REPORT FROM THE COMMISSION Belgium, Bulgaria, Czechia, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Slovenia, Slovakia, Finland and Sweden Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union
Date: 2021-06-02
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU Member State, budget deficit, budget policy, budgetary control, coronavirus disease, epidemic, gross domestic product, macroeconomics, stability pact, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 2.6.2021  COM(2021) 529 final  REPORT FROM THE COMMISSION Belgium, Bulgaria, Czechia, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Slovenia, Slovakia, Finland and Sweden   Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union  
 
 
REPORT FROM THE COMMISSION 

Belgium, Bulgaria, Czechia, Denmark, Germany, Estonia, Ireland, Greece, Spain, 
France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the 
Netherlands, Austria, Poland, Portugal, Slovenia, Slovakia, Finland and Sweden  

Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of 
the European Union 

1. 

INTRODUCTION     

Article 126 of the Treaty on the Functioning of the European Union (the Treaty) lays down 
the  excessive  deficit  procedure.  That  procedure  is  further  set  out  in  Regulation  (EC)  No 
1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure, 
which is part of the Stability and Growth Pact.  

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of  the 
general  escape  clause1  of  the  Stability  and  Growth  Pact.2  The  clause,  as  set  out  in  Articles 
5(1),  6(3),  9(1)  and  10(3)  of  Regulation  (EC)  1466/97,  and  Articles  3(5)  and  5(2)  of 
Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in times of severe 
economic  downturn  in  the  euro  area  or  the  Union  as  a  whole.  In  its  Communication,  the 
Commission  set  out  its  view  that,  given  the  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. 

The general escape clause does not suspend the procedures of the Stability and Growth Pact. 
However,  its  activation  has  granted  Member  States  budgetary  flexibility  to  deal  with  the 
current  crisis,  by  allowing  for  a  temporary  departure  from  the  adjustment  path  towards  the 
medium-term  budgetary  objective  of  each  Member  State,  provided  this  does  not  endanger 
fiscal sustainability in the medium term. For the corrective arm of the Pact, the Council may 
decide, on a recommendation from the Commission, to adopt revised fiscal trajectories. The 
general escape clause allows Member States to depart from the budgetary requirements that 
would  normally  apply  while  enabling  the  Commission  and  the  Council  to  undertake  the 
necessary policy coordination measures within the framework of the Pact. 

On  20  July  2020,  as  part  of  the  country-specific  recommendations3  under  the  European 
Semester,  the  Council  recommended  Member  States  to  take  all  necessary  measures  to 
effectively  address  the  COVID-19  pandemic,  sustain  the  economy  and  support  the  ensuing 
recovery.  Member  States  were  also  recommended  to,  when  economic  conditions  allowed, 
pursue fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring 

1 

2 

3  

The  clause, as set out in  Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and Articles 
3(5) and 5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in times of 
severe economic downturn. 
Communication from the Commission to the Council on the activation of the general escape clause of  
the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final. 
Council Recommendations of 20 July 2020 (2020/C 282/01 to 2020/C 282/27), OJ C 282, 26.8.2020, 
p. 1-182. 

1 

 
 
 
                                                           
debt sustainability, while enhancing investment. Similarly, the Council Recommendation on 
the economic policy of the euro area indicates that fiscal policies should remain supportive in 
all euro area Member States throughout 2021.4   

On 17 September 2020, the Commission’s Annual Sustainable Growth Strategy5 called upon 
Member  States  to  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.  

On  19  February  2021,  Regulation  (EU)  2021/241  establishing  the  Recovery  and  Resilience 
Facility  came into force.6  The implementation  of reforms  and investment  under the Facility 
will  contribute  to  the  economic  recovery  and  provide  financial  support  to  strengthen 
economic  resilience  and  the  economy’s  growth  potential.  It  will  also  help  Member  States’ 
public finances return to more favourable positions in the near term, and it will contribute to 
strengthening  their  sustainability  in  the  medium  and  long  term.  On  3  March  2021,  the 
Commission adopted a Communication providing further policy orientations to facilitate the 
coordination  of  fiscal  policies  and  the  preparation  of  Member  States’  Stability  and 
Convergence Programmes.7 

The Commission Communication of 2 June 2021 on economic policy coordination8 indicates 
that the general escape clause of the Stability and Growth Pact will continue to be applied in 
2022  and  is  expected  to  be  deactivated  as  of  2023.  Member  States’  fiscal  policies  should 
become more differentiated in 2022 as economic activity gradually normalises in the second 
half  of  2021.  Fiscal  policies  should  take  into  account  the  state  of  the  recovery,  fiscal 
sustainability  and  the  need  to  reduce  economic,  social  and  territorial  divergences.  As  the 
recovery  takes  hold,  fiscal  policy  should  prioritise  higher  public  and  private  investment, 
supporting the transition towards a green and digital economy. 
According  to  data  validated  by  Eurostat  on  22  April  20219,  the  2020  general  government 
deficit  exceeded  the  3%  of  GDP  Treaty  reference  value  in  25  Member  States:  Belgium, 
Bulgaria,  Czechia,  Germany,  Estonia,  Ireland,  Greece,  Spain,  France,  Croatia,  Italy, 
Cyprus,  Latvia,  Lithuania,  Luxembourg,  Hungary,  Malta,  the  Netherlands,  Austria, 
Poland, Portugal, Slovenia, Slovakia, Finland and Sweden.10 Moreover, the Commission’s 

4 

5 

6  
7  

8  

9 
10  

Pending final adoption by the Council, after endorsement by the European Council. The text agreed by 
the Eurogroup on 16 December 2020 is available at: 
https://data.consilium.europa.eu/doc/document/ST-14356-2020-INIT/en/pdf  
Communication  from  the  Commission  on  Annual  Sustainable  Growth  Strategy  2021,  Brussels, 
17.9.2020, COM(2020) 575 final. 
OJ L57, 18.2.2021, p.17. 
Communication  from  the  Commission  to  the  Council  on  one  year  since  the  outbreak  of  COVID-19: 
fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final. 
Communication from the Commission on Economic policy coordination in 2021: overcoming COVID-
19, supporting the recovery and modernising our economy, Brussels, 2.6.2021, COM(2021)500 final. 
Eurostat Euro Indicators 48/2021 of 22 April 2021. 
Romania’s  general  government deficit also exceeded 3% of GDP in 2020 and is under the excessive 
deficit  procedure.  Thus,  it  is  not  covered  in  this  report.  On  26  May  2021,  the  Commission 
recommended the Council to adopt a recommendation for Romania under Article 126(7) of the Treaty, 
with a view to bring the excessive deficit situation to an end. 

2 

 
 
                                                           
2021  spring  forecast11  (hereafter  Commission’s  forecast)  indicates  that,  in  2021,  the 
government  deficits  will  remain  above  the  reference  value  in  all  these  Member  States,  but 
Luxembourg. The observed deficit for 2020 provides prima facie evidence of the existence, 
in those Member States, of an excessive deficit as defined by Article 126 of the Treaty. The 
Commission shall take into account all relevant factors as appropriate.  

According  to  data  validated  by  Eurostat,  the  general  government  deficit  for  Denmark  was 
below 3% of GDP in 2020 and based on the Commission’s forecast it is projected to remain 
below  that  reference  value.  However,  according  to  its  2021  Convergence  Programme, 
Denmark  plans  a  general  government  deficit  of  3.3%  of  GDP  in  2021,  also  exceeding  the 
Treaty deficit reference value. The planned deficit for 2021 provides prima facie evidence of 
the existence of an excessive deficit in Denmark, as defined by Article 126 of the Treaty. The 
Commission shall take into account all relevant factors as appropriate. 

In Belgium, Germany, Greece, Spain, France, Croatia, Italy, Cyprus, Hungary, Austria, 
Portugal, Slovenia, Slovakia and Finland, the general government gross debt exceeded the 
60%  of  GDP  reference  value  at  the  end  of  2020.  Moreover,  the  data  for  2020  imply  that 
Belgium,  Greece,  Croatia,  Italy,  Cyprus,  Hungary,  Austria,  Portugal  and  Slovenia  did 
not  respect  the  debt  reduction  benchmark  –  or,  in  the  case  of  Spain  and  France,  the 
transitional debt rule.12 Germany, Slovakia and Finland breached the Treaty reference value 
of 60% of GDP in  2020, having  recorded a debt  ratio of below 60% of  GDP in  2019. The 
observed general government debt in 2020 provides prima facie evidence of the existence, in 
those 14 Member States, of an excessive deficit as defined by Article 126 of the Treaty. The 
Commission shall take into account all relevant factors.   

Against this background, the Commission has prepared this report in accordance with Article 
126(3)  of  the  Treaty,  which  analyses  Member  States’  compliance  with  the  deficit  and  debt 
criteria of the Treaty. It takes into account all relevant factors, including due consideration of 
the  severe  economic  downturn  resulting  from  the  COVID-19  pandemic  and  the  Council 
Recommendations of 20 July 2020. 

11  

12  

The  source  for  the  figures  provided  in  this  report  is  the  Commission’s  2021  spring  forecast,  unless 
stated otherwise. 
Applicable during the transition period of three years from the correction of the excessive deficit, for 
excessive deficit procedures that were ongoing in November 2011. 

3 

 
 
                                                           
Table 1: Member States’ position vis-à-vis the Treaty’s deficit and debt 
reference values 

Debt ratio not 
exceeding 60% of 
GDP in 2020 

Actual deficit not 
exceeding 3% of 
GDP in 2020 

Belgium 
Bulgaria 
Czechia 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Croatia 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Slovenia 
Slovakia 
Finland 
Sweden 
Source: Commission 2021 spring forecast and 2021 Stability and Convergence Programmes 

Projected and 
planned deficits 
not exceeding 3% 
of GDP in 2021 

















































































2. 

DEFICIT CRITERION  

For  all  Member  States,  the  deficit  in  excess  over  the  Treaty  reference  value  in  2020  was 
exceptional, as it resulted from a severe economic downturn in the EU as a whole. Real GDP 
in  2020  contracted  in  all  EU  Member  States  but  Ireland.  For  the  EU  as  a  whole,  the 
contraction in economic activity was of 6.1% (6.6% for the euro area). The deficit increases 
were  driven  by  the  budgetary  cost  of  measures  taken  by  these  Member  States  to  tackle  the 
COVID-19 pandemic, and the operation of the automatic stabilisers. On the basis of the latest 
data  validated  by  Eurostat,  fiscal  support  for  the  EU  as  a  whole  in  2020  –  including 
discretionary  fiscal  measures  and  automatic  stabilisers,  as  measured  by  the  change  in  the 
primary balance – is estimated at 6.6% of GDP (6.8% for the euro area). 

In 2020, based on data validated by Eurostat, the general government deficit was above and 
not close to the Treaty reference value of 3% of GDP in 23 Member States (Table 2) – i.e. in 
Belgium,  Czechia,  Germany,  Estonia,  Ireland,  Greece,  Spain,  France,  Croatia,  Italy, 
Cyprus,  Latvia,  Lithuania,  Luxembourg,  Hungary,  Malta,  the  Netherlands,  Austria, 

4 

 
 
  
 
Poland,  Portugal,  Slovenia,  Slovakia  and  Finland.  At  the  same  time,  in  Bulgaria  and 
Sweden the general government deficit was above but close to 3% of GDP.   

Based on the Commission’s forecast,  Denmark’s general  government deficit is expected at 
2.1% of GDP in 2021. However, according to its 2021 Convergence Programme, Denmark 
plans a general government deficit of 3.3% of GDP in 2021, which is above but close to 3% 
of GDP.13  

The deficit in excess over the Treaty reference value is expected to be temporary in the case 
of  Bulgaria,  Denmark,  Germany,  Ireland,  Cyprus,  Latvia,  Luxembourg,  the 
Netherlands,  Austria,  Poland,  Finland  and  Sweden,  with  the  general  government  deficit 
projected  to  fall  below  3%  of  GDP  in  2022  (already  in  2021  in  the  case  of  Luxembourg) 
based  on  the  Commission’s  forecast.  These  projections  are  surrounded  by  an  exceptionally 
high degree of uncertainty.   

