On 9 November, the European Commission published a Communication on Orientations for a Reform of the EU Economic Governance Framework. On 22 November, it announced that the ‘general escape clause’ would be deactivated in 2024, as stated in the Annual Sustainable Growth Survey 2023.
These two announcements are crucial for the higher education sector: the ‘general escape clause’ that allowed deviation from the fiscal restrictions of the Stability and Growth Pact was crucial during the pandemic for avoiding cuts in national budgets, with education usually being first in line.
Therefore, the discussion about the future fiscal framework of the European Union is critical to understanding the direction of education funding in the EU.
The EU economic governance framework is based on the Stability and Growth Pact: a series of procedures on how countries can limit government deficits to 3% of GDP and public debt levels to 60% of GDP, as indicated by the Maastricht Treaty.
It is a year-long process that starts with the ‘European Semester’, where the macroeconomic policies of the EU member states are coordinated via commission guidelines. It culminates with the publication of country-specific recommendations for reforms in May.
Up until the pandemic the main focus was on the fiscal surveillance happening in the second half of the year: even if country-specific recommendations were included in the commission’s assessment of the budgetary plans of Euro-area member states, it was the adherence to the ‘Maastricht criteria’ that acted as the main point of reference.
In 2020, when COVID hit, a ‘general escape clause’ suspended many of the fiscal surveillance provisions of the Stability and Growth Pact, allowing member states to spend on deficit to support the economy without risking a macroeconomic imbalance procedure by the commission.
The creation of the Recovery and Resilience Facility (RRF) as a financial aid for European economies to tackle the pandemic-induced economic crisis made more than €720 billion (US$760 billion) available through common EU-level borrowing on the capital markets and allowed ambitious spending on reforms and investment.
The funds are disbursed by the commission based on National Recovery and Resilience Plans (NRRPs), agreed between the EU and the member states, which have to cover reforms and investment under common goals, for instance, the green transition and digital transformation.
How does this relate to education? The general escape clause and the RRF have allowed member states to support and invest in education, which accounts for 14% of the NRRPs’ funds, according to commission officials.
The NRRPs had to include the European Semester’s country-specific recommendations, giving teeth to their implementation. And with the European Education Area Progress Report announcing an important role for the European Semester in the implementation of the goals of the European Strategy for Universities, the role the EU will play in countries’ education systems will probably increase.
The return of ‘fiscal prudence’
The announced deactivation of the general escape clause in 2024 signals a return of ‘fiscal prudence’, which would make EU control over budgets as stringent as before 2020. That is where the new EU-proposed Fiscal Framework finds its place. Most of the austerity elements of the previous framework have been watered down: there is more focus on the medium term.
In addition, the reforms to reduce the deficit in highly-indebted countries are to be measured against the European Pillar of Social Rights and the digital and climate commitments.
However, since investment into future assets (like education) haven’t been excluded from calculations about deficits, as many organisations suggested, there is no guarantee that austerity will not hit the education sector in a difficult economic situation. And the European Semester’s role is limited to surveillance of the reforms agreed in debt reduction plans.
In this proposal of the framework for the Stability and Growth Pact, what is lacking is the ‘growth’ element: there is no indication yet about what will be the fate of the RRF after 2026.
At the same time, the financial pressure to achieve the NRRPs’ targets has been a powerful tool for governments to push through reforms, sometimes without properly consulting stakeholders, as has happened with some higher education reforms that student organisations have challenged.
This creates a problem of accountability, both around the reforms agreed in the NRRPs and in their design and implementation by governments.