Keeping deficits down: How successful is the EU's budget-surveillance mechanism?

Deficits in EU member states have gone up due to the crisis, leading them to better coordinate their budgets and move towards a form of mutual oversight. Finance ministers now present their draft budgets to the European Commission, which examines the plans and if they are found lacking will ask countries to adapt them or else face sanctions. On Tuesday (16 December), the Commission will present a report to MEPs on how this mechanism has affected member states’ finances.

During recessions, tax revenues often plummet, as more people claim unemployment benefits and banks might need to be saved using taxpayers' money.  Lower revenues and higher spending result in higher deficits and higher levels of public debt. The Commission says that the reinforced budget surveillance mechanism, which sees governments present their budget plans to its services before they are voted on in national parliaments, has been effective in pushing member states to cut their spending.

In 2011, 23 out of 27 member states were subject to the excessive deficit procedure, but now there are only 11. Governments have agreed that deficits above 3% of the gross domestic product are excessive. In that case member states have to implement spending cuts (for example in health and social services, salaries, pensions and investment) and/or tax hikes in order to avoid sanctions. Greece, Ireland, Portugal and Cyprus got in such dire straits that they had to request financial assistance from the EU. In return, they had to implement wide-ranging cuts and reforms and were subject to stricter surveillance. The Commission points out that Ireland and Portugal are borrowing again on the markets and don’t need EU assistance anymore.

The legislation packages underlying the two budget-surveillance mechanisms - six-pack for the EU as a whole and two-pack for the eurozone - entered into force in December 2011 and May 2013, respectively.