In sum, the analysis suggests that the deficit criterion as defined by the Treaty and Regulation 
(EC) No 1467/97 is fulfilled by Bulgaria, Denmark and Sweden, while it is not fulfilled by 
23 Member States  before the consideration of the relevant  factors as appropriate:  Belgium, 
Czechia,  Germany,  Estonia,  Ireland,  Greece,  Spain,  France,  Croatia,  Italy,  Cyprus, 
Latvia,  Lithuania,  Luxembourg,  Hungary,  Malta,  the  Netherlands,  Austria,  Poland, 
Portugal, Slovenia, Slovakia and Finland.  

13  

The difference between the general government deficit planned in the Stability Programme of Denmark 
(-3.3%  of  GDP)  and  expected  by  the  Commission’s  2021  spring  forecast  (-2.1%  of  GDP)  is  mainly 
driven  by  the  fact  that  the  Commission  expects  a  better  macroeconomic  outlook,  led  by  stronger 
domestic demand, which contributes to higher tax revenues, and more optimistic assumptions about the 
pension yield tax (i.e. closer to the observed yield in 2019 and 2020). 

5 

 
 
 
                                                           
Table 2: General government balance  
Percentage of GDP 

Belgium 
Bulgaria 
Czechia 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Croatia 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Slovenia 
Slovakia 
Finland 
Sweden 
Source: Commission 2021 spring forecast 

2018 
-0.8 
2.0 
0.9 
0.7 
1.8 
-0.6 
0.1 
0.9 
-2.5 
-2.3 
0.2 
-2.2 
-3.5 
-0.8 
0.6 
3.0 
-2.1 
1.9 
1.4 
0.2 
-0.2 
-0.3 
0.7 
-1.0 
-0.9 
0.8 

2017 
-0.7 
1.2 
1.5 
1.8 
1.4 
-0.7 
-0.3 
0.6 
-3.0 
-3.0 
0.8 
-2.4 
1.9 
-0.8 
0.5 
1.3 
-2.4 
3.2 
1.3 
-0.8 
-1.5 
-3.0 
-0.1 
-1.0 
-0.7 
1.4 

2019 
-1.9 
2.1 
0.3 
3.8 
1.5 
0.1 
0.5 
1.1 
-2.9 
-3.1 
0.3 
-1.6 
1.5 
-0.6 
0.5 
2.4 
-2.1 
0.4 
1.8 
0.6 
-0.7 
0.1 
0.4 
-1.3 
-0.9 
0.6 

2020 
-9.4 
-3.4 
-6.2 
-1.1 
-4.2 
-4.9 
-5.0 
-9.7 
-11.0 
-9.2 
-7.4 
-9.5 
-5.7 
-4.5 
-7.4 
-4.1 
-8.1 
-10.1 
-4.3 
-8.9 
-7.0 
-5.7 
-8.4 
-6.2 
-5.4 
-3.1 

2021 
-7.6 
-3.2 
-8.5 
-2.1 
-7.5 
-5.6 
-5.0 
-10.0 
-7.6 
-8.5 
-4.6 
-11.7 
-5.1 
-7.3 
-8.2 
-0.3 
-6.8 
-11.8 
-5.0 
-7.6 
-4.3 
-4.7 
-8.5 
-6.5 
-4.6 
-3.3 

2022 
-4.9 
-1.9 
-5.4 
-1.4 
-2.5 
-3.3 
-2.9 
-3.2 
-5.2 
-4.7 
-3.2 
-5.8 
-2.0 
-2.0 
-6.0 
-0.1 
-4.5 
-5.5 
-1.8 
-3.0 
-2.3 
-3.4 
-4.7 
-4.1 
-2.1 
-0.5 

3. 

DEBT CRITERION  

In  2020,  the  general  government  gross  debt  ratio  increased  in  all  Member  States,  and  it 
exceeded  the  60%  of  GDP  Treaty  reference  value  in  14  of  them:  Belgium,  Germany, 
Greece,  Spain,  France,  Croatia,  Italy,  Cyprus,  Hungary,  Austria,  Portugal,  Slovenia, 
Slovakia  and  Finland  (Table  3).  That  increase  stemmed  from  the  sizeable  contraction  of 
nominal  GDP  and  from  the  large  amount  of  debt  issued  to  finance  exceptionally  large 
deficits.  In  2019,  Belgium,  Greece,  Spain,  France,  Croatia,  Italy,  Cyprus,  Hungary, 
Austria,  Portugal  and  Slovenia  already  had  general  government  gross  debt  above  60%  of 
GDP.  

Data  show  that  in  2020  the  debt  reduction  benchmark  was  not  complied  with  in  Belgium, 
Greece, Croatia, Italy, Cyprus, Hungary, Austria, Portugal and Slovenia (Table 4). The 
debt reduction benchmark is computed over a three-year horizon that can be forward-looking 
(t-1 to t+1), backward-looking (t-3 to t-1) and adjusted for the cycle. If in any of the years the 
debt ratio is below 60% of GDP, the benchmark cannot be meaningfully computed. This is 
the case when Member States cross the reference value from below to above 60% of GDP, 

6 

 
 
  
notably in the case of Germany, Slovakia and Finland. Since for Slovakia the debt-to-GDP 
ratio is projected to fall below the Treaty threshold reference value in 2021, it is considered to 
comply  with  the  debt  criterion.  For  Germany  and  Finland,  the  debt  ratio  is  projected  to 
remain above 60% of GDP over the forecast horizon and they are thereby not considered to 
comply  with  the  debt  criterion.  Moreover,  Spain  and  France,  which  are  subject  to  the 
transitional  debt  rule,  did  not  make  sufficient  progress  towards  meeting  the  debt  reduction 
benchmark  in  2020,  as  the  change  in  their  structural  balance  was  below  their  required 
minimum linear structural adjustment (Table 5). 

The  analysis  thus  suggests  that,  among  the  Member  States  with  general  government  debts 
exceeding 60% of GDP at the end of 2020, the debt criterion is fulfilled by Slovakia, while it 
is  not  fulfilled,  before  the  consideration  of  the  relevant  factors,  by  Belgium,  Germany, 
Greece, Spain, France, Croatia, Italy, Cyprus, Hungary, Austria, Portugal, Slovenia and 
Finland.   

95.5 
97.6 
72.8 

97.4 
98.0 
74.3 

Table 3: General government debt 
Percentage of GDP 
2019 
2018 
98.1 
99.8 
20.2 
22.3 
30.3 
32.1 
33.3 
34.0 
59.7 
61.8 
8.4 
8.2 
57.4 
63.0 

Belgium 
Bulgaria 
Czechia 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Croatia 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Slovenia 
Slovakia 
Finland 
Sweden 
Source: Commission 2021 spring forecast 

2020 
2022 
2021 
2017 
114.1  115.3  115.5 
102.0 
24.0 
24.5 
25.0 
25.3 
47.1 
44.3 
38.1 
34.2 
38.8 
40.2 
42.2 
35.9 
72.2 
73.1 
69.8 
65.1 
24.0 
21.3 
18.2 
9.1 
67.0 
59.7 
61.4 
59.5 
179.2  186.2  180.5  205.6  208.8  201.5 
120.0  119.6  116.9 
98.6 
115.7  117.4  116.4 
98.3 
77.6 
82.9 
85.6 
88.7 
134.1  134.4  134.6  155.8  159.8  156.6 
118.2  112.2  106.6 
93.5 
46.4 
47.3 
43.5 
39.0 
54.1 
51.9 
47.3 
39.1 
26.8 
27.0 
24.9 
22.3 
77.1 
78.6 
80.4 
72.2 
65.5 
64.7 
54.3 
48.5 
56.8 
58.0 
54.5 
56.9 
85.0 
87.2 
83.9 
78.5 
50.6 
55.1 
57.1 
57.5 
126.1  121.5  116.8  133.6  127.2  122.3 
76.7 
74.1 
59.0 
51.5 
70.1 
61.2 
39.4 
40.7 

99.2 
37.1 
33.7 
21.0 
69.1 
44.8 
52.4 
74.0 
48.8 

94.0 
37.0 
35.9 
22.0 
65.5 
42.0 
48.7 
70.5 
45.6 

79.0 
59.5 
71.0 
40.8 

70.3 
49.6 
59.7 
38.9 

80.8 
60.6 
69.2 
39.9 

65.6 
48.2 
59.5 
35.0 

7 

 
 
 
  
  
 
Table 4: Gap to the debt reduction benchmark1 

-5.3 
-6.0 

-3.4 
6.3 

2017 
0.0 
-6.0 

Transitional debt rule 

-3.0 
7.3 
-0.8 
-5.3 
-6.0 

2019 
0.0 
Debt < 60%  

2021 
6.2 
2.0 
7.4 
0.2 
9.6 
-1.6 
-0.1 
2.6 
-0.6 
0.9 

2018 
0.0 
-6.1 
Transitional debt rule 
-4.5 
6.9 

-3.7 
-5.8 
Transitional debt rule 

Belgium 
Germany 
Greece 
Croatia 
Italy 
Cyprus 
Hungary 
Austria 
Portugal 
Slovenia 
Slovakia 
Finland 
Source: Commission 2021 spring forecast 
1 The debt reduction benchmark, for the Member States with a debt in excess of 60% of GDP, is computed over a three-year 
horizon that can be forward-looking (t-1 to t+1), backward-looking (t-3 to t-1) and adjusted for the cycle. The table shows 
the difference between the debt-to-GDP ratio and the debt benchmark. If negative, the projected debt-to-GDP ratio complies 
with the debt reduction benchmark. In that case, the differential with respect to the reference value decreased over a three-
year horizon (forward- or backward-looking) at least at an average rate of 1/20th. 
2 The debt reduction benchmark is not pertinent in cases where a Member State debt was below 60% of GDP in 2019 and 
above  that  reference  level  in  2020  as  neither  the  backward-  nor  the  forward-looking  benchmark  can  be  meaningfully 
computed.   

2020 
8.0 
n.a.2 
16.1 
2.5 
12.2 
2.8 
3.6 
5.4 
2.6 
2.8 
n.a.2 
n.a.2 

2022 
2.9 
1.5 
5.6 
-3.7 
4.3 
-2.1 
-2.5 
-0.2 
-6.1 
-2.6 

Transitional debt rule 

Debt < 60%  

Debt < 60%  

Debt < 60%  

-0.9 

-7.2 

-0.1 

0.6 

Table 5: Compliance with the transitional debt rule 

Required Minimum Linear 
Structural Adjustment  
(MLSA)3 

Change in structural balance 

Gap to the debt 
reduction 
benchmark4 

2021 
n.r. 2 
7.3 

2022 
0.3 
3.4 

2018 
EDP1 
-0.1 

2018 
EDP1 
1.0 

2020  2021 
1.8 
0.7 
n.r.2 
3.6 

2019  2020  2021 
-0.7 
-0.5 
-0.9 
n.r.2 
-1.3 
-0.3 

2019 
2017 
EDP1 
0.1 
Spain 
France  EDP1 
1.6 
Source: Commission 2021 spring forecast 
1 Under excessive deficit procedure 
2 Spain corrected its excessive deficit in 2018 and is therefore still in the transition period until 2021, i.e. it is not assessed on the 
basis  of  the  debt  reduction  benchmark,  but  according  to  the  minimum  linear  structural  adjustment.  On  the  other  hand,  France 
corrected its excessive deficit in 2017 and is therefore subject to the debt reduction benchmark as from 2021. 
3 Applicable during the transition period of three years after the correction of the excessive deficit, for excessive deficit procedures 
that were ongoing in November 2011. The MLSA defines the remaining annual structural adjustment over the transition period, 
which would ensure that Member States comply with the debt reduction benchmark at the end of those three years. If the change 
in structural balance is above the required MLSA, then the Member State complies with the transitional debt rule. 
4  The  debt  reduction  benchmark,  for  the  Member  States  with  a  debt  in  excess  of  60%  of  GDP,  is  computed  over  a  three-year 
horizon that can be forward-looking (t-1 to t+1), backward-looking (t-3 to t-1) and adjusted for the cycle.  The table shows the 
difference between the debt-to-GDP ratio and the debt benchmark. If negative, the projected debt-to-GDP ratio complies with the 
debt  reduction  benchmark.  In  that  case,  the  differential  with  respect  to  the  reference  value  decreases  over  a  three-year  horizon 
(forward- or backward-looking) at least at an average rate of 1/20th. 

