EN    EN  
 EUROPEAN  
COMMISSION 
Brussels, 28.11.2014  
COM(2014) 907 final 
  
COMMUNICATION FROM THE COMMISSION 
2015 DRAFT BUDGETARY PLAN S: OVERALL ASSESSMENT 
 
 
2 
 Executive summary  
This Communication summarises the Commission's assessment of the 2015 Draft Budgetary Plans 
(DBPs) submitted by 15 October by the sixteen eu ro area Member States not under a macroeconomic 
adjustment programme (EA-16). In line with Re gulation (EU) No 473/2013, the Commission has 
assessed these plans and the overall budgetary situati on and fiscal stance in th e euro area as a whole, 
at a time when there are also major structural reforms underway. 
The overall assessment of the 2015 Draft Budgetary Pl ans (DBPs) and the aggregate fiscal stance can 
be summarised as follows: 
1. The Member States' plans imply a continuing decr ease in the aggregate headline budget deficit in 
the euro area: after returning below 3% of GDP in  2013 for the first time since 2008, the deficit is 
expected to fall further to 2.6% of GDP in 20 14 and 2.2% of GDP in 2015. Based on the DBPs, 
the aggregate debt ratio in 2015 is planned to remain virtually unchanged from the value 
estimated for the current year at around 92.5% of GDP. 
2. Compared to the medium-term plans formulat ed in the spring 2014 Stability Programmes, the 
planned deficit reduction is significantly lower. This reflects both a lower growth outlook and a 
reduced fiscal effort. After coming to a halt in 2014,  fiscal consolidation is not planned to resume 
in 2015, according to the aggregate of the EA-16's Draft Budgetary Plans. 
3. The picture emerging from the DBPs is broadly confirmed by the Commission's 2014 autumn 
forecast. Although starting from an identical h eadline deficit estimate for 2014 (2.6% of GDP), 
the Commission forecasts a smaller reduction in h eadline deficits than Member States in 2015 (by 
only 0.2 percentage points instead of 0.4). This refl ects a smaller expected fiscal effort in 2015. 
Higher deficits and lower growth account for an aggregate debt-to-GDP ratio that the 
Commission projects will increase from 91.7% of GDP in 2013 to 93.1% in 2014 and 93.6% in 2015, against the stabilisation projected in the DBPs. 
4. The Commission's forecast also indicates a broadl y neutral fiscal stance (neither tightening nor 
loosening) in 2015 in the euro area, following a ha lt in consolidation in 2014. This appears to 
strike an appropriate balance between fiscal sust ainability requirements, underscored by high and 
increasing government debt ratios, and cyclical st abilisation concerns, highlighted by significant 
and persistent negative output gaps  which are projected to diminish only slowly in the coming 
years. At the same time, the assessment of the plans confirms that several Member States are 
currently not expected to meet their obligations  under the Stability and Growth Pact (SGP).  
5. There is a need to closely monitor both th e overall fiscal stance of the euro area and its 
distribution across Member States in relation to the room available under the SGP. In particular, 
maintaining a neutral aggregate fiscal stance, wh ile some Member States are called to increase 
their efforts in order to comply with the SG P implies a degree of fiscal support coming from the 
exploitation of the fiscal space available elsewhere. This also strongly u nderlines the case for the 
ambitious Investment Plan for Europe presented by the Commission on 26 November. 
6. This avenue for supporting euro area growth is  relevant when examining the composition of 
public finances. While the recent moves to re duce the tax burden on labour go in the right 
direction, the composition of expenditure shows little if any progress towards being more growth–
friendly. This underscores the necessity of a bette r alignment of Member St ates' policies with the 
 
3 
 priorities of the Jobs, Growth and Investment Package presented by the Commission. 
7. The Commission assessment of individual Memb er States can be summarised as follows: 
No DBP for 2015 has been found in particularly serious non-compliance with the requirements of 
the SGP. In several cases, however, the Commissi on finds that the planned fiscal adjustments fall 
short, or risk doing so, of what is required by the SGP. Specifically: 
For five countries (Germany, Ireland, Luxembourg, the Netherlands and Slovakia), the 
DBPs are found to be compliant with the SGP provisions. 
For four countries (Estonia, Latvia, Sloveni a and Finland), the DBPs are found to be 
broadly compliant with the SGP provisions.  For Estonia, Latvia and Finland, the plans might 
result in some deviation from the adjustment  paths towards each country's medium-term 
budgetary objective (MTO). In the case of Slove nia, while the headline deficit might be brought 
below 3% of GDP by the deadline set under the Ex cessive Deficit Procedure, a shortfall in the 
fiscal effort puts at risk the correction of the ex cessive deficit in a timely and sustainable manner. 
The Commission invites the authorities to take  the necessary measures within the national 
budgetary process to ensure that the 2015 budget will be compliant with the SGP. 
For seven countries (Belgium, Spain, France, Ital y, Malta, Austria and Portugal), the DBPs 
pose a risk of non-compliance. For Austria, the plans might result in a significant deviation from 
the adjustment paths towards the MTO, which woul d be also the case for Malta if it moved to the 
preventive arm. The DBPs of Spain, France,  Malta and Portugal contain risks as regards 
compliance with the Excessive Deficit Procedure requirements. For France in particular, the 
information available indicates that the country has not taken effective action in 2014 at this stage 
and is at risk of non-compliance in 2015. Belgium and Italy, currently under the preventive arm of 
the SGP, are at risk of non-compliance with the debt rule. The Commission invites the authorities 
to take the necessary measures within the nati onal budgetary process to ensure that the 2015 
budget will be compliant with the SGP. 
8. In some cases, the risk of non-compliance has implications for possible steps under the Excessive 
Deficit Procedure. In the cases of France, Ital y and Belgium, the Commission will examine in 
early March 2015 its position vis-à-vis their obligations under the SGP in the light of the 
finalisation of the budget laws and the expected sp ecification of the structural reform programmes 
announced by the authorities in their letters of  21 November. These three Member States have 
committed at the highest level of government  to adopt and implement growth-enhancing 
structural reforms by early 2015 that are expected to have an impact on the sustainability of public 
finances over the medium term. 
 
4 
 Table of Contents  
1. Introduction................................................................................................................ .........................5 
2. Main findings for the euro area............................................................................................. ..............6 
3. Overview of individual Draft Budgetary Plans................................................................................ .12 
ANNEX 1: Country-specific assessment of DBPs .......................................................................18 
ANNEX 2: The methodology and assumptions unde rpinning the Commission's 2014 autumn 
forecast....................................................................................................................... ...................23 
ANNEX 3: Sensitivity analysis.................................................................................................. ...25 
ANNEX 4: The implementation of structural reforms: addressing macroeconomic imbalances 
and reducing the tax wedge..................................................................................................... ......28 
ANNEX 5: Graphs  and tables..................................................................................................... ..31 
 
 
 
 
5 
 1. Introduction 
 
To improve economic policy coordination in the Economic and Monetary Union, EU legislation 
foresees that euro area Member St ates submit Draft Budgetary Plans (DBPs) for the following year to 
the Commission by 15 October1. These plans summarise the draft budgets that governments submit to 
national parliaments. On each plan, the Commissi on provides an Opinion, assessing whether it is 
consistent with the country's obligations under the Stability and Growth Pact (SGP). It also provides 
an overall assessment of the budgetary situation an d prospects for the euro area as a whole.  
Sixteen2 euro area Member States sent their 2015 DBPs  to the Commission by 15 October, in line 
with the provisions of the so-called Two-Pack. Be lgium and Latvia initially submitted DBPs on a no-
policy change basis, reflecting the absence of ag reed governmental budgetary policy resulting from 
recent national elections, with Belgium s ubmitting a full programme one week later3.  
While respecting Member States' budgetary autonomy, the Commission's Opinions provide 
independent policy advice, in particular for nati onal governments and parliame nts, to facilitate the 
assessment of the draft budgets' compliance with EU fiscal rules. The Two-Pack provides for a 
comprehensive toolbox to treat economic and budgetary policy as a matter of common concern, as 
intended by the Treaty. 
In addition, in July 2014, the Council invited th e Eurogroup to monitor and coordinate euro area 
Member States' fiscal policies and the aggregate fis cal stance for the euro area to ensure a growth-
friendly and differentiated fiscal policy4. The Council recommended that  euro area Member States 
take action, individually and collectively over 2014 ‐15 to "coordinate fiscal policies of the euro area 
Member States, in close cooperation with the Commission, in particular when assessing Draft 
Budgetary Plans to ensure a coherent and growth ‐friendly fiscal stance across the euro area. Improve 
the quality and sustainability of public finances by pr ioritising material and immaterial investment at 
national and EU levels. Ensure that national fiscal  frameworks, including national fiscal councils, are 
strong." This recommendation is an anchor for the Commission's assessment. 
                                                            
1  As set out in Regulation (EU) No 473/2013 on common provi sions for monitoring and assessing Draft Budgetary Plans 
and ensuring the correction of excessive deficits of the Member States in the euro area. It is one of the two Regulations 
in the so-called Two-Pack which entered into force in May 2013.  
2  Greece and Cyprus, the remaining euro area countries under a macroeconomic adjustment programme, are not obliged to 
submit a plan, as the programme already provides for close fiscal monitoring. 
3  Latvia is invited to re-submit an updated plan in time to allow the Commission to adopt an informed Opinion on the 
DBP and the Eurogroup to hold a proper discussion before th e budget law is planned to be adopted by the national 
parliament. 
4  Council Recommendation of 8 July 2014 on the implementation of the broad guidelines for the economic policies of the 
Member States whose currency is th e euro (OJ C 247, 29.7.2014, p. 143). 
 
