The new Stability and Growth Pact: innovation and continuity in the light of NextGenerationEU

Coming after the breakthrough of NGEU, the proposed reform of the Stability and Growth Pact represents the most radical overhaul of fiscal governance since the launch of EMU. While the original orientations of the Commission, which put national medium-term fiscal structural plans constrained only by debt sustainability standards squarely at the centre of the system, have been traduced in part by the reintroduction of artificial numerical benchmarks, important simplifications remain, largely freeing low-debt Member States from any intrusive surveillance and greatly facilitating the assessment of compliance through a single observable indicator. Both the concept of plans designed by Member States and the trade-off between reforms and investment and more gradual adjustment reflect the influence of the NGEU. The reform does not question, however, the primacy of fiscal sustainability. In spite of the improvements, challenges in implementation and enforcement are bound to persist, essentially reflecting the unresolved tension between the centralization of monetary policy and national fiscal sovereignty.