COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, AND THE EUROPEAN CENTRAL BANK on the 2021 Draft Budgetary Plans: Overall Assessment
Date: 2020-11-18
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: budget deficit, budget estimate, budgetary equilibrium, coronavirus disease, draft budget, economic forecasting, epidemic, euro area, public debt, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 18.11.2020  COM(2020) 750 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, AND THE EUROPEAN CENTRAL BANK on the 2021 Draft Budgetary Plans: Overall Assessment  
 
 
Executive summary 

This  Communication  summarises  the  Commission’s  assessment  of  the  2021  Draft  Budgetary  Plans 
submitted by euro area Member States as required by Regulation (EU) No 473/2013. 

The  Commission’s  assessment  takes  into  account  the  ongoing  health  crisis,  the  high  level  of 
uncertainty  and  the  severe  economic  downturn  resulting  from  the  COVID-19  outbreak.  The 
assessment is based on the fiscal policy recommendation adopted by the Council on 20 July 2020 and 
takes  into  account  the  activation  of  the  general  escape  clause  of  the  Stability  and  Growth  Pact.  As 
indicated in the Annual Sustainable Growth Strategy 2021, Member States should continue to provide 
targeted  and  temporary  fiscal  support  in  2021  to  effectively  address  the  pandemic,  sustain  the 
economy,  and  support  the recovery.  When economic conditions allow, fiscal  policies should aim  at 
achieving  prudent  medium-term  fiscal  positions  and  ensuring  debt  sustainability,  while  enhancing 
investment. This Communication summarises the assessment of the individual Draft Budgetary Plans 
and the overall budgetary situation in the euro area, including the aggregate fiscal stance.  

The 2021 Draft Budgetary Plans, including the assessment of the fiscal stance for the euro area as a 
whole, can be summarised as follows:  

1.  The euro area economy continues to be in the grip of the COVID-19 pandemic. Real GDP is 
forecast  to  decline  by  almost  8%  in  2020.  Despite  a  forecast  return  to  growth  in  2021,  the 
recovery  is  expected  to  be  incomplete  and  will  differ  widely  across  Member  States.  The 
economy is expected to continue operating below its potential. Uncertainty and risks remain 
exceptionally large. 

2.  The  necessary  sizable  temporary  measures  taken  in  2020  to  cushion  the  effect  of  the 
pandemic  in  the  euro  area  weigh  on  the  aggregate  fiscal  position,  which  is  set  to  improve 
slightly in 2021. The Draft Budgetary Plans point to an aggregate headline deficit of almost 
6%  of  GDP  and  a  debt-to-GDP  ratio  of  around  100%  in  2021,  broadly  in  line  with  the 
Commission  2020  autumn  forecast.  The  recent  resurgence  of  the  virus  in  Europe  implies 
downside  risks  that  could  worsen  economic  and  fiscal  outcomes  in  2021  compared  to  the 
estimates in the Draft Budgetary Plans. 

3.  Member  States  have  taken  sizeable  fiscal  measures  in  response  to  the  pandemic  (4.2%  of 
GDP in 2020 and 2.4% of GDP in 2021). Most emergency measures have aimed at addressing 
the  public  health  situation,  and  compensating  workers  and  firms  for  income  losses  due  to 
lockdown measures and supply chain disruptions (3.4% of GDP in 2020 and 0.9% of GDP in 
2021).  Other  measures,  such  as  indirect  tax  cuts  or  extra  public  works,  have  focused  more 
broadly  on  supporting  the  economic  recovery  (0.8%  of  GDP  in 2020  and  1.5%  of  GDP  in 
2021). Member States also provided ample liquidity support to households and businesses in 
the form of guarantees or suspension of tax and social security contributions. In some cases, 
limited fiscal space constrained the size of the fiscal response. Member States with stronger 
fiscal positions provided generally more direct budgetary support, while Member States with 
weaker fiscal positions tended to rely more on liquidity support. Such measures do not have 
an immediate impact on the headline deficit, but constitute contingent liabilities. 

4.  The euro area fiscal stance in both 2020 and 2021 appears supportive when adjusted for the 
unwinding of temporary emergency measures as planned in the Draft Budgetary Plans (+1.1% 
of GDP in 2020 and +1.4% of GDP in 2021). However, in light of the recent resurgence of 
the pandemic in Europe, the envisaged withdrawal of emergency measures in 2021 is subject 
to increased uncertainty. Member States are expected to extend further emergency support to 
provide  a  necessary  lifeline  to  the  economy,  on  top  of  the  current  budgetary  plans  already 
reflected in the Commission forecast.  

5.  Financing from the Recovery and Resilience Facility can be expected to provide a significant 
additional  fiscal  impulse,  compared  with  what  has  been  included  in  the  Member  States’ 

1 

 
 
current plans and forecasts. Since the submission of the Recovery and Resilience Plans and 
their subsequent approval are expected to take place in 2021, the Commission 2020 autumn 
forecast  assumes  in  the  budgetary  projections  for  2021  the  10%  pre-financing  of  Recovery 
and Resilience Facility grants. This pre-financing is treated as a financial transaction with no 
impact on the budget balance, but with a public debt-reducing impact. Moving forward, the 
Recovery  and  Resilience  Facility  is  expected to  have a  macro-relevant impact  on  economic 
activity and public finances in many Member States and the euro area as a whole.  

6.  Individual  fiscal  stances,  very  accommodative  in  2020,  appear  still  supportive  in  almost  all 
Member States in 2021, once corrected for the phasing out of temporary emergency measures. 
While emergency measures represent over one third of total measures foreseen for 2021 in the 
Draft  Budgetary  Plans,  the  majority  of  measures  aim  at  supporting  the  economic  recovery. 
Expenditure financed via grants under the Recovery and Resilience Facility can be expected 
to provide a significant additional fiscal impulse without having an impact on Member States’ 
deficit and debt levels. 

7.  Member  States  should  avoid  withdrawing  fiscal  support  abruptly.  The  mix  of  large  output 

losses and downside risks calls for continued fiscal policy support in 2021.  

8.  Support  measures  should  be  well  targeted  and  temporary.  Member  States  currently  plan  a 
combination of temporary and permanent measures in 2021. Permanent measures that are not 
planned  to  be  financed  by  revenue  increases  or  compensatory  expenditure  reductions  may 
affect fiscal sustainability in the medium term. 

9.  Credible  medium-term  fiscal  strategies  are  particularly 

to  ensure  fiscal 
sustainability, in particular in the case of highly-indebted Member States. Implementation of 
well-designed  fiscal  measures  and  reform  packages,  not  least  through  Recovery  and 
Resilience  Plans,  is  important  to  address  the  challenges  identified  in  the  relevant  country-
specific recommendations. 

important 

Against this backdrop, the Commission Opinions on the 2021 Draft Budgetary Plans are based on a 
qualitative assessment of fiscal measures. The Opinions are summarised as follows:  

1.  The Commission is of the opinion that the Draft Budgetary Plans are overall in line with the 
fiscal policy recommendation adopted by the Council on 20 July 2020. Most of the measures 
in  the  Draft  Budgetary  Plans  support  economic  activity  against  the  background  of 
considerable uncertainty.   

2.  For  Austria,  Belgium,  Cyprus,  Estonia,  Finland,  Germany,  Greece,  Ireland,  Latvia, 
Luxembourg,  Malta,  Netherlands,  Portugal,  Slovenia  and  Spain,  the  measures  are  (mostly) 
temporary.  Some  measures  set  out  in  the  Draft  Budgetary  Plans  of  France,  Italy,  Lithuania 
and Slovakia do not appear to be temporary or matched by offsetting measures. Lithuania has 
submitted  its  Draft  Budgetary  Plan  based  on  a  no-policy-change  scenario  and  is  invited  to 
submit an updated Draft Budgetary Plan.  

3.  For Belgium, France, Greece, Italy, Portugal and Spain, given the level of their government 
debt  and  high  sustainability  challenges  in  the  medium-term  before  the  outbreak  of  the 
COVID-19  pandemic,  it  is  important  to  ensure  that,  when  taking  supporting  budgetary 
measures, fiscal sustainability in the medium term is preserved. 

2 

 
 
 
 
 
I. 

Introduction  

Coordination of national budgetary policies is an important part of the economic governance 
framework  in  the  Economic  and  Monetary  Union.1  To  enable  this  coordination,  euro  area 
Member States  submit their next-year Draft  Budgetary Plans to  the Commission  and to  the 
Eurogroup by mid-October. These plans summarise the draft budgets that governments plan 
to  submit  to  national  parliaments.  The  Commission  provides  an  Opinion  on  each  plan, 
assessing  whether  it  is  compliant  with  Member  State’s  obligations  under  the  Stability  and 
Growth Pact. The Commission also provides an overall assessment of the budgetary situation 
and prospects for the euro area as a whole. 