6 
 The objective of this Communication is twofold. Fi rstly, it gives an aggregate picture of budgetary 
policy at euro area level, building on a horizontal assessment of the DBPs. This exercise mirrors the 
horizontal assessment of Stability Programmes taking place in the spring, but with a focus on the 
forthcoming year rather than on medium-term fiscal plans. Secondly, it provides an overview of the 
DBPs at country level, explaining the Commission approach in assessing them. This approach boils 
down to assessing compliance with the requirements of the SGP.  
2. Main findings for the euro area 
 
Overall findings 
This year's DBPs confirm the slowdown of GDP growth  compared to the Commission's spring 2014 
forecast, published in May. According to the macro economic assumptions provided in the plans, GDP 
is now projected to grow by 1.0% in 2014 in the sixteen euro area Member  States concerned (EA-16), 
below the 1.3% expected at the time of the Stab ility Programmes (SPs) in April 2014 (Table 1). For 
2015, the forecast pick-up in EA-16 GDP growth to 1. 5% is below the 1.7% projected in the SPs. The 
downward revision is relatively widespread, with on ly Spain, Ireland, Malta and Slovenia reporting 
upward revisions to their growth forecasts, while the majority of other countries show significant 
reductions.  
The inflation  outlook has also been revised down due to falling energy and food prices but also 
reflecting the substantial slack in the economy. Accord ing to the DBPs, this year's inflation rate of 
0.8%  in the EA-16 will mark the trough, followed by  a slightly higher rate in 2015 (1.2%). 
After returning below 3% of GDP in 2013 for the first time since 2008, the aggregate headline 
budget deficit  for the EA-16 is expected to fall to 2. 6% of GDP in 2014, according to the DBPs, 
though this is higher than the 2.4% deficit project ed in the SPs. A slowdown in deficit reduction is 
also evident in 2015, with the a ggregate headline deficit falling by 0.4 percentage points to 2.2% of 
GDP, compared to a fall of 0.6 percentage points proj ected in the spring. This higher deficit projection 
is linked to the worsening growth outlook for 2014-15,  but is also driven by a reduction in the fiscal 
effort (see hereafter). 
At 92.5% of GDP in 2015, the aggregate debt ratio  is planned to remain virtually unchanged from 
this year. This contrasts with the SPs which had pr ojected that debt would start declining next year. 
The aggregate ratio masks a wide range of national figures, from 133% of GDP in Italy to just below 
10% of GDP in Estonia. In terms of levels, the dow nward revisions to debt ratios from the SPs reflect 
the implementation of the new ESA 2010 system of national accounting, which more than 
compensates for the worsening growth and inflation outlook and reduced fiscal consolidation effort.  
Examining the planned fiscal effort  in more detail, the DBPs do not provide evidence of 
consolidation at the aggregate level, as measured by  a positive change in the structural balance, in 
2014 and 2015. For both years, an improvement of 0.3% of GDP had been anticipated by Member 
States in their SPs. Given that six of the EA-16 Me mber States remain in Excessive Deficit Procedure 
in 20145 and that only two of the Member States in the preventive arm are expected  to be at or above 
their MTOs in 2014-15, this appears to point to a shortfall with respect to the requirements of the 
                                                            
5  France, Ireland, Malta, Portugal, Slovenia, Spain. 
 
7 
 SGP. However, the aggregate structural adjustment  can only be viewed as illustrative in this respect, 
as it fails to capture the important differences across Member States vis-à-vis the requirements of the 
SGP, which are the subject of the Commission's country-specific assessments. In addition, any 
conclusion on the overall consolidation effort based on the change in structural balance should be 
qualified, as the structural balance may not always give an accurate picture of the underlying fiscal 
effort due, for example, to an unusual response of revenue to economic growth. However, the lack of 
fiscal consolidation at the aggregate level is confir med by using an alternative measurement of fiscal 
effort, which suggests an adjustment of just 0.2% of GDP in both 2014 and 20156. 
 
Table 1: Overview of economic and budgetary aggregates (EA-16) for 2014-15 
2014 2015 
  2014 
Stability 
Programmes 
(April) Draft 
Budgetary 
Plans 
(October) Commission 
2014 autumn 
forecast 
(November) 2014 
Stability 
Programmes 
(April) Draft 
Budgetary 
Plans 
(October) Commission 
2014 autumn 
forecast 
(November) 
Real GDP 
growth (% 
change)  1.3 1.0 0.8 1.7 1.5 1.1 
HICP inflation 
(% change) 1.1 0.8 0.6 1.4 1.2 0.9 
Headline deficit  
(% GDP)  -2.4 -2.6 -2.6 -1.8 -2.2 -2.4 
Change in 
structural 
balance  
(p.p. GDP)  0.3 0.0 0.1 0.3 0.1 0.0 
Debt (% GDP)  94.3 92.7 93.1 93.1 92.5 93.6 
Cyclically-
adjusted 
expenditure 
ratio (% 
potential GDP)  47.8 47.9 48.0 47.5 47.7 48.0 
Cyclically-
adjusted 
revenue ratio  
(% potential 
GDP)  46.9 46.7 46.8 46.7 46.5 46.8 
 
Composition of public finances 
                                                            
6  An alternative measure of the fiscal effort in the DBPs can be obtained by considering the amount of discretionary 
revenue measures net of the change in  cyclically-adjusted expenditure ratio (Table A5.7). This suggests a fiscal 
adjustment of 0.2% of GDP both in 2014 and 2015 for the EA-16. While these  estimates are slightly higher than the 
changes in the structural balance (0.0% and 0.1% of GDP , respectively, in the two ye ars), the downward revisions 
compared to the spring are of the same order of magnitude for both measures of effort. This confirms that the aggregate 
fiscal effort derived from the DBPs is smaller than what was projected in the SPs in spring. 
 
8 
 For the euro area as a whole, the DB Ps foresee only limited changes in the composition of public 
finances in 2014-15 (Table A5.5). The cyclically adjusted  expenditure ratio is e xpected to recede very 
slightly in 2015 (by 0.2 percentage points), offsetting the effects of a similarly limited increase in 
20147. Most expenditure categories are expected to fall, including the public sector wage bill and 
interest expenditures in particular (Graph A5.2 ), with the exception of social transfers.  
The taxation measures presented in the DBPs, thou gh moving in a more growth-friendly direction, 
would only moderately affect tax composition  in 2015. The impact of a 0.1 percentage point decrease 
in revenue from social contributions is offset by a 0.1 percentage point increase in direct tax revenues 
(Graph A5.3). The share of indirect taxes is e xpected to remain stable in relation to GDP. 
Many DBPs refer to measures to address the tax burden on labour , known as the tax wedge. The 
staff working documents accompanying the Commissi on's Opinions on the DBPs contain a dedicated 
box on "addressing the tax wedge" for those Member States that were issued a country-specific 
recommendation (CSR) in this area8 and/or that have announced a relevant reform in their DBPs. 
Annex IV of this Communication contains  further information on this issue. 
Overall, the DBPs show a clear awareness in euro area Member States of the benefits of addressing 
high taxes on labour. First, whereas the tax wedge h as steadily increased in most euro area Member 
States over the past few years, the DBPs only in clude very few measures that would increase it 
further. By contrast, many Member States are planning or implementing measures to reduce the tax 
wedge. Second, measures to lower the tax wedge are not foreseen only by Member States with a 
relatively high tax wedge but also by those with a relatively low tax wedge. Third, many measures are 
targeted at lower income categories, by increasing the tax free allowance or by reducing taxes at low 
income levels or social contributions for low-wage  earners. However, most tax wedge reforms remain 
relatively modest compared with the challenges. Th is reflects both the lack of fiscal space in many 
countries and the difficulty in finding compensati ng measures, either by cutting public spending or 
raising taxes that are less detrimental to growth , such as consumption, property or environmental 
taxes. 
Differences in forecasts 
An innovation of the Two-Pack is intended to m itigate the potential for divergence between Member 
States' and the Commission's forec asts, namely the introduction of a requirement for greater oversight 
of the forecast process by fiscal councils. Box 1 on page 10 shows how Member States have applied 
the requirement that draft budgets be based on independent macroeconomic forecasts . 
In terms of the overall fiscal outlook , the aggregate EA-16 headline deficit emerging from the DBPs 
for 2015 is 0.2 percentage points of GDP lower th an in the Commission's forecast. Firstly, the DBPs 
assume a larger fiscal effort (0.2% of GDP versus  -0.1% of GDP in the Commission's forecast as 
measured using the alternative indicator referred to above; see Table A5.7). Secondly, the plans 
forecast higher GDP growth for 2015 (1.5% agai nst 1.1% in the Commission's forecast, with 
Germany accounting for a signifi cant part of the difference9). However, the macroeconomic 
                                                            
7  The non-cyclically adjusted ratio would fall more signifi cantly in 2015, by about 0.6 percentage points, given positive 
'denominator effects' linked to a narrowing output gap. 
8  OJ C 247, 29.7.2014, pp. 1-140. 
9  The macroeconomic scenario underlying the Draft Budgetary Pl an is based on the spring issue of the German Federal 
Government's forecast published in April. However, given that  further official statistics and worsened business cycle 
 
 
9 
 assumptions are not the main explanation for the diffe rence in the deficit forecasts for 2015. This is 
because Member States in the aggregate, while having  a higher GDP growth projection, also forecast 
a lower reaction of revenues to growth than in the Commission's forecast10. This lower projected 
elasticity broadly offsets the impact of higher exp ected GDP growth. Most of the difference between 
the Commission's deficit forecast and the DBPs act ually comes from a different evaluation of the 
effort on the expenditure side. 
Differences between individual DBPs' and the Co mmission's headline deficit forecast can be 
relatively large, for reasons varying from one country to another. The Commission forecasts the 
deficit to be higher in Belgium, Spain, Malta, Portugal and Slovakia compared to the respective 
DBPs, with the largest differential in the case of Malta (Table A5.1 and Graph A5.4). The remaining 
forecast differentials are all within a 0.2 percentage  point range and the Commission's forecast is for a 
lower deficit figure in the Netherlands and Austria. 
Similar to the aggregate headline defic it projections, the Commission forecasts higher aggregate debt  
than projected by Member States. The Commissi on forecasts that debt will continue to rise 
moderately in 2015, to over 93% of GDP, versus a virtually unchanged level in the DBPs. The main 
reasons behind this difference are higher headline de ficits and lower nominal GDP growth projected 
by the Commission. Here again, differences between the DBPs and the Commission's forecast can be 
larger at Member State level, for reasons varying fro m one country to another. The larger differentials 
relate to Belgium, Germany, Latvia and Malta, wh ere the DBPs project debt to be around 2% of GDP 
lower than in the Commission's forecast (Table A5 .3 and Graph A5.5). In most cases, the forecast 
differentials range between zero a nd 1% of GDP. The Commission's forecasts a lower deficit only in 
the case of Slovenia. In terms of composition, the Commission's forecast projects that even the limited 
decline in the cyclically adjusted expenditure ratio foreseen in the DBPs  is at risk of not materialising 
(Table A5.5). Within expenditures,  the Commission's forecast confirms that public wages, interest 
payments and possibly public investment could see their weights reduced, while the share of social 
payments may increase further (Graph A5.2). On the revenue side, the Commission's forecasts are 
aligned with the DBPs (Graph A5.3).  
Size and composition of adjustment 
Regarding the size of structural budgetary adjustment , the Commission's forecast gives the same 
message as the DBPs; after three years of sustained fiscal consolidation the aggregate fiscal stance in 
the euro area is neutral in 2014 and is anticipated to remain so in 2015. At the aggregate level, the 
absence of fiscal tightening appears a broadly accep table balance between sust ainability requirements, 
underscored by high and increasing debt ratios, and th e cyclical conditions, which point to significant 
and persistent negative output gaps , projected to diminish only slow ly in the coming years. At the 
same time, the assessments of the plans confirm that  several Member States are currently not expected 
to meet their current obligations under the SGP. Ta ken together these considerations suggest the need 
to closely monitor both the overall fiscal stance of the euro area and its distribution across Member 
                                                                                                                                                                                         
indicators became available after its publication, it describes a significantly  more optimistic outlook for economic 
activity in 2014 and 2015 than the Commission's 2014 autumn forecast. The German Government has updated its own forecast since the submission of the Draft Budgetary Plan.
 
