COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, AND THE EUROPEAN CENTRAL BANK on the 2022 Draft Budgetary Plans: Overall Assessment
Date: 2021-11-24
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: budget deficit, budget estimate, budgetary equilibrium, coronavirus disease, draft budget, economic forecasting, epidemic, euro area, public debt, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.11.2021  COM(2021) 900 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, AND THE EUROPEAN CENTRAL BANK on the 2022 Draft Budgetary Plans: Overall Assessment  
 
 
Executive summary 

This Communication summarises the Commission’s assessment of the 2022 Draft Budgetary Plans 
submitted by euro area Member States, and the overall budgetary situation in the euro area, including 
the aggregate fiscal stance, as required by Regulation (EU) No 473/2013. 

The Commission’s assessment takes into account the ongoing economic recovery from the COVID-
19 crisis and the continued application of the general escape clause of the Stability and Growth Pact 
in 2022, while it is expected to be deactivated as of 2023. The assessment is based on the fiscal policy 
recommendations adopted by the Council on 18 June 2021. That guidance can be summarized as 
follows. For 2022, Member States with low/medium debt should pursue or maintain a supportive 
fiscal stance, while Member States with high debt should use the Recovery and Resilience Facility 
(RRF) to finance additional investment in support of the recovery, while pursuing a prudent fiscal 
policy.  All  Member  States  should  preserve  nationally  financed  investment.  With  a  view  to 
maximising  support  to  the  recovery  without  pre-empting  future  fiscal  trajectories  and  creating  a 
permanent burden on public finances, the growth of nationally financed current expenditure should 
be kept under control, and be limited by Member States with high debt.  

The 2022 Draft Budgetary Plans, including the assessment of the fiscal stance for the euro area as a 
whole, can be summarised as follows:  

1.  The re-opening of euro area economies is fueling a strong recovery across Member States 
and  sectors.  Real  GDP  growth  is  projected  to  reach  5%  in  2021  following  a  rebound  in 
private  consumption  and  investment.  Economic  activity  is  expected  to  continue  growing 
swiftly  at  4.3%  in  2022,  while  the  pace  of  the  recovery  is  uneven  across  countries. 
Uncertainty  and  risks  remain  high  and  are  tilted  toward  the  downside,  with  new  and 
mounting supply-side headwinds to the economic outlook.  

2.  Member States are unwinding the temporary emergency measures and increasingly focusing 
support measures on sustaining the recovery. Together with the operation of the automatic 
stabilisers,  this  helps  the  aggregate  euro-area  fiscal  position,  which  is  set  to  improve 
significantly in 2022. The Draft Budgetary Plans point to an aggregate headline deficit of 
4.1%  of  GDP  and  a  debt-to-GDP  ratio  of  around  96%  in  2022,  broadly  in  line  with  the 
Commission 2021 autumn forecast. Materialisation of risks to the forecast could aggravate 
economic  and fiscal  outcomes  in  2022  compared to the  estimates  in  the  Draft Budgetary 
Plans.  

3.  Member States pivot from crisis-related measures towards measures sustaining the recovery. 
Member  States  have  taken  sizeable  fiscal  measures  in  response  to  the  pandemic  and  in 
support  of  the  recovery  (5.2%  of  GDP  in  2021  and  2.8%  of  GDP  in  2022).  Temporary 
emergency measures are projected to be mostly phased out in 2022 (3.7% of GDP in 2021, 
0.4% of GDP in 2022). By contrast, recovery support measures are set to rise (1.5% of GDP 
in 2021, 2.3% of GDP in 2022), which is increasingly related to measures financed by the 
EU. RRF non-repayable financial support or “grants” will in 2022 fund 24% of total recovery 
support measures. Member States also provided ample liquidity support to households and 
businesses in the form of guarantees or suspension of tax and social security contributions. 
Such measures do not generally have an impact on the headline deficit,  except in case of 
standardised guarantees.  

4.  The absorption of RRF grants  is  expected to be frontloaded. According to the Commission 
2021 autumn forecast and the Draft Budgetary Plans, Member States are expected to spend 
over  40%  of  the  total  amount  of  allocated  RRF  grants,  pending  the  decision  to  disburse 
following the fulfilment of the milestones and targets. Most (over 70%) of the RRF grants 
over the 2020-2022 period will be geared towards funding private and public investment, 
with the remainder being channelled mostly towards current expenditure, planned to fund 

1 

 
 
measures  to  support  the  recovery,  improve  resilience  and  foster  the  green  and  digital 
transitions. 

5.  Nationally financed investment is planned to be preserved or broadly preserved in 2022 in 
all Member States, as recommended by the Council. The projected increase in the share of 
public investment in GDP is driven by both EU and national funding sources. Most Member 
States have reported RRF-funded measures in their 2022 DBPs. The spending profile of RRF 
grants over 2020-2022 across euro area Member States shows some degree of heterogeneity. 
High-debt Member States are planning to use most RRF grants to fund additional investment 
as recommended by the Council.  

6.  The  euro  area  fiscal  stance  is  projected  to  be  expansionary  over  the  2020-2022  period. 
Individual fiscal stances are planned to remain supportive in almost all Member States in 
2022,  once  corrected  for  the  phasing  out  of  temporary  emergency  measures.  As 
recommended by the Council, the large majority of low/medium debt Member States plan a 
fiscal expansion. 

7.  The positive contribution coming from public investment and other capital spending financed 
by both the national and EU budgets is important, but the main driver of the fiscal expansion 
in 2021 and 2022 is nationally financed net current primary expenditure. In several Member 
States including some high-debt ones, the projected supportive fiscal stance is set to be driven 
by higher nationally financed current spending, or by unfunded tax cuts. In some cases, this 
is expected to have a sizable impact on the underlying fiscal position. In about a quarter of 
Member  States  the  supportive  fiscal  stance  is  expected  to  be  driven  by  investment,  both 
nationally and EU financed. 

The  Commission  Opinions  on  the  2022  Draft  Budgetary  Plans  focus on  the consistency  with the 
Council  Recommendations  of  18  June  2021.  The  following  is  a  summary  of  the  Commission 
Opinions, which  are based on the Commission 2021 autumn forecast:  

High-debt Member States (Belgium, France, Greece, Italy and Spain)  

  As recommended by the Council, all Member States use the RRF to finance additional 

investment in support of the recovery. 

  As  recommended  by  the  Council,  all  Member  States  preserve  nationally  financed 

 

investment. 
Italy has been recommended by the Council to limit the growth of nationally financed 
current expenditure. This is not projected to be sufficiently ensured, as the growth of 
nationally financed primary current expenditure (net of new revenue measures) in 2022 
is projected to provide a sizeable contribution to Italy’s overall supportive fiscal stance. 
In order to contribute to the pursuit of a prudent fiscal policy, the Commission invites 
Italy to take the necessary measures within the national budgetary process to limit the 
growth of nationally financed current expenditure. 

  For Belgium, France, Greece, Italy and Spain, given the level of their government debt 
and  high  sustainability  challenges  in  the  medium  term  before  the  outbreak  of  the 
COVID-19  pandemic,  when  taking  supporting  budgetary  measures,  it  is  important  to 
preserve  prudent  fiscal  policy  in  order  to  ensure  sustainable  public  finances  in  the 
medium term. 

Low/medium debt Member States (Austria, Cyprus, Estonia, Finland, Germany, Ireland, 
Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Slovenia and Slovakia) 

  As recommended by the Council, all Member States, with the exception of Slovakia and 
Malta, pursue a supportive fiscal stance, including the impulse provided by the RRF. 
Slovakia’s restrictive fiscal stance occurs against the background of high output growth 
and  emerging  capacity  constraints.  Malta’s  neutral  stance  reflects  mainly  very  high 

2 

 
 
estimated  potential  growth,  while  public  investment  reaches  a  historically  high  level. 
This is broadly as recommended by the Council. 

  All Member States plan to use the RRF to support their recovery, while the Netherlands 

has not yet submitted its Recovery and Resilience Plan.  

  As  recommended  by  the  Council,  all  Member  States  preserve  or  broadly  preserve 

nationally financed investment.  

  Latvia and Lithuania have been recommended by the Council to control the growth of 
nationally financed current expenditure. This is not projected to be sufficiently ensured, 
as the growth of nationally financed primary current expenditure (net of new revenue 
measures)  in  2022  is  projected  to  provide  a  sizeable  contribution  to  their  overall 
supportive fiscal stance.   

3 

 
 
 
 
 
I. 

Introduction  

Coordination of national budgetary policies is an important part of the economic governance 
framework  in  the  Economic  and  Monetary  Union.1    To  enable  this  coordination,  euro  area 
Member States submit their Draft Budgetary Plans for the following year to the Commission 
and  to  the  Eurogroup  by  mid-October.2  Those  plans  summarise  the  draft  budgets  that 
governments plan to submit to national parliaments. The Commission provides an Opinion on 
each plan assessing whether it is compliant with Member State’s obligations under the Stability 
and Growth Pact. The Commission’s Opinions provide policy advice to national governments 
and inform national parliaments with a view to facilitating the adoption of budgets compliant 
with EU fiscal rules. The Commission also provides an overall assessment of the budgetary 
situation and prospects for the euro area as a whole. 

The Commission’s assessment is anchored by the recommendations on the updated stability 
programmes adopted by the Council on 18 June 2021. This year, in the context of the COVID-
19  pandemic,  the  fiscal  recommendations  are  qualitative  and  do  not  include  numerical 
budgetary requirements. This reflects the continued application in 2022 of the general escape 
clause  of  the  Stability  and  Growth  Pact,  which  was  activated  by  the  Commission  and  the 
Council in March 2020.3 Based on current projections, the general escape clause is expected to 
be deactivated from 2023.  

For 2022, the recommendations focused on the overall direction and composition of the fiscal 
stance, including expenditure funded by the RRF and other EU funds. Temporary emergency 
measures were netted out. The Council recommended that Member States with low/medium 
debt pursue or maintain a supportive fiscal stance, while Member States with high debt should 
pursue a prudent fiscal policy and use the RRF to finance additional investment in support of 
the  recovery.  All  Member  States  were  recommended  to  preserve  nationally  financed 
investment.  With a view to  maximising  support to the recovery  without pre-empting  future 
fiscal  trajectories  and  creating  a  permanent  burden  on  public  finances  ensure  fiscal 
sustainability,  the  growth  of  nationally  financed  current  expenditure  should  be  kept  under 
control, and be limited for Member States with high debt. 

