# Stability and Growth Pact
The **Stability and Growth Pact** (SGP) is the European Union's fiscal surveillance framework, which assesses excessive deficits against reference values of 3% of GDP for deficits and 60% for public debt, subject to treaty qualifications, and sets out the procedures and sanctions for correcting breaches.[1](https://eur-lex.europa.eu/eli/reg/2024/1263) It fleshes out the fiscal provisions of the [Maastricht](https://www.edgepedia.org/maastricht) treaty adopted in 1992, and operates through a preventive arm that steers budgets toward medium-term objectives and a corrective arm, the excessive deficit procedure (EDP).[2](https://www.imf.org/external/pubs/ft/wp/2006/wp06116.pdf) • [3](https://www.europarl.europa.eu/RegData/etudes/STUD/2021/679085/EPRS_STU(2021)679085_EN.pdf) The pact has been amended repeatedly, most recently by regulations in force since 30 April 2024 that replaced much of the old numerical machinery with country-specific net expenditure paths.[4](https://www.consilium.europa.eu/en/press/press-releases/2025/01/21/stability-and-growth-pact-council-adopts-recommendations-to-countries-under-excessive-deficit-procedure/)
| Key fact | Detail |
|---|---|
| Reference values | Government deficit not exceeding 3% of GDP (unless the excess is small, exceptional, and temporary) and debt not exceeding 60% of GDP (unless sufficiently diminishing), under Article 126(2) TFEU and Protocol No 12[1](https://eur-lex.europa.eu/eli/reg/2024/1263) • [5](https://ec.europa.eu/economy_finance/publications/occasional_paper/2013/pdf/ocp150_en.pdf) |
| Two arms | A preventive arm operating through medium-term fiscal-structural plans and country-specific net expenditure paths, and a corrective arm (the EDP) for states in excessive deficit[6](https://cepr.org/voxeu/columns/mixed-success-stability-and-growth-pact) • [3](https://www.europarl.europa.eu/RegData/etudes/STUD/2021/679085/EPRS_STU(2021)679085_EN.pdf) |
| Sanctions | For euro area states in EDP, a fine of up to 0.05% of the previous year's GDP per six-month period until effective action is taken[7](https://eur-lex.europa.eu/eli/reg/2024/1264/oj) • [8](https://www.consilium.europa.eu/en/policies/excessive-deficit-procedure/) |
| Enforcement record | In 2003 the Council put the EDPs of Germany and France in abeyance, and the European Court of Justice annulled that decision[9](https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp47.pdf) |
| 2024 reform | Net expenditure growth is now the single operational indicator; plans cover four years, extendable to seven with reforms and investments[10](https://data.consilium.europa.eu/doc/document/ST-15964-2025-INIT/en/pdf) • [1](https://eur-lex.europa.eu/eli/reg/2024/1263) |
| Current EDPs | Nine member states: Austria, Belgium, France, Hungary, Italy, Malta, Poland, Romania, and Slovakia[10](https://data.consilium.europa.eu/doc/document/ST-15964-2025-INIT/en/pdf) |
| Escape clauses | The COVID general escape clause suspended the rules for all member states in 2020–2023; since 2025 a national escape clause allows temporary deviation for defense spending[8](https://www.consilium.europa.eu/en/policies/excessive-deficit-procedure/) • [10](https://data.consilium.europa.eu/doc/document/ST-15964-2025-INIT/en/pdf) |
## What the pact requires
The [Treaty on the Functioning of the European Union](https://www.edgepedia.org/treaty-on-the-functioning-of-the-european-union) obliges member states to avoid excessive deficits, assessed against two reference values: a government deficit of 3% of GDP, unless the excess is small, exceptional, and temporary, and government debt of 60% of GDP, unless the ratio is sufficiently diminishing.[5](https://ec.europa.eu/economy_finance/publications/occasional_paper/2013/pdf/ocp150_en.pdf) • [1](https://eur-lex.europa.eu/eli/reg/2024/1263) The SGP is the secondary legislation that gives these treaty values operational content.[2](https://www.imf.org/external/pubs/ft/wp/2006/wp06116.pdf)
The framework has two arms.[3](https://www.europarl.europa.eu/RegData/etudes/STUD/2021/679085/EPRS_STU(2021)679085_EN.pdf) Under the current framework, the *preventive arm* operates through medium-term fiscal-structural plans and country-specific net expenditure paths; growth of net expenditure is the single operational indicator for monitoring compliance.[6](https://cepr.org/voxeu/columns/mixed-success-stability-and-growth-pact) • [5](https://ec.europa.eu/economy_finance/publications/occasional_paper/2013/pdf/ocp150_en.pdf) The *corrective arm* is the excessive deficit procedure, which deals with the policy responses a member state must take once it is judged to be in excessive deficit.[3](https://www.europarl.europa.eu/RegData/etudes/STUD/2021/679085/EPRS_STU(2021)679085_EN.pdf)
