Credible ECB monetary policy requires that the revised EU economic governance framework be tightly enforced from its start. Net primary expenditures as key control variable allow predictable monetary policy focused on stabilisation. However, widespread debt reduction pushing spending growth below potential GDP growth may prompt more accommodative ECB policy. Moreover, potentially cumulating changes in public spending-to-GDP ratios need close monitoring. Finally, the criteria for TPI may increase pressure to be lenient on enforcement of the fiscal rules. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 4 December 2024.
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