For the medium term, all Member States were recommended to achieve prudent fiscal positions 
and ensure fiscal sustainability, while enhancing investment to boost growth potential. Those 

1 As set out in Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013 on 
common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive 
deficits of the Member States in the euro area (OJ L 140, 27.5.2013, p. 11). 
2 Almost all euro area Member States submitted their 2022 Draft Budgetary Plans by 15 October 2021, as required 
by Regulation (EU) No 473/2013. Italy submitted its plan on 20 October. France submitted an updated plan on 22 
October. The Commission Opinion is based on the assessment of the updated plan. The Commission did not adopt 
an Opinion on the Draft Budgetary Plan submitted by Portugal, as the draft budget on which Portugal’s plan was 
based was in the meantime rejected by its parliament. In its letter of 15 November 2021, the Commission invited 
the Portuguese authorities to submit a Draft Budgetary Plan in due course, and as soon as a government presents 
to the Portuguese parliament a new draft law on the State Budget for 2022. The submission should take place at 
least one month before the new Draft Budget Law is planned to be adopted by the national parliament. 
3 In the Communication 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, the Commission set out its view that given the expected severe 
economic downturn resulting from the COVID-19 outbreak the conditions to activate the general escape clause 
were met. On 23 March 2020, the Ministers of Finance of the Member States agreed with the assessment of the 
Commission. 

4 

 
 
                                                           
recommendations  also  aimed  to  ensure  that  the  composition  of  national  fiscal  policy  is 
conducive to a sustainable recovery consistent with the green and digital transitions.4 

The  objective  of  this  Communication  is  twofold.  First,  it  provides  an  aggregate  picture  of 
budgetary  policy  at  euro  area  level,  building  on  a  cross-country  assessment  of  the  Draft 
Budgetary Plans. This exercise mirrors the cross-country assessment of Stability Programmes 
conducted  in  the  spring.  Second,  it  provides  an  overview  of  the  Draft  Budgetary  Plans  at 
country  level  and  explains  the  Commission’s  approach  to  assessing  them,  in  particular  the 
fiscal  measures  taken  to  support  a  sustainable  recovery  for  the  Union  from  the  COVID-19 
crisis.  

II. Main euro area findings  

Economic outlook  

Graph 2.1 

Euro area: real GDP growth, 2016-2022 (%) 

The  re-opening  of  euro  area  economies  is 
fuelling  a  strong  recovery  across  Member 
States  and  sectors.  The  improving  health 
situation  and  the  easing  of  the    lockdown 
measures led to a strong rebound in economic 
activity in the euro area in the second quarter of 
2021,  which  further  accelerated  in  the  third 
quarter. The Commission 2021 autumn forecast 
expects real GDP growth to reach 5.0% for the 
year  as  a  whole  (following  a  contraction  of 
6.4%  in  2020).  The  euro  area  economy  will 
reach its pre-pandemic level in quarterly terms 
by  the  end  of  the  year,  although  remaining 
below  its  pre-crisis  trend  level,  which  is  now 
forecast to be reached in 2023. The recovery is 
being  fuelled  by  the  rebound  in  private 
consumption and investment. The acceleration 
in private consumption is due to the increase in household disposable income and the decline 
in  the  savings  rate  towards  historical  levels,  while  investment  growth  is  being  driven  by 
favourable financing conditions for the corporate sector, the impulse given by the RRF and 
strong activity in the construction sector. The significant acceleration in exports is providing a 
boost  to  economic  activity,  especially  the  manufacturing  sector.  However,  the  recovery  is 
expected  to  be  uneven  across  countries  and  sectors.  Twelve  euro-area  Member  States  are 

Sources: 2022 Draft Budgetary Plans (DBP), European 
Commission 2021 autumn forecast (AF), and 2021 Stability 
Programmes (SP). 

4  In  the  Recommendations  on  the  updated  stability  programmes  adopted  on  18  June  2021,  the  Council 
recommended all Member States to: “Pay particular attention to the composition of public finances, on both the 
revenue  and  expenditure  sides  of  the  budget,  and  to  the  quality  of  budgetary  measures  in  order  to  ensure  a 
sustainable  and  inclusive  recovery.  Prioritise  sustainable  and  growth-enhancing  investment,  in  particular 
investment  supporting  the  green  and  digital  transition.  Give  priority  to  fiscal  structural  reforms  that  will  help 
provide  financing  for public policy priorities and contribute  to the long-term  sustainability of public  finances, 
including,  where  relevant,  by  strengthening  the  coverage,  adequacy  and  sustainability  of  health  and  social 
protection systems for all.” 

5 

 
 
 
 
                                                           
  
 
  
expected to return to pre-pandemic quarterly levels of output by the end of 2021, in five5 the 
gap  is  set  to  close  in  the  course  of  2022  and  in  one6  at  the  beginning  of  2023.  In  terms  of 
sectoral activity, contact-intensive service sectors benefited strongly from the easing of health  
related restrictions in the second quarter of 2021, but the value-added in those sectors remained 
substantially below pre-pandemic levels.  In contrast, the manufacturing sector is  recovering 
fast  but  is  being  held  back  by  bottlenecks  and  disruptions  in  global  supply  chains  such  as 
shortages of raw materials and intermediary components, notably semiconductors. For 2021, 
macroeconomic  projections  in  the  DBPs  are  on  aggregate  more  optimistic  than  in  the 
Commission 2021 autumn forecast, as the aggregate euro area GDP growth is projected to be 
5.4%7 in the DBPs compared to 5% in the Commission forecast (Graph 2.1 and Annex Table 
IV.1). In 2022, economic activity is expected to continue growing swiftly at 4.3%. There is no 
difference  in  the  aggregate  2022  euro-area  GDP  growth  projections.  Both  the  Commission 
2021 autumn forecast and the DBPs expect  significantly higher  growth in  2021  (at  5% and 
5.4% respectively) compared to the 2021 Stability Programmes (where growth was estimated 
at 4%) and slightly higher growth in 2022. 

Uncertainty  and  risks  remain  high  and  are  tilted  towards  the  downside with  new  and 
mounting supply-side headwinds to the economic outlook. The evolution of the pandemic 
both within and outside the euro area remains a key source of uncertainty. Within the euro area 
the progress in vaccination rollout has led to  a significant decrease in the number of severe 
cases and deaths, decreasing the stringency of government-mandated restrictions. As a result 
the impact of the pandemic on economic activity has weakened significantly. Outside the euro 
area (and the EU in general) the picture is mixed, with emerging countries in particular being 
vulnerable to new lockdowns given low vaccination rates. Disruptions to economic acitivity in 
these regions can negatively affect euro area economies given the global integration of their 
production  chains.  The  pandemic  is  also  contributing  to  an  exacerbation  of  supply-side 
bottlenecks which are holding back economic activity in the euro area and which could have 
further negative effects if they were to worsen. An additional downside risk factor is given by 
persistent inflationary pressures brought on by high energy prices and labour market shortages 
in some sectors.   

Fiscal outlook 

The aggregate euro area headline deficit is expected to fall in 2022 mainly driven by the 
unwinding  of  the  emergency  support  measures  and  the  operation  of  the  automatic 
stabilisers (Graph 2.2 and Annex Table IV.2). The Draft Budgetary Plans point to an aggregate 
headline deficit of 4.1% of GDP in 2022, down from an expected 7.5% of GDP in 2021 (up 
from  7.2%  of  GDP  in  2020).  These  deficit  projections  are  slightly  higher  than  in  the 
Commission 2021 autumn forecast (7.1% of GDP in 2021 and 3.9% of GDP in 2022), but mark 
a significant decrease compared to the 2021 Stability Programmes, which had projected an  

5 These Member States are: Germany, Greece, Italy and Malta. 

6 Spain 

7  The  more  optimistic  projections  on  aggregate  for  GDP  growth  for  2021  in  the  DBPs  compared  to  the  
Commission 2021 autumn forecast are due to more optimistic projections in some large euro area Member States 
rather than to a general trend. The difference in projections in these Member States are generally due to a timing 
issue  as  the  DBPs  were  prepared  before  the  release  of  additional  data  on  GDP  which  was  integrated  into  the 
Commission 2021 Autumn Forecast.  

6 

 
 
                                                           
in 

improvement 

the  emergency 

aggregate  deficit  of  6.8%  of  GDP  in  2022 
(down  from  8.7%  of  GDP  in  2021).  The 
expected 
the  aggregate 
deficit  in  2022  is  mostly  driven  by  the 
support 
unwinding  of 
measures and the operation of the automatic 
stabilisers,  as 
recovery 
continues. All euro-area Member States plan 
a markedly lower deficit in 2022 compared to 
2021. The largest falls of more than 4 pps. of 
GDP are planned in Greece (to 3.7% of GDP 
in  2022),  Latvia  (to  4.8%)  and  Malta  (to 
5.6%). In total, eleven Member States plan a 
deficit above 3% of GDP in 2022. 

the  economic 

Graph 2.2 

Euro area: headline deficit, 2016-2022 (% of GDP) 

Sources:  2021  Draft  Budgetary  Plans 
Commission  2021  autumn 
Programmes (SP). 

(DBP),  European 
forecast,  and  2021  Stability 

The  aggregate  euro  area  debt-to-GDP  ratio  is  projected  to  decrease  slightly  in  2022 
thanks to a favourable interest rate-growth differential (Graph 2.3 and Annex Table IV.3). 
The Draft Budgetary Plans project the debt ratio to reach 98% of GDP in 2021 (down from 
99% in 2020), and decrease again in 2022 to around 96%.8 This projection is  lower than the 
Commission  2021  autumn  forecast  (100.0%  of  GDP  in  2021  and  97.9%  of  GDP  in  2022). 
Overall,  the  primary  deficit  will  continue  to 
Graph 2.3 
weigh  on  debt  dynamics  in  2022,  while  the 
interest  rate-growth  differential  will  support 
the reduction in the debt ratio (Graph 2.4).  

 Euro area: public debt, 2016-2022 (% of GDP) 

The debt projections for the coming years 
are  subject  to  considerable  uncertainty. 
Stochastic  simulations,  which  apply  a  large 
range  of  macroeconomic  shocks  around  the 
central  scenario,  suggest  that  the  euro  area 
debt-to-GDP  ratio  is  likely  to  lie  between 
89% and 107% of GDP in 2022, and between 
79% and 112% of GDP in 2026 (Annex III). 
The ratio is likely to decline slowly over the 
medium  term,  as the impact  of the  COVID-19  crisis  on public finances  gradually unwinds. 
Contingent  liabilities  arising  from  the  provision  of  public  guarantees  to  sustain  economic 
activity and sectors particularly hit by the pandemic would  in general be reflected in public 
debt  and  deficits  only  if  called,  except  in  case  of  standardised  guarantees9.  The  contingent 
liabilities accumulated during the COVID-19 crisis show large differences across Member  

Sources:  2021  Draft  Budgetary  Plans 
Commission  2021  autumn 
Programmes (SP). 

(DBP),  European 
forecast,  and  2021  Stability 

8 The only Member States with projected increases in their debt ratios in 2022 are Belgium, Estonia, Latvia and 
Malta. Most Member States that had the highest pre-crisis debt ratios plan improvement in 2022. 
9  In  some  cases,  governments  issued  standardised  guarantees  in  response  to  the  COVID-19  crisis;  for  such 
guarantees,  an  estimated  deficit  impact  is  recorded  from  the  outset  in  line  with  ESA  2010  rules.  While  high 
uncertainty remains, this mitigates the potential impact of the guarantees for future deficits. This was particularly 
the  case  for  Italy,  where  the  stock  of  guarantees  increased  most  in  2020:  as  the  guarantees  issued  in  2020  in 
response  to the  COVID-19 crisis  were predominantly standardised, losses associated  with the expected future 
guarantee calls (0.7% of GDP) were already reflected in the deficit of 2020. 