Almost  all  euro  area  Member  States  submitted  their  2021  Draft  Budgetary  Plans  by 
15 October 2020, as required by Regulation (EU) No 473/2013. Cyprus and Italy submitted 
their plans with minor delays. In line with the indications of the Two-Pack Code of Conduct,2 
Belgium and Lithuania submitted Draft Budgetary Plans prepared under a no-policy-change 
assumption.  Belgium,  which  had  formed  a  new  government  on  30  September  2020, 
subsequently submitted an updated plan on 30 October. The Commission Opinion is based on 
the assessment of the updated plan. Lithuania held parliamentary elections in October and its 
caretaker government submitted a plan based on an unchanged-policy scenario. 

While  respecting  Member  States’  budgetary  competence,  the  Commission’s  Opinions 
provide  objective  policy  advice,  in  particular  for  national  governments  and  parliaments,  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 within the euro area, in line with the Treaty. 

The Commission’s assessment is anchored by the country-specific recommendations (CSRs), 
adopted  by  the  Council  on  20  July  2020.3  This  year,  in  the  context  of  the  COVID-19 
pandemic, the fiscal CSRs are of a purely qualitative nature and do not include the numerical 
budgetary requirements that would normally apply. This reflects the activation of the general 
escape clause of the Stability  and Growth  Pact.  The recommendations focused on the most 
urgent challenges brought about by the COVID-19 outbreak and the need for a coordinated 
fiscal  response.  The  Council  issued  an identical  fiscal  CSR  to  all  euro  area  Member  States 
under the preventive arm,4 recommending that Member States take all necessary measures, in 
line with the general escape clause, to effectively address the pandemic, sustain the economy, 
and  support  the  recovery.  When  economic  conditions  allow,  fiscal  policies  should  aim  at 
achieving  prudent  medium-term  fiscal  positions  and  ensuring  debt  sustainability,  while 
enhancing investment.  

1   As set out in Regulation (EU) No 473/2013, known as Two-Pack, on common provisions for monitoring and 
assessing Draft Budgetary Plans and ensuring the correction of excessive deficits of the Member States in 
the euro area. This regulation entered into force in May 2013. 

2   See the Two-Pack Code of Conduct: 

http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/coc/2014-11-
07_two_pack_coc_amended_en.pdf  

3    https://www.consilium.europa.eu/en/press/press-releases/2020/07/20/european-semester-2020-country-

specific-recommendations-adopted/  

4   Romania is currently subject to an excessive deficit procedure. Its current fiscal CSR reflects the Council 

126(7) recommendation to end the excessive deficit situation, adopted in April 2020. 

3 

 
 
                                                           
The  Commission  in  the  Annual  Sustainable  Growth  Strategy  2021  confirmed  that  fiscal 
policy should continue to support the recovery in 2021.5 In light of this need and the still high 
uncertainty about the economic consequences of the pandemic, the general escape clause will 
remain  active  in  2021.  In  spring  2021,  taking  into  account  updated  macroeconomic 
projections,  the  Commission  will  reassess  the  situation  and  take  stock  of  the  application  of 
the general escape clause. 

The  objective  of  this  Communication  is  twofold.  First,  it  provides  an  aggregate  picture  of 
budgetary  policy  at  euro  area  level,  building  on  a  cross-country  assessment  of  the  Draft 
Budgetary Plans. This exercise mirrors the cross-country assessment of Stability Programmes 
conducted  in  the  spring,  but  with  a  focus  on  the  forthcoming  year  instead  of  medium-term 
fiscal  plans.  Second,  it  provides  an  overview  of  the  Draft  Budgetary  Plans  at  country  level 
and explains the Commission’s approach to assessing them, in particular the fiscal measures 
taken in response to the COVID-19 pandemic and the resulting economic crisis. 

II. Main euro area findings  

Economic outlook  

Graph 2.1 

Euro area: real GDP growth, 2015-2021 (%) 

The  euro  area  economy  continues  to  be  in 
the  grip  of  the  COVID-19  pandemic.  The 
extraordinary  containment  measures  imposed 
in  the  first  half  of  2020  to  curb  the  spread  of 
the  virus  gave  rise  to  a  dramatic  reduction  in 
economic  activity.  Output  shrank  by  around 
15%  in  the  first  half  of  2020,  down  to  levels 
last  seen  in  2005.  Contact-intensive  sectors 
were  hit  particularly  hard.  Despite  a  strong 
rebound  in  economy  activity  in  the  third 
quarter,  the  recovery  is  set  to  stall  due  to  a 
new 
renewed 
containment  efforts.  Overall,  real  GDP  is 
forecast  to  decline  by  almost  8%  in  2020. 
Macroeconomic  assumptions  contained  in  the 
Draft  Budgetary  Plans  paint  a  similar  picture, 
with  the  aggregate  growth  forecast  standing  about  1 pp.  below  the  outcomes  anticipated  in 
the 2020 Stability Programmes (Graph 2.1 and Annex Table IV.1).6  Looking further ahead, 
both  the  Commission  and  Member  States  project  a  pick-up  in  activity  in  2021,  though 
Member  States  expect  a  more  vigorous  recovery,  in  particular,  Spain  and  Luxembourg. 
However,  it  should  be  noted  that  the  Commission  forecast,  which  was  released  on  5 
November, reflects more recent information than the Draft Budgetary Plans on the spread of 

Note: European Commission 2020 spring forecast is used for 
countries that did not present forecasts for 2020 or 2021 in their 
2020 Stability Programmes.  
Sources: 2021 Draft Budgetary Plans (DBP), European 
Commission 2020 autumn and spring forecasts, and 2020 
Stability Programmes (SP). 

infections  and 

surge  of 

5   See also letters on fiscal policy orientations for 2021: https://ec.europa.eu/info/business-economy-
euro/economic-and-fiscal-policy-coordination/eu-economic-governance-monitoring-prevention-
correction/stability-and-growth-pact/annual-draft-budgetary-plans-dbps-euro-area-countries/draft-budgetary-
plans-2021_en   

6   Euro area Member States are required to base their draft budgets on independently endorsed or produced 

macroeconomic forecasts. 

4 

-10-505102015201620172018201920202021SP2020DBP2021AF2020 
 
 
                                                           
 
the virus and the introduction of new containment measures. In the context of uncertain and 
fast-moving developments, such differences are to be expected. Despite the return to growth, 
the recovery  is  set  to remain incomplete  and euro area  economies  are expected to continue 
operating below potential in 2021. The implementation of Next Generation EU, which is only 
marginally  incorporated  in  the  Commission  2020  autumn  forecast  and  the  Draft  Budgetary 
Plans, will further support the recovery in the euro area. 

Uncertainty  and  risks  remain  exceptionally  large.  The  evolution  of  the  COVID-19 
pandemic and its economic fallout are the main source of uncertainty. The recent resurgence 
of the virus could further weaken economic activity. A premature withdrawal of COVID-19-
related support could hamper the rebound of economic activity, for example by undermining 
economic  confidence.  At  the  same  time,  longer-than-necessary  extension  of  policy  support 
measures  could  be  counterproductive  (for  example  by  extending  support  to  non-viable 
companies).  Insufficient  coordination  of  national  policy  responses  could  also  hamper  the 
recovery.  Spillovers  from  lower-than-projected  global  demand  would  slow  growth  even 
further.  The  possibility  of  financial  market  stress  cannot  be  excluded.  The  banking  sector 
could  be  tested  as  higher  corporate  defaults  would  lead  to  an  increase  in  non-performing 
loans. On the upside, faster progress in controlling the pandemic and the implementation of 
ambitious and coordinated policies within the EU could enable a faster recovery.  

