Abstract
The Excessive Deficit Procedure (EDP) consists in the operationalisation of the surveillance present in the Stability and Growth Pact and in the Fiscal Compact. The calculation of the deficit and the public debt, for purposes of the EDP, is carried out in the National Accounts. However, the rules for the calculation of the public debt in the EDP are slightly different from those of the ESA 2010. The opening of an EDP results from the situation of a Member State having violated the deficit limit of 3% of GDP, except in the exceptional circumstances defined in the Stability and Growth Pact (see Chap. 1). Once an EDP has been opened, the country commits to taking measures with the objective of closing the procedure, which can only occur when the fiscal deficit returns to below 3%. The EDP has a preventive arm, and consequently in March and September of each year, all Member States have to communicate their government’s accounts.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Council Regulation (EC) No 3605/93 of 22 November 1993 on the application of the Protocol on the Excessive Deficit Procedure annexed to the Treaty establishing the European Community, Official Journal n.° L 332 de 31/12/1993 p. 0007–0009 [1993].
- 2.
Protocol on the Excessive Deficit Procedure:
The High Contracting Parties, desiring to lay down the details of the Excessive Deficit Procedure referred to in Article 126 of the Treaty on the Functioning of the European Union, have agreed upon the following provisions, which shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union:
Article 1
The reference values referred to in Article 126(2) of the Treaty on the Functioning of the European Union are:
-
3% for the ratio of the planned or actual government deficit to gross domestic product at market prices;
-
60% for the ratio of government debt to gross domestic product at market prices.
Article 2
In Article 126 of the said Treaty and in this Protocol:
-
government means general government, that is central government, regional or local government and social security funds, to the exclusion of commercial operations, as defined in the European System of Integrated Economic Accounts;
-
deficit means net borrowing as defined in the European System of Integrated Economic Accounts;
-
investment means gross fixed capital formation as defined in the European System of Integrated Economic Accounts;
-
debt means total gross debt at nominal value outstanding at the end of the year and consolidated between and within the sectors of general government as defined in the first indent.
Article 3
In order to ensure the effectiveness of the Excessive Deficit Procedure, the governments of the Member States shall be responsible under this procedure for the deficits of general government as defined in the first indent of Article 2. The Member States shall ensure that national procedures in the budgetary area enable them to meet their obligations in this area deriving from these Treaties. The Member States shall report their planned and actual deficits and the levels of their debt promptly and regularly to the Commission.
Article 4
The statistical data to be used for the application of this Protocol shall be provided by the Commission.
-
- 3.
Article 104 of the Maastricht Treaty.
- 4.
See Council Regulation No 2103/2005, which changes Regulation No 3605/93, 2005, which changes Regulation No. 3605/93, on the role of the CMFB in the scope of the EDP.
- 5.
In the original, from the code of conduct: “As a rule, the initial deadline for correcting an excessive deficit should be the year after its identification and thus, normally, the second year after its occurrence unless there are special circumstances. This deadline should be set taking into account the effort that the Member State concerned can undertake, with a minimum of 0.5% of GDP, based on a balanced assessment of the relevant factors considered in the Commission report under Article 126(3). If this effort seems sufficient to correct the excessive deficit in the year following its identification, the initial deadline should not be set beyond the year following its identification. Longer deadlines could be set, in particular in the case of Excessive Deficit Procedures based on the debt criterion, when the government balance requested to comply with the debt criterion is significantly higher than a 3% of GDP deficit”.
References
Balassone F, Fabrizio S, Franco D et al (2006) EMU fiscal indicators: a misleading compass? Empirica 33:63–87
Balassone F, Fabrizio S, Franco D, et al (2007) The reliability of EMU fiscal indicators: risks and safeguards. Temi di Discussione 633, Banca d’Italia, Rome. http://wp.peio.me/wpcontent/uploads/2014/04/Conf1_Balassone.Franco.Zotteri_Reliability.pdf. Accessed 1 Feb 2016
Belke A (2017) The fiscal compact and the excessive deficit procedure: relics of bygone times? In: da Costa Cabral N et al (eds) The Euro and the crisis, financial and monetary policy studies, vol 43. Springer, Heidelberg, pp 131–152
Castro F, Perez J, Rodriguez-Vives M (2013) Fiscal data revisions in Europe. J Money Credit Bank 45(6):1187–1209
ESA 2010 European System of Accounts 2010. https://ec.europa.eu/eurostat/cache/metadata/Annexes/nasa_10_f_esms_an1.pdf
Kohen V, Van den Noord P (2005) Fiscal gimmickry in Europe: one-off measures and creative accounting. OECD Economics Department Working Papers, 417
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2018 Springer Nature Switzerland AG
About this chapter
Cite this chapter
Miranda Sarmento, J. (2018). Excessive Deficit Procedure. In: Public Finance and National Accounts in the European Context . Financial and Monetary Policy Studies, vol 47. Springer, Cham. https://doi.org/10.1007/978-3-030-05174-7_7
Download citation
DOI: https://doi.org/10.1007/978-3-030-05174-7_7
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-05173-0
Online ISBN: 978-3-030-05174-7
eBook Packages: Economics and FinanceEconomics and Finance (R0)