4. 

RELEVANT FACTORS  

Article 126(3) of the Treaty provides that the Commission report must also “take into account 
whether  the  government  deficit  exceeds  government  investment  expenditure  and  take  into 

8 

 
 
 
 
  
 
  
 
account  all  other  relevant  factors,  including  the  medium-term  economic  and  budgetary 
position of the Member State”.  

Those factors are further clarified in Article 2(3) of Regulation (EC) No 1467/97, which also 
provides  that  “any  other  factors  which,  in  the  opinion  of  the  Member  State  concerned,  are 
relevant in order to comprehensively assess compliance with the deficit and debt criteria and 
which the Member State has put forward to the Council and to the Commission” need to be 
given due consideration. In particular, Article 2(3) of Regulation (EC) No 1467/97 indicates 
that the medium-term debt position can also be considered as relevant factors.  

Hence,  in  addition  to  the  budgetary  impact  of  the  COVID-19  pandemic,  country-specific 
relevant  factors  are  considered.  Those  include  the  medium-term  economic  position,  the 
medium-term  budgetary  position  (including  public  investment),  the  medium-term  debt 
position and any other relevant factors put forward by Member States.   

As specified in Article 2(4) of Regulation (EC) No 1467/97, as regards compliance with the 
deficit  criterion,  if  the  government  debt-to-GDP  ratio  does  not  exceed  the  60%  reference 
value,  or  if  it  does  but  a  double  condition  is  met  –  i.e.  that  the  deficit  remains  close  to  the 
reference  value  and  that  its  excess  over  the  reference  value  is  temporary  –,  those  relevant 
factors can be taken into account in the steps leading to the decision on the existence of an 
excessive deficit on the basis of the deficit criterion. 

Of  the  26  Member  States  considered  in  this  report  and  exceeding  in  2020,  or  planning  to 
exceed in 2021, the 3% of GDP deficit reference value of the Treaty, the debt ratio at end-
2020  did  not  exceed  the  60%  reference  value  in  the  case  of  12  Member  States:  Bulgaria, 
Czechia,  Denmark,  Estonia,  Ireland,  Latvia,  Lithuania,  Luxembourg,  Malta,  the 
Netherlands, Poland and Sweden.  

In the remaining 14 Member States exceeding the 3% of GDP deficit reference value of the 
Treaty  –  i.e.  Belgium,  Germany,  Greece,  Spain,  France,  Croatia,  Italy,  Cyprus, 
Hungary, Austria, Portugal, Slovenia, Slovakia and Finland – the debt ratio exceeded the 
60% reference value of the Treaty and the double condition necessary for relevant factors to 
be  taken  into  account  has  not  been  met.  The  deficit  did  not  remain  close  to  the  reference 
value in all these Member States, with the excess over 3% of GDP ranging between 1.2 and 
8%  of  GDP.  Except  in  Germany,  Cyprus,  Austria  and  Finland,  the  excess  over  the 
reference  value  is  expected  not  to  be  temporary  either.  Therefore,  for  these  14  Member 
States, relevant factors cannot be taken into account in the steps leading to the decision on the 
existence of an excessive deficit on the basis of the deficit criterion. 

Concerning the apparent breach of the debt criterion in the same 14 Member States, Article 
2(4) of Regulation (EC) No 1467/97 provides that relevant factors shall always be taken into 
account when assessing compliance on the basis of the debt criterion irrespective of the size 
of the breach. 

Moreover, Article 2(6) of Regulation (EC) No 1467/97 states that if the Council decides that 
an excessive deficit exists in a Member State, the relevant factors referred to in Article 126(3) 
of the Treaty shall be taken into account in the subsequent steps under the excessive deficit 
procedure. 

The relevant factors are presented in this report even if they cannot be taken into account in 
the steps leading to the decision on the existence of an excessive deficit on the basis of the 
deficit criterion.  

9 

 
 
4.1. 

BUDGETARY IMPACT OF THE COVID-19 PANDEMIC  

In  the  current  situation,  a  key  factor  to  take  into  consideration  for  all  the  Member  States 
covered  in  this  report  is  the  economic  and  budgetary  impact  of  the  COVID-19  pandemic, 
which  has  created  an  extraordinary  degree  of  uncertainty  for  the  macroeconomic  and 
budgetary outlook. The pandemic and the related severe economic downturn have led to the 
activation of the general escape  clause of the Stability  and Growth Pact  and to  the Council 
Recommendations of 20 July 2020 for  all Member States to  take all necessary measures to 
effectively  address  the  COVID-19  pandemic,  sustain  the  economy  and  support  the  ensuing 
recovery. 

In particular, the outbreak of the COVID-19 pandemic has caused an unprecedented  global 
public  health  crisis,  which  entailed  a  sharp  decline  in  economic  activity  only  partially 
cushioned by the effect of automatic stabilisers. Member States have faced an imperative of 
addressing the public health emergency, supporting households and corporates, and providing 
more  general  support  to  their  economies.  Significant  liquidity  support  measures  and  state 
guarantees have also been adopted by the Member States. These liquidity support measures, 
in  particular  public  guarantees  in  support  of  credit  flows,  do  not  have  a  direct  budgetary 
impact unless and until they are called. 

The forceful policy response at the national and at the EU level cushioned the impact of the 
crisis on Europe's economic and social fabric. Member States took crisis-related discretionary 
fiscal measures estimated at close to 4% of GDP in 2020 on top of already sizeable automatic 
stabilisers, estimated at close to 3% of GDP.  Based on the latest data, fiscal support in the 
Union in 2020 (measured by the annual change in the primary balance) is estimated at 6.6% 
of  GDP  (and  at  6.8%  of  GDP  in  the  euro  area).  Together,  the  fiscal  support  and  liquidity 
measures implemented by Member States are estimated to have cushioned the contraction in 
economic activity in 2020.14 

The  sharp  increase  in  government  deficits  and  public  debt  described  in  Sections  2  and  3 
reflected the need to support the economy in exceptionally challenging circumstances, in line 
with  the  Council  Recommendation  of  20  July  2020.  This  is  taken  into  account  in  the 
Commission assessment.  

4.2 

COUNTRY-SPECIFIC RELEVANT FACTORS  

This  section  provides  an  assessment  of  country-specific  relevant  factors,  which  include  the 
medium-term  macroeconomic  outlook,  the  medium-term  budgetary  position  (including 
public investment, Table 6), the medium-term debt position and any other relevant factors put 
forward by Member States in accordance with Article 2(3) of Regulation (EC) No 1467/97.   

the  country-specific  sections 

While 
the  medium-term 
include  key 
macroeconomic  position,  for  instance  on  the  contributions  to  growth  (private  consumption, 
public consumption, investment and net exports) in 2021, more detail on the macroeconomic 
developments  can  be  found  in  the  Commission’s  2021  spring  forecast.  Further  information 

information  on 

14 

The  updated  Commission  estimates  point  to  4.5  percentage  points  based  on  the  simulation  analysis 
presented in Pfeiffer, P., Roeger W. and in  ’t  Veld, J. (2020), ‘The COVID-19 pandemic in the EU: 
Macroeconomic  transmission  and  economic  policy  response’,  European  Economy-Discussion  Paper 
127, July 2020. 

10 

 
 
                                                           
regarding  the  budgetary  measures  and  the  debt  sustainability  analysis  discussed  for  each 
Member  State  hereunder  is  included  in  the  Commission  recommendations  for  Council 
Recommendations on the 2021 Stability or Convergence Programmes and the accompanying 
statistical  annex. The debt  sustainability analysis has been updated15, compared to the 2020 
Debt Sustainability Monitor16 (published in February 2021), to reflect both the Commission’s 
forecast and the latest estimates for the costs of ageing from the 2021 Ageing Report.17   

In 2021, the general government deficit for the EU and euro area as a whole is set to increase 
further to 7.5% of GDP and 8% respectively (up by around ½ and ¾ of a percentage point of 
GDP,  respectively).  The  increase  in  the  deficit  is  mainly  due  to  the  adoption  of  new  or 
extended  emergency  measures  to  support  economic  activity  at  the  time  of  new  necessary 
restrictions in the first half of the year. 

Based on the Commission’s forecast, in 2021 the general government deficit ratio is expected 
to fall (in some cases only marginally) in half of the 26 Member States covered in this report 
–  i.e.  Belgium,  Bulgaria,  Ireland,  Spain,  France,  Croatia,  Cyprus,  Luxembourg, 
Hungary,  Austria,  Poland,  Portugal  and  Finland  –,  due  to  the  rebound  in  economic 
activity  and  the  gradual  phasing  out  of  temporary  emergency  measures.  However,  only 
Denmark and Luxembourg are projected to run a deficit of less than 3% of GDP. 

In 2022, the average budget deficits are forecast to fall to around 3¾% of GDP in both the 
EU  and  the  euro  area.  The  economic  recovery  and  the  unwinding  of  much  of  the 
discretionary policy support activated to combat the effects of the crisis are both forecast to 
drive the reduction in the budget deficit in 2022. 

While  in  Bulgaria,  Denmark,  Spain,  Croatia,  Cyprus,  Hungary,  Poland,  Portugal, 
Slovenia and Slovakia the debt ratio is expected to decrease in 2021, the aggregate debt-to-
GDP ratio is projected to rise further, with a new peak of around 95% and 103% in the EU 
and the euro area, respectively, before decreasing slightly in 2022. Most Member States are 
still expected to record debt ratios above 60% of GDP in 2021.  

Following the entry into force of the Recovery and Resilience Facility on 19 February 2021, 
Member  States  have  submitted,  or  are  preparing  to  submit,  their  Recovery  and  Resilience 
Plans to the Commission. The Commission’s forecast therefore includes the impact of those 
plans  in  its  budgetary  and  macroeconomic  projections.  However,  at  the  time  of  the  cut-off 
date  of  the  forecast  (30  April  2021),  details  of  some  plans  were  still  under  discussion  in  a 
number of Member States. Working  assumptions have been used for the preparation of the 
Commission forecasts, as follows: 

̶  Time profile of expenditure: by default the forecast assumes linear absorption of the full 
grant  allocation  over  the  facility’s  lifetime,  starting  from  the  second  half  of  2021  and 
ending  in  2026.  This  results  in  an  absorption  of  1/11  of  the  entire  Recovery  and 
Resilience Facility grant allocation in 2021 and 2/11 in 2022.  

15  

16  
17  

The  debt sustainability analysis does not take into account  longer-term  growth impact of the reforms 
and investments  financed by the  Recovery and Resilience Facility,  which  may  mitigate sustainability 
risks. 
Debt Sustainability Monitor 2020 (February 2021), European Economy-Institutional Papers 143. 
The 2021 Ageing Report: Economic and budgetary projections for the EU Member States (2019-2070) 
(May 2021), European Economy-Institutional Papers 148.   

11 

 
 
                                                           
̶  Composition  of  expenditure:  by  default  the  forecast  assumes  that  expenditure  to  be 
financed  by  the  facility  is  split  between  gross  fixed  capital  formation  (i.e.  public 
investment)  and  capital 
transfers  (which  would  predominantly  support  private 
investment). 

̶  The above assumptions only cover the absorption of the grant allocation of the Recovery 

and Resilience Facility.  