Fiscal outlook  

Graph 2.2 

Euro area: headline deficit, 2015-2021 (% of GDP) 

in 

increases 

projected 

The aggregate euro area headline deficit is 
expected to fall in 2021 but to remain at a 
very high level (Graph 2.2 and Annex Table 
IV.2). The Draft Budgetary Plans point to  an 
aggregate headline deficit of 5.9% of GDP in 
2021,  down  from  an  expected  8.6%  of  GDP 
in 2020. These projections are broadly in line 
with  the  Commission  2020  autumn  forecast, 
but mark a significant increase since the 2020 
Stability Programmes, which had foreseen an 
aggregate  deficit  of  3.5%  of  GDP  in  2021. 
general 
The 
government  deficits  are  larger  than  those 
observed  during  the  global  financial  crisis 
(Graph  2.3).  The  expected  improvement  in 
the aggregate deficit in 2021 is mostly driven 
by  the  expiry  of  temporary  fiscal  measures 
adopted  in  2020  to  combat  the  health  crisis 
recent 
and 
resurgence  of  the  pandemic  in  Europe  may 
lead  to  the  extension  of  these  measures  in 
order to sustain the economy and support the 
recovery,  putting  upward  pressure  on  the 
deficit in  2021. Nearly  all euro area Member 
States plan a lower deficit in  2021 compared 
to 2020. The largest falls of more than 4 pps. 
of GDP are planned in Belgium, Greece and Luxembourg. 

its  economic 

impact.  The 

Graph 2.3 

5 

Note: European Commission 2020 spring forecast is used for 
countries that did not present forecasts for 2020 or 2021 in their 
2020 Stability Programmes.  
Sources: 2021 Draft Budgetary Plans (DBP), European 
Commission 2020 autumn and spring forecasts, and 2020 
Stability Programmes (SP). 

Euro area: change in headline deficit and public 
debt, 2008-2010 and 2019-2021 (pps. of GDP) 

Source: European Commission 2020 autumn forecast. 

02468102015201620172018201920202021SP2020DBP2021AF2020-5051015200820092010201920202021Global financial crisisCOVID-19 pandemicPublic debtHeadline deficit 
 
 
 
 
Graph 2.4 

Euro area: public debt, 2015-2021 (% of GDP) 

Note: European Commission 2020 spring forecast is used for 
countries that did not present forecasts for 2020 or 2021 in their 
2020 Stability Programmes.  
Sources: 2021 Draft Budgetary Plans (DBP), European 
Commission 2020 autumn and spring forecasts, and 2020 
Stability Programmes (SP). 

Graph 2.5 

Euro area: decomposition of the change in the 
debt ratio, 2020-2021 (pps. of GDP) 

ratio 

is 
The  aggregate  debt-to-GDP 
projected to remain broadly stable in 2021 
at  around  100%  (Graph  2.4  and  Annex 
Table IV.3). The pre-pandemic decline in the 
debt  ratio  reversed  in  2020,  reflecting  a 
sizeable  contraction  of  GDP  and  the  large 
amount of debt issued to finance the response 
to  the  pandemic.  The  projected  worsening  of 
the debt ratio in 2020 was much larger than in 
2008-2009 (Graph 2.3).  The Draft  Budgetary 
Plans  project  the  debt  ratio  to  rise  from  86% 
in 2019 to 102% in 2020, with a stabilisation 
in  2021.  This  projection  is  similar  to  the 
Commission  2020  autumn  forecast  for  2020 
but not 2021, when the Commission expects a 
further increase of the debt ratio of 0.6 pps. of 
GDP.  Overall, 
the  primary  deficit  will 
continue  to  weigh  on  debt  dynamics  in  2021 
rate-growth 
but 
differential  should  help  contain  the  projected 
increase (Graph 2.5). Member States with the 
largest projected increases in their debt ratios 
in  2021  are  Estonia,  Ireland  and  Malta. 
Member States that had the highest pre-crisis 
debt  ratios  tend to  expect  some improvement 
in 2021. 

favourable 

interest 

a 

Note:  The  snowball  effect  refers  to  the  net  impact  of  interest 
rates,  inflation  and  real  GDP  growth  (that  is,  the  interest  rate-
growth differential) on the debt dynamics. 
Source: European Commission 2020 autumn forecast. 

The  debt  projections  are  exceptionally 
uncertain.  Stochastic  simulations  suggest 
that the euro area debt-to-GDP ratio is  likely 
to  lie  between  99%  and  106%  of  GDP  in 
2021 (Annex III). Over the medium-term, the ratio is likely to stabilise as the impact of the 
COVID-19  crisis  on  public  finances  gradually  unwinds.  Contingent  liabilities  arising  from 
the provision of public guarantees to sustain economic activity and sectors particularly hit by 
the pandemic, only if called, would be reflected in public debt and deficits. These contingent 
liabilities amount to about 20% of GDP in 2020, with large differences across Member States 
(Box  1).  On  the  other  hand,  several  mitigating  factors  exist.  These  factors  include  the 
lengthening  of  debt  maturities  in  recent  years,  stable  financing  sources,  historically  low 
borrowing costs, and EU initiatives such as the European instrument for temporary Support to 
mitigate  Unemployment  Risks  in  an  Emergency  (SURE)  and,  more  importantly,  Next 
Generation EU, which includes the Recovery and Resilience Facility (RRF).  

6 

808590951001052015201620172018201920202021SP2020DBP2021AF2020-50510152020202021Primary deficitSnowball effectsStock-flow adjustmentTotal 
 
 
 
 
 
 
Box 1. Guarantees and other liquidity support measures in the 2021 Draft Budgetary Plans 

Member  States  provided  ample  liquidity  support  to  counter  the  economic  fallout  of  the  COVID-19 
pandemic. The most common forms of liquidity support are state guarantees to support private sector 
borrowing  and  tax  deferrals  (that  is,  the  possibility  of  delaying  tax  obligations  without  penalty). 
Member States also issued guarantees to support new EU level instruments. 

State guarantees are the largest category of liquidity support measures. Member States have put 
in  place  schemes  amounting  to  17%  of  GDP.  This  amount  represents  the  maximum  size  of  the 
guarantee  frameworks  but  the  actual  take-up  or  contractual  agreements  between  households,  firms, 
financial sector and government may be smaller. Only a part of the contractual obligations is likely to 
result  in  calls  on  government,  materialising  as  deficit  and  affecting  debt  levels.  This  proportion  is 
difficult  to  estimate  in  advance.  Member  States  also  issued  guarantees  to  support  new  EU  level 
instruments, in particular SURE and the European Guarantee Fund. 

The  size  of  guarantee  programs  and  their  set-ups  vary  among  Member  States.  Some 
governments have directly guaranteed loans issued by banks to households and firms. Other Member 
States  have  relied  on  national  promotional  institutions  to  implement  liquidity  support  programmes. 
These institutions include KfW in Germany, KredEx in Estonia, the Hellenic Development Bank, BPI 
France,  CDP  in  Italy,  Altum  in  Latvia,  INVEGA  in  Lithuania,  the  Malta  Development  Bank,  and 
Finnvera  in  Finland.  The  take-up  of  guarantees, 
theoretically  possible 
which 
maximum contingent liability under a scheme into 
the government’s actual contingent liability, is also 
uneven  across  the  Member  States.  According  to 
the Commission’s estimates, only around a quarter 
of available guarantees has been taken up so far. 

Graph B1.1  Guarantees  extended  to  domestic  agents,  2020 

transforms 

(% of GDP) 

the 

The  Commission  invited  Member  States  to 
report  in  their  Draft  Budgetary  Plans,  on  a 
voluntary basis, the maximum size of guarantee 
frameworks  and  their  take-up.  Most  Member 
States  provided  this  information  at  least  partially. 
Some  Member  States  also  reported  guarantees 
supporting  EU  and  international  level  instruments 
such  as  SURE.  Graph  B1.1  shows  guarantees 
extended 
to  domestic  economic  actors  only, 
adjusted for comparability reasons.  

Note: Guarantees to EU and international level instruments are 
excluded.  For  Germany,  the  graph  shows  the  size  of  new 
guarantee  schemes  set  up,  while  the  overall  guarantee 
framework is actually unlimited. For France, Ireland and Latvia, 
data  in  the  Draft  Budgetary  Plans  was  supplemented  with 
information  from  other  public  sources.  Austria  and 
Italy 
provided no guarantee data despite existing schemes. In Italy, 
the  maximum  contingent  liabilities  are  estimated  at  around 
30%  of  GDP,  with  an  indicative  take-up  of  around  7%  of  GDP 
so far. 
Sources: 2021 Draft Budgetary Plans and other public sources. 

Euro  area  Member  States  also  allowed  for 
deferrals of tax and social security contribution 
payments of around 1½% of GDP in 2020. Tax 
deferrals have no direct impact on the government 
deficit,  since  taxes  are  recorded  in  national  accounts  in  the  period  when  the  economic  activity 
generating  the  tax  liability  takes  place.  At  the  same  time,  deferrals  may  temporarily  affect  debt, 
should they entail additional borrowing by the general government in the deferral period. However, in 
view of the sizeable expected economic contraction in 2020, some businesses are unlikely to survive 
the  crisis  and  some  of  the  postponed  tax  obligations  may  never  be  paid.  According  to  the  EU 
statistical framework, accrued but uncollectable taxes should not be recorded as government revenue, 
so they have a deficit-increasing impact. Overall, the Draft Budgetary Plans did not provide explicit 
disclosures  of  estimated  tax-related  losses,  although  their  tax  projections  likely  account  for  this 
impact. 

