INCORPORATING THE IMPACT OF SOCIAL INVESTMENTS AND REFORMS IN THE EU’S

The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of the Belgian Presidency of the Council of the EU. [...] For France, the debt sustainability safeguard is not binding under a four-year adjustment because France would exit the excessive deficit (EDP) procedure in the last year of the adjustment period (and hence the requirement of a debt reduction from the year of exiting the EDP to the end of the adjustment period cannot be interpreted). [...] In the seven-year case, however, France would exit the EDP one year before the end of the adjustment period and hence the debt sustainability safeguard applies for the last year of the adjustment period. [...] The reason is that the co-financing remains included in the definitions of deficits and debts, and hence subject to the DSA requirements, the requirement to reduce the budget deficit below 3 percent of GDP, and the four safeguards (see Annex 1). [...] As with the education policy, we augment the growth projections underlying the DSA by assuming a gradual increase of GDP, from the start of the adjustment period to 20 years after the start of the adjustment period, by the 20-year effect reported by Pfeiffer et al (2023).