On Tuesday, the European Commission
announced their assessment results of the member states' fiscal
plans for the 2025-2028 period as well as draft budgets for next
year. The bloc's new fiscal rules aim at decreasing debt,
encouraging investment and reforms.
The European Commission's budget evaluation from Tuesday comes
after the bloc's debt and deficit rules were reformed earlier
this year.
Next to annual draft budgets which have to be submitted by the
Eurozone members, all European Union capitals now have to submit
multi-annual spending plans to the Commission. The goal is to
make European economies more robust and public finances more
sustainable.
To limit government deficit and debt, the EU's fiscal rules
foresee that member countries shall not produce a deficit that
is higher than three percent of its gross domestic product and
not surpass the threshold of 60 percent of the gross domestic
product in government debt.
In their Autumn Package, the Commission released the evaluation
results of the medium term fiscal-structural plans (MTPs) of 21
EU member states as well as 17 assessments of draft budgets by
Eurozone members which inform the MTPs of the countries.
In addition, the EU executive took a look at the eight countries
currently facing an excessive debt procedure, evaluating their
plans to get back on track with EU rules.
A facelift for fiscal rules: What is the medium-term fiscal
structural plan?
The medium-term fiscal structural plan is replacing the EU's
stability programme and the national reform programme, standing
at the core of the EU's revised economic governance framework.
The EU's Stability Pact was suspended between 2020 and 2023 to
avoid a collapse of the European economy following the Covid-19
pandemic and the war in Ukraine. It was reactivated at the start
of this year, but had been given a facelift to make it more
flexible and pragmatic.
Budgetary trajectories are now tailored to each member state and
margins for manoeuvre have been introduced for investment. They
are spread over a four-year period, which can be extended to
seven years to make the adjustment less abrupt, in exchange for
reforms. Five countries - France, Finland, Romania, Spain and
Italy - have requested and obtained such an extension.
The plan needs to meet requirements concerning net expenditure,
as well as general government deficits and debts.
The financial penalties for non-compliance with the pact,
previously unenforceable because they were too severe, have been
reduced to make them easier to enforce.
Once the MTP is adopted by the Council of the EU, the
expenditure path becomes binding for the member state during the
period covered by the document. Its implementation will be
assessed by the Commission regularly.
What is the outcome of the MTP assessments?
In their Tuesday publication, the Commission assessed the
multi-annual plans of 21 member states who submitted their MTPs
- giving passing grades to 20, failing one.
The passing countries: Croatia, Cyprus, Czechia, Denmark,
Estonia, Finland, France, Greece, Ireland, Italy, Latvia,
Luxembourg, Malta, Poland, Portugal, Romania, Slovakia,
Slovenia, Spain and Sweden.
While the majority of countries' plans were accepted, the
multi-annual plan of the Netherlands has been rejected.
Hungary's plan is still being looked at while Austria, Belgium,
Bulgaria, Germany and Lithuania have not yet submitted their
plans due to general elections and the formation of new
governments.
In Bulgaria, the submission has been delayed due to another
series of snap parliamentary elections in late October and the
absence of a regular government.
In an interview with Bulgarian news agency BTA, Executive Vice
President of the European Commission for An Economy that Works
for People, Valdis Dombrovskis, stressed the importance of
Bulgaria keeping its budget deficit below three percent of the
country's GDP in the context of Bulgaria's possible accession to
the Euro area.
How are the Eurozone countries' draft budgets for next year
faring?
On Tuesday, the European Commission published its regular
evaluation of the budget plans for 2025, assessing the
submissions of 17 out of the 20 Eurozone members.
While some countries passed with flying colours, others have
some work to do - and the Netherlands received another
rejection.
In principle, EU countries have to send their draft budget for
the following year to Brussels before October 15 each year, but
this year the Commission has given governments more leeway
because it is the first year in which the new European rules on
fiscal discipline are applied.
8 "in line": Croatia, Cyprus, France, Greece, Italy, Latvia,
Slovakia, and Slovenia;
6 "not fully in line": Estonia, Germany, Finland,
Luxembourg, Malta and Portugal;
1 "risk not being in line": Lithuania;
1 "not in line": the Netherlands;
1 without concluding overall assessment: Ireland hasn't
received a concluding overall assessment but the Commission
found that the country's net expenditure growth is "expected to
be above the ceiling";
3 without submission: Austria, Belgium, Spain.
(continues)
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