CICC: The adjustments to the EU fiscal policy in this round are more about reform rather than revolution.

The research report from CICC stated that in recent years, the fiscal system of EU member states has been undergoing profound changes. Beyond the member states, there has been a significant restructuring of the EU budget at the supranational level. The adjustments in this round of EU fiscal policy are more in the form of reform rather than revolution, mainly reflected in the fact that the Stability and Growth Pact has not completely relaxed the quantitative requirements for deficit and debt ratios, and member states still need to return to a sustainable debt growth trajectory after a temporary exemption. The fiscal expansion at the supranational level of the EU still mainly relies on own-resource income and emphasizes sustainability, and the negotiation process of the MFF for 2028-2034 may be fraught with difficulties. Overall, the European fiscal situation faces a triple dilemma of increasing public investment, fiscal consolidation, and not further raising macro tax burden being incompatible. If the EU cannot establish a sustainable common financing mechanism through MFF reform or promote a true "European public goods" supply system, we believe that the triple dilemma may lead countries to restructure social welfare in exchange for strategic investments.