Fears that acrimonious Stability and Growth Pact reform rows would overshadow the EU Spring Summit have proved unfounded. Eurozone and non-eurozone countries have reached a deal on the reform of the Stability and Growth Pact following emergency meetings prior to the summit.
The 3% deficit/GDP and 60% debt/GDP criteria remain unchanged.
However, the following has changed:
No excessive deficit procedure will be launched against a member state experiencing negative growth or a prolonged period of low growth (previously the exception was for countries in a recession of 2% negative growth).
Member states recording a "temporary" deficit or one close to the 3% reference value will be able to refer to a series of "relevant factors" to avoid an excessive deficit procedure. Factors will include potential growth, the economic cycle, structural reforms (pensions, social security), policies supporting R&D plus medium-term budgetary efforts (consolidating during good economic times, debt levels, public investment).
Rather than referring to an exhaustive list of "relevant factors" to be taken into account in the assessment of a country's slight and temporary overshoot of the 3% deficit ceiling, the deal sets out chapter headings. These will take the form of general principles whose application will be thrashed out between member states and EU institutions.
Leeway will be given where countries spend on efforts to "foster international solidarity and to achieving European policy goals, notably the reunification of Europe if it has a detrimental effect on the growth and fiscal burden of a member state".
The latter will please France, which wanted public money to development and some military expenditure, and Germany, which wanted special treatment for what it regards as its high contribution to the EU budget. Germany also appears to have got its way as regards the last part of the above text in that it is expected to cite the cost of German reunification.
Countries will have two years (previously one) to correct an excessive deficit. This may be extended in cases of "unexpected and adverse economic events with major unfavourable budgetary effects occurring during the procedure". To benefit from these, countries must show proof that they have adopted the correction measures that were recommended to them.
Member states have committed to using unexpected fiscal receipts during periods of strong growth to reduce their deficits and debt.
Medium-term objectives will be tailored to individual member states based on their current debt ratio and potential growth. This will vary from -1% of GDP for low debt/high potential growth countries to balance or surplus for high debt/low growth countries.