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2019 annual report of the European Fiscal Board


Publication date
29 October 2019


Today, the European Fiscal Board (EFB) has published its third annual report. The report reviews the way the EU fiscal framework was implemented in 2018, highlighting scope for improvement. It finds that a mixed picture emerged from macroeconomic and fiscal developments in 2018. Economic growth, although weaker than in 2017, remained relatively robust and should have provided a chance to build fiscal buffers where needed. Yet, most high-debt countries missed that opportunity. Moreover, the Commission used flexibility and discretion to weaken some requirements and not to take action in several apparent cases of significant deviation. Looking ahead, the EFB reiterates its proposals to simplify the Stability and Growth Pact (SGP) and make it more effective.

The EFB’s third annual report provides a comprehensive and independent assessment of how the SGP was applied in the last complete surveillance cycle, 2018. Economic growth in 2018 turned out relatively strong, albeit slowing down in the second semester. Although it was in line with the expectations of spring 2017, many perceived the growth outturn as disappointing by comparison with the strong momentum of 2017 and after an intermediate period of more optimistic forecasts.

Growth was unexpectedly job-rich and tax revenues turned out higher than planned. As a result, on aggregate fiscal positions improved more rapidly than expected, with the aggregate deficit reaching a historical low in both the EU and the euro area. On aggregate, the structural primary balance improved marginally. However, a large share of the unexpectedly high tax revenues was located in countries that already had fiscal space; and most of the countries that needed to reduce their high debt levels spent their higher revenues, if not more, instead of building fiscal buffers. Therefore, their fiscal position deteriorated or did not improve by as much as required. For the euro area as a whole, the relatively vigorous pace of expenditure growth net of revenue measures actually signals that fiscal policy was overly expansionary.

During the 2018 fiscal surveillance cycle, the Commission applied a ‘margin of discretion’ on top of existing flexibility, reducing fiscal requirements for two Member States. When assessing compliance with requirements, it also used various elements of discretion to justify not drawing conclusions or taking corrective measures against several Member States for which there were serious signs of significant deviation. In this context, useful interventions by some national independent fiscal institutions (IFIs) helped strengthening transparency and accountability in individual Member States. More generally, IFIs could play a more effective role if they all were to meet an EU-wide set of minimum standards ensuring that they have sufficient means, independence and impact.

The 2018 experience provides a good illustration of more general weaknesses in the EU fiscal framework and its implementation, as the EFB highlighted in its recent Assessment report. To overcome issues of complexity, opacity, poor compliance and political interference, the Board proposes radically simplifying the rules and clarifying governance. The reformed Pact would target a sustainable debt level, to be achieved by controlling net expenditure growth in a way that allows stabilising the economic cycle. An escape clause would allow room for inevitable discretion, but based on independent judgement. Additional possible reforms include a targeted Golden Rule to protect growth-enhancing public expenditure, making compliance with rules a precondition for access to a central fiscal capacity, reconsidering reverse qualified majority voting, and appointing a full-time President of the Eurogroup who is not a national finance minister.


The European Fiscal Board (EFB) is an independent body mandated to advise the European Commission on the overall direction of fiscal policy of the euro area and to evaluate how the EU fiscal governance framework is implemented. It was formally established end 2015 and began operating shortly after its members were appointed in October 2016.

The annual report that is published today documents the work of the European Fiscal Board (EFB) in 2018. It offers an independent view of fiscal policy surveillance and coordination. The report’s content and structure are based on the main areas of responsibility set out in the Commission Decision (EU) 2015/1937 establishing the EFB. Firstly, it provides an evaluation of the implementation of the EU’s fiscal framework. Secondly, it reviews and assesses the fiscal stance for the euro area as a whole and in individual Member States from an economic perspective. Thirdly, it takes a look at national fiscal councils with a view to identifying aspects of best practice. Finally, the report also puts forward a number of suggestions on the future evolution of the EU's fiscal framework.


28 OCTOBER 2019
2019 annual report of the European Fiscal Board
(2.05 MB - PDF)