The role of the European Commission’s Directorate General for Economic and Financial Affairs — DG ECFIN

 

SUMMARY OF:

Article 121 of the Treaty on the Functioning of the European Union (TFEU)

Article 126 of the Treaty on the Functioning of the European Union (TFEU)

WHAT IS THE AIM OF ARTICLES 121 AND 126 OF THE TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION?

Articles 121 and 126 of the TFEU provide for the surveillance of the economic policies and performances of European Union (EU) Member States, involving the European Commission.

• Member States must provide the Commission with information on their economic policies.
• Where an EU country’s policies risk jeopardising economic and monetary union, the Commission may issue a warning and propose recommendations to the Council (Art. 121).
• The Commission must monitor the development of the budgetary situation in EU countries and in the case of gross policy errors may propose recommendations to the Council to open a procedure against the country in question.

The Directorate-General for Economic and Financial Affairs (DG ECFIN) is a Commission department which aims to contribute to raising the economic welfare of citizens in the EU and beyond by promoting the development of competitive, employment-rich economies.

KEY POINTS

Role

The department contributes to the development of policies that are geared towards sustainable and inclusive economic growth while preserving macroeconomic and financial stability. Among other things, it:

• implements necessary structural reforms;
• aims to achieve and maintain sound public finances and an appropriate policy mix (finding the right combination of policies to maximise growth and employment);
• promotes investment in productive capital (goods and infrastructure that help to generate growth) and in human capital (training and educating people).

Key objectives

Its efforts are focused on achieving 2 of the Commission’s general objectives:

• a new boost for jobs, growth and investment;
• a deeper and fairer economic and monetary union.

In order to do so, it has established a strategy consisting of the pursuit of 5 specific objectives:

• promoting growth- and employment-enhancing policies in the euro area and the EU,
• promoting macro-economic and fiscal stability in the euro area and the EU,
• promoting investment in the EU,
• promoting prosperity beyond the EU,
• improving the efficient functioning of the economic and monetary union.

European Semester

The European Semester has been established to coordinate economic policies across the EU throughout the year and to address the EU’s economic challenges. ECFIN plays a key role by:

• undertaking a detailed analysis of each country’s budgetary and economic challenges and policy plans;
• providing policy guidance tailored to each EU country with country-specific recommendations to be implemented within the following 12-18 months; and then
• monitoring of economic developments and reform implementation.

Launching procedures

ECFIN plays an important role in launching procedures against EU countries under the Stability and Growth Pact (SGP) and the Macroeconomic Imbalance Procedure (MIP):

• In situations where an EU country's budget deficit or public debt is considered excessive in relation to certain established reference values, the Commission may prepare a report to launch an Excessive Deficit Procedure (EDP) and recommend the Council to open an EDP. The Commission may also address a warning to countries that do not adhere to their medium-term budgetary objective.
• DG ECFIN is the main provider of the analysis in the Alert Mechanism Report (AMR) and for large part of the in-depth reviews (IDRs) and plays a coordination role in certain aspects of MIP surveillance. In cases of more serious imbalances, the Commission may propose to launch an Excessive Imbalance Procedure (EIP) as part of the corrective arm of the MIP. Afterwards, DG ECFIN monitors the correction of the excessive imbalances.

BACKGROUND

For more information, see:

• Economic and Financial Affairs (European Commission).

MAIN DOCUMENTS

Consolidated version of the Treaty on the Functioning of the European Union — Part Three — Union policies and internal actions — Title VIII — Economic and monetary policy — Chapter 1 — Economic policy — Article 121 (ex Article 99 TEC) (OJ C 202, 7.6.2016, pp. 97-98)

Consolidated version of the Treaty on the Functioning of the European Union — Part Three — Union policies and internal actions — Title VIII — Economic and monetary policy — Chapter 1 — Economic policy — Article 126 (ex Article 104 TEC) (OJ C 202, 7.6.2016, pp. 99-102)

last update 03.09.2021