## How the excessive deficit procedure works
The EDP runs in steps. When a member state exceeds, or risks exceeding, the deficit or debt reference values, the Commission prepares a report. The Council then decides on the existence of an excessive deficit, as a rule within four months of the reporting dates, and adopts a recommendation setting a corrective budgetary path and a deadline; the member state must take effective action within six months (three where warranted).[8](https://www.consilium.europa.eu/en/policies/excessive-deficit-procedure/) • [7](https://eur-lex.europa.eu/eli/reg/2024/1264/oj) If no effective action has been taken by the deadline, the Council may impose sanctions: for euro area member states, a fine of up to 0.05% of the previous year's GDP for a six-month period, paid every six months until the Council assesses that effective action has been taken.[8](https://www.consilium.europa.eu/en/policies/excessive-deficit-procedure/) • [7](https://eur-lex.europa.eu/eli/reg/2024/1264/oj) The Council may also extend the correction deadline, by one year as a rule.[7](https://eur-lex.europa.eu/eli/reg/2024/1264/oj)
The sanctions regime has changed over the pact's life. Under the original 1997 regime, sanctions consisted of a non-interest-bearing deposit combining a fixed element of 0.2% of GDP and a variable element equal to one-tenth of the excess over the reference value, with a ceiling of 0.5% of GDP; after two years, deposits would be converted into fines.[9](https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp47.pdf) The 2011 Six Pack reform added graduated enforcement mechanisms including financial sanctions, frontloaded them, and extended them to the preventive arm for euro area member states.[11](https://economy-finance.ec.europa.eu/document/download/2f59e456-b0f5-48ee-8a2a-7237fb4cff91_en?filename=ip021_en.pdf)
## Enforcement in practice
The record of the pact's first decade explains the enforcement problem. Six euro area member states incurred excessive deficits between 1999 and 2005: Portugal in 2001 (and again in 2005), Germany and France in 2002, the Netherlands and [Greece](https://www.edgepedia.org/greece) in 2003, and Italy in 2004; only the Netherlands corrected its deficit in the interim.[9](https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp47.pdf) In early 2002 the Council rejected Commission recommendations to issue early warnings to Germany and Portugal, taking the view that such a formal step was unnecessary; both subsequently breached the 3% limit.[9](https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp47.pdf)
**The 2003 crisis.** In November 2003 the Council, lacking a qualified majority against Germany and France, put their EDPs in abeyance. The Commission challenged this, and the [European Court of Justice](https://www.edgepedia.org/european-court-of-justice) annulled the Council's conclusions on the grounds that it had not followed the rules and procedures set out in the Treaty.[9](https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp47.pdf) The episode exposed the procedure's structural weakness: the EDP is not mechanistic and ultimately leaves it to the discretion of the ECOFIN Council whether to take action.[9](https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp47.pdf) The European Fiscal Board, the Commission's advisory body, reaches a similar conclusion about the current framework: the EDP remains the only effective enforcement instrument under the revised rules, and it observes a tendency toward forbearance, with informal guidance increasingly substituting formal Treaty-based enforcement.[12](https://commission.europa.eu/publications/implementation-national-medium-term-fiscal-structural-plans-progress-2025-outlook-2026_en)
## Deficits, debt, and current procedures
The fiscal position after the pandemic and energy shock remains strained. In 2024 the euro area government deficit fell from 3.5% of GDP in 2023 to 3.1%, and the EU ratio from 3.4% to 3.1%; euro area debt rose slightly from 87.0% of GDP at end-2023 to 87.1%.[13](https://ec.europa.eu/eurostat/web/products-euro-indicators/w/2-21102025-ap) The highest 2024 deficits were Romania (−9.3%), Poland (−6.5%), France (−5.8%), and Slovakia (−5.5%), and twelve member states had deficits equal to or higher than 3% of GDP.[13](https://ec.europa.eu/eurostat/web/products-euro-indicators/w/2-21102025-ap) At end-2024 the highest debt ratios were Greece (154.2%), Italy (134.9%), France (113.2%), Belgium (103.9%), and Spain (101.6%).[13](https://ec.europa.eu/eurostat/web/products-euro-indicators/w/2-21102025-ap)
