Proceedings from the ECFIN Workshop "The budgetary implications of structural reforms" - Brussels, 2 December 2005

• For what concerns the corrective part of the Stability and Growth Pact, i.e., the implementation
of the Excessive Deficit Procedure,

• structural reforms enter the broad definition of “policies in the context of the Lisbon
agenda” and are therefore among the elements considered in the evaluation of “all relevant
factors” in the implementation of the EDP (Art. 1.1.3 CR 1056/2005);²⁶

• pension reforms introducing “a multi-pillar system that includes a mandatory fully funded
pillar” shall be considered by the Commission and the Council in the application of the
EDP (Art. 1.1.5 and Art. 1.1.7 CR 1055/2005);

• for countries with excessive deficits close to the reference value reflecting the
implementation of pension reforms introducing a multi-pillar system, the “cost of the
reform to the publicly managed pillar” will be considered when assessing developments in
EDP deficit figures and (Art. 1.1.7 CR 1055/2005).

The new SGP also recognizes the need of adequate information concerning the implementation of
structural reforms to implement the EU fiscal framework, and consistently states that “a detailed
cost-benefit analysis of major structural reforms which have direct long-term cost-saving effects,
including by raising potential growth” should be included in Member States’ stability and
convergence programmes (Art. 1.2. and 1.4. CR 1055/2005).

Overall, the reformed SGP comprises provisions that in principle would allow help to avoid a
possible clash between budgetary discipline and the implementation of structural reforms. The
extent to which such provisions could lead to an effective improvement in the conduct of
budgetary policy in Europe will depend to a large extent on the actual implementation of the
framework. Although the amended SGP regulations define criteria that need to be satisfied for the
consideration of structural reforms in the implementation of the SGP, some implementation issues
are left open.²⁷ Which reforms could be considered for the definition of the adjustment path and

SGP, see, e.g., Deroose and Langedijk (2005). For a description of the contents of the March 2005 ECOFIN report
see European Commission (2005).

²⁶ In addition, Art 1.1.3. CR 1056/2005 mentions that the Commission analysis shall reflect “...developments in the
medium-term budgetary position (in particular, fiscal consolidation efforts in “good times”, debt sustainability,
public investment, and the overall quality of public finances).”

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For instance, deviations from the medium-term objective could only concerns “.major structural reforms with direct long-term cost saving
effects.”. Moreover, deviations from the medium-term budgetary objective are conditional on the respect of a safety margin against the breach
of the 3% deficit ceiling under representative weak cyclical conditions. Concerning the consideration of structural reforms among the “other

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