Apart from the specific case of Italy (see other article), the European Commission on Friday 19 October asked the governments of five Eurozone countries – Belgium, France, Greece, Portugal and Slovenia – for more information concerning the draft 2019 budget.
To judge from the tone taken, it is unlikely that the European institution will ask any of these five countries to scrap their draft plans and start again, as the differences in analysis concern the anticipated level of reduction in the structural deficit (not including cyclical effects), against a backdrop of public indebtedness that is relatively under control.
France. Next year, Paris intends to reduce its structural deficit by 0.3% of GDP, although this structural effort should theoretically be 0.6% of GDP for countries whose government deficit in nominal terms is below 3% of GDP, according to the Stability and Growth Pact (see EUROPE 12118, 12102).
The Commission, which calculates that the anticipated structural effort is actually 0.2% of GDP, regrets that France will not respect the benchmark debt reduction pace in 2019.
However, the European Commissioner for Economic and Financial Affairs, Pierre Moscovici, told France Inter on Monday 22 October that there would not be a problem with the French draft budget. All the same, he urged France to reduce its public debt in the coming years and thereby bring down its structural deficit.
On Friday, the French Ministry for the economy and finance argued that the French budgetary trajectory was consistent with France's overall economic policy strategy, which is accompanied by structural reforms and political decisions aiming to facilitate the re-establishment of public finances.
Spain. A letter has also been sent to Spain, the only Eurozone country still under an excessive deficit procedure, but which is expected to come out of it next year. The Spanish nominal deficit will be under the 3% of GDP mark in 2019, for the second year in a row (see EUROPE 12117, 12014).
However, Madrid is already required to comply with the rules of the preventive arm of the Pact and reduce its structural deficit by 0.65% in 2019. However, the Spanish government forecasts a reduction of 0.4%.
The Commission also notes that the 2019 draft budget submitted to the Commission and the one presented to the national parliament are not same, hence the institution's calls for an updated draft budget to be submitted “as soon as possible”.
Portugal. The Portuguese government anticipates a 0.3% reduction in structural deficit next year (the Commission puts this at 0.2%) whereas under the rules of the Pact, structural effort should be 0.6% of GDP.
It is also worth noting that the Portuguese authorities anticipate a nominal deficit of 0.2% of GDP in 2019.
Belgium. The comments sent to Brussels are broadly similar to those sent to Paris. For instance, it appears that the structural deficit reduction is expected to be 0.2% next year, although it should be 0.6% of GDP. The debt reduction benchmark pace in 2019 will also not be complied with. In 2017, the Belgian debt stood at 103.4% of GDP.
Slovenia. The situation in Slovenia is slightly different as public debt is expected to be 66.6% of GDP in 2019, with Ljubljana anticipating a nominal budgetary surplus of 0.2% of GDP.
However, although the reduction of the Slovenian structural deficit should be 0.65% next year, the national authorities forecast this to increase by 0.7% of GDP, an increase that the Commission puts at 0.6% of GDP. (Original version in French by Lucas Tripoteau)