Today the Council adopted decisions establishing the existence of excessive deficits for Belgium, France, Italy, Hungary, Malta, Poland and Slovakia. In addition the Council established that Romania, which is under the excessive deficit procedure since 2020, has not taken effective action to correct its deficit and therefore the procedure should remain open.
The deficit-based excessive deficit procedure aims to ensure that all member states return to or maintain discipline in their governments’ budgets, and avoid running excessive deficits. Ultimately, the goal is to maintain low government debt or reduce high debt to sustainable levels.
Member states must comply with budgetary discipline on the basis of criteria and reference values set in the EU Treaties: their deficit should not exceed 3% of their gross domestic product (GDP) and their debt should not exceed 60% of their GDP. All member states have to respect these Treaty reference values.
If an excessive deficit occurs in a member state, the aim of the excessive deficit procedure is to prompt its correction by putting member states under enhanced scrutiny and providing recommendations for them to take effective action to correct the deficit.
Next steps
Towards the end of the year, the Council will be invited to adopt, on a recommendation from the Commission, recommendations addressed to the member states to take effective action to correct their deficit within a given time period. The recommendations may contain a corrective budgetary path, expressed in numerical terms, and a deadline.
The Commission is expected to present recommendations for Council recommendations around November, at the same time as it intends to submit the European Semester Autumn package.
This year, exceptionally, the timing of recommendations to member states in excessive deficit procedure to take effective action will be aligned with the provisions of the EU’s reformed economic governance framework. Under the new rules, in force since 30 April, member states will prepare medium-term fiscal structural plans in the autumn, setting out their expenditure paths and their priority reforms and investments for the next 4-7 years.
The objective is to align the Council recommendations under the excessive deficit procedures with those under the medium-term fiscal-structural plans.
Background
Based on reported and confirmed data for the year 2023, all member states which are now subject to an excessive deficit procedure ran, in 2023, a general government deficit that exceeded the Treaty reference value:
Italy (-7.4%) ,Hungary (-6.7%) ,Romania (-6.6%) , France (-5.5%) ,Poland (-5.1%) ,Malta (-4.9%) Slovakia (-4.9%) and Belgium (-4.4%)
After a four-year break due to the activation of the general escape clause between 2020 and 2023 following the Covid-19 pandemic, the Commission prepared on 19 June a report under Article 126(3) of the Treaty on the Functioning of the EU (TFEU). The report identified 12 member states that ran a government deficit exceeding the Treaty reference value of 3% or were at risk of exceeding the Treaty reference value, in 2023.
The report proposed the opening of a deficit-based excessive deficit procedure for seven member states. The Economic and Financial Committee provided its opinion within the following two weeks.
On 8 July 2024, the Commission proposed to the Council decisions establishing the existence of excessive deficits for seven member states and a decision stating that Romania, which is under the excessive deficit procedure since 2019, has not taken effective action to correct the situation.
The Council, at its meeting of 16 July 2024, exchanged views on the proposals. The Committee of Permanent Representatives decided, on 24 July, to launch a written procedure for the formal adoption of the decision, which was completed successfully. Today’s adoption means that the excessive deficit procedures are now formally launched.