10  The so-called 'net elasticity' of revenues, i.e. the percen tage change in revenues, net of  the effect of discretionary 
measures, for a one per cent ch ange in GDP. The aggregate elasticity of re venues in 2015 arising from the plans is lower 
than that underpinning the Commission's forecast (0.8 and 1.0, respectively; see Table A5.6).  
 
10 
 States in relation to the room available under the rule s of the SGP. In principle, it would be possible to 
achieve a re-alignment of fiscal policies across count ries that would ensure compliance with the SGP 
in all Member States while avoiding an unwarranted fiscal tightening. This would imply exploiting 
the fiscal space available under the rules in some countries.  
The above considerations also strongly underline the case for an ambitious Investment Plan at the EU 
level to boost aggregate demand and lessen supply si de constraints, and hence support the stimulus 
being provided by accommodative monetary policy.  
This avenue for supporting growth across the euro area is relevant when examining the composition 
of the adjustment of public finances . While the observed move away from taxes on labour – and the 
number of policy actions taken to re duce the tax burden on labour – are steps in the right direction, the 
composition of expenditure shows little if any progress towards bei ng more growth-friendly. This 
underscores the need for a better alignment of Member  States' policies with the priorities of the Jobs, 
Growth and Investment package, including by maki ng use of the flexibility available under the rules. 
 
Box 1: The contribution of independent fiscal institutions to the DBPs for 2015 
Articles 1, 4 and 5 of the Two-Pack Regulation (EU) No 473/2013 refer to the concept of independent 
bodies. The Regulation represents a further specificati on and extension of prev ious requirements laid 
down in EU and intergovernmental legislation empowering independent bodies with various fiscal-
related tasks. Two supplementary  fields are earmarked: (i) monitoring of compliance with fiscal 
rules and (ii)  macroeconomic forecasts. Impl ementing provisions with a view to providing guidance to 
Member States have been defined in the Code of Conduct on the Two-Pack in relation to the 
forecasting process. Supplementing these provisions, th e Council on 8 July 2014 called for euro area 
Member States "to ensure that national fiscal fr ameworks, including nationa l fiscal councils, are 
strong". 
Specifically,  according to  Article 4(4) of the Regulation, draft budgets "shall be based on 
independent macroeconomic forecast s", which means according to Article 2(1b) that they must be 
"produced or endorsed by independent bodies". Many  of the DBPs submitted in October 2014 contain 
references to the Two-Pack requirements, with Member States opting for either the independent 
production or endorsement of the underlying macroeconomic forecasts. 
According to the DBPs, forecasts have been produc ed by separate entities in five Member States: 
Austria  (Österreichisches Institut für Wirtschaftsforschung,  WIFO), Belgium ( Bureau Fédéral du 
Plan, FPB), Luxembourg (STATEC), the Netherlands ( Centraal Planbureau, CPB) and Slovenia 
(Urad Rs Za Makroekonomske Analize in Razvoj, UMAR-IMAD). The Ministry of Economics still 
produces Germany's forecasts, but on the basis of the Joint Economic Forecast (JEF) elaborated by 
research institutes. The independent Council of Economic Advisors in November reviews their 
plausibility. The DBP forecast is based on the spring  issues of the JEF and the government's forecast 
and does not factor in the autumn issues of the JEF and the government's macroeconomic projections. 
In Finland, the Ministry of Finance produces the macroeconomic forecasts internally but 
acknowledges the need for measures to ensure th e formal independence of the producing team. 
The DBPs of Estonia, Spain, Ireland, Italy and Slovakia referred to the opinions on the 
macroeconomic forecasts delivered by separate bodies ( Eelarvenõukogu , Autoridad Independiente de 
 
11 
 Responsabilidad Fiscal  (AIReF), Irish Fiscal Advisory Council (IFAC), Ufficio Parlamentare di 
Bilancio  (UPB) and the Slovakian Macroeconomic Fo recasting Committee respectively). In France, 
Malta and Portugal, although an opinion has b een delivered by a separate body (the HCFP ( Haut 
Conseil des Finances Publiques) , the National Audit Office of Malta and the CFP ( Conselho das 
Finanças Públicas ) respectively), there is no reference to it in the DBP. For France and Portugal the 
opinion was eventually included in the budgetary doc uments. In Latvia, the released no-policy change 
budget document does not qualify as a DBP, so does not formally trigger the need for an opinion of a 
separate body. For Estonia, Spain, Ireland, Italy, Malta, Portugal and Slovakia, the forecasts were 
largely endorsed by the above-mentioned bodies while a number of risks were highlighted. For 
France, the macroeconomic scenario for 2015 was de emed optimistic by the HCFP. Downward risks 
arising from external developments, potentially mate rialising in lower than expected export growth, 
were referred to in Estonia, Spain, France, Ireland,  Malta, and Portugal. Uncertainties in relation to 
domestic demand (France), consumption (Spain) or  investment (Malta) were also mentioned. 
 
 
12 
 3. Overview of individual Draft Budgetary Plans 
 
The Commission's Opinions on the Draft Budgetary Plans focus on compliance with the Stability and 
Growth Pact (SGP) and recommendations issued on this basis. For Member States in Excessive 
Deficit Procedure (EDP), the Commission's Opin ions take stock of progress in correcting the 
excessive deficits, with respect to both headline and st ructural deficit targets. For euro area Member 
States in the preventive arm of the Pact, i.e. not in EDP, the progress towards the Medium-Term 
Budgetary Objectives (MTOs) is a ssessed to see whether it is in line with the SGP and the fiscal 
Country Specific Recommendations (CSRs) addressed to Member States by the Council in July.  
The assessment of plans is based on the Commission's autumn 2014 forecast.  
The Commission, after having carried out consultations  with certain Member States to request further 
information or to highlight some initial concerns re lated to the DBPs they submitted, did not find by 
the end of October any DBP to be in "particularly  serious non-compliance" as referred to in Article 
7(2) of Regulation (EU) No 473/2013. Still, several of  the submitted plans give rise to concerns about 
risks of non-compliance. Tables 2a and 2b summari se the assessments of individual countries' DBPs 
as per the Commission Opinions adopted on 28 Nove mber together with the assessment of progress 
with fiscal-structural11 reforms. In order to facilitate comparison, the assessment of the Draft 
Budgetary Plans is summarised in three broad categories:  
• Compliant:  According to the Commission's forecast, there is no need to adapt the budgetary 
plans  within the national budgetary  procedure to ensure comp liance with the SGP rules. 
However, in cases where the Commission's assessment of the DBP is subject to particular risks, 
the Commission invites the Member States concerned to react as needed. 
• Broadly compliant:  The Commission invites the authorities to take the necessary measures  
within the national budgetary process to ensure that the 2015 budget will be compliant with the 
SGP based on the following reasoning: 
For Member States in EDP: while the Commission's forecast pr ojects that the headline deficit 
will be brought below the 3% of GDP Treaty refe rence value by the EDP deadline, there is a 
noticeable shortfall in fiscal effort that puts at risk the correction of the excessive deficit in a 
timely and sustainable manner.  
For Member States under the preventive arm of the SGP:  according to the Commission's forecast, 
the required structural adjustment towards the MTO is not expected to be delivered in 2015, but 
the shortfall relative to the requirement would not represent a significant deviation from the 
required adjustment towards the MTO12. Should this situation persist over the years, it might 
                                                            
11 Structural reforms with a direct budgetary impact.  
12  For a Member State that has not reached its MTO, the deviation will be considered significant if: 
 (i) the deviation of the structural balance from the appropriate adjustment path is at least 0.5% of GDP in one single year 
or at least 0.25% of GDP on average per year in two consecutive years; and 
 (ii) an excess of the rate of growth of expenditure net of  discretionary revenue measures over the appropriate adjustment 
path defined in relation to the reference medium-term ra te of growth has had a negative impact on the government 
balance of at least 0.5 of a percentage  point of GDP in one single year, or cumulatively in two consecutive years. 
 A deviation may also be considered signi ficant if only one of the two conditions (i ) and (ii) is verified and the overall 
assessment shows that this condition is the most a ppropriate for gauging the underlying fiscal effort.  
 
