Reapplying EU fiscal rules will cause contention

Significance

The Stability and Growth Pact (SGP) which governs fiscal rules has been partly suspended since early 2020, but is due to be fully reinstated in 2023. A key issue will be how to apply the rules in order to get government debt burdens onto more sustainable paths.

Impacts

• Some flexibility is likely to prevail in 2023, whether new rules are already in place or not.
• New fiscal rules will likely include more flexibility about debt reduction paths, but this may be counterbalanced by stricter controls.
• The basis of surveillance is likely to switch to spending rules from theoretical estimates of structural deficits.