7 

 
 
                                                           
 
 
factors 

include 

States (Box 1). Debt ratios will also 
rise further if interest rates increase. 
On  the  other  hand,  several  factors 
mitigate  fiscal  sustainability  risks. 
the 
These 
lengthening  of  debt  maturities  in 
recent  years10,  stable 
financing 
sources,  historically  low  borrowing 
costs11,  and  EU  initiatives  such  as 
the  European 
for 
to  mitigate 
temporary  Support 
an 
in 
Unemployment  Risks 
Emergency 
(SURE)  and,  more 
importantly,  Next  Generation  EU 
and  the  Recovery  and  Resilience 
Facility  (RRF).  Moreover, 
large 
shares  of  government  debt,  in  the 
range of 15% to 30% for most euro 
area  countries12,  are  held  by  the 
European System of Central Banks. 

instrument 

Graph 2.4 

 Euro area: decomposition of the change in the debt ratio, 
2021-2022 (pps. of GDP) 

Note: The snowball effect refers to the net impact of interest rates, inflation 
and  real  GDP  growth  (that  is,  the  interest  rate-growth  differential)  on  the 
debt dynamics. 
Source: European Commission 2021 autumn forecast. 

Box 1. Guarantees in the 2022 Draft Budgetary Plans 

In  addition to  the  measures  with a  direct  budgetary  impact,  Member  States  have  provided ample 
liquidity support to the economy in response to the COVID-19 crisis, mostly in the form of public 
guarantees. These measures have facilitated the continued provision of credit to the economy by the 
banking  sector  and  an  efficient  pass-through  of  favourable  financing  conditions  to  all  economic 
sectors, as well as alleviated temporary liquidity constraints. Some Member States  have highlighted 
in their DBPs the efficiency of such measures for preserving confidence and thereby limiting the 
impact of the crisis on employment. 

With the easing of containment measures and the ensuing recovery, the take-up of public guarantees 
related to the COVID-19 crisis is expected to have reached its peak, as many guarantee schemes have 
already expired or are expiring by the end of 2021. This is confirmed by information provided in the 
DBPs, which often  expect that the level of contingent liabilities will start declining from 2022, also 
reflecting the expected economic recovery. The information provided in the DBPs also highlights 
that, for some schemes, the actual take-up, reflected in government’s actual contingent liabilities, 
remained modest compared to their initially announced maximum size.  

Based  on  the  existing  evidence,  the  increase  in  the  stock  of  government  guarantees  has  so  far 
remained moderate in most cases (see graph B1.1) and overall lower than during the Great Financial 
Crisis. It is worth noting that the mere amount of the guarantees that have been taken up does not 
correlate with their probabiliy to be called , since this is driven by other aspects, in particular the 
solvency of the firms that benefitted from the guarantees.  
Graph B1.1 Euro area: Stock of government guarantees, 2019 and 2020 (% of GDP) 

10 The average maturity in the euro area is currently 7.9 years (calculated as a simple average of maturities in euro 
area Member States). 
11 The implicit interest rate stood at 1.5% in 2020 for the euro area as a whole. 
12 2020 data, source: Government finance statistics, ECB. 
8 

 
 
 
                                                           
 
 
Source: Eurostat (gov_10dd_guar and gov_cl_guar); data are not available for 2020 for Germany, Greece and Netherlands 

9 

 
 
 
 
 
 
Fiscal response to the COVID-19 pandemic: from emergency to recovery  

Graph 2.5 

estimates, 

Euro area:  Temporary emergency measures and 
recovery support measures, 2020-2022 (% of GDP) 

Member  States  have  maintained 
sizeable  fiscal  measures  in  response  to 
the worsening pandemic evolution in the 
beginning  of  2021.  According  to  the 
Commission’s 
temporary 
emergency  measures13  have  amounted  to 
3.4% of GDP in 2020, around 85% of total 
discretionary fiscal measures taken in that 
year (Graph 2.5). Other measures of a more 
general recovery-supporting nature (either 
temporary  or  permanent),  such  as  extra 
public  works  or  indirect  tax  cuts,  are 
estimated  to  have  amounted  to  0.5%  of 
GDP  in  2020.14  The  cost  of  temporary 
emergency  measures  is  set  to  increase  in 
2021  to  3.7%  of  GDP.  The  increase  in 
temporary  emergency  measures  is  mainly 
due  to  the  adoption  of  new  or  extended 
measures in response to  the need for new 
restrictions to economic activity in the first 
part  of  the  year.  The  cost  of  recovery 
support measures (financed by both national sources and the EU) is forecast to increase in 2021 
to 1.5% of GDP, including EU-financed measures equivalent to 0.4% of GDP.  

Note:  The chart shows the cost in 2022 of measures adopted from 
2020 onwards. For the definition of temporary emergency measures 
see  Box  2.  For  the  definition  of  recovery  support  measures  see 
footnote 12. 
Sources: 2022 Draft Budgetary Plans and European Commission 
2021 autumn forecast. 

Temporary  emergency  measures  are  projected  to  be  mostly  phased  out  in  2022  as 
Member States pivot towards measures sustaining the recovery. In 2022, according to the 
Commission forecast, temporary emergency measures would amount to less than 0.5% of GDP, 
while  recovery  support  measures  are  estimated  at  2.3%  of  GDP.  Those  recovery  support 
measures would make up around 85% of total discretionary fiscal measures in 2022, a reverse 
situation to the one in 2020. This confirms the pivot towards recovery support is materialising. 
A growing part of that recovery support is related to measures financed by the EU, especially 
RRF grants, which in 2022 will fund 24% of total recovery support measures, or 0.5% of GDP. 
Some emergency measures may be extended in case of a worsening of the pandemic evolution, 
however. In addition, Member States may adopt or extend measures to counteract economic 
and social impact of the recent abrupt increase in energy prices.  

13 The reason for distinguishing the emergency measures is that the appropriateness of their deployment should 
be gauged not in connection with the state of the economy but the state of public health and the restrictions it 
demands. For the definition of temporary emergency measures see Box 2.  
14 Recovery support measures are fiscal measures introduced since March 2020 to ensure a sustainable recovery 
following the COVID-19 pandemic. Those measures can be either temporary or permanent; some may be funded 
by  RRF  grants.  When  those  measures  affect  the  budgetary  balance  beyond  2022,  they  are  considered  to  be 
permanent.  Those  measures  can  take  the  form  of  public  investment,  capital  transfers,  current  expenditure  or 
revenue measures (tax cuts). On the composition of the fiscal support measures, Member States should follow the 
Council’s recommendation of 18 June to ensure a sustainable and sustained recovery. 

10 

 
 
                                                           
 
 
 
Trends in RRF-financed expenditure 

by 

Graph 2.6 

sovereign 

Expenditure financed by RRF grants, 2020-2022 (% of 
total costs) 

The absorption of RRF grants (non-repayable financial support) is projected by the 2021 
Commission autumn forecast and the 2022 Draft Budgetary Plans to be frontloaded with 
most grants geared towards funding private and public investment15.   
The RRF provides financial support for Member States for investment and reforms through 
grants  as  well  as  loans.  This  section  only 
examines trends relative to RRF grants as 
they are “above the line” budget items. In 
contrast,  RRF  loans  are  “below  the  line” 
financing  items  similar  to  other  loans 
on 
the 
contracted 
international  financial  markets  to  finance 
itself16.    Based  on  the  Commission  2021 
autumn  forecast,  the  aggregate  spending 
profile of RRF grants is frontloaded, with 
42% of the total amount of allocated RRF 
grants  to  euro  area  Member  States  being 
spent  by  the  end  of  2022,  pending  the 
the 
decision 
fulfilment  of  the  milestones  and  targets, 
and  around  67%  by  the  end  of  2023.  In 
terms of GDP, RRF-funded expenditure in 
2022 is estimated at over 0.5% of GDP  and 
0.5%  in  2023.  A  similar  profile  emerges 
from  the  DBPs,  with  around  44%  of  the 
total amount of allocated RRF grants to euro area Member States being spent by the end of 
2022, pending the decision to disburse following the fulfilment of the milestones and targets, 
and around 65% by the end of 2023. Disbursements to Member States under the RRF began in 
the summer of 2021 in the form of pre-financing (amounting to over EUR 34 bn in RRF grants 
so far) following the approval of the first Recovery and Resilience Plans (RRPs). Euro area 
Member States are estimated to have spent around 17% of the total RRF grants in 2021 which 
is equivalent to around 0.4% of euro area GDP.  Around 72% of RRF grants over the 2020-
2022 period would be geared towards supporting investment, both public and private (around 
47% would support private investment through capital transfers, while around 25% would fund 

Source: European Commission 2021 autumn forecast. 

to  disburse 

following 

15 This Communication as well as the DBP Opinions use the national accounts definition of investment, while the 
RRF uses a broader concept of investment. The RRF Regulation defines investment as capital formation in areas 
such as fixed capital, human capital, and natural capital. This would also cover for instance intangible assets such 
as data, intellectual property and skills. Fixed capital is broadly equivalent to the concept of ‘gross fixed capital 
formation’ used in national accounts (e.g. infrastructure, buildings, but also some intangibles such as R&D, patents 
or software). Human capital is accumulated by means of spending on health, social protection, education, training 
and  skilling,  etc.  Natural  capital  is  enhanced  by  actions  aiming  at  increasing  the  share  of  renewable  natural 
resources, protecting or restoring the environment (e.g. emission reduction, land rehabilitation, reforestation), or 
by mitigating/adapting to climate change.   
16 Unlike expenditure financed by RRF loans, expenditure financed by RRF grants is offset by matching revenue 
and is therefore not directly visible in the general government balance.  

11 

 
 
 
 
                                                           
  
 
 
 
public  investment  through  gross  fixed  capital  formation)  based  on  the  Commission  2021 
autumn  forecast.  The  remainder  of  the  RRF  grants  would  be  channeled  towards  current 
expenditure  (around 27%) and tax cuts  (around 1%) used by  Member  States to  fund other 
measures to support the recovery, improve resilience and foster the green and digital  
transitions. Similar trends emerge from the Member States’ DBPs: around 74% of the RRF 
grants over the 2020-2022 period will be channeled towards investment expenditure, with a 
near-equal allocation between public investment (around 38%) and private investment (around 
36%).  The  remainder  of  the  grants  are  expected  to  be  allocated  largely  towards  current 
expenditure  (around  25%)  and  tax  cuts  (around  1%)  used  by  Member  States  to  fund  other 
measures  to  support  the  recovery,  improve  resilience  and  foster  the  green  and  digital 
transitions.  

ratio 

aggregate 

Graph 2.7 Public investment in the euro area, 2019-2023 (% of GDP) 

The projected increase in the share of public investment in GDP is driven by both EU 
and  national  funding  sources. 
The  Commission  2021  autumn 
forecast projects an increase in the 
public 
euro 
area 
investment-to-GDP 
from 
2.8%  in  2019  to  around  3.2%  in 
2022 as a result of higher funding 
from  EU and national  sources. A 
significant  part  of  the  increased 
EU  funding  is  due  to  the  use  of 
RRF  grants.  At  the  same  time, 
nationally  financed  investment  is 
projected to be  broadly preserved 
in  2022 as  all Member States are 
expected  to  keep  the  share  of 
nationally  financed  investment  in 
GDP to at least a similar level as 
in 2021.  