For Member States where there was sufficiently detailed and credible information available 
on the (draft) Recovery and Resilience Plans at the cut-off date of the forecast, the forecast 
deviates from the default assumptions.18  

Table 6: Public investment 
Percentage of GDP 

2017  2018  2019  2020  2021  2022 
2.9 
2.4 
Belgium 
4.2 
2.3 
Bulgaria 
5.3 
3.3 
Czechia 
3.7 
3.4 
Denmark 
2.8 
2.2 
Germany 
6.2 
5.7 
Estonia 
3.0 
1.8 
Ireland 
5.8 
4.5 
Greece 
2.4 
2.0 
Spain 
3.9 
3.3 
France 
7.4 
2.8 
Croatia 
3.2 
2.2 
Italy 
3.5 
2.7 
Cyprus 
6.1 
4.6 
Latvia 
3.9 
3.2 
Lithuania 
4.2 
4.1 
Luxembourg 
6.6 
4.5 
Hungary 
5.3 
2.4 
Malta 
3.7 
3.4 
Netherlands 
3.5 
3.1 
Austria 
4.9 
3.8 
Poland 
3.2 
1.8 
Portugal 
5.8 
3.1 
Slovenia 
3.7 
3.4 
Slovakia 
4.3 
4.1 
Finland 
5.0 
4.6 
Sweden 
Source: Commission 2021 spring forecast 

2.7 
3.4 
4.4 
3.2 
2.5 
5.0 
2.4 
2.5 
2.1 
3.7 
4.3 
2.3 
2.6 
5.0 
3.1 
4.0 
6.2 
3.9 
3.4 
3.1 
4.3 
1.9 
3.8 
3.6 
4.4 
4.9 

2.8 
4.5 
4.9 
3.6 
2.7 
5.7 
2.7 
3.0 
2.5 
3.8 
5.6 
2.7 
2.9 
5.7 
4.1 
5.0 
6.4 
4.5 
3.4 
3.4 
4.4 
2.2 
4.2 
3.5 
4.6 
5.1 

2.6 
3.1 
4.1 
3.4 
2.4 
5.3 
2.1 
3.2 
2.2 
3.4 
3.5 
2.1 
4.9 
5.6 
3.2 
3.9 
5.8 
3.3 
3.4 
3.1 
4.7 
1.8 
3.7 
3.7 
4.3 
4.9 

3.0 
4.2 
5.2 
3.7 
2.8 
6.3 
2.9 
4.9 
2.5 
3.9 
6.3 
2.9 
3.5 
6.2 
3.9 
4.3 
6.4 
5.6 
3.9 
3.6 
4.7 
2.5 
5.8 
3.8 
4.6 
5.0 

18  

More information in the 2021 Spring Economic Forecast: 
https://ec.europa.eu/info/sites/default/files/economy-finance/ip149_en.pdf  

12 

 
 
 
  
  
                                                           
4.2.1  BELGIUM 

Medium-term macroeconomic position: After a contraction of 6.3% in 2020, the economy 
is  set  to  grow  by  4.5%  in  2021  and  by  3.7%  in  2022.  Growth  in  2021  is  mainly  driven  by 
private  consumption  and  investment.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from 9.4% of GDP in 2020 to 7.6% of GDP in 2021, and then to 4.9% of 
GDP in 2022. Government investment is estimated to increase from 2.8% of GDP in 2020 to 
3%  in  2021.  Nationally  financed  fiscal  support  in  2020  and  2021  –  as  measured  by  the 
change  in  the  primary  balance  compared  with  the  pre-crisis  level  (2019)  –  is  estimated  at 
7.5%  and  6%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  The  discretionary  budgetary  measures 
adopted by the government in 2020 and 2021 are mostly temporary or matched by offsetting 
measures.  

Medium-term debt position: The general government debt stood at 99.8% at end-2018 and 
at  98.1%  at  end-2019,  before  rising  to  114.1%  of  GDP  at  end-2020.  It  is  then  projected  to 
increase  from  115.3%  of  GDP  at  end-2021  to  115.5%  of  GDP  at  end-2022.  The  debt 
sustainability analysis confirms the high risks in the medium term. According to the baseline 
10-year projection, the general government debt ratio would stabilise, and start declining over 
the  second  half  of  the  period,  although  remaining  at  a  high  level.  The  debt  trajectory  is 
sensitive  to  macroeconomic  shocks.  When  taking  into  account  a  large  range  of  possible 
temporary shocks to macroeconomic variables (through stochastic projections), it is probable 
that the debt ratio could be higher in 2025 than in 2020. Concerning other factors relevant for 
an overall assessment of debt sustainability, the lengthening of debt maturity in recent years, 
relatively  stable  financing  sources  (with  a  diversified  and  large  investors’  base),  and 
historically low borrowing  costs supported by the Eurosystem’s interventions,  contribute to 
mitigate the risks. In addition, the implementation of reforms and investments under the Next 
Generation  EU,  notably  the  Recovery  and  Resilience  Facility,  is  expected  to  have  a 
substantial  positive  and  long-lasting  impact  on  GDP  growth  in  the  coming  years,  which, 
ceteris  paribus,  should  contribute  to  strengthening  debt  sustainability.  Moreover,  gross 
financing  needs  are  projected  to  decline.  Risk-increasing  factors  are  related  to  contingent 
liability risks stemming from the private sector, including via the possible materialisation of 
state guarantees granted to firms and self-employed during the COVID-19 crisis, even though 
this risk currently remains limited due to relatively low take-up so far. 

Other  factors  put  forward  by  the  Member  State:  On  30  April  2021,  Belgium  provided 
additional relevant factors, namely that from 21 December 2018 to 1 October 2020, Belgium 
had,  at  federal  level,  several  caretaking  governments,  and  the  commitment  of  the  incoming 
government  to  pursue  important  structural  reforms  in  order  to  enhance  the  composition  of 
public expenditure and the sustainability of public finances. Reform plans mentioned in the 
letter concern the pension and tax systems, implementing spending reviews, and raising the 
level of public investment.  

4.2.2  BULGARIA 

Medium-term macroeconomic position: After a 4.2% contraction in 2020, the economy is 
set  to  grow  by  3.5%  in  2021  and  by  4.7%  in  2022.  Growth  in  2021  is  mainly  driven  by 

13 

 
 
investment  and  private  consumption.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from 3.4% of GDP in 2020 to 3.2% of GDP in 2021, and then to 1.9% of 
GDP in 2022. Government investment is estimated to decrease from 4.5% of GDP in 2020 to 
4.2% in 2021, being larger than the government deficit in 2020 and 2021. Nationally financed 
fiscal  support  in  2020  and  2021  –  as  measured  by  the  change  in  the  primary  balance 
compared  with  the  pre-crisis  level  (2019)  –  is  estimated  at  5.6%  and  5.1%  of  GDP 
respectively, including discretionary budgetary measures and the operation of the automatic 
stabilisers.  The  measures  taken  in  2020  and  2021  have  been  in  line  with  the  Council 
Recommendation  of  20  July  2020.  The  discretionary  budgetary  measures  adopted  by  the 
government in 2020 and 2021 are temporary or matched by offsetting measures. 

Medium-term debt position: The general government debt stood at 22.3% at end-2018 and 
at  20.2%  at  end-2019,  before  rising  to  25%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease  from  24.5%  of  GDP  at  end-2021  to  24%  of  GDP  at  end-2022.  Overall,  the  debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Bulgaria on 29 April 2021.  

4.2.3  CZECHIA 

Medium-term macroeconomic position: After a 5.6% contraction in 2020, the economy is 
set  to  grow  by  3.4%  in  2021  and  by  4.4%  in  2022.  Growth  in  2021  is  mainly  driven  by 
investment and net exports. Economic activity is forecast to return to its annual 2019 level in 
2022.  

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 6.2% of GDP in 2020 to 8.5% of GDP in 2021, and then fall to 
5.4% of GDP in 2022. Government investment is estimated to increase from 4.9% of GDP in 
2020 to 5.2% in 2021. Nationally financed fiscal support in 2020 and 2021 – as measured by 
the change in the primary balance compared with the pre-crisis level (2019) – is estimated at 
6.4%  and  8.7%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  Some  of  the  discretionary  measures 
adopted by the government in 2020 and 2021 do not appear to be temporary or matched by 
offsetting  measures.  Beyond  the  horizon  of  the  Commission’s  forecast,  in  2023,  the 
remaining impact of those non-temporary measures is preliminarily estimated at around 2% 
of GDP.  

Medium-term debt position: The general government debt stood at 32.1% at end-2018 and 
at  30.3%  at  end-2019,  before  rising  to  38.1%  of  GDP  at  end-2020.  It  is  then  projected  to 
increase  from  44.3%  of  GDP  at  end-2021  to  47.1%  of  GDP  at  end-2022.  Overall,  the  debt 
sustainability analysis indicates medium risks over the medium term. The implementation of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 

14 

 
 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other  factors  put  forward  by  the  Member  State:  On  30  April  2021,  Czechia  provided 
additional relevant factors. The authorities consider the state of Czech public finances ahead 
of the pandemic, including fiscal buffers and low public debt, as relevant mitigating factors. 
In  accordance  with  the  amendments  of  the  Act  on  Budgetary  Responsibility  Rules,  
consolidation  of  public  finances  will  start  in  2022,  with  a  minimum  fiscal  effort  of  0.5 
percentage points per year. 

4.2.4  DENMARK 

Medium-term macroeconomic position: After a 2.7% contraction in 2020, the economy is 
set  to  grow  by  2.9%  in  2021  and  by  3.5%  in  2022.  Growth  in  2021  is  mainly  driven  by 
private  consumption  and  investment.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2021. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 1.1% of GDP in 2020 to 2.1% of GDP in 2021, and then fall to 
1.4% of GDP in 2022. Government investment is estimated to increase from 3.6% of GDP in 
2020 to 3.7% in 2021, being larger than the government deficit in 2020 and 2021. Nationally 
financed fiscal support in 2020 and 2021 – as measured by the change in the primary balance 
compared  with  the  pre-crisis  level  (2019)  –  is  estimated  at  5.2%  and  5.8%  of  GDP 
respectively, including discretionary budgetary measures and the operation of the automatic 
stabilisers.  The  measures  taken  in  2020  and  2021  have  been  in  line  with  the  Council 
Recommendation  of  20  July  2020.  The  discretionary  budgetary  measures  adopted  by  the 
government in 2020 and 2021 are temporary or matched by offsetting measures.  

Medium-term debt position: The general government debt stood at 34% at end-2018 and at 
33.3%  at  end-2019,  before  rising  to  42.2%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease from 40.2% of GDP at  end-2021 to 38.8% of GDP at end-2022. Overall, the debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Denmark on 12 May 2021.  

4.2.5  GERMANY 

Medium-term macroeconomic position: After a 4.9% contraction in 2020, the economy is 
set to grow by 3.4% in 2021 and by 4.1% in 2022. Growth in 2021 is mainly driven by net 
exports  and  investment.  Economic  activity  is  forecast  to  return  to  its  annual  2019  level  in 
2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 4.2% of GDP in 2020 to 7.5% of GDP in 2021, and then fall to 
2.5% of GDP in 2022. Government investment is estimated to increase from 2.7% of GDP in 

15 

 
 
2020 to 2.8% in 2021. Nationally financed fiscal support in 2020 and 2021 – as measured by 
the change in the primary balance compared with the pre-crisis level (2019) – is estimated at 
5.9%  and  9.2%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  Some  of  the  discretionary  measures 
adopted by the government in 2020 and 2021 do not appear to be temporary or matched by 
offsetting  measures.  Beyond  the  horizon  of  the  Commission’s  forecast,  in  2023,  the 
remaining impact of those non-temporary measures is preliminarily estimated at around 1% 
of GDP.  

Germany  is  experiencing  imbalances  in  the  sense  of  the  Macroeconomic  Imbalance 
Procedure.  The  current  account  surplus  persists  at  high  levels  reflecting  a  subdued  level  of 
investment  relative  to  savings  and  has  cross-border  relevance.  Looking  forward,  the 
Recovery and Resilience Plan provides an opportunity to address imbalances, investment and 
reforms needs. 

Medium-term debt position: The general government debt stood at 61.8% at end-2018 and 
at  59.7%  at  end-2019,  before  rising  to  69.8%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease from 73.1% of GDP at  end-2021 to 72.2% of GDP at end-2022. Overall, the debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other  factors  put  forward  by  the  Member  State:  On  3  May  2021,  Germany  provided 
additional relevant factors, namely that the planned budget assumes a complete execution of 
all the support measures.  

4.2.6  ESTONIA 

Medium-term macroeconomic position: After a 2.9% contraction in 2020, the economy is 
set to grow by 2.8% in 2021 and by 5% in 2022. Growth in 2021 is mainly driven by private 
consumption and net exports. Economic activity is forecast to return to its annual 2019 level 
in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 4.9% of GDP in 2020 to 5.6% of GDP in 2021, and then fall to 
3.3% of GDP in 2022. Government investment is estimated to increase from 5.7% of GDP in 
2020 to 6.3% in 2021, being larger than the government deficit in 2020 and 2021. Nationally 
financed fiscal support in 2020 and 2021 – as measured by the change in the primary balance 
compared with the pre-crisis level (2019) – is estimated at 5% and 5.6% of GDP respectively, 
including  discretionary  budgetary  measures  and  the  operation  of  the  automatic  stabilisers. 
The measures taken in 2020 and 2021 have been in line with the Council Recommendation of 
20  July  2020.  Some  of  the  discretionary  measures  adopted  by  the  government  in  2020  and 
2021 do not appear to be temporary or matched by offsetting measures. Beyond the horizon 
of  the  Commission’s  forecast,  in  2023,  the  remaining  impact  of  those  non-temporary 
measures is preliminarily estimated at around 1% of GDP.  

