The European Commission has given a positive evaluation of Greece’s 2025 budget plan and medium-term fiscal strategy, according to the autumn package of the European Semester released on Tuesday.
France’s draft 2025 budget and medium-term plan to bring down public debt are in line with EU rules and credible, while spending plans of the normally frugal Netherlands are too high, the Commission said.
In its assessment of the draft budgets of a majority of eurozone countries and their four- to seven-year plans to bring down public debt, the Commission said that the overall eurozone fiscal stance would be tighter in 2025, which was appropriate.
Public investment, however, would be maintained at 2024 levels or grow, thanks to the EU’s recovery fund spending.
The Commission said that the fiscal plans of 20 countries – Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Ireland, Greece, Italy, Latvia, Luxembourg, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden – met EU requirements and “set out a credible fiscal path to ensure fiscal sustainability over the medium term.”
“The Netherlands is assessed to be not in line with the recommendation, as the net expenditure (both in annual and in cumulative terms) is projected to be above the ceilings,” it said of Dutch plans for 2025 and cumulatively for 2024-2025.
Under the EU’s new fiscal rules, that came into force in April, the Commission and each country agree on a four- to seven-year plan for net expenditure that would bring down debt in a sustainable way and reduce the budget deficit below the EU ceiling of 3% of GDP.
France is to have a budget gap of 6.1% of GDP this year and the minority government of Michel Barnier has presented a draft budget for 2025 that would cut it to 4% and then bring the gap down to below the EU limit of 3% in 2029.
But this budget still has to get parliamentary approval in December and, if it fails, it could mean the end of the minority French government and the consolidation plans presented.
Markets have been fretting about the state of French public finances as the country’s public debt is reaching 112% of GDP and political instability increases uncertainty about the eurozone’s second biggest economy’s ability to repay debts.
Adding to market worries is the lack of a stable government tin Germany, which faces snap elections in February, the prospect of U.S. president-elect Donald Trump imposing tariffs on EU goods and trade tensions with China.
“It’s a big mess,” said ING’s global head of macro Carsten Brzeski. “The concern is not that this could lead to a severe recession, but rather it will further contribute to this undermining of economic prosperity in Europe,” adding he was concerned politicians and policymakers will react too late.
Source: reuters.com