Source: European Commission 2021 autumn forecast. 

Assessment of the euro area fiscal stance  

The fiscal stance indicator for  2020-2022 was adjusted to take into account the special 
circumstances brought about by the pandemic. The fiscal stance measures the short-term 
impulse  to  the  economy  from  discretionary  fiscal  policy.  In  line  with  the  approach  used  in 
Spring17, this Communication computes the fiscal stance by looking at the annual increase in 
net expenditure relative to 10-year potential growth (for more details see Box: Indicators used 
in the assessment of the 2022 Draft Budgetary Plans in the Statistical Annex). Following the 
Council recommendations on the 2021 Stability Programmes, the net expenditure aggregate 
used to compute the overall fiscal stance was adjusted to include expenditure financed by RRF 

17 Communication from the Commission to the European Parliament, the Council, the European Central Bank, 
the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank: 
“Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our 
economy”, 2 June 2021. Please see link: com-2021-500_en.pdf (europa.eu) 

12 

 
 
 
 
                                                           
 
grants and other EU funds and to exclude the temporary emergency measures related to the 
COVID-19  crisis  (Box 2 provides a detailed overview of these changes).  In addition  to  the 
contribution from EU-financed expenditure, this Communication identifies the contributions 
to  the  overall  fiscal  stance  from  different    nationally  financed  expenditure  aggregates:  i) 
investment;  ii)  other  capital  expenditure;  and  iii)  current  primary  expenditure  (net  of 
discretionary revenue measures). 

Graph 2.8 

Euro area: fiscal stance, 2020-2022 (% of GDP) 

the  fiscal  expansion 

The aggregate euro area fiscal stance will remain expansionary in 2021. In 2020, the fiscal 
stance  is  estimated  to  have  been 
slightly  expansionary  (¼  %  of 
GDP)18, as the lockdowns needed 
to limit the spread of the pandemic 
affected the ability of governments 
to  spend  on  normal  activities.  In 
2021, 
is 
projected to be sizeable at 1¾% of 
GDP  driven  largely  by  nationally 
financed  net  current  primary 
expenditure,  which  is  expected  to 
provide 
expansionary 
contribution  of slightly  more than 
1%  of  GDP.  Other  positive 
contributions are expected to come 
from  public  investment  and  other 
capital  spending financed by both 
the national  and EU budgets.  The 
substantial 
expansionary 
contribution of nearly ½% of GDP 
from the EU budget mainly reflects the implementation of Member States’ RRPs. 

Note:  The  graph  shows  the  discretionary  fiscal  impulse  adjusted  to  take  into 
account the special circumstances of the COVID-19 pandemic. 
Source: European Commission 2021 autumn forecast. 

an 

Fiscal  policy  in  the  euro  area  is  projected  to  remain  supportive  in  2022  to  sustain  the 
recovery. As the economic recovery gathers pace, euro area Member States are expected to 
shift their policies from temporary emergency measures (set to expire for the most part in 2022) 
to recovery support measures, which are necessary to reduce the output losses and to foster the 
green and digital transition of our economies. Based on the Commission 2021 autumn forecast, 
which incorporates the 2022 DBPs, a further fiscal expansion of nearly 1% of GDP is expected 
for 2022.  

18 The COVID-19 pandemic poses specific challenges to the assessment of the underlying fiscal position, not least 
the need to take into account the phasing-out of temporary emergency measures. In particular, the implementation 
and subsequent phasing-out of sizeable temporary emergency measures in 2022 blurs the reading of underlying 
fiscal developments. The phasing out of these measures should not be considered as restrictive fiscal policy when 
economic activity and hours worked return to normal levels. Excluding them from the analysis will help to avoid 
misleading inferences on the evolution of demand support since the start of the pandemic. For consistency and 
comparison  purposes,  the  fiscal  stance  indicator  also  for  2020  has  been  adjusted  to  exclude  the  temporary 
emergency measures taken as a response to the COVID-19 crisis. Given that in 2020 most of the fiscal impulse 
was provided by these temporary emergency  measures, the  modified  metric used in this note points only to a 
slightly expansionary fiscal stance for 2020. When including the temporary emergency measures, the euro area 
fiscal stance would be expansionary by 3¾% in 2020 and 2.0% in 2021 and contractionary by 2.0% in 2022.   

13 

 
 
                                                           
 
EU-financed  expenditure  and  nationally  financed  capital  expenditure  will  continue  to 
support the recovery and potential growth in 2022, with an overall additional spending 
of  ¼%  of  GDP  (with  EU-  financed  spending  accounting  for  0.1%  of  GDP).  As  the 
implementation  of  the  RRPs  accelerates,  the  spending  financed  by  the  EU  is  projected  to 
increase  further  in  2022,  adding  to  the  expansionary  fiscal  stance.  Nationally  financed 
investment is also projected to further increase next year. The expected fiscal support to finance 
public  and private investments will  have a positive impact  on  potential growth  and  thus  on 
fiscal sustainability.   

A large part of the fiscal support in 2022 is geared towards higher nationally financed 
current spending or lower tax revenue (¾% of GDP). In some cases, these projections imply 
a sizeable impact on the underlying fiscal position, also in some high-debt Member States.  

While the aggregate euro area fiscal stance is supportive in 2022, its composition could 
be improved. In the 2021 CSRs, Member States were recommended to implement different 
types of fiscal strategies based on the level of their public debt. Member States with low debt 
should pursue a supportive fiscal stance, including the impulse provided by the RRF. Member 
States with high debt should use the RRF to finance additional investment in support of the 
recovery  while  pursuing  a  prudent  fiscal  policy.  Member  States  should  preserve  nationally 
financed investment. At the same time, the growth of nationally financed current expenditure 
should be kept under control, and be limited for Member States with high debt. As shown in 
Section III below, all Member States are complying with the recommendations to use the RRF 
to finance additional investment in support of the recovery and all Member States, preserve or 
broadly preserve their nationally financed investment. However, a further increase in nationally 
financed current expenditure above potential growth is expected in 2022 in several Member 
States, including some with high debt-sustainability risks. This projected increase in current 
expenditure above potential  growth  follows similar trends  in  2020 and 2021, suggesting an 
increasing weight of permanent current expenditure or unfunded tax cuts. The composition of 
the  2022  fiscal  stance  could  therefore  be  improved  by  shifting  the  fiscal  support  towards 
investment to the possible extent. These elements would promote investment and lead to an 
improvement in  medium-term  fiscal  sustainability. Moreover,  for high-debt Member States, 
limiting  the  growth  of  current  expenditure  will  help  to  pursue    a  prudent  fiscal  policy,  as 
recommended by the Council. 

Box 2. Fiscal stance indicators used in the COVID-19 pandemic 

Traditionally, the fiscal stance indicates the short-term impact of discretionary fiscal policy on the 
economy  and  is  defined  as  a  measure  of  the  year-on-year  change  in  the  general  government’s 
budgetary position. However, in view of the exceptional circumstances triggered by the COVID-19 
pandemic, the presence of sizeable transfers from the EU budget (such as those from the  RRF or 
other EU grants), and the significant uncertainty surrounding the output gap estimates, conventional 
indicators such as the change in the structural budget balance or the ‘expenditure benchmark’ are not 
deemed suitable to measure the fiscal stance in the current context.  

In particular, the change in the structural budget balance does not capture the additional fiscal impulse 
provided by the EU, as the related national expenditure is exactly offset by corresponding revenue 
from the EU. The economy may therefore experience a significant impulse from the EU, without 
being visible in the headline or  structural budget balance. Likewise, the ‘expenditure benchmark’ 
excludes the impact of EU funded expenditure and therefore also does not capture the overall fiscal 
stance.  

14 

 
 
 
 
Moreover, since 2020 government balances have also been considerably impacted by the introduction 
and  subsequent  phasing-out  of  crisis-related  temporary  emergency  measures.  Such  measures 
generally  aim  at  supporting  health  systems  and  compensating  workers  and  firms  for  pandemic-
induced income losses. They are by nature temporary, with an expiry date in 2023 or earlier, but their 
impact is contingent on the development of the health situation. While useful in the initial phase of 
the crisis, these measures are likely to be less efficient to support the recovery when the health related 
emergency gradually wanes. 

For those reasons, the Commission uses a measure of fiscal stance that is based on the change in 
primary expenditure (net of discretionary revenue measures), relative to the 10-year average potential 
GDP  growth  rate.  The  expenditure  aggregate  includes  nationally  financed  expenditure  as  well  as 
expenditure financed by the RRF and other EU grants, and therefore measures the impulse by the 
national  budget  as  well  as  the  EU.  At  the  same  time,  taking  into  account  the  exceptional 
circumstances created by the impact of the COVID-19 pandemic, it excludes the impact of crisis-
related  temporary  emergency  measures.  The  difference  between  the  change  in  net  primary 
expenditure (as defined above) relative to the 10-year average potential GDP growth can then be 
interpreted as a measure for the overall fiscal stance.  

In line with the 2 June 2021 Council Recommendations, the Commission’s assessment also pays 
particular attention to the evolution of subcomponents of the overall fiscal stance separately, notably 
expenditure  financed  by  RRF  grants  and  other  EU  funds,  nationally  financed  investment  and 
nationally financed primary current expenditure.  

Monetary Policy Stance  

The ECB’s accommodative monetary policy stance since the beginning of the pandemic 
has contributed to the preservation of favourable financing conditions across  the euro 
area. While long-term market interest rates have picked up since September, composite credit 
costs (CCCI)19 of euro area firms and households have remained at historically low levels so 
far  (graph  2.9).  By  preserving  favourable  financing  conditions,  the  ECB’s  monetary  policy 
measures20 also contributed to a more effective transmission of fiscal impluses to the entire 
euro-area  economy  during  the  pandemic.  At  the  same  time,  a  supportive  fiscal  stance  also 
supported the ECB monetary policy transmission. This strong complementarity between fiscal 
and monetary policies in the euro area has created space for both policies to operate in tandem 
and effectively mitigated the economic damages of the pandemic. Looking ahead, financing  

19 The composite credit cost indicator (CCCI) is a synthetic measure of the external financing costs for the euro 
area corporate sector and households. The CCCI of non-financial corporations includes the costs of credit provided 
by both banks and financial markets (i.e. through bonds). The CCCI of households includes the costs on three 
types of bank loans granted to households, i.e. for consumption, house purchase and other purposes. 