13 
 however lead to a significant deviation from th e required adjustment. These Member States are 
compliant with the debt reduction benchmark where applicable. 
• Risk of non-compliance:  According to the Commission's fore cast, the DBP is not expected to 
ensure compliance with the SGP requirements. The Commission therefore invites the authorities 
to take the necessary measures  within the national budgetary process to ensure that the 2015 
budget will be compliant with the SGP based on the following reasoning:  
For Member States in EDP: the Commission's forecast for 2015, if confirmed ex post, could lead 
to the stepping up of the EDP as the fiscal effort is not projected to be delivered and the headline 
target is expected to be missed.  
For Member States under the preventive arm of the SGP:  the Commission's forecast projects a 
significant deviation from the required adjustment path towards the MTO in 2015 and/or non-
compliance with the debt reduction benchmark if  applicable (whichever is more binding). 
The impact of the changeover to the ESA2010 sta ndard of national accounts and other statistical 
revisions on both deficit and debt figures have been  taken into account in the assessment of plans (the 
impact of the switch to ESA2010 was most significant in the case of France, Ireland, Italy, Portugal 
and Finland). In particular, statistical revisions ha ve been dealt with in qualitative terms and, where 
feasible, also in quantitative terms in the staf f working documents accompanying the Commission's 
Opinions, whenever their impact affected the ma in variables used for the assessment of compliance 
with the SGP. Other statistical changes have be en explicitly mentioned fo r Estonia, Latvia and 
Slovenia. In other cases, the impact was not significant and/or would not change the assessment. 
Moreover, the Commission has assessed the degree of overall compliance with the fiscal-structural 
reforms outlined in the 2014 CSRs. The assessment of the DBPs is summarised in five broad 
categories. These are: 
• No progress: The Member State has neither announced nor adopted any measures to address the 
relevant CSR.  
• Limited progress:  The Member State has announced so me measures to address the relevant 
CSR, but these measures appear insufficient and/ or their adoption/implementation is at risk. 
• Some progress:  The Member State has announced or a dopted measures to address the relevant 
CSR. These measures are promising, but not al l of them have been implemented yet and 
implementation is not certain in all cases. 
• Substantial progress:  The Member State has adopted measures, most of which have been 
implemented. These measures go a long way to addressing the relevant CSR. 
• Fully addressed:  The Member State has adopted and implemented measures that address the 
relevant CSR appropriately. 
 
14 
 Table 2a: Overview of individual Commission Opinions on the Draft Budgetary Plans – 
Member States under the preventive arm of the SGP 
 Overall compliance of Draft Budgetary Plan 
with Stability and Growth Pact (SGP)   
Overall compliance with the fiscal-
structural reforms suggested in 2014 
Country Specific Recommendations 
(CSRs) 
Country  
Overall conclusion 
based on the 
Commission's 2014 
autumn Forecast  Compliance with the 
preventive arm 
requirements in 2014-
15 Overall 
conclusion on 
progress towards 
fiscal-structural 
reforms  
Main measures in 
DBP to address tax 
wedge CSRs 
BE Risk of non-
compliance  2014: some deviation 
from the adjustment 
path towards the MTO; 
compliance with the 
debt benchmark at risk 
2015: some deviation 
from the adjustment 
path towards the MTO; 
compliance with the 
debt benchmark at risk Some progress 'Tax wedge' CSR 
 
Increase in personal 
income tax deduction. 
Reductions of employer 
social security 
contributions 
DE Compliant 2014: MTO 
overachieved; 
compliance with the 
debt benchmark 
2015: MTO 
overachieved; 
compliance with the 
debt benchmark Limited progress'Tax wedge' CSR 
 
As of 2014, increase in 
personal income tax 
allowance and non-
implementation of 
initially planned 
reduction in pension 
contribution rate to 
finance additional 
pension benefits. As of 
2015, increase in long-
term care contribution 
rate and reform of 
financing of healthcare 
insurance 
EE Broadly compliant 2014: some deviation 
from the adjustment 
path towards the MTO 
2015: some deviation 
from the adjustment 
path towards the MTO No progress 'Tax wedge' CSR 
 
Reduction of personal 
income tax rate and 
unemployment 
insurance contributions. 
Increase of basic 
allowance 
 
15 
  
IT Risk of non-
compliance  2014: allowed to deviate 
from the adjustment 
path towards the MTO 
due to exceptionally 
severe economic 
conditions; compliance 
with the debt benchmark 
at risk 
2015: significant 
deviation from the 
adjustment path towards 
the MTO; compliance 
with the debt benchmark 
at risk Some progress 'Tax wedge' CSR 
 
Exemption of labour 
costs from the taxable 
base of the regional tax 
on businesses. 
Permanent tax credit 
(recorded as social 
transfer in ESA2010) to 
low-wage employees, 
currently only financed 
for 2014. Exemption of 
employer social security 
contributions for three 
years for new hirings 
under open-ended 
contracts during 2015 
LV Broadly compliant 2014: no deviation from 
the adjustment path 
towards the MTO 
2015: some deviation 
from the adjustment 
path towards the MTO 
based on no-policy 
change DBP Limited progress'Tax wedge' CSR 
 
No measures in DBP  
submitted by outgoing 
government. However, 
the Tax Policy Strategy 
for 2015-17 includes 
plans to increase 
minimum wage and 
untaxed minimum 
income 
LU Compliant 2014: MTO 
overachieved 
2015: no deviation from 
the MTO Some progress No 'tax wedge' CSR 
MT13 Risk of non-
compliance 2014: in EDP 
2015: significant 
deviation from the 
adjustment path towards 
the MTO; compliance 
with the debt benchmark Some progress No 'tax wedge' CSR 
NL Compliant 2014: no deviation from 
the MTO; compliance 
with the debt benchmark 
2015: no deviation from 
the MTO; compliance 
with the debt benchmark Some progress 'Tax wedge' CSR 
 
Reform of employee tax 
credit, reducing burden 
on lower and middle 
incomes. Reduction of 
the personal income tax 
rate in the lowest tax 
bracket 
                                                            
13  Malta is currently under the corrective arm, but could move  to the preventive arm from 2015 if a timely and sustainable 
correction is achieved.  
 
16 
  
AT Risk of non-
compliance 2014: some deviation 
from the adjustment 
path towards the MTO; 
compliance with the 
debt benchmark 
2015: significant 
deviation from the 
adjustment path towards 
the MTO; compliance 
with the debt benchmark Limited progress'Tax wedge' CSR 
 
General announcement 
of reform to reduce the 
tax wedge to be decided 
in March 2015 
SK Compliant 2014: no deviation from 
the adjustment path 
towards the MTO 
2015: no deviation from 
the adjustment path 
towards the MTO Limited progress No 'tax wedge' CSR 
FI Broadly compliant 2014: some deviation 
from the MTO 
2015: some deviation 
from the adjustment 
path towards the MTO Some progress No 'tax wedge' CSR 
 
Table 2b: Overview of individual Commission Opinions on the Draft Budgetary Plans – 
Member States under the corrective arm of the SGP 
 Overall compliance of Draft 
Budgetary Plan with Stability and 
Growth Pact   
Overall compliance with the fiscal-structural 
reforms suggested in 2014 CSRs 
Country  Overall conclusion 
based on the 
Commission's 2014 
autumn Forecast  Compliance with 
the Excessive 
Deficit Procedure 
in 2014-15  Overall conclusion on 
progress towards 
fiscal-structural 
reforms  
Main measures in DBP 
to address the tax wedge
ES Risk of non-
compliance 2014: headline 
target met 
2015: in the absence 
of additional 
measures 
compliance not 
ensured Some progress 'Tax wedge' CSR 
 
Reduction of personal 
income tax rates. 
Temporary reduction in 
social contributions on 
new contracts signed in 
2014 
FR Risk of non-
compliance 2014: risk of no 
effective action 
2015: in the absence 
of additional 
measures 
compliance not 
ensured Limited progress 'Tax wedge' CSR 
 
As of 2014, new tax credit 
for wages of up to 2.5 
times the minimum wage. 
Reduction in employer 
social security 
contributions. Reduction 
in personal income tax for 
low wage earners 
 
17 
  
IE Compliant 2014: effective 
action 
2015: timely 
correction expected Some progress No 'tax wedge' CSR 
PT Risk of non-
compliance 2014: risk of no 
effective action 
2015: in the absence 
of additional 
measures 
compliance not 
ensured Limited progress No 'tax wedge' CSR 
SI Broadly compliant 2014: risk of no 
effective action 
2015: timely 
correction expected Limited progress No 'tax wedge' CSR 
 
 
 
18 
 ANNEX 1: Country-specific assessment of DBPs 
 
Member States under the preventive arm of the Stability and Growth Pact (SGP)  
Plans compliant with the country's obligations 
The Commission is of the opinion that the Draft Budgetary Plan of Germany , which is currently 
under the preventive arm of the SGP and subject to th e transitional debt rule, is compliant with the 
provisions of the SGP. However, the sizeable fis cal space, the investment needs and the very low 
interest rates, which imply that the social return s largely outweigh the borrowing costs, leave scope to 
boost public investment. Furthermore, it is necessar y that Germany ensures that an independent body 
in charge of producing or endorsing macroeconomic forecasts is in place. The Commission is also of 
the opinion that Germany has made limited progress with  regard to the structural part of the fiscal 
recommendations issued by the Council in the contex t of the 2014 European Semester and thus invites 
the authorities to accelerate implementation. 
The Commission is of the opinion that the Draft Budgetary Plan of Luxembourg , which is currently 
under the preventive arm, is complia nt with the provisions of the SGP. In particular, in 2015 
Luxembourg plans to make use of its buffer with resp ect to the MTO as the struct ural surplus is set to 
deteriorate, while still respecting the country-specifi c MTO. The reduction in the structural surplus is 
mostly related to the decrease in VAT revenues li nked to the change in e-commerce legislation 
(around 1½% of GDP), which is only partially compen sated by the new measures planned in the Draft 
Budgetary Plan. However, the VAT revenues losses c ould turn out to be larger than expected. The 
Commission therefore invites the authorities to sta nd ready to take additional measures in case these 
risks should materialise. The Commission is also of the opinion that Luxembourg made some progress 
with regard to the structural part of the fiscal r ecommendations issued by the Council in the context of 
the 2014 European Semester and invites the authorities to make further progress. 
The Commission is of the opinion that the Draft Budgetary Plan of the Netherlands , which is 
currently under the preventive arm and subject to the transitional debt rule, is compliant with the 
provisions of the SGP. The Commission invites the authorities to rigorously implement the 2015 
budget. The Commission is also of the opinion th at the Netherlands has made some progress with 
regard to the structural part of the fiscal recommenda tions issued by the Council in the context of the 
2014 European Semester and invites th e authorities to make further progress. 
The Commission is of the opinion that the Draft Budgetary Plan of Slovakia , which is currently under 
the preventive arm, is compliant with the provisions of the SGP. In particular, based on the currently 
available information, the general government defi cit would not exceed the Treaty reference value, 
although there are some uncertainties with respect to  the deficit developments in 2014. Slovakia was 
found to be eligible to the investment clause in 2014, which allows for a temporary deviation from the 
required adjustment path towards the MTO in that y ear. In 2015, when this temporary deviation has to 
be compensated for, Slovakia is projected to make  sufficient progress towards the MTO. In light of 
the above, and taking into account that the nationa l debt brake, underpinning the Draft Budgetary 
Plan, is no longer expected to apply, the Commission  invites the authorities to stand ready to take the 
necessary measures within the national budgetary pro cess to ensure that the 2015 budget will remain 
compliant with the SGP. The Commission is also of the opinion that Slovakia has made limited 
progress with regard to the structural part of the fiscal recommendations issued by the Council in the 
context of the 2014 European Semester and thus invites the authorities to accelerate implementation. 
 