7 

05101520DEFRESBELUFISIPTNLMTSKEEELLTLVIECurrent take-upRemaining 
 
 
 
Fiscal 
pandemic  

response 

to 

the  COVID-19 

Graph 2.6 

Euro area: Measures with a direct budgetary impact, 
2020-2021 (% of GDP) 

Member  States  have  taken  swift  and 
sizeable  fiscal  measures  in  response  to 
the  pandemic.  Fiscal  measures  introduced 
in  2020  mostly  aimed  at  addressing  the 
public  health  situation  and  compensating 
workers and firms for income losses due to 
lockdown  measures  and  supply  chain 
disruptions.  These  temporary  emergency 
measures  are  estimated  to  amount  to  3.4% 
of  GDP 
in  2020  (Graph  2.6).  Other 
measures  of  a  more  general  recovery-
supporting  nature  (either 
temporary  or 
permanent),  such  as  extra  public  works  or 
indirect tax cuts, are estimated to amount to 
0.8%  of  GDP  in  2020.  In  2021,  according 
temporary 
to 
emergency  measures  would  amount  to 
0.9%  of  GDP  and  other  support  measures 
to  1.5%  of  GDP.7  Some  Member  States 
took  additional  measures  after  submitting 
their  Plans  and  more  emergency  measures 
may need to be extended in response to the 
second wave of the pandemic. 

forecast, 

current 

the 

Note: Emergency measures mostly aim at addressing the public 
health situation and compensating workers and firms for income 
losses due to lockdown measures and supply chain disruptions. 
They are mostly temporary. Recovery measures aim at a more 
general support of economic activity. 
Sources: 2021 Draft Budgetary Plans and European Commission 
2020 autumn forecast. 

Graph 2.7 

Euro area: Fiscal support and pre-crisis medium-
term fiscal sustainability risk, 2020 (% of GDP) 

Emergency  measures  are  essential  to 
support  the  health  sector  and  keep 
households  and  businesses  afloat, with  a 
further  positive  impact  on  the  economy. 
While  useful  in  the  initial  phase  of  this 
crisis, they are likely to be  less efficient to 
support  the  recovery  when  the  health-
related 
vanes. 
Because of their very nature, the short-term 
emergency 
multipliers 
measures are likely to be low in the context of restrictions in economic activity, as confirmed 
by the sharp rise in the private sector’s propensity to save (rather than consume) in 2020. This 
is why, when the pandemic situation improves, emergency measures may need to be adjusted 
and  combined  with  measures  that  improve  the  fundamentals  of  our  economies,  support  the 
green and digital transition and have a positive impact on demand. In the meantime, and in 

Note: The chart shows the (simple) average discretionary fiscal 
support in 2020. Member States are clustered according to their 
pre-pandemic medium-term sustainability risks, with Belgium, 
Spain, France, Italy and Portugal in the high risk cluster. The debt 
sustainability analysis carried out for Greece in the 2019 Debt 
Sustainability Monitor differed from the common approach, due 
to specificities of the Greek debt structure, notably the large share 
of official sector lending, with no risk classification provided. 
Sources: 2021 Draft Budgetary Plans, European Commission 2020 
autumn forecast, and European Commission’s 2019 Debt 
Sustainability Monitor. 

emergency 

temporary 

gradually 

of 

7   The reason for distinguishing the emergency measures is that the appropriateness of their deployment should 
be gauged not in connection with the state of the economy but the state of public health and the restrictions it 
demands. These emergency measures are (almost exclusively) temporary, with an expiry date of 2022 or 
earlier. Other measures related to the COVID-19 crisis, either temporary or permanent, are deemed to 
support the ensuing recovery (i.e. other support measures). 

8 

01234520202021Emergency measuresOther support measures05101520Measures with a directbudgetary impactLiquidity measureswithout a directbudgetary impactLow or medium riskHigh risk 
 
                                                           
 
 
 
 
light of the recent resurgence of the pandemic in Europe, emergency measures may continue 
to prove necessary for providing a lifeline to the economy. 

Member  States  with  stronger  fiscal  positions  have  provided  more  direct  budgetary 
support  while  Member  States  with  weaker  fiscal  positions  tended  to  rely  more  on 
liquidity  support  (Graph  2.7).  Overall,  countries  with  relatively  stronger  fiscal  positions 
extended  more  fiscal  support  with  a  direct  budgetary  impact  (1%  of  GDP).  In  contrast, 
countries with weaker fiscal positions appear to have relied more heavily on liquidity support 
without a direct budgetary impact. Moving forward, EU level support initiatives such as the 
RRF  should  provide  additional  fiscal  space  to  support  the  recovery  and  Member  States’ 
resilience. 

Assessment of the euro area fiscal stance  

A  mechanical  reading  of 
traditional 
indicators to assess the fiscal stance is not 
well  suited  at  the  current  juncture.  The 
introduction  and  subsequent  withdrawal  of 
temporary  emergency  measures 
sizeable 
distort  the  picture,  as  the  corresponding 
changes in the level of public spending from 
one  year  to  the  next  affect  the  indicators 
used  to  assess  the  fiscal  stance.8  Excluding 
the temporary emergency measures from the 
calculation  of  the  fiscal  stance  indicators 
leads to a more representative assessment of 
the  underlying  fiscal  support  to  economic 
activity.  

Graph 2.8 

Euro area: fiscal stance, 2020-2021 (% of GDP) 

Note: The graph shows the discretionary fiscal impulse based on 
the expenditure benchmark methodology, which measures the 
growth of spending (net of discretionary measures) in excess to 
potential growth. In this graph, positive figures indicate an 
expansionary stance. 
Source: European Commission 2020 autumn forecast. 

The fiscal stance in 2021 appears supportive when adjusted for the planned unwinding 
of temporary emergency measures. The Draft Budgetary Plans assume that a large share of 
temporary  emergency measures will expire in  2021. The  conventional  indicators (including 
emergency  measures)  point  to  a  supportive  fiscal  stance  +4.5%  of  GDP  in  2020  but  to  a 
tightening  of  –1.0%  of  GDP  in  2021  (according  to  the  Commission  2020  autumn  forecast; 
Graph  2.8).  By  contrast,  excluding  temporary  emergency  measures  directly  linked  to  the 
pandemic, the fiscal stance is supportive for both years at +1.1% of GDP in 2020 and +1.4% 
in  2021. While the recovery is  projected to  be incomplete, fiscal  measures already in  place 
will contribute to supporting economic activity over 2020-2021.  

Financing from the RRF will provide an additional fiscal impulse. Expenditure financed 
by  RRF  grants  provides  an  additional  fiscal  stimulus  at  the  euro  area  level,  despite  being 
neutral for Member States’ budget balances.9 For now, the Commission 2020 autumn forecast 
assumes a small impact of RRF-financed expenditure on the euro area fiscal stance in 2021 
(0.15% of GDP). However, this is due to the lack of sufficiently detailed information on those 

8   COVID-19 related emergency measures are not considered one-offs, although most of them have been 

introduced for a temporary period in order to complement automatic stabilisers. 

9   Eurostat has given a preliminary favourable assessment of the budget neutrality of RRF grants, following 

a consultation with national statistical offices.  

9 

-2-1012345Corrected for emergencymeasuresConventional approach20202021 
 
                                                           
 
measures in  the 2021 Draft Budgetary Plans. Only  six Member States reported expenditure 
financed  by  RRF  in  their  Draft  Budgetary  Plans:  Greece,  France,  Italy,  Lithuania,  Portugal 
and Slovenia.  

The  timing  and  the  scale  of  the  withdrawal  of  emergency  measures  foreseen  in  2021 
seems  now  uncertain  in  light  of  the  second  wave  of  the  pandemic.  This  timeline  for 
withdrawal  was  based  on  an  assumption  of  switching  from  an  ‘emergency’  phase  to  a 
‘recovery’ phase of the crisis, that is, from containing the heath-related and economic damage 
of  the  pandemic  to  a  phase  focused  on  achieving  a  durable  recovery.  However,  the  recent 
resurgence of the pandemic in Europe may entail an extension of the ‘emergency’ response in 
order  to  provide  a  lifeline  to  the  economy.  This  support  is  likely  to  modify  the  budgetary 
plans already reflected in the Commission forecast. However, the new ‘emergency’ measures 
should not necessarily mimic those taken during the first epidemical wave but instead should 
reflect the lessons learnt and be combined with actions that improve economic fundamentals. 
The challenge will be to continue to support the economy in the emergency whilst creating 
the conditions for the return to sustained and sustainable growth consistent with the green and 
digital transition of the EU economy.  