Medium-term debt position: The general government debt stood at 8.2% at end-2018 and at 
8.4% at end-2019, before rising to 18.2% of GDP at end-2020. It is then projected to increase 

16 

 
 
from 21.3% of GDP at end-2021 to 24% of GDP at end-2022. Overall, the debt sustainability 
analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of  reforms  and 
investments under the Next Generation EU, notably the Recovery and Resilience Facility, is 
expected to have a substantial positive and long-lasting impact on GDP growth in the coming 
years, which, ceteris paribus, should contribute to strengthening debt sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Estonia on 29 April 2021.  

4.2.7 

IRELAND 

Medium-term macroeconomic position: This is the only Member State in the EU in which 
the economy did not contract in 2020, with GDP just decelerating to a 3.4% growth rate. The 
economy  is  set  to  grow  further  by  4.6%  in  2021  and  by  5%  in  2022.  Growth  in  2021  is 
mainly driven by investment and private consumption. However, annual ‘modified domestic 
demand’19,  a  measure  that  better  reflects  the  underlying  domestic  economy,  indicates  a 
contraction by 5.4% in 2020. According to this measure, the economy is set to grow by 4.3% 
in  2021  and  by  7%  in  2022,  and  economic  activity  is  forecast  to  return  to  its  annual  2019 
level in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to remain stable at 5% of GDP in 2021, and then fall to 2.9% of GDP in 2022. 
Government investment is estimated to increase from 2.7% of GDP in 2020 to 2.9% in 2021. 
Nationally  financed  fiscal  support  in  2020  and  2021  –  as  measured  by  the  change  in  the 
primary balance compared with the pre-crisis level (2019) – is estimated at 5.7% of GDP in 
both  years,  including  discretionary  budgetary  measures  and  the  operation  of  the  automatic 
stabilisers.  The  measures  taken  in  2020  and  2021  have  been  in  line  with  the  Council 
Recommendation  of  20  July  2020.  The  discretionary  budgetary  measures  adopted  by  the 
government in 2020 and 2021 are mostly temporary or matched by offsetting measures.  

Ireland is experiencing imbalances in the sense of the Macroeconomic Imbalance Procedure. 
Vulnerabilities  relate  to  large  private  and  government  debts  and  net  external  liabilities 
remain.  Looking  forward,  the  Recovery  and  Resilience  Plan  provides  an  opportunity  to 
address imbalances, investment and reforms needs. 

Medium-term debt position: The general government debt stood at 63% at end-2018 and at 
57.4%  at  end-2019,  before  rising  to  59.5%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease from 61.4% of GDP at  end-2021 to 59.7% of GDP at end-2022. Overall, the debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Ireland on 30 April 2021.  

19 

Modified domestic demand is a measure of domestic activity that excludes globalisation effects such as 
trade in intellectual property and trade in aircraft by leasing companies and is an important indicator of 
underlying demand.  

17 

 
 
                                                           
4.2.8  GREECE 

Medium-term macroeconomic position: After an 8.2% contraction in 2020, the economy is 
set to grow by 4.1% in 2021 and by 6% in 2022. Growth in 2021 is mainly driven by private 
consumption and investment. Economic activity is forecast to return to its annual 2019 level 
in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 9.7% of GDP in 2020 to 10% of GDP in 2021, and then fall to 
3.2% of GDP in 2022. Government investment is estimated to increase from 3% of GDP in 
2020 to 4.9% in 2021. Nationally financed fiscal support in 2020 and 2021 – as measured by 
the change in the primary balance compared with the pre-crisis level (2019) – is estimated at 
11.3% and 11.7% of GDP respectively, including discretionary budgetary measures  and the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  The  discretionary  budgetary  measures 
adopted  by  the  government  in  2020  and  2021,  and  announced  for  2022,  are  temporary  or 
matched by offsetting measures.  

Greece is experiencing excessive imbalances in the sense of the Macroeconomic Imbalance 
Procedure.  Vulnerabilities  relate  to  high  government  debt,  incomplete  external  rebalancing 
and high non-performing loans, in a context of high unemployment and low potential growth. 
Looking  forward,  the  Recovery  and  Resilience  Plan  provides  an  opportunity  to  address 
imbalances, investment and reforms needs.   

Medium-term debt position: The general government debt stood at 186.2% at end-2018 and 
at 180.5% at end-2019, before rising to 205.6% of GDP at end-2020. It is then projected to 
decrease from 208.8% of GDP at end-2021 to 201.5% of GDP at end-2022. Greece is under 
enhanced  surveillance.20  The  debt  sustainability  analysis  confirms  the  high  risks  in  the 
medium  term.  According  to  the  baseline  10-year  projection,  the  general  government  debt 
ratio would decline over the period, although remaining at a high level. In particular, the debt 
trajectory  is  sensitive  to  macroeconomic  shocks  over  the  medium  term.  When  taking  into 
account  a  large  range  of  possible  temporary  shocks  to  macroeconomic  variables  (through 
stochastic projections), it is probable that the debt ratio could be higher in 2025 than in 2020.  
In addition, the debt sustainability analysis presented in the 10th enhanced surveillance report 
shows  increased  sustainability  risks  under  alternative  scenarios.21  Concerning  other  factors 
relevant for an overall assessment of debt sustainability, the composition and maturity profile 
of government debt mitigates debt vulnerabilities, while additional risks could emerge from 
contingent  liabilities.  A  large  share  of  debt  is  financed  at  low  rates  with  long  maturities, 
which,  along  with  the  high  cash  reserves  of  the  Greek  general  government,  effectively 
cushion  the  impact  of  short-term  fluctuations  in  financing  costs.  The  debt  sustainability 
analysis  presented  in  the  10th  enhanced  surveillance  report  does  not  take  into  account  the 
long-term  growth  impact  of  the  reforms  and  investments  presented  in  the  Recovery  and 
Resilience Plan, which may further mitigate sustainability risks. By contrast, there are risks 
stemming  from  the  uncertainty  related  to  contingent  liabilities  vis-à-vis  the  private  sector, 

20  

21  

Commission  Implementing  Decision  (EU)  2021/271  of  17  February  2021  on  the  prolongation  of 
enhanced surveillance for Greece (OJ L61, 22.02.2021, p. 3). 
Communication from  the  Commission  – Enhanced Surveillance update  – Greece, Brussels, 2.6.2021, 
COM(2021) 528 final. 

18 

 
 
                                                           
including the state guarantees granted to firms and self-employed during the pandemic or in 
the context of the Hercules scheme.  

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Greece on 29 April 2021.   

4.2.9 

SPAIN 

Medium-term macroeconomic position: After a 10.8% contraction in 2020, the economy is 
set  to  grow  by  5.9%  in  2021  and  by  6.8%  in  2022.  Growth  in  2021  is  mainly  driven  by 
private  consumption  and  investment.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from 11% of GDP in 2020 to 7.6% of GDP in 2021, and then to 5.2% of 
GDP in 2022. Government investment is estimated to remain stable at 2.5% of GDP in 2021. 
Nationally  financed  fiscal  support  in  2020  and  2021  –  as  measured  by  the  change  in  the 
primary balance compared with the pre-crisis level (2019) – is estimated at 8.1% and 4.8% of 
GDP  respectively,  including  discretionary  budgetary  measures  and  the  operation  of  the 
automatic  stabilisers.  The  measures  taken  in  2020  and  2021  have  been  in  line  with  the 
Council Recommendation of 20 July 2020. The discretionary budgetary measures adopted by 
the government in 2020 and 2021 are mostly temporary or matched by offsetting measures.  

Spain  is  experiencing imbalances in  the sense of  the Macroeconomic  Imbalance Procedure. 
Vulnerabilities relate to high external and internal debt, both government and private, remain, 
in  a  context  of  high  unemployment  and  have  cross-border  relevance.  Looking  forward,  the 
Recovery and Resilience Plan provides an opportunity to address imbalances, investment and 
reforms needs. 

Medium-term debt position: The general government debt stood at 97.4% at end-2018 and 
at  95.5%  at  end-2019,  before  rising  to  120%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease  from  119.6%  of  GDP  at  end-2021  to  116.9%  of  GDP  at  end-2022.  The  debt 
sustainability analysis confirms the high risks in the medium term. According to the baseline 
10-year  projection,  the  general  government  debt  ratio  would  stabilise,  and  slightly  decline 
over the second half of the period, although remaining at a high level. The debt trajectory is 
sensitive  to  macroeconomic  shocks.  When  taking  into  account  a  large  range  of  possible 
temporary shocks to macroeconomic variables (through stochastic projections), it is probable 
that the debt ratio could be higher in 2025 than in 2020. Concerning other factors relevant for 
an overall assessment of debt sustainability, the lengthening of debt maturity in recent years, 
relatively  stable  financing  sources  (with  a  diversified  and  large  investors’  base),  and 
historically low borrowing  costs  supported by the Eurosystem’s interventions,  contribute to 
mitigate the risks. In addition, the implementation of reforms and investments under the Next 
Generation  EU,  notably  the  Recovery  and  Resilience  Facility,  is  expected  to  have  a 
substantial  positive  and  long-lasting  impact  on  GDP  growth  in  the  coming  years,  which, 
ceteris  paribus,  should  contribute  to  strengthening  debt  sustainability.  Moreover,  gross 
financing  needs  are  projected  to  decline.  Risk-increasing  factors  are  related  to  contingent 
liability risks stemming from the private sector, including via the possible materialisation of 
state guarantees granted to firms and self-employed during the COVID-19 crisis.  

Other  factors  put  forward  by  the  Member  State:  On  30  April  2021,  Spain  provided 
additional  relevant  factors,  namely  i)  that  as  of  the  statistical  year  2020,  SAREB,  the  asset 

19 

 
 
management company, is classified in general government adding around 1 percentage point 
to the deficit ratio and 3 percentage points to the debt ratio in 2020; and ii) that Spain has also 
implemented  revenue  measures,  in  particular,  new  taxes  on  financial  transactions,  certain 
digital  services  and  single-use  plastics,  which  are  expected  to  strengthen  public  finances  in 
the medium term. 

4.2.10  FRANCE 

Medium-term macroeconomic position: After an 8.1% contraction in 2020, the economy is 
set  to  grow  by  5.7%  in  2021  and  by  4.2%  in  2022.  Growth  in  2021  is  mainly  driven  by 
investment  and  private  consumption.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from 9.2% of GDP in 2020 to 8.5% of GDP in 2021, and then to 4.7% of 
GDP in 2022. Government investment is estimated to increase from 3.8% of GDP in 2020 to 
3.9%  in  2021.  Nationally  financed  fiscal  support  in  2020  and  2021  –  as  measured  by  the 
change  in  the  primary  balance  compared  with  the  pre-crisis  level  (2019)  –  is  estimated  at 
6.2%  and  5.7%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  Some  of  the  discretionary  measures 
adopted by the government in 2020 and 2021, and announced for 2022, do not appear to be 
temporary  or  matched  by  offsetting  measures.  Beyond  the  horizon  of  the  Commission’s 
forecast,  in  2023,  the  remaining  impact  of  those  non-temporary  measures  is  preliminarily 
estimated at around 1% of GDP.   

France is experiencing imbalances in the sense of the Macroeconomic Imbalance Procedure. 
Vulnerabilities  relate  to  high  government  debt,  weak  competitiveness  and  low  productivity 
growth,  which  have  cross-border  relevance.  Looking  forward,  the  Recovery  and  Resilience 
Plan provides an opportunity to address imbalances, investment and reforms needs. 

