Eurogroup statement on the Draft Budgetary Plans for 2018

The Eurogroup welcomes that 18 Member States have submitted Draft Budgetary Plans (DBPs) for 2018. On 22 November, the Commission has provided in-depth individual assessments and Opinions, together with an analysis of the budgetary situation in the euro area as a whole. The Eurogroup underlines the importance of a timely and meaningful multilateral examination of the draft budgetary plans and invites the Member States to provide the draft budgets and the Commission to provide its assessments as soon as possible to allow for an in-depth discussion in the Eurogroup and its preparatory committees. 

The Eurogroup takes note that no DBP was found in particularly serious non-compliance with the SGP and consequently no resubmission of a DBP was requested by the Commission. We note that Germany, Austria and Spain have submitted DBPs on a no-policy-change basis. We invite them to submit the updates of their DBPs as soon as possible and look forward to the Commission assessment of those updates. We also recall that Greece was not assessed as part of this exercise as it is subject to a macro-economic adjustment programme. 

The euro area is enjoying broad based economic growth, although crisis legacies persist in some areas. According to the Commission autumn forecast, the aggregate deficit in the euro area is expected to further decline to 0.9% of GDP in 2018 from 1.5% of GDP in 2016. Aggregate debt in the euro area is also set to be on a downward path, from 91% of GDP in 2016 to 87% of GDP in 2018. A broadly neutral fiscal stance appears still appropriate at the aggregate euro area level in 2018. At the same time, the improving economic conditions call for the need to rebuild fiscal buffers, while continuing to strengthen the growth potential of our economies. 

The Eurogroup notes that a slow pace of debt reduction from high levels in a number of Member States remains a matter for concern and should be decisively addressed in the current favourable economic situation. In this context, the limited structural fiscal adjustment expected in 2018 in some Member States is worrying, in particular when coupled with high sustainability risks. The Eurogroup recalls in this context that the focus on debt reduction is an integral part of the Stability and Growth Pact (SGP) and calls upon the Commission and the Council to apply the SGP in full. The Eurogroup underlines that fiscal policies should be pursued in full respect of the Stability and Growth Pact, thereby taking into account stabilisation needs and sustainability concerns. The Eurogroup also recalls the country-specific recommendations adopted by the Council on 11 July 2017 which include detailed and quantified fiscal policy guidance.

The Eurogroup remarks that Member States are in very different budgetary situations. The Eurogroup takes note that, based on the Commission assessment, the following Member States' plans are deemed to be at risk of non- compliance with the SGP in 2018: Belgium, Italy, Portugal, Slovenia and Austria – under the preventive arm of the SGP and France – currently under the corrective arm of the SGP, assessed under the assumption of a timely and durable correction of the excessive deficit. According to the Commission assessment, the DBPs of these Member States might result in a significant deviation from the adjustment path towards their respective MTOs. In addition, Italy, Belgium and France are also not expected to comply prima facie with the debt reduction benchmark in 2018. The Eurogroup invites all these Member States to consider in a timely manner the necessary additional measures to address the risks identified by the Commission and to ensure that their 2018 budget will be compliant with SGP provisions. 

Based on the Commission assessment, the following Member States' plans are deemed to be broadly compliant with the SGP in 2018: Estonia, Ireland, Cyprus, Malta, Slovakia – under the preventive arm and Spain under the corrective arm. The Eurogroup invites these Member States to ensure compliance with SGP provisions within the national budgetary processes and welcomes their commitment to take any necessary measures. 

The Eurogroup welcomes that a number of Member States' plans are deemed to be compliant with the SGP in 2018: Germany, Lithuania, Latvia, Luxembourg, Netherlands and Finland, all under the preventive arm. The Eurogroup notes that Member States having outperformed their medium term objectives could use their favourable budgetary situation to prioritise investments to boost potential growth while preserving the long-term sustainability of public finances. 

The Eurogroup recalls the importance of a growth-friendly composition of public finances across the euro area. In this regard, the Eurogroup took stock of progress made by some Member States in the reduction of the tax burden on labour in line with the benchmarking agreement of September 2015 and encourages Member States to continue their efforts in this field, while ensuring full compliance with the SGP. 

The Eurogroup welcomes the ongoing work to explore more country specificity in the commonly agreed methodology for output gap estimates. We will continue to monitor euro area Member States' fiscal and economic policies, as well as the budgetary situation of the euro area as a whole.

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