The EU needs to further strengthen its legal requirements for national budgetary frameworks and better monitor how Member States put them into practice, according to a new report from the European Court of Auditors (ECA). In several respects the requirements are softer than international standards and the European Commission has so far only limited knowledge about whether countries apply them properly. The auditors also warn against the risk of inconsistency between the Commission’s and independent fiscal institutions’ (IFIs) assessment of countries’ compliance with EU fiscal rules, as well as of the limited effectiveness of the European Fiscal Board due to the fact that it is not fully independent from the Commission.
To remedy the root cause of the financial crisis and improve fiscal governance, particularly in the euro area, the Commission sought to complement the EU fiscal framework with binding national provisions. Amongst other things, it required Member States to set up IFIs, national fiscal rules and multi-annual budgetary frameworks. The auditors examined whether the EU requirements strengthened the national budgetary frameworks and whether the Commission assessed how the Member States applied them.
“The EU’s legislative action provided an impetus to strengthening the way the Member States conduct their fiscal policies,” said Mihails Kozlovs, the ECA Member responsible for the report. “However, the EU legal framework governing the national budgetary frameworks is fragmented and leaves room for improvement.”
Press Release: EU fiscal governance: requirements for Member States need to be strengthened further and better monitored