This week, the European Commission assessed the multiannual spending plans of the 21 member states who submitted them – giving passing grades to 20 and failing one.
The passing countries: Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.
However, the commission rejected the multiannual plan put forward by the Netherlands. The Hague has been asked to prepare a revised plan in line with earlier projections.
Hungary’s spending plan is still being examined, while Austria, Belgium, Bulgaria, Germany and Lithuania have not yet submitted theirs due to upcoming general elections and the formation of new governments.
How are the eurozone countries faring?
The commission also published its regular evaluation of EU member states’ budget plans for 2025, including the submissions of 17 out of 20 eurozone members.
EU countries must submit their draft budget to Brussels by October 15 each year, but this time the commission has allowed more flexibility due to the new European fiscal discipline rules introduced earlier in the year.
The annual draft budgets have to be submitted by the 20 eurozone members, while all 27 European Union capitals should submit their multi-annual spending plans.
The goal is to make European economies more robust and public finances more sustainable.
While some countries passed their fiscal health check with flying colours, others have some work to do – and the Netherlands received another rejection for its 2025 budget.
The commission found eight EU member states, Croatia, Cyprus, France, Greece, Italy, Latvia, Slovakia, and Slovenia, to be “in line.”
The following six EU member states were “not fully in line”: Estonia, Germany, Finland, Luxembourg, Malta and Portugal.
Lithuania is deemed to “risk being not in line” while the Netherlands is “not in line.”
Ireland has not received a concluding overall assessment, but the commission found that the country’s net expenditure growth is “expected to be above the ceiling.”
Austria, Belgium and Spain did not make a submission.
Richer members of the European Union, including Germany and the Netherlands, are traditionally avid defenders of the bloc’s strict spending limits, compared to less affluent southern members.
Sluggish recovery from the economic fallout of the Covid-19 pandemic and Russia’s war against Ukraine, however, have seen usually frugal countries struggle to keep their expenditure low.
Berlin’s cumulative spending is expected to exceed the allowed limits, the commission said.
Germany’s three-party governing coalition recently collapsed over differences on how to tackle the country’s economic problems.
It is now expected that the 2025 budget will be adopted by the next German government, following elections penned for February 23.
France, too, is facing internal issues over money: Its belt-tightening draft budget for 2025 is at the centre of a political standoff that is threatening to topple the government in Paris.
With a public deficit expected to reach 6.2% of gross domestic product this year, France almost has the worst performance of the 27 member states, surpassed only by Romania, and is a long way from the 3% deficit ceiling authorized by EU rules.
French Prime Minister Michel Barnier is struggling to get his economic plan past opposition from the political extremes.
It has drawn criticism from French far-right figurehead Marine Le Pen, who has threatened to back a no-confidence motion if the plan is pushed through.
To limit government deficit and debt, the EU’s fiscal rules foresee that member states do not produce a deficit higher than 3% of their gross domestic product (GDP) and do not surpass the threshold of 60% of GDP in government debt.
Countries with excessive deficits being closely watched
EU members in breach of these rules enter an excessive deficit procedure and are closely monitored by the commission while they realign their expenditures with EU law.
A total of eight countries are currently facing the EU’s excessive deficit procedure, namely France, Belgium, Hungary, Italy, Malta, Poland, Romania and Slovakia.
Romania has been in the procedure since 2020.
The commission warned that Austria, whose deficit is expected at 3.6% this year, could join them.
These countries must take corrective measures to comply with the EU’s budgetary rules in future, or face fines.
Until now, the commission has never dared to resort to financial sanctions, which are considered politically explosive. But that may change.
Fiscal rules facelift: What’s behind it?
The revamped rules are an adaptation of the EU’s Stability and Growth Pact, which guided member states through the eurozone crisis and ensuing years with mixed success.
The pact was suspended between 2020 and 2023 to avoid a collapse of the European economy following the Covid-19 pandemic and the outbreak of war in Ukraine.
It was reactivated at the start of 2024, but was given the facelift to make it more flexible and pragmatic.
Budgetary trajectories are now tailored to each member state and margins for manoeuvre have been introduced to allow 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 reform pledges.
Five countries – France, Finland, Romania, Spain and Italy – have requested and obtained such an extension.
The multiannual plan needs to meet EU 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 apply.
Once a country’s medium-term fiscal plan is adopted collectively by all EU members, the expenditure path becomes binding during the period covered by the document.
Its implementation will be assessed by the commission regularly.
The content of this article is based on reporting by AFP, AGERPRES, ANSA, BTA, dpa, EFE, LUSA, HINA, and STA as part of the European Newsroom (enr) project.
