Economic-policy cooperation in the EU

After the introduction of the euro the euro area member states are subject to the single monetary policy. The other economic policies are still pursued at the national level, but the EU Treaty stipulates certain provisions concerning the size of the government deficit and debt. These provisions apply to all EU member states. Furthermore, Broad Economic Policy Guidelines are prepared every third year. In the intervening years the guidelines are updated on a limited scale. The guidelines comprise a number of recommendations for the individual EU member states.

According to the Treaty, the individual member states should seek to avoid excessive government budget deficits and excessive government debt. As a general rule, the government budget deficit may not exceed 3 per cent of GDP, while the government debt may not exceed 60 per cent of GDP. If the government debt is diminishing and approaching 60 per cent of GDP at a satisfactory pace, this is acceptable, however.

The Stability and Growth Pact
With effect from 1 January 1999 the EU member states adopted the Stability and Growth Pact to ensure sustained compliance with the provisions on government deficit and debt. The Stability and Growth Pact obliges all EU member states to seek to ensure a medium-term budgetary position close to balance or in surplus. Sanctions may be imposed on the euro area member states that fail to implement sufficient measures to adjust a budget deficit exceeding 3 per cent of GDP.
The euro area member states must regularly prepare and publish stability programmes stating their medium-term objectives and how they intend to fulfil the objectives. Denmark and the other non-euro area EU member states have also endorsed the objectives and requirements of the Stability and Growth Pact and must regularly prepare and publish convergence programmes. However, no sanctions can be imposed on the non-euro area EU member states.
On the basis of the stability and convergence programmes, the Ministers of Economic Affairs and Finance continuously assess the risk of the individual EU member states' fail to comply with the rules of the Stability and Growth Pact.

Broad Economic Policy Guidelines
Besides the work related to the Stability and Growth Pact, each third year the EU member states prepare the Broad Economic Policy Guidelines. In the intervening years the guidelines are updated on a limited scale.The guidelines include country-specific guidelines. Should a member state fail to observe the guidelines, the Ministers of Economic Affairs and Finance may issue a recommendation.

The economic-policy cooperation is undertaken by the governments of the 27 EU member states, especially the Ministers of Economic Affairs and Finance, in the Ecofin Council. The Ministers of Economic Affairs and Finance of the euro area member states have agreed to meet informally prior to the actual Ecofin meetings. The informal forum of the Ministers of Economic Affairs and Finance of the euro area member states is called the Eurogroup.