Excessive deficit procedure

The basic rule of budgetary policy enshrined in the Treaty is that Member States shall avoid excessive government deficits. Compliance with budgetary discipline is to be examined on the basis of reference values for the general government deficit (3%) and gross debt (60%) in relation to GDP, whereby a number of qualifications can be applied.

In particular, only an exceptional and temporary excess of the deficit over the reference value can be exempt from being considered excessive, and then only if it remains close to the reference value.

The decision as to whether a Member State is in a situation of excessive deficit lies with the ECOFIN Council, acting upon a recommendation by the European Commission.

If the Council decides that a Member State is in a situation of excessive deficit, the excessive deficit procedure provides for the necessary steps to be taken. These could ultimately lead to imposing sanctions on the country concerned.

Stability and Growth Pact

The Stability and Growth Pact provides an operational clarification of the Treaty's budgetary rules. It defines the procedures for multilateral budgetary surveillance (preventive arm) as well as the conditions under which to apply the excessive deficit procedure (corrective arm). The Pact mainly provides a framework with the aim to
  • ensure lasting compliance of fiscal policies with the requirement of budgetary prudence, and
  • monitor and co-ordinate fiscal developments with a view to safeguarding the sustainability of public finances, to promote growth and to avoid imposing excessive burdens on future generations.

The main rationale of the Stability and Growth Pact provision is to ensure sound budgetary policies on a permanent basis. The Stability and Growth Pact lays down the obligation for incorporates the Member States ' commitments to adhere to the attain their medium-term budgetary objective s for their budgetary positions of �close to balance or in surplus', as defined unde r country-specific considerations . Adjusting to such positions will allow Member States to deal with normal cyclical fluctuations without breaching the 3% of GDP reference value for the government deficit.

For details, see

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