Timeline

  1. Announced

    Commission proposes the reform package[4][5]

  2. The Commission tables three proposals: a new preventive-arm regulation, an amended excessive deficit procedure and an amended directive on national budgetary frameworks[4]

  3. Under debate

    The Council’s preparatory bodies begin examining the proposal (ECB opinion on 5 July 2023)[5]

  4. European Parliament adopts its position on the preventive-arm regulation and gives its opinion on the two Council acts[1][2][3][5]

    Regulation 2024/1263 follows the ordinary legislative procedure (Parliament and Council co-decide); Regulation 2024/1264 (special legislative procedure) and Directive 2024/1265 are Council acts, adopted after consulting the Parliament.

  5. Adopted

    Adoption of the three acts by the Council, after the Parliament’s vote of 23 April[1][2][3][5]

  6. In force

    Publication in the Official Journal and entry into force[1][2][3]

    Both regulations apply directly from 30 April 2024; Member States had until 31 December 2025 to transpose the directive.

  7. Commission report under Article 126(3) TFEU on compliance with the deficit and debt criteria[8][6]

  8. The Commission sends Member States its prior guidance for the first plans[1][7]

    Under the transitional provisions, prior guidance was due by 21 June 2024 and plans by 20 September 2024, unless a later date was agreed with the Commission.

  9. The Council finds excessive deficits in seven Member States: Belgium, France, Italy, Hungary, Malta, Poland and Slovakia[6][7]

    Romania has been under an excessive deficit procedure since 2020. For France, the deficit reached 5.5% of GDP in 2023 and debt 110.6%; as the Council had not yet set a net expenditure path, the decisions concern only the deficit criterion.

  10. Deadline for the first medium-term plans: only Denmark and Malta submit on time[7][1]

    Most Member States agreed with the Commission to submit around 15 October 2024, alongside their draft budgetary plans.

  11. The Commission assesses 21 of the 22 plans submitted; five obtain a seven-year adjustment period[7]

    Extensions from four to seven years for Finland, France, Italy, Romania and Spain, backed by reform and investment commitments. For the Netherlands, the Commission proposes the path of its own technical information. The plans of Austria, Belgium, Bulgaria, Germany and Lithuania are delayed by elections and government formation; Hungary’s plan, submitted on 4 November, is still under assessment.

  12. Current step

    Defence flexibility period under the national escape clause[10][11][13]

    After 2028, deviations remain allowed only for deliveries of military equipment contracted before the end of 2028, within the same overall cap.

  13. The Council endorses the first national plans, including France’s[14][15]

    According to the European Fiscal Board, this came about half a year later than the normal calendar set by the new rules.

  14. The Commission invites all Member States to activate the national escape clause for defence spending[10][9]

    The deviation allowed is limited to the increase in defence spending relative to a reference year, with an annual excess not exceeding 1.5% of GDP through 2028. The European Council of 6 March 2025 had welcomed the idea.

  15. The Council activates the national escape clause for defence in fifteen Member States[10][9]

    Belgium, Bulgaria, Czechia, Denmark, Estonia, Greece, Croatia, Latvia, Lithuania, Hungary, Poland, Portugal, Slovenia, Slovakia and Finland may exceed their net expenditure path over 2025-2028 by the rise in defence spending, within 1.5% of GDP; such deviations are not recorded as debits in the control account.

  16. The defence escape clause is extended to Germany, Austria and Spain: eighteen Member States in all[11][12][13][9]

    Council recommendations of 10 October 2025 (Germany, together with the endorsement of its plan), 17 February 2026 (Austria) and 12 June 2026 (Spain), with the same 1.5% of GDP cap over 2025-2028.

  17. The European Fiscal Board’s first assessment of the new rules: a rollout « rushed and fragmented »[15]

  18. Deadline for Member States to transpose the budgetary frameworks directive[3]

  19. Upcoming — the outcome is not known

    Deadline for the Commission’s preliminary findings on the application of Regulation 2024/1263[1]

  20. Upcoming — the outcome is not known

    Deadline for the Commission’s review of the reform (then every five years)[1][2][3]

    Reports on the application of both regulations, possibly with amendment proposals, and a review of the directive’s effectiveness.

  21. Upcoming — the outcome is not known

    Independent fiscal institutions must give an opinion on the macroeconomic assumptions of national plans[1]

    Provided they have built up sufficient capacity; until then such an opinion is optional, at the Member State’s request.

The debate

Citoyen takes no position: arguments are reported as their authors put them.