Medium-term debt position: The general government debt stood at 98% at end-2018 and at 
97.6%  at  end-2019,  before  rising  to  115.7%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease  from  117.4%  of  GDP  at  end-2021  to  116.4%  of  GDP  at  end-2022.  The  debt 
sustainability analysis confirms the high risks in the medium term. According to the baseline 
10-year  projection,  the  general  government  debt  ratio  would  stabilise,  and  slightly  decline 
over the second half of the period, although remaining at a high level. The debt trajectory is 
sensitive  to  macroeconomic  shocks.  When  taking  into  account  a  large  range  of  possible 
temporary shocks to macroeconomic variables (through stochastic projections), it is probable 
that the debt ratio could be higher in 2025 than in 2020. Concerning other factors relevant for 
an overall assessment of debt sustainability, the lengthening of debt maturity in recent years, 
relatively  stable  financing  sources  (with  a  diversified  and  large  investors’  base),  and 
historically low borrowing  costs supported by the Eurosystem’s interventions,  contribute to 
mitigate the risks. In addition, the implementation of reforms and investments under the Next 
Generation  EU,  notably  the  Recovery  and  Resilience  Facility,  is  expected  to  have  a 
substantial  positive  and  long-lasting  impact  on  GDP  growth  in  the  coming  years,  which, 
ceteris  paribus,  should  contribute  to  strengthening  debt  sustainability.  Moreover,  gross 
financing  needs  are  projected  to  decline.  Risk-increasing  factors  are  related  to  contingent 
liability risks stemming from the private sector, including via the possible materialisation of 
state guarantees granted to firms and self-employed during the COVID-19 crisis. 

20 

 
 
Other  factors  put  forward  by  the  Member  State:  On  30  April  2021,  France  provided 
additional  relevant  factors,  namely  the  containment  in  the  increase  of  general  government 
expenditure in recent years, which is estimated at an average increase in real terms of 0.7% 
between 2017 and 2019.  

4.2.11  CROATIA 

Medium-term macroeconomic position: After an 8% contraction in 2020, the economy is 
set to grow by 5% in 2021 and by 6.1% in 2022. Growth in 2021 is mainly driven by private 
consumption and investment. Economic activity is forecast to return to its annual 2019 level 
in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from 7.4% of GDP in 2020 to 4.6% of GDP in 2021, and then to 3.2% of 
GDP in 2022. Government investment is estimated to increase from 5.6% of GDP in 2020 to 
6.3%  in  2021,  with  the  latter  being  larger  than  the  government  deficit  in  2021.  Nationally 
financed fiscal support in 2020 and 2021 – as measured by the change in the primary balance 
compared  with  the  pre-crisis  level  (2019)  –  is  estimated  at  8.1%  and  5.3%  of  GDP 
respectively, including discretionary budgetary measures and the operation of the automatic 
stabilisers.  The  measures  taken  in  2020  and  2021  have  been  in  line  with  the  Council 
Recommendation  of  20  July  2020.  The  discretionary  budgetary  measures  adopted  by  the 
government in 2020 and 2021 are mostly temporary or matched by offsetting measures.  

Croatia is experiencing imbalances in the sense of the Macroeconomic Imbalance Procedure. 
Vulnerabilities relate to government, private and external debts, in a context of low potential 
growth.  Looking  forward,  the  Recovery  and  Resilience  Plan  provides  an  opportunity  to 
address imbalances, investment and reforms needs. 

Medium-term debt position: The general government debt stood at 74.3% at end-2018 and 
at  72.8%  at  end-2019,  before  rising  to  88.7%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease from 85.6% of GDP at  end-2021 to 82.9% of GDP at end-2022. Overall, the debt 
sustainability analysis indicates medium risks over the medium term. The implementation of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Croatia on 30 April 2021.  

4.2.12  ITALY 

Medium-term macroeconomic position: After an 8.9% contraction in 2020, the economy is 
set  to  grow  by  4.2%  in  2021  and  by  4.4%  in  2022.  Growth  in  2021  is  mainly  driven  by 
private consumption and investment. Economic activity is not forecast to return to its annual 
pre-crisis level in 2022, with the level of GDP in 2022 still projected to be 0.9% lower than in 
2019. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 9.5% of GDP in 2020 to 11.7% of GDP in 2021, and then fall to 
5.8% of GDP in 2022. Government investment is estimated to increase from 2.7% of GDP in 

21 

 
 
2020 to 2.9% in 2021. Nationally financed fiscal support in 2020 and 2021 – as measured by 
the change in the primary balance compared with the pre-crisis level (2019) – is estimated at 
8%  and  10.2%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  Some  of  the  discretionary  measures 
adopted by the government in 2020 and 2021 do not appear to be temporary or matched by 
offsetting  measures.  Beyond  the  horizon  of  the  Commission’s  forecast,  in  2023,  the 
remaining impact of those non-temporary measures is preliminarily estimated at around 1% 
of GDP.   

Italy  is  experiencing  excessive  imbalances  in  the  sense  of  the  Macroeconomic  Imbalance 
Procedure.  Vulnerabilities  relate  to  high  government  debt  and  protracted  weak  productivity 
dynamics,  which  have  cross-border  relevance  in  a  context  of  labour  market  and  banking 
sector fragilities. Looking forward, the Recovery and Resilience Plan provides an opportunity 
to address imbalances, investment and reforms needs. 

Medium-term debt position: The general government debt stood at 134.4% at end-2018 and 
at 134.6% at end-2019, before rising to 155.8% of GDP at end-2020. It is then projected to 
decrease  from  159.8%  of  GDP  at  end-2021  to  156.6%  of  GDP  at  end-2022.  The  debt 
sustainability analysis confirms the high risks in the medium term. According to the baseline 
10-year projection, the general government debt ratio would stabilise over the next five years, 
and decline over the second half of the period, although remaining at a high level. The debt 
trajectory is sensitive to  macroeconomic shocks.  When taking into account a large range of 
possible temporary shocks to macroeconomic variables (through stochastic projections), it is 
probable that the debt  ratio could be higher in 2025 than in 2020. Concerning other factors 
relevant for an overall assessment of debt sustainability, the lengthening of debt maturity in 
recent years, relatively stable financing sources (with a diversified and large investors’ base), 
and historically low borrowing costs supported by the Eurosystem’s interventions, contribute 
to  mitigate  the  risks.  In  addition,  the  implementation  of  reforms  and  investments  under  the 
Next  Generation  EU,  notably  the  Recovery  and  Resilience  Facility,  is  expected  to  have  a 
substantial  positive  and  long-lasting  impact  on  GDP  growth  in  the  coming  years,  which, 
ceteris  paribus,  should  contribute  to  strengthening  debt  sustainability.  Moreover,  gross 
financing  needs  are  projected  to  decline.  Risk-increasing  factors  are  related  to  contingent 
liability risks stemming from the private sector, including via the possible materialisation of 
state guarantees granted to firms during the COVID-19 crisis.  

Other  factors  put  forward  by  the  Member  State:  On  30  April  2021,  Italy  provided 
additional relevant factors, namely that the substantial assets held by the general government 
and  their  role  for  its  overall  creditworthiness,  the  comparatively  low  stock  of  contingent 
liabilities even after the increase caused by the COVID-19 crisis, and that the stock of debt 
held by the market can be expected to be substantially lower than the overall level of debt in 
the coming years. 

4.2.13  CYPRUS 

Medium-term macroeconomic position: After a 5.1% contraction in 2020, the economy is 
set  to  grow  by  3.1%  in  2021  and  by  3.8%  in  2022.  Growth  in  2021  is  mainly  driven  by 
private  consumption  and  net  exports.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2022. 

22 

 
 
Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from  5.7% of GDP in 2020 to 5.1% of GDP in 2021, and then to 2% of 
GDP in 2022. Government investment is estimated to increase from 2.9% of GDP in 2020 to 
3.5%  in  2021.  Nationally  financed  fiscal  support  in  2020  and  2021  –  as  measured  by  the 
change  in  the  primary  balance  compared  with  the  pre-crisis  level  (2019)  –  is  estimated  at 
7.6%  and  6.8%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  The  discretionary  budgetary  measures 
adopted by the government in 2020 and 2021 are mostly temporary or matched by offsetting 
measures.  

Cyprus is experiencing excessive imbalances in the sense of the Macroeconomic Imbalance 
Procedure. Vulnerabilities relate to high stocks of external, government, and private debt, and 
still  high  non-performing  loans,  alongside  a  substantial  current  account  deficit.  Looking 
forward,  the  Recovery  and  Resilience  Plan  provides  an  opportunity  to  address  imbalances, 
investment and reforms needs. 

Medium-term debt position: The general government debt stood at 99.2% at end-2018 and 
at  94%  at  end-2019,  before  rising  to  118.2%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease from 112.2% of GDP at end-2021 to 106.6% of GDP at end-2022. Overall, the debt 
sustainability analysis indicates medium risks over the medium term. The implementation of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Cyprus on 29 April 2021.  

4.2.14  LATVIA 

Medium-term macroeconomic position: After a 3.6% contraction in 2020, the economy is 
set to grow by 3.5% in 2021 and by 6% in 2022. Growth in 2021 is mainly driven by private 
consumption and investment. Economic activity is forecast to return to its annual 2019 level 
in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 4.5% of GDP in 2020 to 7.3% of GDP in 2021, and then fall to 
2% of GDP in 2022. Government investment is estimated to increase from 5.7% of GDP in 
2020  to  6.2%  in  2021,  with  the  first  being  larger  than  the  government  deficit  in  2020. 
Nationally  financed  fiscal  support  in  2020  and  2021  –  as  measured  by  the  change  in  the 
primary balance compared with the pre-crisis level (2019) – is estimated at 4% and 6.8% of 
GDP  respectively,  including  discretionary  budgetary  measures  and  the  operation  of  the 
automatic  stabilisers.  The  measures  taken  in  2020  and  2021  have  been  in  line  with  the 
Council Recommendation of 20 July 2020. Some of the discretionary measures  adopted by 
the  government  in  2020  and  2021  do  not  appear  to  be  temporary  or  matched  by  offsetting 
measures. Beyond the horizon of the Commission’s forecast, in 2023, the remaining impact 
of those non-temporary measures is preliminarily estimated at around 1% of GDP.  

Medium-term debt position: The general government debt stood at 37.1% at end-2018 and 
at  37%  at  end-2019,  before  rising  to  43.5%  of  GDP  at  end-2020.  It  is  then  projected  to 

23 

 
 
decrease from 47.3% of GDP at  end-2021 to 46.4% of GDP at end-2022. Overall, the debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Latvia on 30 April 2021.  

4.2.15  LITHUANIA 

Medium-term macroeconomic position: After a 0.9% contraction in 2020, the economy is 
set  to  grow  by  2.9%  in  2021  and  by  3.9%  in  2022.  Growth  in  2021  is  mainly  driven  by 
private  consumption  and  investment.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2021. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 7.4% of GDP in 2020 to 8.2% of GDP in 2021, and then fall to 
6% of GDP in 2022. Government investment is estimated to decrease from 4.1% of GDP in 
2020 to 3.9% in 2021. Nationally financed fiscal support in 2020 and 2021 – as measured by 
the change in the primary balance compared with the pre-crisis level (2019) – is estimated at 
8%  and  9%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  Some  of  the  discretionary  measures 
adopted by the government in 2020 and 2021 do not appear to be temporary or matched by 
offsetting  measures.  Beyond  the  horizon  of  the  Commission’s  forecast,  in  2023,  the 
remaining impact of those non-temporary measures is preliminarily estimated at around 1% 
of GDP.  

Medium-term debt position: The general government debt stood at 33.7% at end-2018 and 
at  35.9%  at  end-2019,  before  rising  to  47.3%  of  GDP  at  end-2020.  It  is  then  projected  to 
increase  from  51.9%  of  GDP  at  end-2021  to  54.1%  of  GDP  at  end-2022.  Overall,  the  debt 
sustainability analysis indicates medium risks over the medium term. The implementation of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Lithuania on 30 April 2021.  

