Debt Sustainability in the Emerging New EU Fiscal Framework: A Major Change

If agreed, the new European Commission legislative proposals on the reform of the fiscal framework will represent a major change. First and foremost debt replaces budget deficit as central variable, and debt sustainability assessment becomes a pivotal concept. It allows to introduce a multiannual approach and more flexible framework disconnected from numerical rules, which, in principle, gives member states greater ownership but also greater responsibility for their choices. It can only work if member states recognise that debt sustainability assessment is a risk-management tool that has to be taken seriously.