With all Euro area member states having been given until 23:59 on Monday 15 October to submit to the European Commission their draft national 2019 budgets, the Commission will now study these drafts with a view to returning its opinions on the matter, most likely on 21 November.
As we were going to press, not all member states concerned had submitted their draft budgets for next year to the institution. Readers may recall that this examination by the Commission, which was brought in by the post-financial crisis reform of the Stability and Growth Pact, aims to ensure that the states are sticking to their budgetary commitments and cleansing their public finances.
Although the Commission will scrutinise all of the drafts, some of them will come in for particular attention.
Top of this list will be Italy. With the government coalition formed by the League and Five Star Movement to discuss “key arbitrations” towards the end of Monday afternoon, the latest forecasts suggest a nominal deficit of 2.4% of GDP next year and a structural deficit to rise from 0.9% of GDP to 1.7% (see EUROPE 12111).
However, Rome is theoretically supposed to reduce its structural deficit by 0.6 percentage points between 2018 and 2019 under the rules of the preventive arm of the Pact.
The Commission will also pay close attention to the French draft budget, which is expected to provide for a reduction of the structural deficit by 0.3 points from 2018 to 2019, although Paris is also supposed to reduce it by 0.6% (see EUROPE 12102).
Spain, the last country still under an excessive deficit procedure, also anticipates that its nominal deficit will be 1.8% of GDP next year. If this pans out, Madrid will also join the preventive arm of the Pact in 2019 (see EUROPE 12014).
Finally, it is worth noting that the Greek 2019 budget will be examined 'normally' by the Commission for the first time since 2010, after Athens came out of its financial bailout plan in August of this year (see EUROPE 12077).
Opinions expected by 21 November. In terms of procedure, the Commission is required to return its opinions on the draft 2019 budgets, which must then be approved by the Council of the EU. Although the date has not yet been set definitively, the opinions are expected to be returned by the Commission on 21 November, with the legal deadline set at 30 November.
In the case of Italy in particular, the Commission may, furthermore, ask member states whose budgetary drafts may appear problematic for more information, by a deadline of 22 October. If it “identifies particularly serious non-compliance with the budgetary policy obligations laid down” in the Pact, it may adopt a negative opinion in the matter by 29 October (Regulation 473/2013). Such a situation would be without precedent. (Original version in French by Lucas Tripoteau)