According to the excessive deficit procedure, Member States are obliged to avoid excessive deficits in national budgets. The reference value for the existence of an excessive deficit is 3% of gross domestic product (GDP).

When the Council decides that an excessive deficit exists in a Member State, it first of all makes recommendations to the State concerned to correct the situation within a given period. If the Member State fails to comply with these recommendations, the Council may instruct it to take appropriate measures for reducing the deficit. If necessary, the Council has the option of imposing penalties or fines and of inviting the European Investment Bank (EIB) to reconsider its lending policy towards the Member State concerned.