Reforming the Stability and Growth Pact: Debt reduction versus sustainable and inclusive growth

The reformed EU fiscal rules (also referred to as Stability and Growth Pact) entered into force in April 2024. The main objectives of the reform were to ensure sound and sustainable public finances, while promoting sustainable and inclusive growth in all Member States through reforms and investments. This article provides an overview of the new legal framework and examines the relation and balance between debt reduction and sustainable growth in the application of the revised framework. It also analyses the Commission’s discretion in balancing these policy goals, first when assessing Member States’ fiscal-structural plans and second, when recommending the opening of an excessive deficit procedure. Further, this article examines the latest revision of the fiscal rules in the broader context of the EU’s legal competence in the field of economic policy, also taking into account other recent initiatives, such as NextGenerationEU and REPowerEU.