4.2.16  LUXEMBOURG 

Medium-term macroeconomic position: After a 1.3% contraction in 2020, the economy is 
set  to  grow  by  4.5%  in  2021  and  by  3.3%  in  2022.  Growth  in  2021  is  mainly  driven  by 
private  consumption  and  net  exports.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2021. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from 4.1% of GDP in 2020 to 0.3% of GDP in 2021, and then to 0.1% of 

24 

 
 
GDP in 2022. Government investment is estimated to decrease from 5% of GDP in 2020 to 
4.3% in 2021, being larger than the government deficit in 2020 and 2021. Nationally financed 
fiscal  support  in  2020  and  2021  –  as  measured  by  the  change  in  the  primary  balance 
compared  with  the  pre-crisis  level  (2019)  –  is  estimated  at  6.5%  and  2.7%  of  GDP 
respectively, including discretionary budgetary measures and the operation of the automatic 
stabilisers.  The  measures  taken  in  2020  and  2021  have  been  in  line  with  the  Council 
Recommendation  of  20  July  2020.  The  discretionary  budgetary  measures  adopted  by  the 
government in 2020 and 2021 are mostly temporary or matched by offsetting measures.  

Medium-term debt position: The general government debt stood at 21% at end-2018 and at 
22% at end-2019, before rising to 24.9% of GDP at end-2020. It is then projected to decrease 
from 27% of GDP at end-2021 to 26.8% of GDP at end-2022. Overall, the debt sustainability 
analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of  reforms  and 
investments under the Next Generation EU, notably the Recovery and Resilience Facility, is 
expected to have a substantial positive and long-lasting impact on GDP growth in the coming 
years, which, ceteris paribus, should contribute to strengthening debt sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Luxembourg on 30 April 2021.  

4.2.17  HUNGARY 

Medium-term macroeconomic position: After a 5% contraction in 2020, the economy is set 
to grow by 5% in 2021 and by 5.5% in 2022. Growth in 2021 is mainly driven by investment 
and private consumption. Economic activity is forecast to return to its annual 2019 level in 
2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from 8.1% of GDP in 2020 to 6.8% of GDP in 2021, and then to 4.5% of 
GDP in 2022. Government investment is estimated to remain stable at 6.4% of GDP in 2021. 
Nationally  financed  fiscal  support  in  2020  and  2021  –  as  measured  by  the  change  in  the 
primary balance compared with the pre-crisis level (2019) – is estimated at 5.9% and 4.5% of 
GDP  respectively,  including  discretionary  budgetary  measures  and  the  operation  of  the 
automatic  stabilisers.  The  measures  taken  in  2020  and  2021  have  been  in  line  with  the 
Council Recommendation of 20 July 2020. Some of the discretionary measures  adopted by 
the  government  in  2020  and  2021  do  not  appear  to  be  temporary  or  matched  by  offsetting 
measures. Beyond the horizon of the Commission’s forecast, in 2023, the remaining impact 
of those non-temporary measures is preliminarily estimated at around 2% of GDP.   

Medium-term debt position: The general government debt stood at 69.1% at end-2018 and 
at  65.5%  at  end-2019,  before  rising  to  80.4%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease from 78.6% of GDP at  end-2021 to 77.1% of GDP at end-2022. Overall, the debt 
sustainability analysis indicates medium risks over the medium term. The implementation of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Hungary on 30 April 2021.  

25 

 
 
4.2.18  MALTA 

Medium-term macroeconomic position: After a 7% contraction in 2020, the economy is set 
to grow by 4.6% in 2021 and by 6.1% in 2022. Growth in 2021 is mainly driven by private 
consumption and investment. Economic activity is forecast to return to its annual 2019 level 
in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 10.1% of GDP in 2020 to 11.8% of GDP in 2021, and then fall 
to 5.5% of GDP in 2022. Government investment is estimated to increase from 4.5% of GDP 
in 2020 to 5.6% in 2021. Nationally financed fiscal support in 2020 and 2021 – as measured 
by the change in the primary balance compared with the pre-crisis level (2019) – is estimated 
at  10.6%  and  12.1%  of  GDP  respectively,  including  discretionary  budgetary  measures  and 
the operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in 
line  with  the  Council  Recommendation  of  20  July  2020.  The  discretionary  budgetary 
measures adopted by the government in 2020 and 2021 are mostly temporary or matched by 
offsetting measures.  

Medium-term debt position: The general government debt stood at 44.8% at end-2018 and 
at  42%  at  end-2019,  before  rising  to  54.3%  of  GDP  at  end-2020.  It  is  then  projected  to 
increase  from  64.7%  of  GDP  at  end-2021  to  65.5%  of  GDP  at  end-2022.  Overall,  the  debt 
sustainability analysis indicates medium risks over the medium term. The implementation of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The  analysis presented in  the previous 
sections already covers the key factors put forward by Malta on 10 May 2021. 

4.2.19  THE NETHERLANDS 

Medium-term macroeconomic position: After a 3.7% contraction in 2020, the economy is 
set to grow by 2.3% in 2021 and by 3.6% in 2022. Growth in 2021 is mainly driven by public 
consumption and net exports. Economic activity is forecast to return to its annual 2019 level 
in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 4.3% of GDP in 2020 to 5% of GDP in 2021, and then fall to 
1.8% of GDP in 2022. Government investment is estimated to increase from 3.4% of GDP in 
2020 to 3.9% in 2021. Nationally financed fiscal support in 2020 and 2021 – as measured by 
the change in the primary balance compared with the pre-crisis level (2019) – is estimated at 
6.1%  and  6.9%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  Some  of  the  discretionary  measures 
adopted by the government in 2020 and 2021 do not appear to be temporary or matched by 
offsetting  measures.  Beyond  the  horizon  of  the  Commission’s  forecast,  in  2023,  the 
remaining impact of those non-temporary measures is preliminarily estimated at around 1% 
of GDP.  

The  Netherlands  is  experiencing  imbalances  in  the  sense  of  the  Macroeconomic  Imbalance 
Procedure. Private debt  and the current account  surplus remain high, and have cross-border 

26 

 
 
relevance.  Looking  forward,  the  Recovery  and  Resilience  Plan  provides  an  opportunity  to 
address imbalances, investment and reforms needs. 

Medium-term debt position: The general government debt stood at 52.4% at end-2018 and 
at  48.7%  at  end-2019,  before  rising  to  54.5%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease  from  58%  of  GDP  at  end-2021  to  56.8%  of  GDP  at  end-2022.  Overall,  the  debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by the Netherlands on 4 May 2021.  

4.2.20  AUSTRIA 

Medium-term macroeconomic position: After a 6.6% contraction in 2020, the economy is 
set  to  grow  by  3.4%  in  2021  and  by  4.3%  in  2022.  Growth  in  2021  is  mainly  driven  by 
private  consumption  and  investment.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from  8.9% of GDP in 2020 to 7.6% of GDP in 2021, and then to 3% of 
GDP in 2022. Government investment is estimated to increase from 3.4% of GDP in 2020 to 
3.6%  in  2021.  Nationally  financed  fiscal  support  in  2020  and  2021  –  as  measured  by  the 
change  in  the  primary  balance  compared  with  the  pre-crisis  level  (2019)  –  is  estimated  at 
9.6%  and  8.4%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  Some  of  the  discretionary  measures 
adopted by the government in 2020 and 2021 do not appear to be temporary or matched by 
offsetting  measures.  Beyond  the  horizon  of  the  Commission’s  forecast,  in  2023,  the 
remaining impact of those non-temporary measures is preliminarily estimated at around 1% 
of GDP.  

Medium-term debt position: The general government debt stood at 74% at end-2018 and at 
70.5%  at  end-2019,  before  rising  to  83.9%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease  from  87.2%  of  GDP  at  end-2021  to  85%  of  GDP  at  end-2022.  Overall,  the  debt 
sustainability analysis indicates medium risks over the medium term. The implementation of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Austria on 28 April 2021.  

4.2.21  POLAND 

Medium-term macroeconomic position: After a 2.7% contraction in 2020, the economy is 
set to grow by 4% in 2021 and by 5.4% in 2022. Growth in 2021 is mainly driven by private 

27 

 
 
consumption and investment. Economic activity is forecast to return to its annual 2019 level 
in 2021. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from  7% of GDP in 2020 to  4.3% of GDP in 2021, and then to 2.3% of 
GDP in 2022. Government investment is estimated to increase from 4.4% of GDP in 2020 to 
4.7%  in  2021,  with  the  latter  being  larger  than  the  government  deficit  in  2021.  Nationally 
financed fiscal support in 2020 and 2021 – as measured by the change in the primary balance 
compared  with  the  pre-crisis  level  (2019)  –  is  estimated  at  6.4%  and  3.7%  of  GDP 
respectively, including discretionary budgetary measures and the operation of the automatic 
stabilisers.  The  measures  taken  in  2020  and  2021  have  been  in  line  with  the  Council 
Recommendation  of  20  July  2020.  The  discretionary  budgetary  measures  adopted  by  the 
government in 2020 and 2021 are temporary or matched by offsetting measures.  

Medium-term debt position: The general government debt stood at 48.8% at end-2018 and 
at  45.6%  at  end-2019,  before  rising  to  57.5%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease from 57.1% of GDP at  end-2021 to 55.1% of GDP at end-2022. Overall, the debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other  factors  put  forward  by  the  Member  State:  On  30  April  2021,  Poland  provided 
additional relevant factors, namely that the increase in the debt-to-GDP ratio was driven not 
only by the deficit but also by an issuance of bonds by the Polish Development Fund in the 
framework of the policy response.  

4.2.22  PORTUGAL 

Medium-term macroeconomic position: After a 7.6% contraction in 2020, the economy is 
set  to  grow  by  3.9%  in  2021  and  by  5.1%  in  2022.  Growth  in  2021  is  mainly  driven  by 
private  consumption  and  investment.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from 5.7% of GDP in 2020 to 4.7% of GDP in 2021, and then to 3.4% of 
GDP in 2022. Government investment is estimated to increase from 2.2% of GDP in 2020 to 
2.5%  in  2021.  Nationally  financed  fiscal  support  in  2020  and  2021  –  as  measured  by  the 
change in the primary balance compared with the pre-crisis level (2019) – is estimated at 6% 
and 5.1% of GDP respectively, including discretionary budgetary measures and the operation 
of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line with the 
Council Recommendation of 20 July 2020. Some of the discretionary measures  adopted by 
the  government  in  2020  and  2021  do  not  appear  to  be  temporary  or  matched  by  offsetting 
measures. Beyond the horizon of the Commission’s forecast, in 2023, the remaining impact 
of those non-temporary measures is preliminarily estimated at around 1% of GDP.  

Portugal  is  experiencing  imbalances  in  the  sense  of  the  Macroeconomic  Imbalance 
Procedure.  Vulnerabilities  relate  to  large  stocks  of  net  external  liabilities,  private  and 
government  debt,  and  non-performing  loans  remain  high,  against  a  backdrop  of  low 

28 

 
 
productivity  growth.  Looking  forward,  the  Recovery  and  Resilience  Plan  provides  an 
opportunity to address imbalances, investment and reforms needs.  

Medium-term debt position: The general government debt stood at 121.5% at end-2018 and 
at 116.8% at end-2019, before rising to 133.6% of GDP at end-2020. It is then projected to 
decrease  from  127.2%  of  GDP  at  end-2021  to  122.3%  of  GDP  at  end-2022.  The  debt 
sustainability analysis confirms the high risks in the medium term. According to the baseline 
10-year  projection,  the  general  government  debt  ratio  would  decline  over  the  projection 
period, although remaining at a high level. The debt trajectory is sensitive to macroeconomic 
shocks.  When  taking  into  account  a  large  range  of  possible  temporary  shocks  to 
macroeconomic  variables  (through  stochastic  projections),  it  is  probable  that  the  debt  ratio 
could  be  higher  in  2025  than  in  2020.  Concerning  other  factors  relevant  for  an  overall 
assessment of debt sustainability, the lengthening of debt maturity in recent years, relatively 
stable  financing  sources  (with  a  diversified  and  large  investors’  base),  the  gradual 
smoothening  of  the  public  debt  redemption  profile  and  historically  low  borrowing  costs 
supported by the Eurosystem’s interventions, contribute to mitigate the risks. In addition, the 
implementation  of  reforms  and  investments  under  the  Next  Generation  EU,  notably  the 
Recovery and Resilience Facility, is expected to have a substantial positive and long-lasting 
impact  on  GDP  growth  in  the  coming  years,  which,  ceteris  paribus,  should  contribute  to 
strengthening  debt  sustainability.  Moreover,  the  treasury  reported  an  accumulation  of 
currency and deposits by 4.7% of GDP in 2020, while gross financing needs are projected to 
decline. Risk-increasing factors are related to contingent liability risks stemming from some 
public corporations and the private sector, including via the possible materialisation of state 
guarantees granted to firms during the COVID-19 crisis. 