19 
 Plans broadly compliant  
The Commission is of the opinion that the Draft Budgetary Plan of Estonia , which is currently under 
the preventive arm, is broadly compliant with the provisions of the SGP. In particular, based on the 
Commission's forecast, some deviation from the adjust ment path towards the MTO is to be expected 
in 2015. The Commission invites the authorities to take the necessary measures within the national 
budgetary process to ensure that the 2015 budget will  be compliant with the SGP. The Commission is 
also of the opinion that Estonia has made no progress with regard to the structural part of the fiscal 
recommendations issued by the Council in the contex t of the 2014 European Semester and thus invites 
the authorities to accelerate implementation. 
Latvia  submitted on 15 October a Draft Budgetary Pl an based on a no-policy change basis. The 
Commission is of the opinion that the Draft Budgetary Plan of Latvia, which is currently under the 
preventive arm, is broadly compliant with the provisions of the SGP. The Commission invites the 
authorities to take the necessary measures in the 2015 budget in order to be compliant with the SGP. 
The Commission is also of the opinion that Latv ia has made limited progress with regard to the 
structural part of the fiscal recommendations issued by the Council in the context of the 2014 
European Semester and thus invites the author ities to accelerate implementation. Following the 
submission of an updated Draft Budgetary Plan  on 22 November 2014 by the new government, the 
Commission aims to adopt an Opinion on the updated Draft Budgetary Plan before the draft budget 
law is planned to be adopted by the national parliament. 
The Commission is of the opinion that the Draft Budgetary Plan of Finland , which is currently under 
the preventive arm, is broadly compliant with the provisions of the SGP. The Commission invites the 
authorities to take the necessary measures within th e national budgetary process to ensure that the 
2015 budget will be compliant with the SGP. Furthe rmore, Finland should put in place the appropriate 
legal framework to guarantee that the macro economic forecasts underlying the draft budget are 
independently endorsed or produced. The Commission is also of the opinion that Finland has made 
some progress with regard to the structural part  of the fiscal recommendations issued by the Council 
in the context of the 2014 European Semester and invites the authorities to make further progress. 
Plans at risk of non-compliance 
The Commission is of the opinion that the Draft Budgetary Plan of Belgium , which is currently under 
the preventive arm of the SGP and subject to the de bt rule, is at risk of non-compliance with the 
provisions of the SGP. The Commission therefore invites the authorities to take the necessary 
measures within the national budgetary process to en sure that the 2015 budget will be compliant with 
the SGP. The Commission is also of the opinion that Belgium has made some progress with regard to 
the structural part of the fiscal recommendations issued by the Council in the context of the 2014 
European Semester and invites the authorities to make further progress. The Commission will 
examine in early March 2015 its position vis-à-vis Be lgium's obligations under the SGP in light of the 
finalisation of the budget law and of the expected specification of the structural reform programme 
announced by the authorities in the letter of 21 N ovember signed by Prime Minister Michel, Minister 
van Overtveldt and Minister Jamar. 
The Commission is of the opinion that the updated Draft Budgetary Plan of Italy , which is currently 
under the preventive arm and subject to the debt rule, is at risk of non-compliance with the 
requirements of the SGP. The Commission therefor e invites the authorities to take the necessary 
measures within the national budgetary process to en sure that the 2015 budget will be compliant with 
 
20 
 the SGP. The Commission is also of the opinion that  Italy has made some progress with regard to the 
structural part of the fiscal recommendations issued by the Council in the context of the 2014 
European Semester, but invites the authorities to make further progress. In this context, policies 
fostering growth prospects, keeping current primar y expenditure under strict control while increasing 
the overall efficiency of public spending, as well as  the planned privatisations, would contribute to 
bring the debt-to-GDP ratio on a declining path consis tent with the debt rule over the coming years. 
The Commission will examine in early March 2015 its position vis-à-vis Italy's obligations under the 
SGP in light of the finalisation of the budget law an d of the expected specification of the structural 
reform programme announced by the authorities in  the letter of 21 November signed by Minister 
Padoan. 
The Commission is of the opinion th at the Draft Budgetary Plan of Malta  is at risk of non-compliance 
with the provisions of the SGP. Malta is currently  under the corrective arm, but could become subject 
to the preventive arm from 2015 in case a timely and su stainable correction is achieved. According to 
the Commission's forecast, the structural effort  in 2014 is far from what was recommended by the 
Council in the EDP recommendation, highlighting the ri sk that the correction of the excessive deficit 
may not be achieved, owing to the apparent lack of a sufficient effort to support it. Also, based on the 
Commission's forecast, compliance with the debt rule falls slightly short in 2014. Finally, a significant 
deviation from the adjustment path towards th e MTO is to be expected in 2015 based on the 
Commission's forecast, according to both the stru ctural balance and the expenditure benchmark, 
unlike in the Draft Budgetary Pl an. The Commission therefore invit es the authorities to take the 
necessary measures within the national budgetary process to ensure that the 2015 budget will be 
compliant with the SGP. The Commission acknowledges that Malta has made some progress with 
regard to the structural part of the fiscal recommenda tions issued by the Council in the context of the 
2014 European Semester. However, it invites th e authorities to accelerate progress on the planned 
efforts to improve the financial sustainability of th e healthcare system, to ensure that further pension 
reform measures are put in place and to ensure that the efforts to improve tax compliance and fight tax 
evasion yield the expected results. 
The Commission is of the opinion that the Draft Budgetary Plan of Austria , which is currently under 
the preventive arm and subject to the transitional de bt rule, is at risk of non-compliance with the 
provisions of the SGP. In particular, the Commission is of the opinion that the Draft Budgetary Plan 
for 2015, after taking into account the measures announ ced in October, implies a significant deviation 
from the adjustment path towards the MTO over 2014- 15 based on both the structural balance and the 
expenditure benchmark pillar. The Commission theref ore invites the authorities to take the necessary 
measures within the national budgetary process to en sure that the 2015 budget will be compliant with 
the SGP. The Commission is also of the opinion that  Austria has made limited progress with regard to 
the structural part of the fiscal recommendations issued by the Council in the context of the 2014 
European Semester and thus invites the author ities to accelerate their implementation efforts. 
Member States under the corrective arm of the Stability and Growth Pact (SGP)  
Plans compliant with the country's obligations 
The Commission is of the opinion that the Draft Budgetary Plan of Ireland , which is currently under 
the corrective arm, is compliant with the provisi ons of the SGP. However, the Commission invites 
Ireland to use the better-than-expected economic re covery to accelerate the reduction of the debt-to-
GDP ratio. While current forecasts are consistent w ith a timely correction of the excessive deficit, 
 
21 
 more ambitious deficit targets for 2015 and 2016 would help to firmly bring the very high government 
debt-to-GDP ratio on a downward path. Finally, the Commission invites Ireland to stand ready, if 
needed, to take the necessary measu res to ensure the timely correction of the excessive deficit in 
2015. The Commission is also of the opinion that Ire land has made some progress with regard to the 
structural part of the fiscal recommendations issued by the Council in the context of the 2014 
European Semester and thus invites the authorities to make further progress. 
Plans broadly compliant 
The Commission is of the opinion that the Draft Budgetary Plan of Slovenia , which is currently under 
the corrective arm, is broadly compliant with the provisions of the SGP. While the Draft Budgetary 
Plan envisages a timely correction of the excessive de ficit as the headline balance is projected to be 
brought below 3% of GDP in 2015, the recommended fisc al effort in structural terms is not expected 
to be met. The Commission invites the authoriti es to stand ready to take the necessary measures 
within the national budgetary process in order to en sure that the 2015 budget will be compliant with 
the SGP. The Commission is also of the opinion that Slovenia has made limited progress with regards to the structural part of the fiscal recommendations  issued by the Council in the context of the 2014 
European Semester and thus invites th e authorities to accelerate implementation. 
Plans at risk of non-compliance 
The Commission is of the opinion that the Draft Budgetary Plan of Spain , which is currently under 
the corrective arm, is at risk of non-compliance with the provisions of the SGP. In particular, the Draft 
Budgetary Plan is not expected to ensure comp liance with the budgetary targets set in the EDP 
recommendation. The Commission therefore invites th e authorities to take the necessary measures 
within the national budgetary process to ensure th at the 2015 budget will be compliant with the SGP. 
The Commission is also of the opinion that Spai n has made some progress towards compliance with 
regard to the structural part of the fiscal recommenda tions issued by the Council in the context of the 
2014 European Semester and invites th e authorities to make further progress.  
The Commission is of the opinion that the Draft Budgetary Plan of France , which is currently under 
the corrective arm, is at risk of non-compliance w ith the provisions of the SGP. Taking into account 
the additional package presented on 27 October, the adju stment in the structural balance is expected to 
be 0.3% of GDP, compared to the 0.8% of GDP recommended by the Council in 2013. The 
Commission therefore invites the authorities to ta ke the necessary measures within the national 
budgetary process to ensure that the 2015 budget will  be compliant with the SGP. The Commission is 
also of the opinion that France h as made limited progress with regard to the structural part of the 
fiscal recommendations issued by the Council in the context of the 2014 European Semester and thus 
invites the authorities to accelerate implementation. Ov erall, the information available so far indicates 
that France has not taken effective action for 2014 at this stage. The Commission will examine in 
early March 2015 its position vis-à-vis France's obliga tions under the SGP in light of the finalisation 
of the budget law and of the expected specification of the structural reform programme announced by 
the authorities in the letter of 21 November signed by Prime Minister Valls. 
The Commission is of the opinion that the Draft Budgetary Plan of Portugal , which is currently under 
the corrective arm, is at risk of non-compliance with the provisions of the SGP. In particular, there is a 
risk that the Draft Budgetary Plan will not fulfil the Council recommendation of correcting the 
excessive deficit by 2015. This risk mainly arises from favourable assumptions of the impact on the budget of macroeconomic developments and from th e lack of structural measures underpinning the 
 
22 
 Plan. The fiscal effort falls clearly short of the recommendation and thus indicates the need for 
sizeable additional structural consolidation measure s for 2015 to underpin a credible and sustainable 
correction of the excessive deficit. The Commissi on therefore invites the authorities to take the 
necessary measures within the national budgetary process to ensure that the 2015 budget will be 
compliant with the SGP. The Commission is also of the opinion that Portugal has made limited 
progress with regard to the structural part of the recommendations issued by the Council in the 
context of the 2014 European Semester and thus invites the authorities to accelerate implementation. 
 
