FOLLOWING weeks of intense negotiations, the European Union has agreed to revise its fiscal rules. The new rulebook will replace the Stability and Growth Pact (SGP) – which has been suspended since the start of the Covid-19 pandemic – and modernise the bloc’s 25-year-old fiscal framework.

While the SGP featured a one-size-fits-all model that ultimately undermined its credibility, the updated fiscal rules allow for a differentiated approach. The goal is to maintain the existing deficit and public debt limits, while still encouraging member states to invest in green and digital technologies.

Member states will be granted extended adjustment periods of up to seven years to reduce their debts to sustainable levels, provided they commit to reforms and investments that support this double – green and digital – transition.