The European Fiscal Board published a report for the European Commission on Tuesday 25 June in which it recommended that the fiscal stance of the euro area in 2020 should be neutral, but differentiated across Member States.
This recommendation of this board, which advises the Commission on budgetary matters, is intended in particular to provide guidance for the presentation of national draft budgets for next year.
Noting the likely slowdown in growth for the year 2019, the advisory body takes up the European Commission's forecasts for stronger growth for the year 2020 (see EUROPE 12249/6). In addition, it notes that the economy is subject to several endogenous and exogenous risks, particularly due to the uncertainties surrounding Brexit or trade tensions around the world.
In addition, the European Fiscal Board notes that, on the basis of the policies announced, the fiscal stance is expected to be expansionary next year and that public debt levels are expected to remain high in some euro area countries, notably in Italy, Belgium, Spain, France, Greece and Portugal.
To move towards a neutral fiscal stance at EU level, the experts of the advisory body believe that some states need to consolidate their public finances while others need to use the fiscal space they have for investment.
In the first category, the Board targets countries that have not yet reached their medium-term budgetary objective (MTO) within the framework of the European Semester. This is at a time when most of these countries are expected to have an expansionary fiscal stance, given economic forecasts.
In the second category, the Board identifies States that have significantly exceeded their MTO, such as Germany and the Netherlands. Investment and support for growth in these countries could have positive effects on those countries that are expected to make fiscal efforts.
Link to the report: https://bit.ly/2xatWQT (Original version in French by Lucas Tripoteau)