23 
 ANNEX 2: The methodology and assumptions underpinning the Commission's 
2014 autumn forecast  
 
According to Article 7(4) of Regulation (EU) No 473/2013, "the methodology and assumptions of the 
most recent economic forecasts of the Commissi on services for each Member State, including 
estimates of the impact of aggregated budgetary measures on economic growth, shall be annexed to 
the overall assessment." The assumptions underlying  the Commission's 2014 autumn forecast, which 
is produced independently by Commission staff,  are explained in the forecast document itself14. 
Budgetary data up to 2013 are ba sed on data notified by Member States to the Commission before 
1 October 2014 and validated by Eurostat on 21 Oc tober. Eurostat has withdrawn the reservation on 
the quality of the government deficit data reported by the Netherlands, which had been expressed in 
Eurostat's news release of 23 April 2014, due to  uncertainties on the statistical impact of the 
government interventions relating to the nationalisa tion and restructuring of SNS Reaal in 2013, as the 
size of the impact has been clarified with the Du tch statistical authorities. Eurostat has made no 
amendments to the data reported by Member States during the autumn 2014 notification round. 
For the forecast, measures in support of financial stab ility have been recorded in line with the Eurostat 
Decision of 15 July 200915. Unless reported otherwise by the Member State concerned, capital 
injections known in sufficient detail have been incl uded in the forecast as financial transactions, i.e. 
increasing the debt, but not the deficit. Stat e guarantees on bank liabilities and deposits are not 
included as government expenditure, unless there is ev idence that they have been called on at the time 
the forecast was finalised. Note, however, that loans granted to banks by the government, or by other 
entities classified in the government sector, usually ad d to government debt. 
For 2015, budgets adopted or presented to nationa l parliaments and all other measures known in 
sufficient detail are taken into consideration. In pa rticular, all the information included in the DBPs 
submitted by mid-October is reflected in this fo recast. For 2016, the 'no-policy change' assumption 
used in the forecasts implies the extrapolation of re venue and expenditure tre nds and the inclusion of 
measures that are known in sufficient detail.  
European aggregates for general government debt  in the forecast years 2014-16 are published on a 
non-consolidated basis (i.e. not corrected for inter governmental loans). To ensure consistency in the 
time series, historical data are also published on th e same basis. For 2013, th is implies a debt-to-GDP 
ratio in the euro area which is 2.2 percentage point s (1.7 percentage points in the EU) higher than the 
consolidated general government debt ratio published by Eurostat in its news release 158/2014 of 
21 October 201416. General government debt projections for individual Member States in 2014-16 
include the impact of guarantees to the EFSF17, bilateral loans to other Member States, and the 
participation in the capital of the ESM as pl anned on the cut-off date of the forecast. 
                                                            
14  Methodological assumptions underl ying the Commission's 2014 autumn  forecast, available at: 
http://ec.europa.eu/economy_finance/publicatio ns/european_economy/forecasts/index_en.htm ). 
15  Available at: http://epp.eurostat.ec.europa.eu/cache/ ITY_PUBLIC/2-15072009-BP/EN/2-15072009-BP-EN.PDF . 
16  Available at: http://epp.eurostat.ec.europa.eu/cache/ ITY_PUBLIC/2-21102014-AP /EN/2-21102014-AP-EN.PDF . 
17  In line with the Eurostat decision of 27 January 2011 on the statistical recording of opera tions undertaken by the EFSF, 
available at: http://epp.eurostat.ec.europa.eu/cache/ ITY_PUBLIC/2-27012011-AP/EN/2-27012011-AP-EN.PDF.  
 
24 
 According to the Commission's 2014 autumn forecast , the aggregate budgetary measures in the DBPs 
for 2015 amount to around 0.2% of GDP. Expenditure savings are estimated at 0.25% of GDP, while 
revenue measures, in the aggregate, have a slight deficit-increasing effect. Overall, the mechanical 
impact on growth in the short-term w ould be around 0.15 percentage points. 
It is important to be prudent in interpreting this estimate:  
• Not acting on fiscal imbalances could heighten fina ncial-asset fragility and lead to higher spreads 
and lending rates, with a negative impact on growth.  
• The Regulation aims at evaluating the effect of the measures taken in the DBPs. So measures 
taken and having entered into force before the DBP are not included in the assessment (even if 
they can affect the forecast).  
• Measures taken with effect in 2015 can also compensate for existing measures having a one-off 
impact in 2014 and for the trend increase in e xpenditure. At the EA-16 aggregate level, the 
Commission evaluates one-offs in 2014 0.0% of GDP and the trend increase in expenditures (as 
measured by the change in the cyclically-adj usted expenditure ratio) in absence of policy 
measures at 0.25% of GDP. 
 
25 
 ANNEX 3: Sensitivity analysis 
 
According to Article 7 of Regulation (EU) No 473/2013, "the overall assessment shall include 
sensitivity analyses that provide an indication of the risks to public finance sustainability in the event 
of adverse economic, financial or  budgetary developments". This  Annex therefore presents a 
sensitivity analysis of public debt  developments to possible macro economic shocks (to growth and 
interest rates), relying on results  from stochastic debt projections18. The analysis allows gauging the 
possible impact of downside and upside risks to nominal GDP growth on public debt dynamics (also 
accounting for their impact on the cyclical component of the budget balance, through the functioning 
of the automatic stabilisers), as well as the eff ects of positive/negative developments on financial 
markets, translating into lower/higher borrowing costs for governments. 
With stochastic projections the uncertainty in fu ture macroeconomic conditions is featured in the 
analysis of public debt dynamics around a 'centr al' debt projection scenario, which corresponds 
respectively to the Commission's autu mn 2014 forecast scenario and the DBPs' forecast scenario in 
the two panels of the graph below, reporting r esults for the EA-16 (in both cases the usual no-fiscal 
policy change assumption is made beyond the forecast horizon)19. Shocks are applied to the 
macroeconomic conditions (short- term and long-term interest rates on government bonds; growth 
rate) assumed in the central scenario  to obtain the 'cone' (distributi on) of possible debt paths presented 
in the graph below. The cone corresponds to a wide set of possible underlying macroeconomic 
conditions, with as many as 2000 shocks simulate d on growth and interest rates. The size and 
correlation of the shocks reflect th e variables' historical behaviour20. This implies that the 
methodology does not capture real-time uncertainty, which at the present juncture may be higher 
especially for the output gap. Simulated debt dynamics account for the fact that shocks to growth feed 
back into 'budgetary shocks', in that the cycli cal component of the budget balance is affected through 
the operation of the automatic st abilisers. The resulting fan charts  in the graph below therefore 
provide probabilistic information on debt dynamics for the EA-16, taking into account the possible 
occurrence of shocks to growth and interest ra tes of a magnitude and correlation mirroring those 
observed in the past. 
The fan charts report the projected debt path unde r the central scenario (around which macroeconomic 
shocks are applied) as a dashed line, and the debt projection trajectory that di vides into two halves the 
whole set of possible trajectories obtained by applying  the shocks (the median) as a solid black line at 
the centre of the cone. The cone itself covers 80% of all possible debt paths obtained by simulating 
the 2000 shocks to growth and in terest rates (as the lower a nd upper lines delimiting the cone 
represent respectively the 10th and the 90th percentiles of the distribution), thus excluding from the 
shaded area simulated debt paths (20% of the w hole) that result from more extreme (less likely) 
shocks, or 'tail events'. The differently shaded ar eas within the cone represent different portions of the 
                                                            
18  The methodology for stochastic public de bt projections used here is presented in the European Commission's Fiscal 
Sustainability Report 2012, Secti on 3.3.3, and in Berti K. (2013), "Stochastic public debt projections using the historical 
variance-covariance matrix approach for EU countries", European Economy Economic Paper  No. 480. 
19  This entails that the EA-16 structural pr imary balance is assumed to remain consta nt at the last forecasted value – a 1.4% 
surplus in 2015 in the DBP scenario, against a 1.2% surplus in 2016 in the Commission scenario – over the rest of the 
projection horizon. 
20  The assumption is made that shocks follow a joint normal distribution.  
 
26 
 overall distribution of possible debt paths. The dark blue area (delimited by the 40th and 60th 
percentiles) includes the 20% of all possible debt paths that are closer to the central scenario. 
Graph A3.1: Fan charts from stochastic pub lic debt projections around the Commission's 
forecast scenario and the Draft Budg etary Plans' (DBP) forecast scenario 
 
 
 
 
For the Commission and DBP forecast  scenarios respectively, the fan charts highlight probabilities of 
about 40% and 50% of a worse than forecasted debt -to-GDP ratio for the EA-16 in 2015, due to the 
occurrence of adverse macroeconomic shocks21. Accounting for both downside and upside risks to 
                                                            
21  In 2015, the dashed line representing forecasts for the central scenario in the two fan charts corresponds, in the DBP and 
Commission scenarios respectively, with the line indicating the 50th and the 60th distributi on percentile (meaning that 
respectively 50% and 40% of all possible values for the debt-t o-GDP ratio in 2015 would lie above the forecasted value). 
 
