Council adopted regulations amending the original SGP on 27 June 2005. 24 The 2005 SGP reform
is the outcome of several months of discussions within the Eurogroup, the Council and the
Commission with a view of improving the EU rules-based framework for fiscal discipline.25 The
main objectives of the 2005 SGP reform package are as follows: (i) strengthening the preventive
part of the Stability and Growth Pact, mainly via country-specific medium-term objectives
(MTOs) and the definition of minimum annual budgetary adjustment for countries not having
reached yet their MTO; (ii) enriching the economic rationale of the corrective arm of the Pact
through a more comprehensive assessment of the case for launching the excessive deficit
procedure (EDP) and the possibility of extending deadlines for correcting the deficits and
repeating steps in the EDP; (iii) complementing the EU rules with improved fiscal governance
both at the EU and national level, notably strengthened statistical institutions.
The amended Stability and Growth Pact includes provisions reflecting the view that numerical
targets and ceilings for deficits may clash with the implementation of structural reforms. Such
provisions are found both in the new text of the regulations disciplining the preventive arm (CR
1055/2005) and the corrective arm of the SGP (CR 1056/2005). In particular, regarding the
preventive arm of the SGP,
• “major structural reforms” will be a possible reason for revising countries’ medium-term
budgetary objectives (Art. 1.1 CR 1055/2005);
• “.. .major structural reforms which have a direct long-term cost saving effects, including by
raising potential growth, and therefore a quantifiable impact on the sustainability of public
finances.” could justify temporary deviations from the medium-term objective and the
adjustment path towards. Structural reforms will be taken into considerations provided
“.an appropriate safety margin with respect to the deficit reference value is preserved.”
and that “.the budgetary position is expected to return to the MTO within the [stability or
convergence] programme period.” (Art. 1.3 CR 1055/2005).
• Special attention should be given to pension reforms introducing “a multi-pillar system that
includes a mandatory fully funded pillar” (Art. 1.5 CR 1055/2005).
24 Council Regulations 1055/2005 and 1056/2005, Official Journal of the European Union L 174, Volume 48.
25 For an assessment by the European Commission of the performance of the EU fiscal framework see
European Commission (2004). For an illustration of the approach of the European Commission to the reform of the
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