- Since 2013, the European Commission has had the right to examine member states’ budget proposals at the time they are presented to their national parliaments, instead of waiting until after implementation.
- Executive leaders are putting the final touches on the budget proposals that must be submitted to the European Commission before 15 October. The Commission will then submit its recommendations in the following weeks.
- For member states still undergoing excessive deficit procedures, the big question is to what extent the Commission will seek to maintain pressure in a tough environment.
- In France, the problem is whether the commitments made today will hold up during an election year. In Spain, the transition government lacks sufficient legitimacy to take action.
- For the other member states, the context is different. Fiscal easing is actively encouraged in Germany, and might be tolerated in Italy. Once these compromises are added together, we can probably count on a slightly expansionist fiscal policy next year, fairly similar, on average, to the trends observed in 2016.
The European budget season has begun. In most European capitals, executive leaders are putting the final touches on their 2017 budget proposals. By 15 October, all of the eurozone member states must submit their 2017 budget proposals to Brussels, along with the latest estimates of their public finance situation at year-end 2016. In the following weeks, the Commission will review their compliance with recommended fiscal trajectories for 2016 and will verify whether their 2017 proposals are based on credible growth prospects, notably in the light of the Commission’s Autumn Economic Forecast1, whether they comply with the economic and fiscal strategies presented last spring, and whether they take into account the European Council’s June recommendations.
The 3% rule: the inescapable dividing line
Although everyone agrees that the famous “3% rule” does not have a solid theoretical basis, that it is too rigid in the face of economic fluctuations and that it does not necessarily ensure the long-term sustainability of a member state, which might, for example, have very high public debt, it has nonetheless survived the numerous European fiscal reforms since the crisis. It remains an inescapable dividing line between member states: constraints differ significantly depending on whether a country’s budget deficit is situated above or below 3% of GDP, independently of all other considerations.
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by Frédérique CERISIER