The mix of large output losses and high downside risks calls for continued fiscal policy 
support,  both  well  targeted  and  temporary.  First,  Member  States  should  avoid 
withdrawing fiscal support abruptly. Second, fiscal support measures in the current phase of 
the  pandemic  might  differ  from  the  usual  aggregate  demand  support  seen  during  a  normal 
recession. As the pandemic continues and uncertainty prevails, stimulus measures should be 
well targeted, since broad-based measures risk being ineffective. Third, the resurgence of the 
pandemic  should  not  lead  to  a  systematic  extension  of  emergency-oriented  fiscal  policy 
measures  once  the  underlying  health  situation  improves.  The  priorities  and  appropriate 
measures under the ‘emergency’ and the ‘recovery’ regimes are different and Member States 
need  to  remain  agile  and  recognise  in  a  timely  manner  how  to  combine  different  types  of 
support. 

Member States’ fiscal policy responses should continue to provide fiscal support, while 
safeguarding  fiscal  sustainability  in  the  medium  term.  The  economic  impact  of  the 
pandemic has been more acute in many high-debt Member States, adding to the challenge of 
finding an optimal fiscal policy response. Currently, Member States benefit from favourable 
financing costs, thanks to the substantial support from the European Central Bank’s monetary 
policy measures and much improved financial markets confidence following the deployment 
of sizeable instruments at the EU level. However, in order to reconcile the need for economic 
support  with  prudent  medium-term  fiscal  positions  and  medium-term  fiscal  sustainability, 
support measures should be temporary and not pre-committing fiscal policy in the post-crisis 
period. When economic conditions allow, government should resume fiscal policies aimed at 
achieving  prudent  medium-term  fiscal  positions  while  enhancing  investment.  Credible 
medium-term  fiscal  strategies  are  important  to  support  fiscal  sustainability,  not  least  in  the 
case of highly-indebted Member States.  

10 

 
 
 
 
 
III. Overview of the Draft Budgetary Plans 

Almost  all  euro  area  Member  States  submitted  their  Draft  Budgetary  Plans  by  15 
October.  This  was  in  line  with  Article  6  of  Regulation  (EU)  No  473/2013.  The  two 
exceptions  were  Italy  and  Cyprus.  Italy  submitted  its  plan  on  19  October,  while  Cyprus 
submitted its plan on 23 October. In accordance with the provisions of the Two-Pack Code of 
Conduct,  Belgium  and  Lithuania  submitted  no-policy-change  Draft  Budgetary  Plans. 
Belgium submitted a no-policy-change plan on 15 October due to the recent formation of a 
new  federal  government,  and  then  submitted  an  updated  plan  on  30 October.  The 
Commission Opinion is based on the assessment of the updated plan. Lithuania submitted a 
no-policy-change Draft  Budgetary Plan due to  the holding of national  elections in  October. 
The  Lithuanian  authorities  are  invited  to  submit  to  the  Commission  and  the  Eurogroup  an 
updated plan as soon  as the new government takes office and, as a rule, at least one month 
before the draft budget law is planned to be adopted by the national parliament.  

Fiscal response to the COVID-19 pandemic in 2020-2021 across Member States 

The fiscal stance appears supportive in all euro area Member States in 2020-2021, once 
the  calculations  are  corrected  for  the  phasing  out  of  temporary  emergency  measures 
(Graph 3.1). As discussed in Section II, the planned withdrawal of the emergency spending 
influences  sizably  the  traditional  indicators  of  the  fiscal  stance.  Excluding  the  temporary 
emergency measures, the underlying fiscal  effort (measured by the expenditure benchmark) 
amounts to  an expansionary stance in  2021 (about  1.5% of GDP).  In some Member States, 
this  support  is  sizeable  at  2%  of  GDP  or  more.  This  support  is  on  top  of  significant 
expansionary  measures  of  about  1%  of  GDP  already  delivered  in  2020  (Graph  3.2)  and  is 
provided across most Member States (Graph 3.3). When adjusted for the planned withdrawal 
of the emergency measures, the fiscal stance is expected to be slightly contractionary in two 
Member States in 2021. RRF financing will provide an additional fiscal stimulus. 

Graph 3.1 

Fiscal stance, 2021 (% of GDP) 

Graph 3.2 

Fiscal stance excl. emergency measures, 2020-
2021 (% of GDP) 

Note: Fiscal stance is calculated as the discretionary fiscal 
impulse based on the expenditure benchmark methodology. 
Positive figures indicate a supportive stance.  
Source: European Commission 2020 autumn forecast. 

Note: Fiscal stance is calculated as the discretionary fiscal 
impulse, with emergency measures excluded. Positive figures 
indicate a supportive stance. 
Source: European Commission 2020 autumn forecast. 

11 

-4-2024ITELSILTFRDEMTATSKLULVCYESNLIEEEPTFIBEEAFiscal impulse 2021, excl. emergency measuresFiscal impulse 2021, incl. emergency measures-1012345LTITESSKSIATMTLUDEELCYLVFRNLBEEEFIPTIEEA20202021 
 
 
 
 
 
the 

support 

third  of 

emergency 

While the majority of measures is aimed 
the  economic  recovery, 
to 
measures 
temporary 
represent  over  one 
total 
measures  in  2021,  on  average,  with  high 
(Graph 3.4).  This 
country  dispersion 
reflects 
uncertainty 
high 
still 
surrounding the evolution of the pandemic. 
Five  Member  States  budget  for  emergency 
spending  of  1%  of  GDP  or  more,  though 
some countries incorporate no impact from 
a  temporary  emergency  response  in  their 
2021  budgets.  Several  countries  plan  to 
pivot  their  fiscal  support  in  2021  from 
emergency  towards  support  of  economic 
recovery.  However,  in  light  of  the  recent 
resurgence  of  the  pandemic  in  Europe,  the 
planned withdrawal of emergency measures 
in  2021  is  subject  to  increased  uncertainty 
as  Member  States  are  expected  to  provide 
further  emergency  support  to  provide  a 
lifeline to the economy. 

Member  States  plan  a  combination  of 
mostly  temporary  and  some  permanent 
measures  in  2021  to  support  economic 
the  background  of 
activity  against 
considerable uncertainty (Graph 3.5). The 
measures  are  expected  to  amount  to  2.6% 
of  GDP  on  average,  with  some  countries 
planning  stimulus  of  3%  of  GDP  or  more. 
On  average,  temporary  measures  represent 
around two thirds of total measures in 2021. 
few  countries  have  also 
However,  a 
implemented permanent  measures, in  some 
limited cases in excess of 1% of GDP, with 
an  impact  on  the  future  fiscal  trajectories. 
This could be of concern, as the uncertainty 
surrounding  the  second  wave  of  pandemic 
remains  high  and  there  may  be  a  need  for 
additional  emergency  measures.  Coupling 
the 
emergency 
measures  with  permanent  measures  should 
not  risk 
the  medium-term 
jeopardising 
fiscal sustainability (Graph 3.6).  

temporary 

necessary 

Graph 3.3 

Fiscal stance excl. emergency measures in 2021 
and public debt in 2019 (% of GDP) 

Note: Fiscal stance is calculated as the discretionary fiscal 
impulse, with emergency measures excluded. Positive figures 
indicate a supportive stance. 
Source: European Commission 2020 autumn forecast. 

Graph 3.4 

Emergency and other support measures, 2021 
(% of GDP) 

Note:  The  chart  shows  fiscal  impact  in  2021  of  discretionary 
measures  adopted  from  2020  onwards.  Emergency  measures 
mostly  aim  at  addressing  the  public  health  situation  and 
compensating  workers  and  firms  for 
income  losses  due  to 
lockdown measures and supply chain disruptions; they are mostly 
temporary.  Other  support  measures  aim  at  a  more  general 
support  of  economic  activity  and  can  be  either  temporary  or 
permanent. 
Source: European Commission 2020 autumn forecast. 

Graph 3.5  

Temporary and permanent measures, 2021 
(% of GDP) 

Note: The graph shows fiscal impact in 2021 of discretionary 
measures adopted from 2020 onwards. Temporary measures are 
set to expire in 2022 or earlier. 
Source: European Commission 2020 autumn forecast. 

