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Commission adopts opinions on euro area draft budgetary plans

Nov 22, 2019
Following the recent Autumn 2019 Economic Forecast and consultations with the member states, the Commission has adopted its opinions on the Draft Budgetary Plans of all euro area countries. It has found that no draft budgetary plan for 2020 shows particularly serious non-compliance with the requirements of the Stability and Growth Pact. The plans of Germany, Ireland, Greece, Cyprus, Lithuania, Luxembourg, Malta, the Netherlands and Austria are found to be compliant with the Stability and Growth Pact in 2020.

The plans of Estonia and Latvia are found to be broadly compliant with the Stability and Growth Pact in 2020. The implementation of the draft budgetary plans might result in some deviation from the country's medium-term budgetary objective for Latvia and from the adjustment path towards this objective in the case of Estonia.

For Belgium, Spain, France, Italy, Portugal, Slovenia, Slovakia and Finland, the plans pose a risk of non-compliance with the Stability and Growth Pact in 2020. The implementation of the plans of these member states might result in a significant deviation from the adjustment paths towards the respective medium-term budgetary objective. In the cases of Belgium, Spain, France and Italy, non-compliance with the debt reduction benchmark is also projected.

Overall, between 2019 and 2020, the number of member states at or above their medium-term budgetary objectives is estimated to increase from six to nine. The Commission projects the euro area aggregate structural deficit to increase by 0.2% of potential GDP in 2020 (to -1.1%), thus showing a broadly neutral fiscal stance. That increase in the structural balance is driven in particular by projected expansionary fiscal policies in member states with fiscal space, particularly the Netherlands and to a lesser extent Germany (0.6% and 0.4% of potential GDP, respectively) and the projected increase in the structural deficit of Italy (0.3% of potential GDP). Overall, fiscal policies continue to be insufficiently differentiated across the euro area. Member states with fiscal space are implementing expansionary fiscal policies and should stand ready to continue using their fiscal space. By contrast, the lack of consolidation in countries with sustainability problems remains a concern.

(Source: EU Commission)