The envisaged reform of the fiscal rules gives EU Member States greater independence on agreeing debt and deficit plans with the European Commission, but only within tight spending limits, the so-called "safeguards" demanded by the fiscally hawkish countries. The requirement to cut excess debt by 5 per cent per year has been ditched, but countries with debt ratios above 90 per cent of GDP will have to cut excess debt by one percentage point per year over the duration of their national spending plan; that target is halved for countries with debt ratios between 60 and 90 per cent of GDP. However, some extra-wriggle room will be allowed for a transition period 2025-2027, when countries subject to such a restriction will be able to discount debt interest costs.
Overall, the package brings some improvements such as moving towards country-specific medium-term expenditure plans (based on debt sustainability analysis), and abandoning completely unrealistic debt reduction targets. However, tight spending limits over the medium-term will remain in place, and the reform falls short of its original objective to simplify the rules and ensure more consistent enforcement. The political agreement reached by ministers will now form the basis for negotiations with European parliament.