20 The ECB has deployed a range of monetary policy easing measures to mitigate the adverse economic effects of 
the  COVID-19  pandemic.  These  measures  consisted  of  sizeable  additional  asset  purchases  under  the  asset 
purchase  programme  and  in  particular  under  the  pandemic  emergency  purchase  programme,  ample  liquidity 
provision at very favourable conditions to euro area banks in particular through the third series of targeted longer-
term refinancing operations (TLTRO III), and a relaxation of collateral requirements  in its liquidity-provision 
operations with euro area banks. 

15 

 
 
 
 
 
 
 
                                                           
Graph 2.9 

Composite credit cost indicators (CCCIs) of non-
financial corporations and households in the euro 
area 

conditions  should  remain  favourable, 
with  market-implied 
rates 
suggesting only a very gradual increase in 
both  short-term  and  long-term  interest 
rates in 2022. At its latest monetary  

forward 

policy  meeting  in  October,  the  ECB 
Governing Council judged that its current 
monetary  policy  measures 
remained 
crucial to helping the economy shift to a 
sustained  recovery  and,  ultimately,  to 
bringing inflation over the medium term 
to  its  2%  target.  The  ECB  Governing 
Council also considered that targeted and 
coordinated 
should 
continue to complement monetary policy. 

support 

fiscal 

Source: ECB, Bloomberg, Datastream, DG ECFIN calculations. 

16 

 
 
 
 
 
 
 
 
 
  
 
 
III. Overview of the Draft Budgetary Plans 

Fiscal  response  to  the  COVID-19  pandemic  across  Member  States:  from  emergency  to 
recovery 

Graph 3.1 

funds, 

Temporary emergency measures and recovery support measures, 
2022 (% of GDP)  

Most  countries  are  expected  to  phase  out  temporary  emergency  measures  and  pivot 
towards  recovery  support 
in 2022 (Graph 3.1). The cost 
of recovery support measures, 
in  part  financed  by  the  RRF 
and  other  EU 
is 
expected  to  exceed  3%  of 
GDP in 2022 in  Italy, Latvia 
and Austria, and be over 2% 
in  another  seven  Member 
States.  Four  Member  States 
are  expected  to  finance  at 
least 1% of GDP of recovery 
support  measures  by  the  EU 
funds.  The  highest  costs  of 
emergency 
temporary 
are 
2022 
measures 
in 
projected 
the 
in  Estonia, 
Netherlands, 
Greece, 
Slovakia, Lithuania and Italy. 
The  withdrawal  of  the  last 
temporary 
emergency 
measures is expected to take 
place in 2023. 

Note: The chart shows the cost in 2022 of measures adopted from 2020 onwards.  For 
the  definition  of  temporary  emergency  measures  see  Box  2.  For  the  definition  of 
recovery support measures see footnote 12. 
Source: European Commission 2021 autumn forecast. 

Fiscal stance of the euro area Member States in 2022 (% of GDP) 

Graph 3.2 

a 

fiscal 

stance 

are  projected 
neutral 

is 
The 
expected 
remain 
to 
supportive  in  almost  all 
in  2022 
Member  States 
(Graph  3.2).  According  to 
the 
2021 
Commission 
autumn forecast, 17 Member 
to 
States 
provide 
or 
supportive  fiscal  stance,  in 
some  cases  at  high  levels 
with  an  expansion  of  1%  of 
GDP  or  more.  As  indicated 
in 
recommendations 
addressed to them in spring, 
a 
the 
large  majority  of 
low/medium debt Member States are projected to pursue a supportive fiscal stance in 2022. 
The only exception is Slovakia, for which a contractionary stance of 0.3% of GDP is forecast 
to  take  place  against  solid  output  growth  in  2022.  A  neutral  stance  is  projected  for  Malta, 
17 

Note:    The  graph  shows  the  fiscal  stance  and  its  components  excluding  COVID-19 
temporary emergency measures based on the Commission forecast only as DBP data 
on COVID-19 temporary emergency measures are not available. 
Source: European Commission 2021 autumn forecast.. 

the 

 
 
 
 
reflecting mainly very high estimated potential growth. Most high debt Member States plan a 
fiscal  expansion  (Belgium,  Greece,  France  and  Italy).  Member  States  with  high  debt  had 
received a recommendation to use the RRF to finance additional investment in support of the 
recovery while pursuing a prudent fiscal policy. 

2022 

and 2022 (% of GDP; in excess of medium-term potential growth) 

Graph 3.3   Growth of nationally financed current expenditure,  average 2020-2021 

In  several  countries,  the  projected  supportive  fiscal  stance  reflects  higher  nationally 
financed  current  spending  or  tax  cuts,  whereas  in  about  a  third  it  reflects  higher 
investment  (Graph  3.2).  In 
the 
most  Member  States, 
growth 
nationally 
of 
financed current expenditure 
revenue 
new 
of 
(net 
measures) 
is 
in 
projected  to  exceed  the  rate 
of  medium-term  potential 
growth,  implying  a  positive 
contribution  to  the  overall 
fiscal stance (Box 2 provides 
a  detailed  overview  of  the 
metrics  of  fiscal  stance).  In 
fact, the growth of nationally 
financed current expenditure 
is set to be the main driver of 
the supportive fiscal stance in 
ten  Member  States.  Only  in 
Spain,  Malta  and  Slovakia 
the 
financed 
current expenditure is expected to provide a contractionary contribution to the fiscal stance, as 
non-temporary current  expenditure is set to decelerate after the sizable increase recorded in 
2020-2021 (Graph 3.3). In Greece, Ireland, Latvia and  Slovenia the supportive fiscal stance in 
2022 is expected to be driven by investment, both nationally and EU financed (Graph 3.2).  

Note: This expenditure aggregate is defined in primary terms and net of discretionary 
revenues. Temporary emergency measures are excluded. 
Source: European Commission 2021 autumn forecast. 

nationally 

The  growth  in  nationally  financed  current  expenditure  exceeds  the  medium-term 
potential growth rate in 2022 in all Member States, except for Spain, Malta and Slovakia 
(Graph 3.3).  In Italy, the impact of the increase in nationally financed current expenditure on 
the underlying fiscal position amounts to 1.5% of GDP. Italy has a high level of debt and had 
received a recommendation to limit the growth of nationally financed current expenditure and 
to use the RRF to finance additional investment in support of the recovery while  pursuing a 
prudent fiscal policy. The impact of the increase in nationally financed current expenditure on 
the underlying fiscal position amounts to 0.8% of GDP in Latvia and 2.2% of GDP in Lithuania. 
Latvia and Lithuania, both with a low/medium debt level, had received a recommendation to 
keep the growth of nationally financed current expenditure under control. 

All Member States are expected to preserve or broadly preserve their nationally financed 
investment expenditure in 2022,  (Graph 3.4). On the basis of the Commission 2021 autumn 
forecast, the growth in nationally financed investment exceeds potential growth in Belgium, 
Estonia, Ireland, Greece, Spain, France, Italy, Lithuania, Latvia, Malta, the Netherlands,  

18 

 
 
 
 
Austria  and  Slovenia,  contributing  to  a  supportive  fiscal  stance.    It  is  broadly  in  line  with 
growth 
in 
potential 
Luxembourg, 
Germany, 
Finland, 
and 
Slovakia,  where  nationally 
financed  investment  remain 
broadly stable.   

Public investment, 2019-2022 (%of GDP) 

Cyprus 

Graph 3.4  

RRF-financed expenditure 

Most  Member  States  have 
RRF-funded 
reported 
measures 
their  2022 
in 
DBPs21.  Many  Member 
States  have  also  reported  on 
RRF-funded  measures    well 
beyond  2022,  even  though 
this was optional. Ireland and 
Lithuania  did  not  report  the 
breakdown  of  RRF-funded 
total  capital  expenditure. 
Moreover,  the  Netherlands 
did not include any impact of 
the RRF in its DBP in the absence of an RRP.  

Note: The Netherlands did not include any RRF projections in their Draft Budgetary Plan 
in the absence of an RRP. [For the Netherlands, the Commission 2021 autumn forecast 
assumed the RRP would be submitted in 2022 and a linear extrapolation was made for 
the RRF amounts.] 

Source: European Commission 2021 autumn forecast. 

There is some degree of heterogeneity in the spending profile of RRF grants over 2020-
2022 across euro area  Member States.  Based on the Commision 2021  autumn forecast, a 
small  number  of  Member  States  (Austria,  Germany,  France,  Cyprus,  Spain,  Luxembourg, 
Malta and Italy) plan to use RRF grants to retroactively finance expenditure in 202022.  In 2021, 
the expenditure as a share of GDP financed by RRF grants is projected to remain limited in 
most Member States, the only exceptions being France, Spain, Estonia and Greece where the 
share of expenditure in  GDP is already expected to be significant. In 2022, the expenditure 
financed by RRF grants is projected to increase substantially in many Member States. It is in 
particular expected to be above 1% of GDP for Greece and Spain and above 0.7% for Italy, 
Latvia  and  Slovakia.  In  contrast,  it  is  expected  to  remain  below  0.2%  of  GDP  in  Ireland, 
Luxembourg, Germany and Austria. This reflects the size of grant allocations in the RRF as 
well as the timing of disbursements linked to the planned completion of milestones and targets. 

21  Overall,  the  completeness  of  reporting  has  improved  compared  to  the  2021  Stability  and  Convergence 
Programmes. However, a number of problems remain in the reporting of some Member States such as incorrect 
applications of accounting rules concerning RRF-related transactions or components not adding up to totals. 

22 According to Regulation (EU) 2021/241 establishing the RRF, measures started from 1 February 2020 onwards 
shall  be  eligible  for  financing  from  the  RRF  provided  that  they  comply  with  the  requirements  set  out  in  this 
Regulation. Moreover, in line  with  Eurostat’s guidance, the general neutrality rule of the EU grants recording 
exceptionally does not apply  to the eligible expenditure incurred in 2020. The corresponding revenue is to be 
recorded at a time of the approval of the RRP by the Council, i.e., in most cases in 2021. 

19 

 
 
 
                                                           
 
 
 
 
Graph 3.5  Expenditure financed by RRF grants, 2021 and 2022 (% of GDP)  

to 

finance 

High-debt  Member  States 
are using most RRF grants 
additional 
to 
investment, 
as 
recommended  in  the  2021 
CSRs.  According 
the 
Commission  2021  autumn 
high-debt 
the 
forecast, 
Member  States 
(Belgium, 
Greece, Spain, France, Italy) 
having  received  a  Council 
recommendation  to  use  the 
RRF  to  finance  additional 
investment  to  support  the 
recovery, are complying with 
the  recommendation.  One 
Member  State  (Greece)  has 
allocated  the  full  amount  of 
in  2022 
its  RRF  grants 
financing  public 
towards 
other 
investment. 
Member  States 
(Belgium, 
Spain,  France,  Italy)  have 
allocated  over  60%  of  their 
RRF grants in 2022 towards 
the financing of private and public investment. 