27 
 growth and financial market conditions in the tw o scenarios leads to a EA-16 debt in 2015 lying 
between 90-91% and 94-95% of GDP with an 80% probability (as the cone represents 80% of all 
possible simulated debt paths). Lower and upper bou nds of the debt ratio interval in 2015 would be 
higher for the Commission scenario compared to the DBP scenario, due to a 1 percentage point 
difference between the respective ce ntral forecasts to which shocks apply (a debt ratio of around 
93.5% in the Commission scenario versus 92.5% in the DBP scenario).  
Beyond 2015, the horizon of the current DBPs, simu lation results show a widening of the difference 
in projected debt ratios under shocks between the Commission and the DBP scenarios. At the end of 
the projection horizon considered in the fan charts (2019), there would be a 50% probability of a debt 
ratio higher than 89% of GDP in the Commission scenario, and a 50% probability of a debt ratio 
higher than 87% of GDP in the DBP scenario. The di fference is mainly due to the structural primary 
balance kept constant at higher last forecasted  surplus in the DBP scenario compared to the 
Commission scenario, leading to a stronger decrease in simulated debt ratios after 2015 in the DBP 
scenario. 
Note that since the size and correlation of the shocks  reflect the variables' historical behaviour, the 
methodology does not capture real-time uncertainty, such as may exist in particular for assessing the 
output gap. Bearing in mind the past experience of  significant revisions of output gap estimates, often 
in the direction of lower potential output than though t in real time, this suggests an additional source 
of risks on future debt paths that is not reflected in the previous analysis. 
 
28 
 ANNEX 4: The implementation of structural reforms: addressing 
macroeconomic imbalances and reducing the tax wedge 
 
Structural reforms are crucial to encourage growth  and jobs in Europe by fostering an efficient 
reallocation of resources, improving productivity and competitiveness prospects22. Other than the 
vulnerable euro area Member States, which have  been implementing an economic adjustment 
programme supported by financial assistance, th e reform needs are the largest in countries 
experiencing excessive imbalances in the sense of the MIP (Italy and Slovenia23) or imbalances 
requiring decisive policy action (France, Ireland and Spain24). In response to the Council 
recommendations to the euro area, the Commission h as put in motion a specific monitoring of policy 
implementation in these Member States.  
For a detailed assessment of the impact of concre te structural policies on economic activity, see 
"Market Reforms at Work", European Economy , 2014(5). It shows that the potential impact of a 
selection of such market reforms in four of Eu rope's most vulnerable economies: Italy, Greece, 
Portugal and Spain can be significant, and that th e reform efforts in these countries appear to be 
starting to have a positive effect. Both reform effo rts and their effectiveness seem to vary across the 
four countries, with Spain showing the strongest signs that the reforms are starting to pay off, 
followed by Portugal, while Italy and Greece seem to lag behind25. 
Reducing the tax wedge 
The tax burden on labour in the euro area is relativ ely high, which weighs on economic activity and 
employment. In 2014, the Council addressed country -specific recommendations (CSRs) to several 
euro area Member States to address this issue. In  addition, the euro area as a whole was issued a 
Recommendation to "…regularly hold thematic discu ssions on structural reforms in the labour and 
product markets with potentially large spillovers, focussing on reducing the high tax wedge on labour 
and reforming services markets". 
Following up on the Recommendation, the Eurogroup discussed the high tax wedge on labour in the 
euro area in July and in September of this year. It expressed its commitment to effectively reduce the 
tax burden on labour in the euro area and adopted a number of common principles for reforms in this 
field, related in particular to their design, their financing, the broader policy context and the political 
                                                            
22  For synthetic indicators on compliance with policy recomme ndation, see Deroose, S. an d J. Griesse, "Implementing 
Economic Reforms – Are EU Member States Res ponding to European Semester Recommendations?", ECFIN Economic 
Brief , 2014(37). 
23  Outside the euro area, the Commission has also identified Croatia as experiencing excessive imbalances. 
24  Outside the euro area, the Commission has also identified H ungary as experiencing imbalan ces requiring decisive policy 
action. 
25  For estimates of the potential impact of a selection of market reforms in sel ected economies, see "Market Reforms at 
Work", European Economy , 2014(5). For more detailed assessments of sectorial reforms see Turrini A. et al. "A Decade 
of Labour Market Reforms in the EU", European Economy-Economic Papers , 522; Lorenzani, D. and J. Varga, "The 
Economic Impact of Digita l Structural Reforms", European Economy-Economic Papers , 529; Lorenzani, D and F. 
Lucidi, "The Economic Impact of Civil Justice Reforms", European Economy-Economic Papers , 530; Connell, W. 
"Economic Impact of  Late Payments", European Economy-Economic Papers , 531; Ciriaci, D. "Business Dynamics and 
Red Tape Barriers", European Economy-Economic Papers , 532, and Canton E. et al. "The Economic Impact of 
Professional Services Li beralisation", European Economy-Economic Papers, 533.  
 
29 
 and societal support. It underlined the importance of  further work in this area, including through the 
exchange of best practices. 
A high tax wedge on labour, on its own or in inte raction with the benefit system, may create 
unemployment or inactivity traps26. By increasing the gap between labour costs and take-home pay, 
high taxes on labour reduce the demand for labour  and depress labour supply. These effects may be 
particularly significant for low-skilled and low-income  earners, and could interact with other labour 
market features such as the minimum wage. Shifting the tax burden away from labour would 
stimulate labour supply by reducing disincentives to work and would raise labour demand by reducing 
firms' labour costs. Lower labour taxation also co ntributes to firms' profitability, which in turn 
improves the return on capital and the incentives to i nvest. For several euro area Member States, the 
need to reduce non-wage labour costs is also rela ted to the need to improve cost competitiveness, 
while avoiding a reduction in take-home pay. 
In the years prior to the crisis, several Member States implemented structural reforms to address the 
high tax wedge on labour. In the context of the cr isis, however, these efforts faded away and many 
Member States raised personal income taxes or soci al contributions to contribute to consolidation. 
This trend is visualised in Graph A4.1. Within the euro area, there are large differences between 
Member States in terms of the size of the tax we dge and its composition as illustrated in Graph A4.2 
for a single worker at the average wage.  
The DBPs show a clear awareness in euro area Member States of the benefits of addressing high taxes 
on labour. Reforms are underway across the euro area. To give three examples:  
• France, which received a CSR to "take action to further lower employer social security 
contributions" and to "reduce the tax burden on la bour" recalled in its DBP that, as part of the 
responsibility and solidarity pact, a number of measures, mainly targeted at low income 
earners, had been announced. As of 2014, the tax credit on competitiveness and employment will reduce the cost of labour for wages of up  to 2.5 times the minimum wage. The budgetary 
cost of this measure will amount to EUR 20 billion when in full effect. In addition, the 
government has announced a EUR 10 billion reducti on in social security contributions paid 
by employers by 2016. Finally, the DBP includes a measure reducing personal income tax for 
the low earning households by EUR 2.7 billion. 
• Estonia, which received a CSR to "improve in centives to work through measures targeted at 
low income earners", included in its DBP several  measures to reduce the tax wedge on labour 
across the board: the personal income tax rate will be lowered by 1 per centage point to 20%, 
the unemployment insurance contribution will be  reduced to 2.4% from the current 3% and 
the tax-exempted income or basic allowance will be increased by 7%. 
• The Netherlands, which received a CSR to "redu ce tax disincentives on labour", included in 
its DBP measures to further increase the employee tax credit. In addition to this, the employee 
tax credit will be refocused to improve incentiv es to work for lower and middle incomes. This 
approach limits the budgetary costs of the measure (EUR 500 million) while keeping the 
significant positive effect that the credit has on labour supply of household with lower and 
middle incomes. Moreover, the increase in the tax ra te of the first income tax bracket (after a 
                                                           
 
26  Unemployment and inactivity traps refer to financial disincentives to take up a job from either unemployment or 
inactivity, caused by the combined effects of tax and benefit systems.  
 
30 
 temporary reduction in 2014) will be lower th an foreseen in the coalition agreement to a 
budgetary cost of EUR 475 million. 
 
Graph A4.1: Euro area tax wedg e single worker, average wage 
 
Source: OECD and Commission services . 
Note: The euro area average presented is  a simple arithmetic aver age; recent data for Cyprus is not available; 
data from 2012 were used for Latvia and Malta.  
 
Graph A4.2: Tax wedge single worker, average wage (2013)  
 
Source: OECD and Commission services . SSC = social security charges.  
Note: The EU and euro area averages presented are si mple arithmetic averages; r ecent data for Cyprus and 
Croatia are not available; data from 2012 were used for Bulgaria, Latvia, Lithuania, Malta and Romania.  
 
 
31 
 ANNEX 5: Graphs and tables 
 
Table A5.1: Headline deficit targets (% of GD P) for the EA-16 according to the Stability 
Programmes (SP), the Draft Budgetary Plans (DBP) and the Commission's 2014 autumn 
forecast (COM) 
  2014 2015 
Country SP DBP COM SP DBP COM 
BE -2.1 -2.9 -3.0 -1.4 -2.1 -2.8 
DE 0.1 0.2 0.2 0.1 0.2 0.0 
EE -0.7 -0.3 -0.4 -0.5 -0.5 -0.6 
ES -5.5 -5.5 -5.6 -4.2 -4.2 -4.6 
FR -3.8 -4.4 -4.4 -3.0 -4.3 -4.5 
IE -4.8 -3.7 -3.7 -3.0 -2.7 -2.9 
IT -2.6 -3.0 -3.0 -1.8 -2.6 -2.7 
LV -1.0 -1.5 -1.1 -0.8 -1.0 -1.2 
LU 0.1 0.2 0.2 -0.5 -0.2 -0.4 
MT -2.1 -2.1 -2.5 -1.6 -1.6 -2.6 
NL -2.9 -2.9 -2.5 -2.1 -2.2 -2.1 
AT -2.7 -2.8 -2.9 -1.4 -1.9 -1.8 
PT -4.0 -4.8 -4.9 -2.5 -2.7 -3.3 
SI -4.1 -4.4 -4.4 -2.4 -2.8 -2.9 
SK -2.8 -2.9 -3.0 -2.8 -2.0 -2.6 
FI -2.0 -2.7 -2.9 -1.1 -2.4 -2.6 
EA-16 -2.4 -2.6 -2.6 -1.8 -2.2 -2.4 
 
