Finland's budget plans pose a "risk of non-compliance" with EU stability pact

The European Commission has today presented its Opinions on euro area member states' 2020 Draft Budgetary Plans.

Since July this year and for the first time since 2002, no euro area member state is under the Excessive Deficit Procedure. The euro area debt-to-GDP ratio is expected to continue its declining path of recent years and to fall from about 86% in 2019 to about 85% in 2020. This is happening against the backdrop of a weakening European and world economy.

However, not all are good news. According to Brussels authorities, the budgetary plans for the next year of eight member states "pose a risk of non-compliance with the Stability and Growth Pact in 2020". Those states are Belgium, Spain, France, Italy, Portugal, Slovenia, Slovakia and Finland.

According to the European Commission, the implementation of the plans of these countries "might result in a significant deviation from the adjustment paths towards the respective medium-term budgetary objective".

Excess of public spending

In the specific case of Finland, the Commission fears that its spending plan may lead to a breach of the European fiscal rules. In fact, last month the EU asked Finnish Government to provide further explanations about its spending plans.

Finnish Ministry of Finance answered that the larger deficit expected for 2020 will be exceptional and corrected in the following years. Still, the EU is not especially worried about Finland's public finances, since the country's debt will not exceed the limit of 60% of the GDP established in the Stability and Growth Pact.

In the cases of Belgium, Spain, France and Italy, "non-compliance with the debt reduction benchmark is also projected", says the European Commission.

Report for Greece

The Commission has also adopted the fourth report for Greece under the Enhanced Surveillance framework that was activated following the conclusion of the European Stability Mechanism stability support programme in August 2018.

The report concludes that Greece has prepared a budget for 2020 that meets the agreed primary surplus target of 3.5% of Gross Domestic Product (GDP) "in a growth-friendly manner", and that the government has overall taken the necessary actions to achieve its specific reform commitments for mid-2019, in the context of advancing a broader reform agenda.

The findings of this report will be discussed at the Eurogroup of 4 December 2019.