The 

Note: The Netherlands did not include any impact of the RRF in its  Draft Budgetary Plan 
in  the  absence  of  an  RRP.  To  allow  for  comparison  between  the  DBPs  and  the 
Commission 2021 autumn forecast, the GDP projections provided by the Commission 
2021  autumn  forecast  were  used  when  expressing  in  %  of  GDP.  Some  differences 
between  the  DBPs  and  the  Commission  2021  autumn  forecast  could  be  due  to  the 
provision of rounded data in the DBPs. 
Sources: Member States’ 2022 Draft Budgetary Plans, European Commission 2021 
Autumn  Forecast. 

Commission assessment of the 2022 Draft Budgetary Plans  

The Commission Opinions on the 2022 Draft Budgetary Plans focus on the consistency of 
the latter with the Council Recommendations of 18 June 2021. The Council recommended 
that  Member  States  with  low  debt  should  pursue  a  supportive  fiscal  stance,  including  the 
impulse provided by the RRF. Member States with high debt should use the RRF to finance 
additional investment in  support of the recovery while pursuing a prudent fiscal policy. All 
Member States should preserve nationally financed investment. At the same time, as the growth 
of  nationally  financed  current  expenditure  should  be  kept  under  control,  and  be  limited  for 
Member States with high debt, there was a recommendation to that effect to those  Member 
States where it was considered to be an issue based on the Commission’s 2021 spring forecast. 
This  will allow fiscal  measures to  create space for investment  and  maximise support to  the 
recovery  without  pre-empting  future  fiscal  trajectories  and  creating  a  permanent  burden  on 
public finances, in order to preserve prudent fiscal policies. 

The  Council  also  recommended  Member  States  to  pay  particular  attention  to  the 
composition of public finances, on both the revenue and expenditure sides of the national 
budget. The quality of budgetary measures should ensure a sustainable and inclusive recovery. 
Sustainable and growth-enhancing investment should be prioritised, in particular investment 
supporting  the  green  and  digital  transition.  Fiscal-structural  reforms  will  help  to  provide 
financing for public policy priorities and contribute to the long-term sustainability of public 

20 

 
 
 
 
 
 
finances, including, where relevant, by strengthening the coverage, adequacy and sustainability 
of health and social protection systems for all. 

Almost  all  euro-area  Member  States  submitted  their  Draft  Budgetary  Plans  by  15 
October, in line with Article 6 of Regulation (EU) No 473/2013. The only exception was 
Italy,  which  submitted  its  Plan  on  20  October.  France  submitted  an  update  of  the  Draft 
Budgetary Plan on 22 October. In the case of the Netherlands, the Draft Budgetary Plan was 
submitted by the outgoing government. As soon as a new government takes office and as a rule 
at  least  one  month  before  the  draft  budget  law  is  planned  to  be  adopted  by  the  national 
parliament,  the  authorities  are  invited  to  submit  to  the  Commission  and  the  Eurogroup  an 
updated  Plan.  The  Commission  did  not  adopt  an  Opinion  on  the  Draft  Budgetary  Plan 
submitted by Portugal, as the budget was rejected by its parliament in the meantime. On 15 
November, the Commission sent a letter inviting the Portuguese authorities to submit a new 
Draft Budgetary Plan to the Commission and the Eurogroup, in due course, and as soon as a 
government  presents  to  the  Portuguese  parliament  a  new  draft  law  on  the  State  Budget  for 
2022. The submission should take place at least one month before the new Draft Budget Law 
is planned to be adopted by the national parliament. 
The  following  is  a  summary  of  the  Commission  Opinions23,  which  are  based  on  the 
Commission 2021 autumn forecast:  

High-debt Member States (Belgium, France, Greece, Italy and Spain)  

  As  recommended  by  the  Council,  all  Member  States  use  the  RRF  to  finance 

additional investment in support of the recovery. 

  As recommended by the Council, all Member States preserve nationally financed 

investment. 

  Italy  has  been  recommended  by  the  Council  to  limit  the  growth  of  nationally 
financed current expenditure. This is not projected to be sufficiently ensured, as the 
growth  of  nationally  financed  primary  current  expenditure  (net  of  new  revenue 
measures) in 2022 is projected to provide a sizeable contribution to Italy’s overall 
supportive  fiscal  stance.  In  order  to  contribute  to  the  pursuit  of  a  prudent  fiscal 
policy,  the  Commission  invites  Italy  to  take  the  necessary  measures  within  the 
national  budgetary  process  to  limit  the  growth  of  nationally  financed  current 
expenditure. 

  For Belgium, France, Greece, Italy and Spain, given the level of their government 
debt and high sustainability challenges in the medium term before the outbreak of 
the  COVID-19  pandemic,  when  taking  supporting  budgetary  measures,  it  is 
important  to  preserve  prudent  fiscal  policy  in  order  to  ensure  sustainable  public 
finances in the medium term. 

23 The usual Staff Working Documents accompanying the Commission Opinions on the Draft Budgetary Plans 
are not published this year, taking into account the qualitative recommendations adopted by the Council and the 
continued departure from the normal budgetary requirements following the activation of the general escape clause 
of the Stability and Growth Pact. The Opinions are accompanied by a Statistical Annex, including the necessary 
information to assess Member States’ plans. 

21 

 
 
                                                           
 
Low/medium  debt  Member  States  (Austria,  Cyprus,  Estonia,  Finland,  Germany, 
Ireland,  Latvia,  Lithuania,  Luxembourg,  Malta,  the  Netherlands,  Slovenia  and 
Slovakia) 

  As recommended by the Council, all Member States, with the exception of Slovakia 
and Malta, pursue a supportive fiscal stance, including the impulse provided by the 
RRF.  Slovakia’s  restrictive  fiscal  stance  occurs  against  the  background  of  high 
output  growth  and  emerging  capacity  constraints.  Malta’s  neutral  stance  reflects 
mainly  very  high  estimated  potential  growth,  while  public  investment  reaches  a 
historically high level. This is broadly as recommended by the Council. 

  All  Member  States  plan  to  use  the  RRF  to  support  their  recovery,  while  the 

Netherlands has not yet submitted its Recovery and Resilience Plan.  

  As recommended by the Council, all Member States preserve or broadly preserve 

nationally financed investment. 

  Latvia  and  Lithuania  have  been  recommended  by  the  Council  to  control  the 
growth  of  nationally  financed  current  expenditure.  This  is  not  projected  to  be 
sufficiently  ensured,  as  the  growth  of  nationally  financed  primary  current 
expenditure (net of new revenue measures) in 2022 is projected to provide a sizeable 
contribution to their overall supportive fiscal stance.   

Overall, the Draft Budgetary Plans include measures that go in the direction of strengthening 
the composition of public finances and contributing to a sustainable and inclusive recovery, 
including  through  growth-enhancing  investment,  notably  supporting  the  green  and  digital 
transition.  A  complete  assessment  of  the  fiscal-structural  reforms  implemented  by  Member 
States will be done in the context of the assessment of the implementation of the Recovery and 
Resilience Plans and the 2022 Country Report.   

Taking  into  account  the  strength  of  their  recovery,  Member  States  are  invited  to  regularly 
review the use, effectiveness and adequacy of the support measures and stand ready to adapt 
them as necessary to changing circumstances. 

22 

 
 
 
ANNEX I: Country-specific assessment of 2022 Draft Budgetary Plans  

In 2022, based on the Commission’s forecast and including the information incorporated in 
Austria’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive,  as  recommended  by  the 
Council.  Austria  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment. As recommended by the 
Council, Austria plans to preserve nationally financed investment. The Commission recalls the 
importance  of  the  composition  of  public  finances  and  the  quality  of  budgetary  measures, 
including  through  growth-enhancing  investment,  notably  supporting  the  green  and  digital 
transition.  Taking  into  account  the  strength  of  the  recovery,  Austria  is  invited  to  regularly 
review the use, effectiveness and adequacy of the support measures and stand ready to adapt 
them as necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Belgium’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive.  As  recommended  by  the 
Council,  Belgium  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment. As recommended by the 
Council,  Belgium  also  plans  to  preserve  nationally  financed  investment.  Given  the  level  of 
Belgium’s government debt and high sustainability challenges in the medium term before the 
outbreak  of  the  COVID-19  pandemic,  when  taking  supportive  budgetary  measures,  it  is 
important to preserve prudent fiscal policy in order to ensure sustainable public finances in the 
medium term. The Commission recalls the importance of the composition of public finances 
and  the  quality  of  budgetary  measures,  including  through  growth-enhancing  investment, 
notably  supporting  the  green  and  digital  transition.  The  measures  announced  in  the  Draft 
Budgetary Plan are in line with the recommendation, while small in size. Taking into account 
the strength of the recovery, Belgium is invited to regularly review the use, effectiveness and 
adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as  necessary  to  changing 
circumstances. 

In 2022, based on the Commission’s forecast and  including the information incorporated in 
Cyprus’  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive,  as  recommended  by  the 
Council.  Cyprus  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment. Broadly as recommended 
by  the  Council,  Cyprus  plans  to  almost  preserve  nationally  financed  investment.  The 
Commission recalls the importance of the composition of public finances and the quality of 
budgetary measures, including through growth-enhancing investment, notably supporting the 
green and digital transition. Investments and reforms funded by the Recovery and Resilience 
Facility  are  expected  to  fulfil  these  objectives  and  contribute  to  support  the  long-term 
sustainability of public finances. Taking into account the strength of the recovery, Cyprus is 
invited to regularly review the use, effectiveness and adequacy of the support measures and 
stand ready to adapt them as necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Estonia’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive,  as  recommended  by  the 
Council.  Estonia  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment.  As recommended by the 

23 

 
 
Council, Estonia plans to preserve nationally financed investment. The Commission recalls the 
importance  of  the  composition  of  public  finances  and  the  quality  of  budgetary  measures, 
including  through  growth-enhancing  investment,  notably  supporting  the  green  and  digital 
transition. Some of the measures included in the Draft Budgetary Plan relate to information 
technology  and  green  investments  and  are  thus  expected  to  contribute  to  addressing  the 
recommendation.  Taking  into  account  the  strength  of  the  recovery,  Estonia  is  invited  to 
regularly review the use, effectiveness and adequacy of the support measures and stand ready 
to adapt them as necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Finland’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive,  as  recommended  by  the 
Council.  Finland  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment. As recommended by the 
Council, Finland plans to preserve nationally financed investment. The Commission recalls the 
importance  of  the  composition  of  public  finances  and  the  quality  of  budgetary  measures, 
including  through  growth-enhancing  investment,  notably  supporting  the  green  and  digital 
transition. Measures related to the implementation of the government programme and of the 
Recovery  and  Resilience  Plan  contained  in  Finland’s  Draft  Budgetary  Plan  contribute  to 
fulfilling  this  Council  recommendation.  Taking  into  account  the  strength  of  the  recovery, 
Finland  is  invited  to  regularly  review  the  use,  effectiveness  and  adequacy  of  the  support 
measures and stand ready to adapt them as necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
France’s updated Draft Budgetary Plan, the fiscal stance, including the impulse provided by 
the Recovery and Resilience Facility, is projected to be supportive. As recommended by the 
Council,  France  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment. As recommended by the 
Council,  France  also  plans  to  preserve  nationally  financed  investment.  Given  the  level  of 
France’s government debt and high sustainability challenges in the medium term before the 
outbreak  of  the  COVID-19  pandemic,  when  taking  supportive  budgetary  measures,  it  is 
important to preserve prudent fiscal policy in order to ensure sustainable public finances in the 
medium term. The Commission recalls the importance of the composition of public finances 
and  the  quality  of  budgetary  measures,  including  through  growth-enhancing  investment, 
notably supporting the green and digital transition. In this regard, measures contained in the 
French Draft Budgetary Plan contribute to fulfilling the Council recommendation of ensuring 
a sustainable and inclusive recovery, while prioritising the green and digital transition, as well 
as the adequacy and sustainability of health and social protection systems for all. Taking into 
account the strength of the recovery, France is invited to regularly review the use, effectiveness 
and adequacy of the support measures and stand ready to adapt them as necessary to changing 
circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Germany’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive,  as  recommended  by  the 
Council. Germany plans to provide continued support to the recovery by making use of the 
Recovery and Resilience Facility to finance additional investment.  As recommended by the 
Council, Germany plans to preserve nationally financed investment. The Commission recalls 
the importance of the composition of public finances and the quality of budgetary measures, 
including  through  growth-enhancing  investment,  notably  supporting  the  green  and  digital 