 
32 
  
Table A5.2: Changes in structural balance (% of  GDP) for the EA-16 according to the Stability 
Programmes (SP), the Draft Budgetary Plans (DBP) and the Commission's 2014 autumn 
forecast (COM) 
 2014 2015 
Country SP DBP COM SP DBP COM 
BE 0.4 0.3 0.1 0.6 0.7 0.4 
DE 0.0 -0.1 0.1 -0.2 -0.2 -0.1 
EE 0.0 0.9 0.4 0.3 0.1 0.1 
ES 0.6 0.4 0.2 0.1 -0.1 -0.2 
FR 0.7 0.2 0.3 0.6 0.1 0.1 
IE 1.5 0.3 1.0 2.0 1.0 0.4 
IT 0.2 -0.3 -0.1 0.4 0.3 0.1 
LV -0.5 -0.5 -0.4 0.0 0.1 -0.2 
LU -0.5 -0.8 -0.9 -1.2 -0.7 -0.7 
MT 0.4 0.4 0.0 0.5 0.1 -0.2 
NL -0.1 -0.3 0.1 0.3 0.1 -0.3 
AT 0.0 0.3 0.2 0.2 -0.1 0.1 
PT 0.5 0.8 0.6 0.8 0.1 -0.3 
SI 0.8 -0.4 -0.7 0.6 0.2 0.3 
SK -0.4 -0.6 -0.7 0.3 1.3 0.8 
FI -0.3 -0.4 -0.4 0.4 -0.2 0.0 
EA-16 0.3 0.0 0.1 0.3 0.1 0.0 
 
 
33 
  
Table A5.3: Debt-to-GDP ratio (% of GDP)  for the EA-16 according to the Stability 
Programmes (SP), the Draft Budgetary Plans (DBP) and the Commission's 2014 autumn 
forecast (COM)  
 2014 2015 
Country SP DBP COM SP DBP COM 
BE 101.2 105.6 105.8 99.4 105.1 107.3 
DE 75.8 73.8 74.5 72.6 70.7 72.4 
EE 9.8 9.8 9.9 9.3 9.3 9.6 
ES 99.5 97.6 98.1 101.7 100.3 101.2 
FR 95.6 95.3 95.5 95.6 97.2 98.1 
IE 121.4 110.5 110.5 120.0 108.5 109.4 
IT 134.9 131.6 132.2 133.3 133.1 133.8 
LV 38.8 39.7 40.3 32.9 34.6 36.3 
LU 23.3 23.0 23.0 24.0 24.1 24.3 
MT 69.4 70.1 71.0 68.5 69.0 71.0 
NL 74.6 69.8 69.7 74.7 70.0 70.3 
AT 79.2 86.5 87.0 77.6 85.6 86.1 
PT 130.2 127.2 127.7 128.7 123.7 125.1 
SI 80.9 82.2 82.2 81.1 83.2 82.9 
SK 55.2 54.1 54.1 56.2 54.4 54.9 
FI 59.8 59.6 59.8 61.0 61.2 61.7 
EA-16 94.3 92.7 93.1 93.1 92.5 93.6 
 
 
34 
  
Table A5.4: Real GDP growth (%) for the EA- 16 according to the Stability Programmes (SP), 
the Draft Budgetary Plans (DBP) and the Commission's 2014 autumn forecast (COM) 
 2014 2015 
Country SP DBP COM SP DBP COM 
BE 1.4 1.1 0.9 1.8 1.5 0.9 
DE 1.8 1.8 1.3 2.0 2.0 1.1 
EE 2.0 1.5 1.9 3.5 2.5 2.0 
ES 1.2 1.3 1.2 1.8 2.0 1.7 
FR 1.0 0.4 0.3 1.7 1.0 0.7 
IE 2.1 4.7 4.6 2.7 3.9 3.6 
IT 0.8 -0.3 -0.4 1.3 0.6 0.6 
LV 4.0 2.9 2.6 4.0 2.8 2.9 
LU 3.2 2.8 3.0 3.2 2.7 2.4 
MT 2.3 3.0 3.0 2.1 3.5 2.9 
NL 0.8 0.7 0.9 1.3 1.3 1.4 
AT 1.7 0.8 0.7 1.7 1.2 1.2 
PT 1.2 1.0 0.9 1.5 1.5 1.3 
SI 0.5 2.0 2.4 0.7 1.6 1.7 
SK 2.3 2.4 2.4 3.0 2.6 2.5 
FI 0.5 0.0 -0.4 1.4 1.2 0.6 
EA-16 1.3 1.0 0.8 1.7 1.5 1.1 
 
 
35 
  
Table A5.5: Composition of fiscal consolidation in 2014 and 2015 for the EA-16 according to the 
Stability Programmes (SP), the Draft Budget ary Plans (DBP) and the Commission's 2014 
autumn forecast (COM) 
2014 2015 % potential GDP 
unless otherwise 
specified SP DBP COM SP DBP COM 
Cyclically-
adjusted revenue ratio  46.9 46.7 46.8 46.7 46.5 
46.8 
p.p. change with 
respect to previous year 0.0 0.1 0.2 -0.1 -0.1 
0.0 
Cyclically-
adjusted expenditure ratio 47.8 47.9 48.0 47.5 47.7 
48.0 
p.p. change with 
respect to previous year -0.3 0.1 0.2 -0.3 -0.2 
0.0 
Change in 
structural balance  0.3 0.0 0.1 0.3 0.1 0.0 
 
Table A5.6: Short-term elasticities underlying revenue projections for 2015 in EA-16: Draft 
Budgetary Plans (DBP) versus Commission's  2014 autumn forecast (COM) and OECD 
Country DBP COM OECD 
BE 0.7 1.0 1.0 
DE 0.8 1.0 1.0 
EE 1.2 1.4 1.1 
ES 0.1 1.1 1.0 
FR 1.0 1.1 1.0 
IE 0.7 0.4 1.1 
IT 1.5 1.5 1.1 
LV 0.1 1.0 0.9 
LU 0.2 1.0 1.0 
MT 0.7 1.2 1.0 
NL 0.7 1.3 1.1 
AT 0.9 1.1 1.0 
PT 1.5 0.6 1.0 
SI -1.5 0.1 1.0 
SK -0.1 1.0 1.0 
FI 0.7 0.8 0.9 
EA-16 0.8 1.0 1.0 
Note: the comparison between the elasticities derived from  the DBPs and the Commissi on's forecast, on the one 
hand, and the OECD's elasticities, on th e other, should be made with care. Wh ile the first two are net elasticities 
to GDP growth, the latter are, strictly speaking, comput ed with respect to the outpu t gap. Differences are in 
general minor.  
 
36 
  
Table A5.7: Fiscal effort measured as the su m of discretionary revenue measures net of the 
change in cyclically-adjusted expenditure ratio: Draft Budgetary Plans (DBP) versus 
Commission's 2014 autumn forecast (C OM) and Stability Programmes (SP) 
 2014 2015 
Country SP DBP COM SP DBP COM 
BE 1.5 0.8 0.5 0.5 0.8 0.2 
DE 0.5 0.2 0.2 0.2 0.2 -0.1 
EE 0.3 0.3 0.0 -0.2 -0.7 -0.5 
ES 1.1 0.6 0.1 0.2 0.1 -0.1 
FR 0.8 -0.1 0.1 0.4 -0.1 0.0 
IE 2.3 1.1 1.3 2.0 1.1 1.2 
IT 0.1 0.1 0.0 0.1 -0.1 -0.5 
LV 0.8 -0.7 -0.1 1.7 2.0 -0.2 
LU 0.6 -0.3 -0.6 0.4 -0.1 -0.7 
MT -0.3 -0.2 -0.8 0.3 -0.1 -0.6 
NL 0.8 0.6 -0.1 0.4 0.5 -0.6 
AT -1.1 -1.4 -1.4 1.5 0.9 0.8 
PT 0.7 0.2 -0.5 0.5 1.1 1.3 
SI 10.4 10.0 9.8 2.9 2.2 1.7 
SK 1.1 1.7 0.5 1.1 1.9 0.4 
FI -0.2 -0.1 -0.5 0.6 -0.1 0.2 
EA-16 0.6 0.2 0.1 0.4 0.2 -0.1 
 
37 
  
Graph A5.1a: Projected changes in expenditure ratios for 2015 in EA-16: Draft Budgetary 
Plans (DBP) versus Commission's 2014 autumn forecast (COM) 
 
The graph shows the changes in expenditure ratios (lhs) between 2014 and 2015 and the ratios in 2015 (rhs).  
 
Graph A5.1b: Projected changes in revenue ratios for 2015 in EA-16: Draft Budgetary Plans 
(DBP) versus Commission's 2014 autumn forecast (COM) 
 
The graph shows the changes in revenue ratios (lhs) between 2014 and 2015 and the ratios in 2015 (rhs). 
 
38 
  
Graph A5.2: Projected changes in main types of expenditure (% of GDP) for 2015 in EA-16: 
Draft Budgetary Plans (DBP) versus Commission's 2014 autumn forecast (COM) 
 
The graph shows the contributions from the main components of expenditure to the projected changes in 
expenditure-to-GDP ratios.  
 
Graph A5.3:  Projected changes in main types of tax revenue (% of GDP) for 2015 in EA-16: 
Draft Budgetary Plans (DBP) versus Commission's 2014 autumn forecast (COM) 
 
The graph shows the contributions from the main components of revenue to the projected changes in revenue-
to-GDP ratios.  
 
39 
  
Graph A5.4: Comparison of headline government balance (% of GDP) as projected for 2015 by 
the Commission's 2014 autumn forecast (COM ) and by the Draft Budgetary Plans (DBP) 
 
The graph plots the 2015 nominal budget balances fro m the Commission's forecast (h orizontal axis) against 
those planned in the DBPs (vertical axis). Member Stat es above (below) the bi-sect or line are those where the 
Commission forecasts a higher (lower ) nominal balance than the DBPs.  
 
40 
  
Graph A5.5: Decomposition of the difference in debt targets (% of GDP) for 2015 between the 
Commission's 2014 autumn forecast and the Draft Budgetary Plans 
 
The graph breaks the projected differences in debt-to-GDP ratios down into differences in base effects, primary 
balances, stock-flow adjustments and snowball effects. The snowball effect represen ts the difference between 
projected growth rates and interest rates.