12 

ESFRBEFIPTSILUEESKNLIECYLVMTLTITELDEAT-101234050100150200Fiscal impulse excl. emergency measuresPublic debt, 2019012345SKATLTIEITEEDEMTFRPTELNLFILVSILUBECYESEAEmergency measuresOther support measures-2-10123456SKATLTIEITEEDEMTFRPTELNLFILVSILUBECYESEATemporary measuresPermanent measures 
 
 
 
 
 
 
 
 
 
Graph 3.6 

Permanent measures and pre-crisis medium-term fiscal 
sustainability risks, 2021 (% of GDP) 

Note: The chart shows fiscal impact in 2021 of the permanent measures adopted 
from 2020 onwards. Member States are clustered according to their pre-
pandemic medium-term sustainability risks. The debt sustainability analysis carried 
out for Greece in the Debt Sustainability Monitor 2019 differed somehow from the 
common approach, due to specificities of the Greek debt structure, notably the 
large share of official sector lending, with no risk classification provided.  
Source: European Commission 2020 autumn forecast and 2019 Debt Sustainability 
Monitor. 

Qualitative Commission assessment of the 2021 Draft Budgetary Plans  

The  Commission  Opinions  on  the  2021  Draft  Budgetary  Plans  take  into  account  the 
activation  of  the  general  escape  clause  of  the Stability  and  Growth  Pact.  On  20  March 
2020,  the  Commission  adopted  a  Communication  on  the  activation  of  the  general  escape 
clause of the Stability and Growth Pact.10 In its Communication, the Commission set out its 
view  that,  given  the  expected  severe  economic  downturn  resulting  from  the  COVID-19 
outbreak, the conditions to activate the general escape clause were met. On 23 March 2020, 
the  Ministers  of  Finance  of  the  Member  States  agreed  with  the  assessment  of  the 
Commission.  As  indicated  in  the  Annual  Sustainable  Growth  Strategy  202111  and  as 
communicated in the letter of 19 September 2020 from the Commission to the EU Ministers 
of Finance,12 Member States should continue to provide targeted and temporary fiscal support 
in 2021 in a context where the general escape clause is  activated, while safeguarding fiscal 
sustainability in the medium term.  

In  spring,  the  Commission  adopted  reports  under  Article  126(3)  of  the  Treaty  on  the 
Functioning of the European Union for all Member States except Romania, which was 
already in the corrective arm of the Pact. In light of the exceptional uncertainty created by 

10   Communication from the Commission to the European Parliament, the European Council, the Council, the 
European Central Bank, the European Investment Bank and the Eurogroup on Coordinated economic 
response to the COVID-19 Outbreak, Brussels, 13.3.2020, COM(2020) 112 final. 

11  Communication from the Commission on Annual Sustainable Growth Strategy 2021, Brussels, 17.9.2020, 

COM(2020) 575 final. 

12  https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-economic-

governance-monitoring-prevention-correction/stability-and-growth-pact/annual-draft-budgetary-plans-dbps-
euro-area-countries/draft-budgetary-plans-2021_en  

13 

ESFRBEFIPTSILUEESKNLIECYLVMTLTITDEAT-1.50.01.53.0012High riskLow/ medium risk 
 
 
 
                                                           
the outbreak of COVID-19 and its extraordinary macroeconomic and fiscal impact, including 
for designing a credible path for fiscal policy, which will have to remain supportive in 2021, 
the  Commission  considered  that  a  decision  on  whether  to  place  Member  States  under  the 
Excessive Deficit Procedure should not be taken. This remains valid. 

Fiscal  policy  in  2020  and  2021  focuses  on  countering  the  pandemic.  Following  the 
activation  of  the  general  escape  clause,  the  Council  recommended  on  20  July  2020  that 
Member  States  should  take  all  necessary  measures  to  effectively  address  the  pandemic, 
sustain  the  economy  and  support  the  ensuing  recovery.  When  economic  conditions  allow, 
Member States should pursue fiscal policies aimed at achieving prudent medium-term fiscal 
positions and ensuring debt sustainability, while enhancing investment. 

The  Opinions  on  the  2021  Draft  Budgetary  Plans  focus  on  the  assessment  of  the 
budgetary  measures  for  2021.  The  Opinions  assess  whether  the  planned  supportive 
measures  are  in  line  with  the  Council  recommendations  of  20  July  2020  and  the  guidance 
provided in the letter sent by the Commission on 19 September. In particular, it is assessed 
whether the measures are temporary. The latter is important in the context of preserving fiscal 
sustainability in the medium term, in line with the general escape clause.  

The  qualitative  assessment  of  the  2021  Draft  Budgetary  Plans  can  be  summarised  as 
follows:  

1.  The Commission is of the opinion that the Draft Budgetary Plans are overall in line 
with the fiscal policy recommendation adopted by the Council on 20 July 2020. Most 
of  the  measures  in  the  Draft  Budgetary  Plans  support  economic  activity  against  the 
background of considerable uncertainty.   

2.  For  Austria,  Belgium,  Cyprus,  Estonia,  Finland,  Germany,  Greece,  Ireland,  Latvia, 
Luxembourg,  Malta,  Netherlands,  Portugal,  Slovenia  and  Spain,  the  measures  are 
(mostly) temporary. Some measures set  out  in  the Draft  Budgetary Plans of France, 
Italy, Lithuania and Slovakia do not appear to be temporary or matched by offsetting 
measures.  Lithuania  has  submitted  its  Draft  Budgetary  Plan  based  on  a  no-policy-
change scenario and is invited to submit an updated Draft Budgetary Plan.  

3.  For  Belgium,  France,  Greece,  Italy,  Portugal  and  Spain,  given  the  level  of  their 
government  debt  and  high  sustainability  challenges  in  the  medium-term  before  the 
outbreak  of  the  COVID-19  pandemic,  it  is  important  to  ensure  that,  when  taking 
supporting budgetary measures, fiscal sustainability in the medium term is preserved.  

All Member States are invited to regularly review the use, effectiveness and adequacy of the 
support measures and stand ready to adapt them as necessary to changing circumstances. 

14 

 
 
 
 
ANNEX I: Country-specific assessment of 2021 Draft Budgetary Plans 

The Commission is of the opinion that the Draft Budgetary Plan of Austria is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Austria  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  Austria  is  invited  to  regularly  review  the  use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances.  

The Commission is of the opinion that the Draft Budgetary Plan of Belgium is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Belgium  are  supporting  economic  activity  against  the 
background of considerable uncertainty. Given the level of Belgium’s government debt and 
high  sustainability  challenges  in  the  medium  term  before  the  outbreak  of  the  COVID-19 
pandemic,  it  is  important  for  Belgium  to  ensure  that,  when  taking  supportive  budgetary 
measures,  fiscal  sustainability  in  the  medium  term  is  preserved.  Belgium  is  invited  to 
regularly review the use, effectiveness and adequacy of the support measures and stand ready 
to adapt them as necessary to changing circumstances.  

The Commission is of the opinion that the Draft Budgetary Plan of Cyprus is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Cyprus  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  Cyprus  is  invited  to  regularly  review  the  use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances.  

The Commission is of the opinion that the Draft Budgetary Plan of Estonia is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Estonia  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  Estonia  is  invited  to  regularly  review  the  use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances.  

The Commission is of the opinion that the Draft Budgetary Plan of Finland is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Finland  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  Finland  is  invited  to  regularly  review  the  use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances. 

The Commission is of the opinion that the Draft Budgetary Plan of France is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  France  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  However,  some  measures  do  not  appear  to  be 
temporary or matched by offsetting measures. Given the level of France’s government debt 
and high sustainability challenges in the medium term before the outbreak of the COVID-19 
pandemic,  it  is  important  for  France  to  ensure  that,  when  taking  supportive  budgetary 
measures, fiscal sustainability in the medium term is preserved. France is invited to regularly 
review the use, effectiveness and adequacy of the support measures and stand ready to adapt 
them as necessary to changing circumstances. 

15 

 
 
The  Commission  is  of the  opinion  that the  Draft  Budgetary  Plan  of  Germany  is  overall  in 
line with the recommendation adopted by the Council on 20 July 2020. Most of the measures 
set out in the Draft Budgetary Plan of Germany are supporting economic activity against the 
background  of  considerable  uncertainty.  Germany  is  invited  to  regularly  review  the  use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances. 

The Commission is of the opinion that the Draft Budgetary Plan of Greece is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Greece  are  supporting  economic  activity  against  the 
background of considerable uncertainty. Given the level of Greece’s government debt before 
the  outbreak  of  the  COVID-19  pandemic,  it  is  important  for  Greece  to  ensure  that,  when 
taking supportive budgetary measures, fiscal sustainability in the medium term is preserved. 
Greece  is  invited  to  regularly  review  the  use,  effectiveness  and  adequacy  of  the  support 
measures and stand ready to adapt them as necessary to changing circumstances. 