24 

 
 
transition.  These  objectives  are  fulfilled  by  the  measures  underpinning  the  Draft  Budgetary 
Plan. Taking into account the strength of the recovery, Germany is invited to regularly review 
the use, effectiveness and adequacy of the support measures and stand ready to adapt them as 
necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Greece’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive.  As  recommended  by  the 
Council,  Greece  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment.  As recommended by the 
Council,  Greece  also  plans  to  preserve  nationally  financed  investment.  Given  the  level  of 
Greece’s government debt and high sustainability challenges in the medium term before the 
outbreak  of  the  COVID-19  pandemic,  when  taking  supportive  budgetary  measures,  it  is 
important to preserve prudent fiscal policy in order to ensure sustainable public finances in the 
medium term. The Commission recalls the importance of the composition of public finances 
and  the  quality  of  budgetary  measures,  including  through  growth-enhancing  investment, 
notably supporting the green and digital transition. Most of the emergency support measures 
will be phased out in 2021 and the ones that are included in the 2022 Draft Budgetary Plan aim 
at  stimulating  aggregate  demand  and  employment,  which  will  support  a  sustainable  and 
inclusive  recovery.  Furthermore,  the  investments  and  reforms  funded  by  the  Recovery  and 
Resilience  Facility  will  contribute  significantly  to  the  green  and  digital  transition.  Finally, 
undergoing fiscal structural reforms such as the spending reviews, the performance budgeting 
reform, the completion of functional classification and the development of a green budgeting 
framework are expected to improve the efficiency of public finances. Taking into account the 
strength  of  the  recovery,  Greece  is  invited  to  regularly  review  the  use,  effectiveness  and 
adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as  necessary  to  changing 
circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Ireland’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive,  as  recommended  by  the 
Council.  Ireland  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment.  As recommended by the 
Council, Ireland plans to preserve nationally financed investment. The Commission recalls the 
importance  of  the  composition  of  public  finances  and  the  quality  of  budgetary  measures, 
including  through  growth-enhancing  investment,  notably  supporting  the  green  and  digital 
transition. Measures included in  the National  Development  Plan, such as residential  retrofit 
and the National Broadband Plan, are in line with supporting the green and digital transition. 
Taking into account the strength of the recovery, Ireland is invited to regularly review the use, 
effectiveness and adequacy of the support measures and stand ready to adapt them as necessary 
to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Italy’s Draft Budgetary Plan, the fiscal stance, including the impulse provided by the Recovery 
and Resilience Facility, is projected to be supportive. As recommended by the Council, Italy 
plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the  Recovery  and 
Resilience Facility to finance additional investment.  As recommended by the Council,  Italy 
also plans to preserve nationally financed investment. At the same time, Italy does not plan to 
sufficiently limit the growth of nationally financed current expenditure. In order to contribute 
to  the pursuit  of a prudent  fiscal  policy, the Commission  invites  Italy to take the necessary 

25 

 
 
measures  within  the  national  budgetary  process  to  limit  the  growth  of  nationally  financed 
current  expenditure.  Given  the  level  of  Italy’s  government  debt  and  high  sustainability 
challenges in the medium term before the outbreak of the COVID-19 pandemic, when taking 
supportive  budgetary  measures,  it  is  important  to  preserve  prudent  fiscal  policy  in  order  to 
ensure sustainable public finances in the medium term. The Commission recalls the importance 
of the composition of public finances and the quality of budgetary measures, including through 
growth-enhancing  investment,  notably  supporting  the  green  and  digital  transition.  In  this 
regard,  measures  contained  in  the  Italian  Draft  Budgetary  Plan  contribute  to  fulfilling  the 
Council recommendation of ensuring a sustainable and inclusive recovery, while prioritising 
the green and digital transition. Taking into account the strength of the recovery, Italy is invited 
to regularly review the use, effectiveness and adequacy of the support measures and stand ready 
to adapt them as necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Latvia’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive,  as  recommended  by  the 
Council.  Latvia  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment. As recommended by the 
Council, Latvia plans to preserve nationally financed investment. At the same time, Latvia does 
not sufficiently keep under control the growth of nationally financed current expenditure. The 
Commission recalls the importance of the composition of public finances and the quality of 
budgetary measures, including through growth-enhancing investment, notably supporting the 
green and digital transition. The measures included in Latvia’s Recovery and Resilience plan 
and which are part of the Draft Budgetary Plan are aimed at addressing the investment needs 
of the green and digital transitions. Taking into account the strength of the recovery, Latvia is 
invited to regularly review the use, effectiveness and adequacy of the support measures and 
stand ready to adapt them as necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Lithuania’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive,  as  recommended  by  the 
Council. Lithuania plans to provide continued support to the recovery by making use of the 
Recovery and Resilience Facility to finance additional investment. As recommended by the 
Council,  Lithuania  plans  to  preserve  nationally  financed  investment.  At  the  same  time, 
Lithuania does not sufficiently keep under control the growth of nationally financed current 
expenditure. The Commission recalls the importance of the composition of public finances and 
the quality of budgetary measures, including through growth-enhancing investment, notably 
supporting  the  green  and  digital  transition.  Measures  included  in  Lithuania’s  Recovery  and 
Resilience  Plan  and  Lithuania’s  Draft  Budgetary  Plan  are  set  to  contribute  to  fulfilling  this 
recommendation.  Taking  into  account  the  strength  of  the  recovery,  Lithuania  is  invited  to 
regularly review the use, effectiveness and adequacy of the support measures and stand ready 
to adapt them as necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Luxembourg’s Draft Budgetary Plan, the fiscal stance, including the impulse provided by the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive,  as  recommended  by  the 
Council. Luxembourg plans to provide continued support to the recovery by making use of the 
Recovery and Resilience Facility to finance additional investment. As  recommended by the 
Council,  Luxembourg  plans  to  preserve  nationally  financed  investment.  The  Commission 
recalls  the  importance  of  the  composition  of  public  finances  and  the  quality  of  budgetary 

26 

 
 
measures, including through growth-enhancing investment, notably supporting the green and 
digital transition. In this regard, measures contained in the Luxembourg Draft Budgetary Plan 
contribute to  fulfilling the Council recommendation of  ensuring a sustainable and inclusive 
recovery,  while  prioritising  the  green  and  digital  transition,  as  well  as  the  adequacy  and 
sustainability of health and social protection systems for all. Taking into account the strength 
of the recovery, Luxembourg is invited to regularly review the use, effectiveness and adequacy 
of the support measures and stand ready to adapt them as necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Malta’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery and Resilience Facility, is projected to be neutral in a context of very high estimated 
potential  growth,  while  public  investment  reaches  a  historically  high  level,  broadly  as 
recommended by the Council. Malta plans to  provide continued support to the recovery by 
making  use  of  the  Recovery  and  Resilience  Facility  to  finance  additional  investment.  As 
recommended by the Council, Malta also plans to preserve nationally financed investment. The 
Commission recalls the importance of the composition of public finances and the quality of 
budgetary measures, including through growth-enhancing investment, notably supporting the 
green and digital transition. The increase in public investment planned in the Draft Budgetary 
Plan  of  Malta  is  expected  to  support  the  green  and  digital  transition  and  increase  growth 
potential,  while  the  increase  in  pension  entitlements,  although  limited,  may  increase  the 
pressure on the sustainability of the pension system. Taking into account the strength of the 
recovery, Malta is invited to regularly review the use, effectiveness and adequacy of the support 
measures and stand ready to adapt them as necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in the 
Netherlands’ Draft Budgetary Plan, the fiscal stance, including the assumed impulse provided 
by the Recovery and Resilience Facility, is projected to be supportive, as recommended by the 
Council. The Netherlands is assumed to provide continued support to the recovery by making 
use of the Recovery and Resilience Facility to finance additional investment. As recommended 
by  the  Council,  the  Netherlands  plans  to  preserve  nationally  financed  investment.  The 
Commission recalls the importance of the composition of public finances and the quality of 
budgetary measures, including through growth-enhancing investment, notably supporting the 
green and digital transition. Measures included in the Netherlands’ Draft Budgetary Plan are 
set  to  contribute  to  fulfilling  this  recommendation.  Taking  into  account  the  strength  of  the 
recovery, the Netherlands is invited to regularly review the use, effectiveness and adequacy of 
the support measures and stand ready to adapt them as necessary to changing circumstances. 
As soon as a new government takes office and as a rule at least one month before the draft 
budget law is planned to be adopted by the national parliament, the authorities are invited to 
submit to the Commission and the Eurogroup an updated Draft Budgetary Plan. 

In 2022, based on the Commission’s forecast and including the information  incorporated in 
Slovakia’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery and Resilience Facility, is projected to be contractionary in a context of high output 
growth and emerging capacity constraints  in 2022, broadly as recommended by the Council. 
Slovakia plans to provide continued support to the recovery by making use of the Recovery 
and  Resilience  Facility  to  finance  additional  investment.  Broadly  as  recommended  by  the 
Council, Slovakia plans to almost preserve nationally financed investment. The Commission 
recalls  the  importance  of  the  composition  of  public  finances  and  the  quality  of  budgetary 
measures, including through growth-enhancing investment, notably supporting the green and 
digital  transition.  The measures announced in  the Draft  Budgetary Plan  are in  line with  the 

27 

 
 
recommendation,  while  small  in  size.  Taking  into  account  the  strength  of  the  recovery, 
Slovakia  is  invited  to  regularly  review  the  use,  effectiveness  and  adequacy  of  the  support 
measures and stand ready to adapt them as necessary to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Slovenia’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery  and  Resilience  Facility,  is  projected  to  be  supportive,  as  recommended  by  the 
Council.  Slovenia plans to  provide continued support to  the recovery by  making use of the 
Recovery and Resilience Facility to finance additional investment.  As recommended by the 
Council, Slovenia plans to preserve nationally financed investment. The Commission recalls 
the importance of the composition of public finances and the quality of budgetary measures, 
including  through  growth-enhancing  investment,  notably  supporting  the  green  and  digital 
transition.  While  most  of  the  measures  are  addressing  the  Council  Recommendation,  the 
adopted  tax  reform  may  put  a  strain  on  the  sustainable  and  inclusive  recovery.  Taking  into 
account  the  strength  of  the  recovery,  Slovenia  is  invited  to  regularly  review  the  use, 
effectiveness and adequacy of the support measures and stand ready to adapt them as necessary 
to changing circumstances. 