According to its supporters

  • The Commission argues that the framework differentiates between Member States according to their own fiscal situation: risk-based surveillance allows credible and gradual debt reduction where needed, keeps deficits below 3% of GDP transparently and ensures equal treatment.[7]
  • According to the Commission, the medium-term orientation and national ownership of the plans should improve compliance, while the option of a more gradual adjustment in exchange for reforms and investments protects investment: Member States plan to maintain or increase it over their plans.[7]
  • For the co-legislators, a single operational indicator anchored in debt sustainability simplifies the framework and makes it more transparent; because net expenditure is not affected by automatic stabilisers, it leaves room for counter-cyclical stabilisation.[2]

According to its opponents

  • The European Fiscal Board judges the rollout « rushed and fragmented »: only two plans were submitted by the 20 September 2024 deadline, and the Council’s recommendations slipped to the end of January 2025, about half a year behind the normal calendar.[15]
  • The same Board criticises a process dominated by confidential bilateral exchanges — the Commission’s prior guidance is only published when plans are submitted — which, in its view, led to leniency towards optimistic national assumptions; the new regulation contains less operational detail and leaves more room for discretion.[15]
  • It also points to new forms of discretion in the excessive deficit procedure — opening delayed for Austria until mid-2025, no procedure for Spain in 2024 — and to the limited formal role of independent fiscal institutions, whose assessment of plan forecasts is not mandatory until 2032.[15][1]

Indicators to watch

  • General government debt, % of GDP — EU · Eurostat / Banque mondialeno Citoyen card yet
  • General government balance, % of GDP — EU · EurostatSee the card →
  • Defence spending, % of GDP — EU · Eurostat (COFOG)See the card →
  • Control account balances and ongoing excessive deficit procedures · Commission européenneno Citoyen card yet

Sources

  1. [1]Regulation (EU) 2024/1263 of the European Parliament and of the Council of 29 April 2024 on the effective coordination of economic policies and on multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 (OJ L, 2024/1263, 30.4.2024) — EUR-Lex — Official Journal of the European Union, April 30, 2024
  2. [2]Council Regulation (EU) 2024/1264 of 29 April 2024 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure (OJ L, 2024/1264, 30.4.2024) — EUR-Lex — Official Journal of the European Union, April 30, 2024
  3. [3]Council Directive (EU) 2024/1265 of 29 April 2024 amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States (OJ L, 2024/1265, 30.4.2024) — EUR-Lex — Official Journal of the European Union, April 30, 2024
  4. [4]Proposal for a Regulation of the European Parliament and of the Council on the effective coordination of economic policies and multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 — COM(2023) 240 final, Brussels, 26.4.2023 — European Commission (EUR-Lex), April 26, 2023
  5. [5]Procedure 2023/0138/COD — steps of the procedure — EUR-Lex
  6. [6]Council Decision (EU) 2024/2122 of 26 July 2024 on the existence of an excessive deficit in France (OJ L, 2024/2122, 1.8.2024) — EUR-Lex — Official Journal of the European Union, August 1, 2024
  7. [7]Communication from the Commission — 2025 European Semester: bringing the new economic governance framework to life, COM(2024) 705 final, Strasbourg, 26.11.2024 — European Commission — DG ECFIN, November 26, 2024
  8. [8]Excessive deficit procedures — overview — European Commission — DG ECFIN
  9. [9]Escape Clauses — national escape clause for defence expenditure — European Commission — DG ECFIN
  10. [10]Council Recommendation of 8 July 2025 allowing Belgium to deviate from the maximum growth rates of net expenditure as set by the Council under Regulation (EU) 2024/1263 (Activation of the national escape clause) (C/2025/3960) — EUR-Lex — Official Journal of the European Union, August 20, 2025
  11. [11]Council Recommendation of 10 October 2025 endorsing the national medium-term fiscal-structural plan of Germany and allowing Germany to deviate from the maximum growth rates of net expenditure (Activation of the national escape clause) (C/2025/5635) — EUR-Lex — Official Journal of the European Union, October 22, 2025
  12. [12]Council Recommendation of 17 February 2026 allowing Austria to deviate from the maximum growth rates of net expenditure (Activation of the national escape clause) (C/2026/1158) — EUR-Lex — Official Journal of the European Union, March 4, 2026
  13. [13]Council Recommendation of 12 June 2026 allowing Spain to deviate from the maximum growth rates of net expenditure (activation of the national escape clause) (C/2026/3314) — EUR-Lex — Official Journal of the European Union, June 18, 2026
  14. [14]Fiscal surveillance in France — medium-term fiscal-structural plan, Council endorsement (21 January 2025), excessive deficit procedure — European Commission — DG ECFIN
  15. [15]European Fiscal Board — 2025 Annual Report (22 October 2025) — European Fiscal Board (European Commission), October 22, 2025