In a statement adopted early on Monday evening (9 December), the Eurogroup recommends a “slightly contractionary” fiscal stance in the euro area for 2025.
“We consider the slightly contractionary fiscal stance for 2025, coupled with a positive trend in public investment, to be appropriate, given the budget challenges that we face and the need to support the ongoing reduction in inflation”, Eurogroup President Paschal Donohoe told the press.
European Commissioner for Economy and Productivity Valdis Dombrovskis also considered this budgetary stance appropriate, quantifying it at “0.25% of GDP” for the euro area.
In July, the finance ministers of the euro area countries opted for a contractionary fiscal stance for next year (see EUROPE 13453/12). Asked about this now less restrictive stance, Mr Donohoe saw it as the effect of a “combination” of two factors: 2025 Draft Budgetary Plans have yet to be presented (Austria, Belgium, Spain) or finalised (France, Germany) and the desire of several euro area countries (Spain, Finland, France, Italy) for a “slightly” longer adjustment period (7 years instead of 4 years) (see EUROPE 13532/11).
DBPs. On the 2025 Draft Budgetary Plans, the Eurogroup notes that, according to the European Commission, the Draft Budgetary Plans of eight countries (Croatia, Cyprus, France, Greece, Italy, Latvia, Slovakia and Slovenia) comply with previous Eurogroup recommendations.
However, the Draft Budgetary Plans of seven other countries - Germany, Estonia, Finland, Ireland, Luxembourg, Malta and Portugal - are not fully in line with the July recommendations. In addition, the Netherlands’ fiscal consolidation path is judged not to comply with the rules of the Fiscal Compact, while Lithuania’s may not as well.
The ministers are inviting countries whose budgets do not fully comply with European fiscal rules to “stand ready to take action as necessary depending on the nature of the risks and to deliver on fiscal commitments”.
See the Eurogroup statement: https://aeur.eu/f/eq9
France. Mr Donohoe was also asked to comment on the political crisis and budgetary difficulties in France, whose short-lived ‘Barnier’ government was unable to approve the 2025 budget.
“We all recalled the importance of sound public finances and the need for all of us to take the measures to deliver on our budget commitments, which fundamentally is about the ability of our economies to grow in the years ahead”, said Mr Donohoe. He said he was “confident” in the French authorities’ ability to adopt the necessary measures to stabilise the French economy and reduce public debt.
In its statement, the Eurogroup says no different: “A shared currency entails shared responsibilities. The Eurogroup therefore underlines the importance of the effective implementation of the revised economic governance framework”, which provides for a “gradual” consolidation of public finances while supporting reforms and investment.
At the end of October, France, which is the subject of an excessive deficit procedure, presented a seven-year multiannual budget programme (2025-2031) designed to reduce the public deficit to below 3% of GDP by 2029 (see EUROPE 13517/7). French public debt would stabilise at 116.5% of national GDP in 2027. (Original version in French by Mathieu Bion)