The Commission is of the opinion that the Draft Budgetary Plan of Ireland is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Ireland  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  Ireland  is  invited  to  regularly  review  the  use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances.  

The  Commission  is  of  the  opinion  that  the  Draft  Budgetary  Plan  of  Italy  is  overall  in  line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Italy  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  However,  some  measures  do  not  appear  to  be 
temporary or matched by offsetting measures. Given the level of Italy’s government debt and 
high  sustainability  challenges  in  the  medium  term  before  the  outbreak  of  the  COVID-19 
pandemic, it is important for Italy to ensure that, when taking supportive budgetary measures, 
fiscal sustainability in the medium term is preserved. Italy is invited to regularly review the 
use,  effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances. 

The Commission is of the opinion that the Draft Budgetary Plan of Latvia is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Latvia  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  Latvia  is  invited  to  regularly  review  the  use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances.  

The Commission is of the opinion that the Draft Budgetary Plan of Luxembourg is overall in 
line with the recommendation adopted by the Council on 20 July 2020. Most of the measures 
set out in the Draft Budgetary Plan of Luxembourg are supporting economic activity against 
the  background  of  considerable  uncertainty.  Luxembourg  is  invited  to  regularly  review  the 
use,  effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances.  

The Commission is of the opinion that the Draft Budgetary Plan of  Lithuania is overall in 
line with the recommendation adopted by the Council on 20 July 2020. Most of the measures 
set out in the Draft Budgetary Plan of Lithuania are supporting economic activity against the 
background  of  considerable  uncertainty.  However,  some  measures  do  not  appear  to  be 
16 

 
 
temporary or matched by offsetting measures. Lithuania is invited to regularly review the use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary  to  changing  circumstances.  As  soon  as  a  new  government  takes  office  and,  as  a 
rule, at least one month before the draft budget law is planned to be adopted by the national 
parliament,  the  authorities  are  invited  to  submit  to  the  Commission  and  the  Eurogroup  an 
updated Draft Budgetary Plan. 

The Commission is of the opinion that the Draft Budgetary Plan of Malta is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Malta  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  Malta  is  invited  to  regularly  review  the  use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances.  

The  Commission  is  of  the  opinion  that  the  Draft  Budgetary  Plan  of  the  Netherlands  is 
overall in line with the recommendation adopted by the Council on 20 July 2020. Most of the 
measures  in  the  Draft  Budgetary  Plan  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  The  Netherlands  is  invited  to  regularly  review  the 
use,  effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances.  

The Commission is of the opinion that the Draft Budgetary Plan of Portugal is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Portugal  are  supporting  economic  activity  against  the 
background of considerable uncertainty. Given the level of Portugal’s government debt  and 
high  sustainability  challenges  in  the  medium  term  before  the  outbreak  of  the  COVID-19 
pandemic,  it  is  important  for  Portugal  to  ensure  that,  when  taking  supportive  budgetary 
measures,  fiscal  sustainability  in  the  medium  term  is  preserved.  Portugal  is  invited  to 
regularly review the use, effectiveness and adequacy of the support measures and stand ready 
to adapt them as necessary to changing circumstances.  

The Commission is of the opinion that the Draft Budgetary Plan of Slovakia is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Slovakia  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  However,  some  measures  do  not  appear  to  be 
temporary or matched by offsetting measures. Slovakia is invited to regularly review the use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances.  

The Commission is of the opinion that the Draft Budgetary Plan of Slovenia is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Slovenia  are  supporting  economic  activity  against  the 
background  of  considerable  uncertainty.  Slovenia  is  invited  to  regularly  review  the  use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances. 

The Commission is of the opinion that the Draft Budgetary Plan of  Spain is overall in line 
with the recommendation adopted by the Council on 20 July 2020. Most of the measures set 
out  in  the  Draft  Budgetary  Plan  of  Spain  are  supporting  economic  activity  against  the 
background of considerable uncertainty. Given the level of Spain’s government debt and high 
sustainability challenges in the medium term before the outbreak of the Covid-19 pandemic, 
it  is  important  for  Spain  to  ensure  that,  when  taking  supportive  budgetary  measures,  fiscal 
17 

 
 
sustainability in the medium term is preserved. Spain is invited to regularly review the use, 
effectiveness  and  adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as 
necessary to changing circumstances.  

18 

 
 
 
 
ANNEX  II:  The  methodology  and  assumptions  underpinning  the  Commission 
autumn 2020 forecast 

According  to  Article  7(4)  of  Regulation  (EU)  No  473/2013,  “the  methodology  and 
assumptions  of  the  most  recent  economic  forecasts  of  the  Commission  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  2020  autumn  forecast,  which  is  produced  independently  by  Commission 
staff, are explained in the forecast document itself.13 

Budgetary data up to 2019 are based on data notified by Member States to the Commission 
before 1 October 2020 and validated by Eurostat on 22 October 2020. Eurostat has made no 
amendments  to  the  data  reported  by  Member  States  during  the  autumn  2020  notification 
round.  Eurostat  withdrew  its  earlier  reservation  on  the  quality  of  the  data  reported  by 
Denmark  for  the  year  2019.  That  reservation  reflected  a  lack  of  completeness  and  high 
statistical  discrepancy  of  data  provided  by  the  Danish  statistical  authorities  in  March  2020. 
Since then, the Danish statistical authorities provided a complete data set and the discrepancy 
decreased considerably. 

For the forecast, measures in support of financial stability have been recorded in line with the 
Eurostat  Decision  of  15  July  2009.14  Unless  reported  otherwise  by  the  Member  State 
concerned, capital injections known in sufficient detail have been included in the forecast as 
financial  transactions,  i.e.  increasing  the  debt,  but  not  the  deficit.  State  guarantees  on  bank 
liabilities and deposits are not included as government expenditure, unless there is evidence 
that they have been called on at the time the forecast was finalised. However, loans granted to 
banks by the government, or by other entities classified in the government sector, usually add 
to government debt. 

For 2021, budgets adopted or presented to national parliaments and all other measures known 
in sufficient detail are taken into consideration. In particular, all the information included in 
the Draft Budgetary Plans submitted by mid-October is reflected in the autumn forecast. For 
2022,  the  ‘no-policy-change’  assumption  used  in  the  forecasts  implies  the  extrapolation  of 
revenue  and  expenditure  trends  and  the  inclusion  of  measures  that  are  known  in  sufficient 
detail. 

European  aggregates  for  general  government  debt  in  the  forecast  years  2020-2022  are 
published  on  a  non-consolidated  basis  (i.e.  not  corrected  for  intergovernmental  loans).  To 
ensure  consistency  in  the  time  series,  historical  data  are  also  published  on  the  same  basis. 
General  government  debt  projections  for  individual  Member  States  in  2020-22  include  the 
impact  of  guarantees  to  the  European  Financial  Stability  Facility,  bilateral  loans  to  other                                                            
Member States, and the participation in the capital of the European Stability Mechanism as 
planned on the cut-off date of the forecast.15 

13   Methodological assumptions underlying the Commission autumn 2020 economic forecast, available at: 
https://ec.europa.eu/info/business-economy-euro/economic-performance-and-forecasts/economic-
forecasts/autumn-2020-economic-forecast_en 

14   Available at: http://ec.europa.eu/eurostat/documents/1015035/2041337/FT-Eurostat-Decision-9-July-20093-

-final-.pdf. 

15   In line with the Eurostat decision of 27 January 2011 on the statistical recording of operations undertaken by 
the EFSF, available at: http://ec.europa.eu/eurostat/documents/2995521/5034386/2-27012011-AP-EN.PDF.  

19 

 
 
                                                           
According to the Commission 2020 autumn forecast, the budgetary measures reported in the 
Draft Budgetary Plans for 2021 are deficit-increasing on aggregate (impact of around 1% of 
GDP). Expenditure-increasing measures are  expected to  drive the negative impact.  Overall, 
the mechanical impact on GDP growth in the short-term is projected to be positive. 

It is important to be prudent in interpreting that estimate: 

  Regulation (EU) No 473/2013 aims at evaluating the effect of the measures taken in 
the Draft  Budgetary Plans. Measures taken and  having  entered into force before the 
Draft  Budgetary  Plans  are  not  included  in  the  assessment  even  if  they  can  have  an 
additional impact on the public finance projections for 2021. 

