The European Union is expected to place a staggering 12 countries on its fiscal watchlist as the bloc’s budget comes under pressure.
According to sources speaking to Bloomberg, France is at risk of flouting guidance and Germany and Italy are expected to be deemed not fully compliant.
A ‘watch list’ of countries is expected to be released today (November 21) as part of the European Commission’s national budgets report for 2024. However, the verdict might still change before it’s adopted by the commission.
In a confidential EU report, Belgium, Finland, and Croatia are also reportedly posing a threat to exceed budgetary targets. Austria, Latvia, Luxembourg, the Netherlands, Portugal, and Slovakia are grouped in with the bloc’s largest economy, according to the report.
The EU’s assessment comes after a pandemic-induced suspension of the fiscal regime, which had limited deficits to three percent of GDP.
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The pause also allowed the EU to consider potential revisions to the entire budget rulebook governing the eurozone’s diverse economies, known as the Stability and Growth Pact.
Being on the watch list doesn’t necessarily mean there will be automatic repurcussions, but the EU commission must decide at a later stage whether to launch the ‘excessive deficit procedure’.
In this case, the country in question must produce a plan for corrective action and policies it will follow, as well as deadlines for their achievement.
If the country’s do not comply, financial penalties may be imposed as a result of this procedure, reports Bloomberg.
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The news comes as the EU budget is already in trouble after Germany’s ability to increase its payments to the EU budget as originally promised by the coalition led by Chancellor Olaf Scholz is fading away.
Last week, Scholz’s government was dealt a blow by his country’s constitutional court after a ruling blew a €60 billion (£52 billion) hole in the country’s finances.
A government’s plan to repurpose the sum left over from an emergency COVID-19 fund to finance its climate agenda was deemed unconstitutional by the court.
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Now officials are worried the move will force the government to backtrack on its promise to increase its contributions to the EU budget.
Germany is also expected to face a double-dip recession going into the fourth quarter of the year. The EU powerhouse is expected to shrink again before the end of the year, according to a report by the Bundesbank on Monday.
The eurozone’s largest economy has struggled this year due to factors such as high energy costs, weak global orders, and higher interest rates, leading to a deep industrial recession.
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