Reforming EU Economic Governance: Assessing the Balance Between Fiscal Sustainability and Political Flexibility
Reforming EU Economic Governance: Assessing the Balance Between Fiscal Sustainability and Political Flexibility

Summary/Abstract: The reform of European economic governance in 2024 is a critical move in EU’s fiscal system, aimed at improving debt sustainability and transparency of budgetary surveillance. This paper examines the impact of net primary expenditure as the newly implemented operating indicator on fiscal discipline, compliance and also evaluates possible trade-offs between fiscal responsibility, political maneuvering, and economic development. The primary objective is to appraise the relevance of the reform on the debt sustainability of the EU in order that member states maintain deficits and expenditure within sustainable limits. Secondary objectives are to investigate the streamlining of the systems, the institutional role of the European Commission, and the Italian experience as a reference point for highly indebted States. Methodological approach comparative study regarding the new EU legislation and Italian experience are combined with a theoretical analysis underpinned by qualitative empirical studies. The findings indicate that reform makes for easier tracking and buttresses the credibility of the fiscal policy, while at same time making it more agile. But question remains the discretionary powers of European Commission and the struggle of countries with high debt with adjustment. Such results suggest asymmetries across member states with serious political implications for EU stability and cohesion.

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