COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Economic governance review: Report on the application of Regulations (EU) No 1173/2011, 1174/2011, 1175/2011, 1176/2011, 1177/2011, 472/2013 and 473/2013 and on the suitability of Council Directive 2011/85/EU
1. This report by the European Commission reviews the application of Six-Pack and Two-Pack reforms introduced by the European Union (EU).
2. Since the Maastricht Treaty of 1992, the EU has pursued the integration of economic and monetary policies through establishment of the Economic and Monetary Union (EMU). By promoting sound national fiscal policies and coordination of national economic policies, EMU aims to ensure an effective single monetary policy in the face of risks from spillover effects and possible free-riding behaviour that could lead to high national deficits and debt levels.
3. In 1997, the Stability and Growth Pact (SGP) was established, with the intention of strengthening the monitoring and coordination of national-level fiscal and economic policies. The SGP confirmed a requirement for Member States to avoid government deficits exceeding 3% of GDP, and to ensure public debt is kept below 60% of GDP. To support these targets, the SGP also introduced a preventive arm requiring Member States to attain a country-specific budgetary objective so as to avoid high deficits, and a corrective arm requiring that Member States follow recommendations on fiscal adjustments so as to correct excessive deficits and avoid breaching the limit on public debt. Initial reform took place in 2005 to allow for a more country-specific approach via the SGP, after some Member States found it difficult to adhere to nominal deficit targets in a recessionary environment.