The ‘European Fiscal Board’ (EFB) openly criticised on Wednesday 10 June the European Commission’s proposal to grant some EU countries additional leeway so that they can act to reduce dependence on fossil fuels, especially imported ones (see EUROPE 13880/5).
“We are critical of [the European Commission’s] proposal because it could lead to more fiscal expansion at a time where the fiscal support still high and inflation is rising”, said Pieter Hasekamp, Chair of the EFB. In his view, this is a “bad signal ”, which “weakens credibility” of the Stability and Growth Pact by implying that, when a specific crisis breaks out, the regulatory framework could be reinterpreted to adapt to the circumstances.
The Commission is proposing that the 17 Member States (soon 18, with Spain) that have activated the national escape clause of the Stability and Growth Pact should be able to devote part of the fiscal leeway granted (0.6% of national GDP over the 2026-2028 period) to spending that supports the energy transition.
Mr Hasekamp recalled that the European committee had approved, subject to conditions (see EUROPE 13665/27), activation in 2025 of the Pact’s national escape clause to allow Member States to increase their military spending because of a clear policy emergency. This time, the geopolitical justification appears less obvious. As for countries (Estonia, Latvia) that have already used the entire 1.5% of GDP fiscal leeway, they will be able to go beyond it within the limits of the parameters laid down, Mr Hasekamp noted.
In its recommendations on the fiscal stance at euro area level for 2027, the European Fiscal Board recommends that Member States stick to the growth path for their public expenditure agreed at European level.
“If you look at Member States’ multiannual fiscal programmes, the fiscal stance for 2027 should be restrictive, amounting to 0.5% of EU GDP”, Mr Hasekamp said. Yet, he added, “what we are observing is a slight deterioration of the fiscal stance of 0.2% of GDP”, with the national escape clause for military spending explaining only a small part of this slippage.
The Chair of the EFB also noted that the emergency fiscal measures adopted by EU countries to support households and businesses most affected by the surge in energy prices caused by the war in the Middle East were “completely untargeted”, whereas they should first and foremost be aimed at the most vulnerable socioeconomic categories.
So far amounting to 0.1% of EU GDP, these fiscal measures are far smaller in scale than those taken in 2022, at the time of the inflationary shock caused by Russia’s military aggression against Ukraine, which the IMF put at 2.2% of GDP.
See the EFB report: https://aeur.eu/f/ma8 (Original version in French by Mathieu Bion)