Other  factors  put  forward  by  the  Member  State:  On  30  April  2021,  Portugal  provided 
additional  relevant  factors.  In  their  letter,  the  Portuguese  authorities  stressed  the  positive 
evolution  of  Portugal’s  budgetary  position  in  the  years  running  up  to  the  outbreak  of  the 
COVID-19  pandemic,  with  the  general  government  balance  having  achieved  a  surplus  in 
2019 and the general government debt-to-GDP ratio having remained on a steady downward 
path over the period 2016-2019. Among other considerations, the Portuguese authorities also 
referred to the asymmetric nature of the impacts stemming from the crisis in view of country-
specific  features.  For  Portugal,  this  particularly  relates  to  its  large  hospitality  sector,  which 
was strongly affected by disruptions in foreign tourism. 

4.2.23  SLOVENIA 

Medium-term macroeconomic position: After a 5.5% contraction in 2020, the economy is 
set  to  grow  by  4.9%  in  2021  and  by  5.1%  in  2022.  Growth  in  2021  is  mainly  driven  by 
private  consumption  and  investment.  Economic  activity  is  forecast  to  return  to  its  annual 
2019 level in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 8.4% of GDP in 2020 to 8.5% of GDP in 2021, and then fall to 
4.7% of GDP in 2022. Government investment is estimated to increase from 4.2% of GDP in 
2020 to 5.8% in 2021. Nationally financed fiscal support in 2020 and 2021 – as measured by 
the change in the primary balance compared with the pre-crisis level (2019) – is estimated at 
9%  and  9.1%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  The  discretionary  budgetary  measures 

29 

 
 
adopted by the government in 2020 and 2021 are mostly temporary or matched by offsetting 
measures.  

Medium-term debt position: The general government debt stood at 70.3% at end-2018 and 
at  65.6%  at  end-2019,  before  rising  to  80.8%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease  from  79%  of  GDP  at  end-2021  to  76.7%  of  GDP  at  end-2022.  Overall,  the  debt 
sustainability analysis indicates medium risks over the medium term. The implementation of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Slovenia on 30 April 2021.  

4.2.24  SLOVAKIA 

Medium-term macroeconomic position: After a 4.8% contraction in 2020, the economy is 
set  to  grow  by  4.8%  in  2021  and  by  5.2%  in  2022.  Growth  in  2021  is  mainly  driven  by 
investment and net exports. Economic activity is forecast to return to its annual 2019 level in 
2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 6.2% of GDP in 2020 to 6.5% of GDP in 2021, and then fall to 
4.1% of GDP in 2022. Government investment is estimated to increase from 3.5% of GDP in 
2020 to 3.8% in 2021. Nationally financed fiscal support in 2020 and 2021 – as measured by 
the change in the primary balance compared with the pre-crisis level (2019) – is estimated at 
4.8%  and  5.2%  of  GDP  respectively,  including  discretionary  budgetary  measures  and  the 
operation of the automatic stabilisers. The measures taken in 2020 and 2021 have been in line 
with  the  Council  Recommendation  of  20  July  2020.  Some  of  the  discretionary  measures 
adopted by the government in 2020 and 2021 do not appear to be temporary or matched by 
offsetting  measures.  Beyond  the  horizon  of  the  Commission’s  forecast,  in  2023,  the 
remaining impact of those non-temporary measures is preliminarily estimated at around 1% 
of GDP.   

Medium-term debt position: The general government debt stood at 49.6% at end-2018 and 
at  48.2%  at  end-2019,  before  rising  to  60.6%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease  from  59.5%  of  GDP  at  end-2021  to  59%  of  GDP  at  end-2022.  Overall,  the  debt 
sustainability analysis indicates medium risks over the medium term. The implementation of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other factors  put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Slovakia on 28 April 2021.  

4.2.25  FINLAND 

Medium-term macroeconomic position: After a 2.8% contraction in 2020, the economy is 
set  to  grow  by  2.7%  in  2021  and  by  2.8%  in  2022.  Growth  in  2021  is  mainly  driven  by 

30 

 
 
domestic demand, notably public and private consumption. Economic activity is forecast to 
return to its annual 2019 level in 2022. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to fall from 5.4% of GDP in 2020 to 4.6% of GDP in 2021, and then to 2.1% of 
GDP in 2022. Government investment is estimated to remain stable at 4.6% of GDP in 2021, 
being  almost  equal  to  the  government  deficit in  2021. Nationally  financed fiscal  support in 
2020 and 2021 – as measured by the change in the primary balance compared with the pre-
crisis  level  (2019)  –  is  estimated  at  4.6%  and  4%  of  GDP  respectively,  including 
discretionary  budgetary  measures  and  the  operation  of  the  automatic  stabilisers.  The 
measures taken in 2020 and 2021 have been in line with the Council Recommendation of 20 
July  2020.  The  discretionary  budgetary  measures  adopted  by  the  government  in  2020  and 
2021 are temporary or matched by offsetting measures.  

Medium-term debt position: The general government debt stood at 59.7% at end-2018 and 
at  59.5%  at  end-2019,  before  rising  to  69.2%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease  from  71%  of  GDP  at  end-2021  to  70.1%  of  GDP  at  end-2022.  Overall,  the  debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability. 

Other  factors  put  forward  by  the  Member  State:  On  30  April  2021,  Finland  provided 
additional  relevant  factors,  namely  its  commitment  to  decide  on  necessary  structural 
measures  to  manage  long-term  debt  sustainability  challenges,  outlined  inter  alia  in  the 
recently adopted sustainability roadmap until 2030. The government also recalled that it can 
use its strong net asset position to promote growth and thereby the long-term sustainability of 
the economy.  

4.2.26  SWEDEN 

Medium-term macroeconomic position: After a 2.8% contraction in 2020, the economy is 
set  to  grow  by  4.4%  in  2021  and  by  3.3%  in  2022.  Growth  in  2021  is  mainly  driven  by 
domestic demand, notably public and private consumption. Economic activity is forecast to 
return to its annual 2019 level in 2021. 

Medium-term budgetary position, including investment: The general government deficit 
is expected to increase from 3.1% of GDP in 2020 to 3.3% of GDP in 2021, and then fall to 
0.5% of GDP in 2022. Government investment is estimated to decrease from 5.1% of GDP in 
2020 to 5.0% in 2021, being larger than the government deficit in 2020 and 2021. Nationally 
financed fiscal support in 2020 and 2021 – as measured by the change in the primary balance 
compared with the pre-crisis level (2019) – is estimated at 3.8% and 4% of GDP respectively, 
including  discretionary  budgetary  measures  and  the  operation  of  the  automatic  stabilisers. 
The measures taken in 2020 and 2021 have been in line with the Council Recommendation of 
20  July  2020.  Some  of  the  discretionary  measures  adopted  by  the  government  in  2020  and 
2021,  and  announced  for  2022,  do  not  appear  to  be  temporary  or  matched  by  offsetting 
measures. Beyond the horizon of the Commission’s forecast, in 2023, the remaining impact 
of those non-temporary measures is preliminarily estimated at around 1% of GDP.  

31 

 
 
Sweden is experiencing imbalances in the sense of the Macroeconomic Imbalance Procedure. 
Vulnerabilities relate to high and rising household debt and overvaluation risks in the housing 
market remain. Looking forward, the Recovery and Resilience Plan provides an opportunity 
to address imbalances, investment and reforms needs. 

Medium-term debt position: The general government debt stood at 38.9% at end-2018 and 
at  35%  at  end-2019,  before  rising  to  39.9%  of  GDP  at  end-2020.  It  is  then  projected  to 
decrease from 40.8% of GDP at  end-2021 to 39.4% of GDP at end-2022. Overall, the debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  The  implementation  of 
reforms and investments under the Next Generation EU, notably the Recovery and Resilience 
Facility, is expected to have a substantial positive and long-lasting impact on GDP growth in 
the  coming  years,  which,  ceteris  paribus,  should  contribute  to  strengthening  debt 
sustainability.  

Other factors put forward by the Member State: On 29 April 2021, Sweden informed the 
Commission that it will not provide additional relevant factors.   

5. 

CONCLUSIONS 

The severe economic downturn resulting from the COVID-19 pandemic led to a steep rise in 
general  government  deficits  and  debt  in  all  Member  States  in  2020.  In  this  context,  the 
general escape clause of the Stability and Growth Pact was activated and Member States have 
been  encouraged  to  pursue  a  supportive  fiscal  stance  to  fight  the  pandemic,  while 
safeguarding fiscal sustainability in the medium term.  

In 23 out of the 26 Member States, the government deficit in 2020 was above and not close to 
the  3%  of  GDP  Treaty  reference  value  –  i.e.  in  Belgium,  Czechia,  Germany,  Estonia, 
Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, 
Hungary,  Malta,  the  Netherlands,  Austria,  Poland,  Portugal,  Slovenia,  Slovakia  and 
Finland. 

At  the  same  time,  in  Bulgaria  and  Sweden  the  general  government  deficit  was  above  but 
close to 3% of GDP. 

According  to  its  2021  Convergence  Programme,  Denmark  plans  a  general  government 
deficit of 3.3% of GDP in 2021, which is above but close to 3% of GDP.  

The excess over the Treaty reference value for the 26 EU Member States is considered to be 
exceptional as defined by  the Treaty. However,  with  the exception of  Bulgaria, Denmark, 
Germany,  Ireland,  Cyprus,  Latvia,  Luxembourg,  the  Netherlands,  Austria,  Poland, 
Finland  and  Sweden,  the  excess  over  the  Treaty  reference  value  is  not  expected  to  be 
temporary.  
Overall, taking into account all relevant factors as appropriate22, the analysis suggests that the 
deficit criterion as defined in the Treaty and in Regulation (EC) No 1467/1997 is fulfilled by 

22  

Section 4 explains the conditions needed for the relevant factors to be taken into account in the steps 
leading to the decision on the existence of an excessive deficit on the basis of the deficit criterion. The 
relevant factors shall always be taken into account when assessing compliance on the basis of the debt 
criterion. 

32 

 
 
 
                                                           
Bulgaria, Denmark and Sweden. The deficit criterion is not fulfilled by 23 Member States: 
Belgium,  Czechia,  Germany,  Estonia,  Ireland,  Greece,  Spain,  France,  Croatia,  Italy, 
Cyprus,  Latvia,  Lithuania,  Luxembourg,  Hungary,  Malta,  the  Netherlands,  Austria, 
Poland, Portugal, Slovenia, Slovakia and Finland.23 

General  government  gross  debt  exceeded  the  60%  of  GDP  reference  value  at  end-2020  in 
Belgium,  Germany,  Greece,  Spain,  France,  Croatia,  Italy,  Cyprus,  Hungary,  Austria, 
Portugal,  Slovenia,  Slovakia  and  Finland.  Data  show  that  in  2020  the  debt  reduction 
benchmark was not complied with in  Belgium, Greece, Croatia, Italy, Cyprus, Hungary, 
Austria,  Portugal  and  Slovenia.  The  debt  reduction  benchmark  cannot  be  meaningfully 
computed in the case of Germany, Slovakia and Finland. However, since for Slovakia the 
debt-to-GDP ratio is projected to fall below the Treaty threshold reference value in 2021, it is 
considered to comply with the debt criterion. Moreover, Spain and France, which are subject 
to  the  transitional  debt  rule,  did  not  make  sufficient  progress  towards  meeting  the  debt 
reduction benchmark in 2020. 

Overall, taking into account all relevant factors, the analysis suggests that the debt criterion as 
defined in the Treaty and in Regulation (EC) No 1467/1997 is fulfilled by Slovakia. The debt 
criterion  is  not  fulfilled  by  Belgium,  Germany,  Greece,  Spain,  France,  Croatia,  Italy, 
Cyprus, Hungary, Austria, Portugal, Slovenia and Finland.  

23  

Romania is under an excessive deficit procedure and therefore has not been discussed in this report.  

33