The European Covid-19 policy response has created the largest commonly funded European crisis fighting tools in EU history. The creation of this tool at the EU level marks the end of attempts to establish a fiscal capacity in the euro area for the foreseeable future. A political urgency exists to ensure that funds are disbursed quickly enough to effectively assist in economic recovery, but clashes with legitimate bids to implement robust oversight of new EU fiscal instruments and embed them within the European Semester process. The short-term imperative to help secure residents’ health and livelihoods invariably decides in favour of the former. This political reality implies that were the European Parliament to attempt to strengthen the role of the European Semester in the oversight and governance of NextGenerationEU (NGEU) and 2021-2027 MFF recovery linked resources, it would likely fail.

As part of the broader EU pandemic policy response, the Commission in late March - with Council approval -suspended the Stability and Growth Pact (SGP) fiscal rules until further notice. Given the dramatic development in all member states’ fiscal balances during the pandemic, a rapid reintroduction of an unreformed Pact would lead to significant short-term fiscal consolidation in many countries. This would run directly counter to the goals of the EU’s new pandemic recovery instruments, and a reintroduction of an unreformed SGP-before especially the grant-based Recovery and Resiliency Facility is planned to be fully disbursed in 2023 - appears implausible. At the same time, the suspension of the SGP and the difficulty in reintroducing it offer a tempting opportunity to reform it, and include the part of the European Semester’s framework for EU economic policy coordination that concerns domestic economic reform implementation – the so-called country-specific-recommendations (CSRs) - in the Pact’s policy prescriptions.