On Friday 27 October, the European Commission sent official requests for additional information to five countries of the eurozone – Belgium, Spain, France, Italy and Portugal – concerning their draft 2018 budgets.
In particular, the requests concern two eurozone countries – Spain and France – still under excessive deficit procedures. For Spain, where the political crisis has heightened further (see other article), the Commission has asked the Spanish authorities to provide more guarantees concerning Madrid's capacity to respect the objectives to reduce government deficit to 2.2% of GDP. Due to the Catalonian crisis, the government sent the European institution a draft budget in mid-October that assumed a status quo situation (see EUROPE 11885).
The Commission's preliminary analysis of the draft French budget appears more pessimistic. The Commission considers that the sustainable correction of the French excessive deficit in nominal terms is subject to risk. Similarly, it feels that structural effort (not including cyclical effects) forecast by the government, of marginally above zero, is insufficient. Flagging up an insufficient effort to reduce public expenditure, it highlights a risk of significant deviation from the effort required in 2018. The French authorities, for their part, describe the differences in assessment as minimal.
For Italy, the Commission considers that the structural budgetary effort is also insufficient, at 0.2% of GDP according to its calculations, rather than the 0.6% required. Noting higher public expenditure than recommended, it also flags up a risk of deviating from the debt reduction target.
In early November, the Commission will present its autumn economic forecasts and at the end of the month, its assessments of the draft 2018 budgets of the eurozone countries.
The letters sent to the five countries can be consulted at: http://bit.ly/2hgBgDb . (Original version in French by Mathieu Bion)