  The impact of reported measures is expressed against a baseline at unchanged policy. 
The fiscal policy orientation of that baseline is not necessarily neutral. For  example, 
the  trend  increase  of  some  expenditure  items  could  be  above  or  below  potential 
growth,  there  might  be  an  additional  impact  of  earlier  measures  in  the  baseline  or 
measures taken earlier might cease in 2021.  

The budgetary projections of some Member States include measures that are expected to be 
financed  under  Next  Generation  EU/  RRF.  The  Commission  2020  autumn  forecast  records 
these measures as deficit-increasing, though they may eventually be financed by RRF. As a 
result, projected deficits of those Member States might be overestimated.  

20 

 
 
 
 
ANNEX III: Debt sustainability analysis and sensitivity analysis  

This  Annex  presents  a  sensitivity  analysis  of  public  debt  developments  to  possible 
macroeconomic shocks, as required by Article 7 of Regulation (EU) No 473/2013. Stochastic 
debt  projections  are  used  to  assess  the  possible  impact  on  public  debt  dynamics  of  risks  to 
nominal  GDP  growth,  financial  market  developments  and  fiscal  shocks  affecting  the 
government budgetary position. 16 

The  stochastic  projections  account  for  macroeconomic  uncertainty  around  a  ‘central’  debt 
projection scenario in 2021-2025. Two ‘central’ debt scenarios are considered: 

  The  Commission  2020  autumn  forecast  scenario,  which  includes  a  baseline  forecast 
through 2022.17 Starting in 2023, countries are generally assumed to gradually adjust 
their structural primary balance to return to the level that was forecasted for year 2021 
in the (pre-pandemic) Commission 2019 autumn forecast. 

  The 2021 Draft Budgetary Plans’ scenario, which includes a baseline forecast through 
2021.  Starting  in  2022,  countries  are  assumed  to  gradually  adjust  their  structural 
primary balance to return to  the level  that  was  forecasted for  year 2021  in  the (pre-
pandemic) 2020 Draft Budgetary Plans.18 

Shocks  are  applied  to  the  macroeconomic  conditions  assumed  in  the  central  scenario  to 
obtain  the  distribution  of  possible  debt  paths  (the  ‘cone’  in  the  fan  charts  shown  in  Graph 
III.1). The cone corresponds to a wide set of possible macroeconomic conditions, with up to 
2000  shocks  simulated  on  growth,  interest  rates  and  the  primary  balance.  The  size  and 
correlation  of  these  shocks  reflect  historical  volatility  and  relationships  between  these 
variables.19  Therefore,  the  fan  charts  provide  probabilistic  information  on  euro  area  debt 
dynamics, taking into account the possible occurrence of shocks to growth, interest rates and 
the primary balance of a magnitude and correlation mirroring the past developments. 

Each fan chart reports the projected debt path under the central scenario as a dashed line. The 
median outcome of the simulations is shown as a solid black line. The cone covers 80% of all 
possible  debt  paths  (20%  of  the  least  likely  shocks  are  not  shown).  The  differently  shaded 
areas within the cone represent different portions of the overall distribution of possible debt 
paths.  

In 2021, the simulations suggest that the euro area debt ratio will be between 99% and 106% 
of  GDP  with  an  80%  probability  under  the  Commission  scenario,  and  between  97%  and 
104%  of  GDP  under  the  Draft  Budgetary  Plan  scenario.  By  2025,  there  would  be  a  50% 
probability of a debt ratio higher than around 104% of GDP under both scenarios.  

16   The methodology for stochastic public debt projections used here is presented in the European Commission's 
Debt Sustainability Monitor 2019, Annex A7, 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. 

17   The Commission 2020 autumn forecast incorporates fiscal policy measures (adopted and/or at least 

credibility announced) and information as of 22 October 2020. 

18  This entails that the euro area structural primary balance is assumed to converge from 3.2% of GDP deficit 
in 2021 to 1.1% of GDP in 2025 in the Draft Budgetary Plan scenario, against a 2.9% deficit in 2021 to a 
1.0% deficit in the Commission scenario. 

19   Shocks are assumed to follow a joint normal distribution. 

21 

 
 
                                                           
Additional risks surround these projections. As the size and correlation of the shocks reflect 
the variables’ historical behaviour, the methodology does not capture real-time uncertainty, in 
particular related to the output gap assessment. Output gaps tend to be revised downwards, in 
the  direction  of  lower  potential  output  than  assumed  in  the  real  time.  This  uncertainty 
suggests an additional source of risks on future debt paths that is not reflected in this analysis. 
Another  source  of  uncertainty  relates  to  the  realisation  of  contingent  liabilities,  as  the  fan 
charts only capture risks that materialised in the past through a deterioration of the primary 
balance. 

Graph III.1: Fan charts from stochastic public debt projections around the Commission’s 
forecast scenario and the Draft Budgetary Plans’ forecast scenario  

22 

 
 
 
 
 
 
 
ANNEX IV: Tables 

Table IV.1: Real GDP growth (%) according to the Stability Programmes (SP), the 
Draft Budgetary Plans (DBP) and the Commission 2020 autumn forecast (COM) 

23 

CountrySPDBPCOMSPDBPCOMBE-8.0-7.4-8.48.66.54.1DE-6-5.8-5.64.43.5EE-8.0-5.5-4.68.04.53.4IE-10.5-2.4-2.36.01.72.9EL-4.7-8.2-9.05.17.55.0ES-9.2-11.2-12.46.89.85.4FR-8.0-10.0-9.48.05.8IT-8.0-9.0-9.94.76.04.1CY-7.0-5.5-6.26.04.53.7LV-7.0-7.0-5.61.05.14.9LT-7.3-1.5-2.26.63.33.0LU-6.0-6.0-4.57.07.03.9MT-5.4-7.4-7.33.95.03.0NL1.4-5.0-5.31.63.52.2AT-5.2-6.8-7.13.54.44.1PT-8.5-9.35.45.4SI-8.1-6.7-7.13.55.15.1SK-7.2-6.7-7.56.85.54.7FI-5.5-4.5-4.31.32.62.9EA-6.7-7.6-7.85.75.94.220202021 
 
 
 
 
 
Table IV.2: Headline balance (% of GDP) according to the Stability Programmes (SP), 
the Draft Budgetary Plans (DBP) and the Commission 2020 autumn forecast (COM) 

24 

 CountrySPDBPCOMSPDBPCOMBE-7.5-10.3-11.2-6.0-7.1DE-7 1/4-6 ¼-6.0-4 ¼-4.0EE-10.1-6.6-5.9-3.8-6.7-5.9IE-7.4-6.2-6.8-4.1-5.7-5.8EL-4.7-8.6-6.9-0.2-3.9-6.3ES-10.3-11.3-12.2-7.7-9.6FR-9.0-10.2-10.5-6.7-8.3IT-7.1-10.5-10.8-4.2-7.0-7.8CY-4.3-4.5-6.1-0.4-0.7-2.3LV-9.4-7.6-7.4-5.0-3.9-3.5LT-11.4-8.8-8.4-3.9-5.0-6.0LU-8.5-7.4-5.1-3.0-2.7-1.3MT-7.5-9.4-9.4-3.6-5.9-6.3NL1.1-7.2-7.20.1-5.5-5.7AT-8.0-9.5-9.6-1.9-6.3-6.4PT-7.3-7.3-4.3-4.5SI-8.1-8.6-8.7-6.6-6.4SK-8.4-9.7-9.6-4.9-7.4-7.9FI-7.2-7.7-7.6-4.0-5.0-4.8EA-7.3-8.6-8.8-3.5-5.9-6.420202021 
 
 
 
 
 
 
Table IV.3: Debt-to-GDP ratio (% of GDP) according to the Stability Programmes (SP), 
the Draft Budgetary Plans (DBP) and the Commission 2020 autumn forecast (COM) 

25 

 CountrySPDBPCOMSPDBPCOMBE115.0116.8117.7113.6117.8DE7171.270 1/470.1EE21.918.217.223.423.622.5IE69.162.663.168.466.666.0EL188.8197.4207.1176.8184.7200.7ES115.5118.8120.3117.4122.0FR115.2117.5115.9116.2117.8IT151.8158.0159.6147.5155.6159.5CY116.8114.8112.6103.2111.0108.2LV51.747.347.552.246.045.9LT50.647.747.252.750.250.7LU28.727.425.429.629.427.3MT54.555.055.255.558.660.0NL46.359.160.045.261.163.5AT81.484.084.279.384.885.2PT134.8135.1130.9130.3SI82.482.482.280.980.2SK61.362.263.462.065.065.7FI69.170.269.871.572.871.8EA100.2101.5101.797.4100.9102.320212020