On 26 July 2024 the Council formally launched EDPs against seven member states and decided to keep the procedure against Romania open, as it had not taken effective action since 2020.[4](https://www.consilium.europa.eu/en/press/press-releases/2025/01/21/stability-and-growth-pact-council-adopts-recommendations-to-countries-under-excessive-deficit-procedure/) On 21 January 2025 the Council adopted recommendations for seven countries: Belgium, France, Italy, Malta, Poland, Slovakia, and Romania, with correction deadlines of Belgium 2027, France 2029, Italy 2026, Malta 2027, Poland 2028, Romania 2030, and Slovakia 2027.[4](https://www.consilium.europa.eu/en/press/press-releases/2025/01/21/stability-and-growth-pact-council-adopts-recommendations-to-countries-under-excessive-deficit-procedure/) A later Council document lists nine member states currently subject to an EDP: Austria, Belgium, France, Hungary, Italy, Malta, Poland, Romania, and Slovakia.[10](https://data.consilium.europa.eu/doc/document/ST-15964-2025-INIT/en/pdf)
The recommendations translate into country-specific net expenditure caps. France must end its excessive deficit by 2029 with nominal net expenditure growth not exceeding 0.8% in 2025, 1.2% in 2026, 1.2% in 2027, 1.2% in 2028, and 1.1% in 2029; Italy must correct by 2026; Poland by 2028 with caps of 6.3% (2025), 4.4% (2026), 4.0% (2027), and 3.5% (2028); and Romania by 2030 with caps of 5.1% in 2025 declining to 3.9% in 2030.[4](https://www.consilium.europa.eu/en/press/press-releases/2025/01/21/stability-and-growth-pact-council-adopts-recommendations-to-countries-under-excessive-deficit-procedure/) Deadlines can move: on 20 June 2025 the Council adopted a revised recommendation for Belgium to end its excessive deficit by 2029 instead of 2027, with net expenditure growth limits of 3.6% (2025), 2.5% (2026), 2.5% (2027), 2.1% (2028), and 2.1% (2029).[8](https://www.consilium.europa.eu/en/policies/excessive-deficit-procedure/)
## The 2024 overhaul
The COVID-19 pandemic led the EU to suspend its budgetary rules for all member states between 2020 and 2023 by activating the general escape clause; the clause is no longer in force and has not been since 2024.[8](https://www.consilium.europa.eu/en/policies/excessive-deficit-procedure/) The reformed rules, in force since 30 April 2024, require member states to prepare medium-term fiscal-structural plans setting out their expenditure paths and priority reforms and investments for the next 4 to 7 years.[4](https://www.consilium.europa.eu/en/press/press-releases/2025/01/21/stability-and-growth-pact-council-adopts-recommendations-to-countries-under-excessive-deficit-procedure/) The adjustment period covers four years, extendable by up to three years if the member state commits to reforms and investments satisfying the criteria of the new regulation.[1](https://eur-lex.europa.eu/eli/reg/2024/1263) The required annual improvement in the structural primary balance is 0.4 percentage points of GDP for a four-year path and 0.25 percentage points for a seven-year path.[14](https://www.ecb.europa.eu/press/economic-bulletin/focus/2024/html/ecb.ebbox202403_08~bf57c948c8.en.html)
**Net expenditure as the single indicator.** Under the reformed framework, growth of net expenditure is the single operational indicator for monitoring compliance with Council recommendations.[10](https://data.consilium.europa.eu/doc/document/ST-15964-2025-INIT/en/pdf) Where debt exceeds 60% of GDP or the deficit exceeds 3%, the Commission transmits a reference trajectory for net expenditure covering the adjustment period.[1](https://eur-lex.europa.eu/eli/reg/2024/1263)
The reform retains safeguards. Where the deficit is above 3% of GDP, member states must correct it with a minimum annual structural adjustment of at least 0.5% of GDP as a benchmark.[7](https://eur-lex.europa.eu/eli/reg/2024/1264/oj) • [14](https://www.ecb.europa.eu/press/economic-bulletin/focus/2024/html/ecb.ebbox202403_08~bf57c948c8.en.html) The debt sustainability safeguard requires countries with 2024 debt above 90% of GDP to reduce it by a minimum annual average of 1 percentage point of GDP, and those with debt between 60% and 90% by 0.5 percentage points.[14](https://www.ecb.europa.eu/press/economic-bulletin/focus/2024/html/ecb.ebbox202403_08~bf57c948c8.en.html) The deficit resilience safeguard requires a safety margin before the 3% threshold, that is, before the structural balance reaches −1.5% of GDP.[14](https://www.ecb.europa.eu/press/economic-bulletin/focus/2024/html/ecb.ebbox202403_08~bf57c948c8.en.html) The underlying debt sustainability analysis requires the debt ratio to decline over ten years along a baseline adjusted for the most demanding of three shock scenarios, or over five years with 70% probability under stochastic analysis.[14](https://www.ecb.europa.eu/press/economic-bulletin/focus/2024/html/ecb.ebbox202403_08~bf57c948c8.en.html)
