Auditors criticise how European Commission enforces deficit rules

19 Apr 16

The European Commission is not strict enough in enforcing rules intended to keep the bloc’s public finances in order, the European Court of Auditors has found.


Portugal's parliament

The commission recently warned Portugal that its 2016 budget may not comply with EDP requirements


The auditors said the commission needs to use a firmer hand when collecting reliable data from member states and enforcing measures under the excessive deficit procedure (EDP), a corrective mechanism initiated against member states whose government deficits exceed of 3% of gross domestic product or debts surpass 60% of national income in order to fix their finances.

The commission’s responsibilities under the EDP include scrutinising the quality of data submitted by member states, considering whether these deficit or debt thresholds are at risk of being breached and submitting recommendations for the European Council to take against the nation. The commission is then responsible for monitoring the implementation of these.

But auditors said it does not make enough use of its enforcement powers to do this, with member states that fail to provide required information or comply with reporting standards suffering no consequences. The commission often did not even report these issues to the council.

In a number of cases studied, the auditors also noted the commission had revised recommendations or deadlines, resulting in too much leeway for member states in implementing corrective measures.

For example, in February 2015 the commission found that Italy was in breach of the conditions of an EDP that had ended in 2013. After the procedure was lifted, Italy had to comply with debt criteria for a further three years.

Despite the fact that the country’s debt-to-GDP ratio was above the threshold and still rising, the commission assessed Italy to be in compliance. It had taken into account a number of related factors, such as very low inflation, which would have made complying with the debt condition very demanding. 

Auditors said the commission took advantage of these factors to avoid applying an EDP to Italy again, rather than addressing the root causes of the problem.

Likewise, the deadline for France to meet its targets under an EDP has been repeatedly extended. Originally due to end in 2012, the deadline was extended for a year in 2009, two years in June 2013 and a further two years in March 2015. France’s EDP is now not due to end until 2017.

The auditors also said the commission focused too much on the steps taken to put corrective measures into law rather than their actual implementation or effectiveness and criticised a lack of transparency in the commission’s data and decisions, insufficient analysis and poor record keeping.

Milan Martin Cvikl, the member of the ECA responsible for the report, said the commission plays a vital role in ensuring the EDP functions as it should, but that it needs to be stricter, more consistent, and more aware of what is happening on the ground.

A total of nine countries are currently subject to an EDP. These are: Croatia, Cyprus, Portugal, Slovenia, France, Ireland, Greece, Spain and the UK.

Earlier this year, the commission warned that Portugal was at risk of failing to comply with requirements under its EDP as it considered the country’s economic projections in its 2016 budget too optimistic.

The commission “invited” Portugal to take necessary steps to ensure its 2016 budget is compliant and said it would reassess this in the spring.

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