The Commission presented its final proposals for the future of European economic governance on 26 March 2023. Budget coordination is based on a single indicator, net public expenditure. National ownership will be strengthened, with each member state committing itself to a tailored, medium-term structural budget plan, in contrast to the previous one-size-fits-all approach. The four-year budget plans must have clear pathways to a gradual reduction in the debt ratio.

The known indicators at the centre of the Stability and Growth Pact (government deficit 3% of GDP, public debt 60% of GDP) will remain in force. Member states whose government deficit is higher than 3% of GDP must introduce a budget adjustment of at least 0.5% of GDP per annum. This may not be deferred to a later date. The moment an excessive deficit procedure is instigated under Regulation (EU) No 1176/2011, the member state must submit an adjusted medium-term structural budget plan to serve as an action plan.

The finance ministers of the 27 EU member states reached final agreement on 29 April 2024 on proposals to revise budget rules. The proposals took effect a day later.

This included agreeing that member states with government debt levels above 60% of GDP would aim for a structural budget deficit of no more than 1.5% of GDP. Additional rules apply to the reduction of public debt. Basically, the higher the debt, the higher the percentage by which it must be reduced.

From now on, member states whose government debt exceeds 90% will have to reduce their debts by an annual average of at least 1% point, while member states with government debt between 60% and 90% of GDP will have to reduce it by at least 0.5% points. 

The Dutch Council of State considers the new budget rules and their consequences for the Netherlands in its spring 2024 report on budgetary supervision.

In response to heightened tensions in Europe, the EU in 2025 has adopted a plan to rearm Europe (ReArm Europe). As part of the plan, EU member states will increase their national defence expenditure without the excessive deficit procedure of the Stability and Growth Pact being triggered. To do so, they must have sufficient budget flexibility. The European Commission has therefore asked the member states – for the first time since the COVID-19 pandemic – to activate the escape clause of the Stability and Growth Pact. They can then increase their defence spending without triggering the Stability and Growth Pact’s excessive deficit procedure.

At the end of January 2026, the escape clause had been activated for 17 member states

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