A new national escape clause followed in 2025: sixteen member states activated it for defense spending, allowing temporary deviation from recommended net expenditure growth rates for defense increases of up to 1.5% of GDP over the period 2025 to 2028.[10](https://data.consilium.europa.eu/doc/document/ST-15964-2025-INIT/en/pdf)
## Reform history
The pact has been reshaped after each crisis. The 2005 reform, adopted after the 2003 France–Germany standoff, replaced the nominal close-to-balance requirement with country-specific medium-term objectives in structural terms, set a benchmark of at least 0.5% of GDP per year of structural adjustment for correcting excessive deficits, and introduced conditional compliance allowing deadline extensions for adverse events beyond a government's control.[5](https://ec.europa.eu/economy_finance/publications/occasional_paper/2013/pdf/ocp150_en.pdf) After the 2008 financial crisis, the 2011 Six Pack added graduated enforcement mechanisms including financial sanctions, a new expenditure benchmark, and put the debt requirement on an equal footing with the deficit requirement; it also specified when deviations from the adjustment path to the medium-term objective are deemed significant, triggering a corrective mechanism within the preventive arm that could lead to sanctions.[11](https://economy-finance.ec.europa.eu/document/download/2f59e456-b0f5-48ee-8a2a-7237fb4cff91_en?filename=ip021_en.pdf) The 2024 regulations are the latest such overhaul.[4](https://www.consilium.europa.eu/en/press/press-releases/2025/01/21/stability-and-growth-pact-council-adopts-recommendations-to-countries-under-excessive-deficit-procedure/)
## References
1. [Regulation (EU) 2024/1263 on the effective coordination of economic policies and on multilateral budgetary surveillance, EUR-Lex](https://eur-lex.europa.eu/eli/reg/2024/1263)
2. [Enforcement and the Stability and Growth Pact, IMF Working Paper 06/116 (Annett, 2006)](https://www.imf.org/external/pubs/ft/wp/2006/wp06116.pdf)
3. [Introduction to the fiscal framework of the EU, European Parliamentary Research Service study (2021)](https://www.europarl.europa.eu/RegData/etudes/STUD/2021/679085/EPRS_STU(2021)679085_EN.pdf)
4. [Stability and Growth Pact: Council adopts recommendations to countries under excessive deficit procedure, Council press release (21 January 2025)](https://www.consilium.europa.eu/en/press/press-releases/2025/01/21/stability-and-growth-pact-council-adopts-recommendations-to-countries-under-excessive-deficit-procedure/)
5. [Building a Strengthened Fiscal Framework in the European Union: A Guide to the Stability and Growth Pact, European Commission Occasional Paper 150 (2013)](https://ec.europa.eu/economy_finance/publications/occasional_paper/2013/pdf/ocp150_en.pdf)
6. [The mixed success of the Stability and Growth Pact, CEPR/VoxEU](https://cepr.org/voxeu/columns/mixed-success-stability-and-growth-pact)
7. [Regulation (EU) 2024/1264 on speeding up and clarifying the implementation of the excessive deficit procedure, EUR-Lex](https://eur-lex.europa.eu/eli/reg/2024/1264/oj)
8. [Excessive deficit procedure, Council of the EU explainer](https://www.consilium.europa.eu/en/policies/excessive-deficit-procedure/)
9. [The reform and implementation of the Stability and Growth Pact, ECB Occasional Paper No 47](https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp47.pdf)
10. [Council of the European Union document ST-15964-2025-INIT](https://data.consilium.europa.eu/doc/document/ST-15964-2025-INIT/en/pdf)
11. [European Commission institutional paper on the 2011 Six Pack reform of the SGP](https://economy-finance.ec.europa.eu/document/download/2f59e456-b0f5-48ee-8a2a-7237fb4cff91_en?filename=ip021_en.pdf)
12. [The implementation of national medium-term fiscal-structural plans: progress to 2025, outlook for 2026, European Commission/European Fiscal Board](https://commission.europa.eu/publications/implementation-national-medium-term-fiscal-structural-plans-progress-2025-outlook-2026_en)
13. [Euro area and EU government deficit at 3.1% of GDP, Eurostat (2025)](https://ec.europa.eu/eurostat/web/products-euro-indicators/w/2-21102025-ap)
14. [The reformed EU fiscal framework – potential macroeconomic implications for the euro area, ECB Economic Bulletin (2024)](https://www.ecb.europa.eu/press/economic-bulletin/focus/2024/html/ecb.ebbox202403_08~bf57c948c8.en.html)
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*Topic: Encyclopedia › Society and history › Economics and business › Economics › Economic policy and stability › Fiscal policy and public economics › Fiscal rules and budget institutions*
*Initially written Oct 10, 2026 · Edited: Oct 11, 2026; Oct 15, 2026*
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License: Edgepedia Community License 1.0, https://www.edgepedia.org/edgepedia/license