In 2022, based on the Commission’s forecast and including the information incorporated in 
Spain’s  Draft  Budgetary  Plan,  the  fiscal  stance,  including  the  impulse  provided  by  the 
Recovery and Resilience Facility, is projected to be contractionary. As recommended by the 
Council,  Spain  plans  to  provide  continued  support  to  the  recovery  by  making  use  of  the 
Recovery and Resilience Facility to finance additional investment.  As recommended by the 
Council, Spain also plans to preserve nationally financed investment. Given the level of Spain’s 
government debt and high sustainability challenges in the medium term before the outbreak of 
the  COVID-19  pandemic,  when  taking  supportive  budgetary  measures,  it  is  important  to 
preserve  prudent  fiscal  policy  in  order  to  ensure  sustainable  public  finances  in  the  medium 
term. The Commission recalls the importance of the composition of public finances and the 
quality  of  budgetary  measures,  including  through  growth-enhancing  investment,  notably 
supporting the green and digital transition. In this regard, the Draft Budgetary Plan contains 
detailed  measures  that  go  in  that  direction  and  foster  the  digital  transition,  increasing 
connectivity  and  reinforcing  cybersecurity  through  different  action  plans  as  the  Plan  for 
Connectivity and Digital Infrastructures for Society. The green transition is also covered by the 
new Law on Climate Change and Energy Transition and the National Hydrological Plan 2021-
2027. There will also be  increased public support for R&D and  knowledge transfer through 
the Spanish Research Agency and Red Cervera, among other actions. Taking into account the 
strength  of  the  recovery,  Spain  is  invited  to  regularly  review  the  use,  effectiveness  and 
adequacy  of  the  support  measures  and  stand  ready  to  adapt  them  as  necessary  to  changing 
circumstances. 

28 

 
 
 
 
ANNEX  II:  The  methodology  and  assumptions  underpinning  the  Commission 
2021 autumn  forecast 

According to Article 7(4) of Regulation (EU) No 473/2013, “the methodology and assumptions 
of  the  most  recent  economic  forecasts  of  the  Commission  services  for  each  Member  State, 
including estimates of the impact of aggregated budgetary measures on economic growth, shall 
be  annexed  to  the  overall  assessment”.  The  assumptions  underlying  the  Commission  2021 
autumn forecast, which is produced independently by Commission staff, are explained in the 
forecast document itself.24 

Budgetary data up to 2020 are based on data notified by Member States to the Commission 
before 1 October 2021 and validated by Eurostat on 21 October 2021. Eurostat has made no 
amendments to the data reported by Member States during the autumn 2021 notification round. 
Eurostat withdrew its earlier reservation on the quality of the data reported by Luxembourg for 
the  year  2020.  The  Luxembourgish  statistical  authorities  have  provided  the  missing 
information on the tax revenue deferred in the context of the COVID-19 pandemic. 

For the forecast, measures in support of financial stability have been recorded in line with the 
Eurostat  Decision  of  15  July  2009.25  Unless  reported  otherwise  by  the  Member  State 
concerned, capital injections known in sufficient detail have been included in the forecast as 
financial  transactions,  i.e.  increasing  the  debt,  but  not  the  deficit.  State  guarantees  on  bank 
liabilities and deposits are not included as government expenditure, unless there is evidence 
that they have been called on at the time the forecast was finalised. However, loans granted to 
banks by the government, or by other entities classified in the government sector, usually add 
to government debt. 

For 2022, budgets adopted or presented to national parliaments and all other measures known 
in sufficient detail are taken into consideration. In particular, all the information included in 
the Draft Budgetary Plans submitted by mid-October is reflected in the autumn forecast. For 
2023,  the  ‘no-policy-change’  assumption  used  in  the  forecasts  implies  the  extrapolation  of 
revenue  and  expenditure  trends  and  the  inclusion  of  measures  that  are  known  in  sufficient 
detail. 

European  aggregates  for  general  government  debt  in  the  forecast  years  2021-2023  are 
published  on  a  non-consolidated  basis  (i.e.  not  corrected  for  intergovernmental  loans).  To 
ensure  consistency  in  the  time  series,  historical  data  are  also  published  on  the  same  basis. 
General  government  debt  projections  for  individual  Member  States  in  2021-23  include  the 
impact  of  guarantees  to  the  European  Financial  Stability  Facility,  bilateral  loans  to  other 
Member States, and the participation in the capital of the European Stability Mechanism as 
planned on the cut-off date of the forecast.26 

According to the Commission 2021 autumn forecast, the budgetary measures reported in the 
Draft Budgetary Plans for 2022 are deficit-increasing on aggregate (impact of around -0.3% of 

24   Methodological  assumptions  underlying  the  Commission  2021  autumn    economic  forecast,  available  at: 

https://ec.europa.eu/info/business-economy-euro/economic-performance-and-forecasts/economic-
forecasts/autumn-2021-economic-forecast_en 

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

-final-.pdf. 

26   In line with the Eurostat decision of 27 January 2011 on the statistical recording of operations undertaken by 
the EFSF, available at: http://ec.europa.eu/eurostat/documents/2995521/5034386/2-27012011-AP-EN.PDF.  
29 

 
 
                                                           
GDP),  driven  broadly  equaly  by  expenditure-increasing  and  revenue-decreasing  measures. 
Overall, the mechanical impact on GDP growth in the short-term is projected to be positive. 

It is important to be prudent in interpreting that estimate: 

  Regulation (EU) No 473/2013 aims at evaluating the effect of the measures taken in the 
Draft Budgetary Plans. Measures taken and having entered into force before the Draft 
Budgetary Plans are not included in the assessment even if they can have an additional 
impact on the public finance projections for 2022. 

  The impact of reported measures is expressed against a baseline at unchanged policy. 
The fiscal policy orientation of that baseline is not necessarily neutral. For example, the 
trend increase of some expenditure items could be above or below potential growth, 
there  might  be  an  additional  impact  of  earlier  measures  in  the  baseline  or  measures 
taken earlier might cease in 2022.  

The budgetary projections of some Member States include measures that are expected to be 
financed  under  Next  Generation  EU/  RRF.  The  Commission  2021  autumn  forecast  records 
these measures as deficit-increasing, though they may eventually be financed by RRF. As a 
result, projected deficits of those Member States might be overestimated.  

30 

 
 
 
 
ANNEX III: Debt sustainability analysis and sensitivity analysis  

This  Annex  presents  a  sensitivity  analysis  of  public  debt  developments  to  possible 
macroeconomic shocks, as required by Article 7 of Regulation (EU) No 473/2013. Stochastic 
debt  projections  are  used  to  assess  the  possible  impact  on  public  debt  dynamics  of  risks  to 
nominal  GDP  growth,  financial  market  developments  and  fiscal  shocks  affecting  the 
government budgetary position (27). 

The stochastic projections account for macroeconomic uncertainty around two ‘central’ debt 
projection  scenarios  in  2022-2026:  the  Commission  2021  autumn  forecast  scenario  and  the 
2022 draft budgetary plans’ (DBP) scenario. In both cases, the usual ‘no-fiscal policy change’ 
assumption is made beyond the forecast horizon (28). 

Shocks are applied to the macroeconomic conditions assumed in the central scenario to obtain 
the distribution of possible debt paths (the ‘cone’ in the fan charts shown in Graph III.1). The 
cone corresponds to a wide set of possible macroeconomic conditions, with up to 2000 shocks 
simulated on growth, interest rates and the primary balance. The size and correlation of these 
shocks reflect historical volatility and relationships between these variables (29). Therefore, the 
fan charts provide probabilistic information on euro area debt dynamics, taking into account 
the  possible  occurrence  of  shocks  to  growth,  interest  rates  and  the  primary  balance  of  a 
magnitude and correlation mirroring the past developments. 

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

For 2022, the simulations suggest that, with an 80% probability, the euro area debt ratio will 
be between 89% and 107% of GDP under the Commission scenario, and between 90% and 
108% of GDP under the DBP scenario. By 2026, there would be a 50% probability of a debt 
ratio higher than around 95% of GDP under the Commission scenario and 99% of GDP under 
the DBP scenario.  

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

27   The methodology for stochastic public debt projections used here is presented in the European Commission's 
Debt Sustainability Monitor 2019, Annex A7, and in Berti K. (2013), "Stochastic public debt projections using 
the historical variance-covariance matrix approach for EU countries", European Economy Economic Paper 
No. 480. 

28   The  Commission  2021  autumn  forecast  incorporates  fiscal  policy  measures  that  were  adopted  or  at  least 
credibility announced and information that was available as of 25 October 2021. Beyond 2023 (the last forecast 
year), the structural primary balance is only modified by the projected (net) costs of ageing.  

29   Shocks are assumed to follow a joint normal distribution. 

31 

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

32 

607080901001101202020202120222023202420252026(% of GDP)Commission scenariop10p10_p20p20_p40p40_p60p60_p80p80_p90p50Central scenario607080901001101202020202120222023202420252026(% of GDP)DBP scenariop10p10_p20p20_p40p40_p60p60_p80p80_p90p50Central scenario 
 
 
 
 
 
 
 
 
 
 
ANNEX IV: Tables 

Table IV.1: Real GDP growth (%) according to the Stability Programmes (SP), the 
Draft Budgetary Plans (DBP) and the Commission 2021 autumn forecast (COM) 

33 

CountrySPDBPCOMSPDBPCOMBE4.15.76.03.53.02.6DE33.52.72.63.64.6EE2.59.59.04.84.03.7IE4.515.614.65.05.05.1EL3.66.17.16.24.55.2ES6.56.54.67.07.05.5FR5.06.36.54.04.03.8IT4.56.06.24.84.74.3CY3.65.55.43.84.04.2LV3.03.74.74.55.05.0LT2.64.35.03.24.03.6LU4.06.05.84.03.53.7MT3.84.85.06.86.56.2NL2.23.94.03.53.53.3AT1.54.44.44.74.84.9SI4.60.06.44.44.74.2SK3.33.73.86.34.25.3FI2.63.33.42.52.92.8EA4.05.45.04.14.34.320212022 
 
 
 
 
 
Table IV.2: Headline balance (% of GDP) according to the Stability Programmes (SP), 
the Draft Budgetary Plans (DBP) and the Commission 2021 autumn forecast (COM) 

34 

 
 
 
 
 
 
 
Table IV.3: Debt-to-GDP ratio (% of GDP) according to the Stability Programmes (SP), 
the Draft Budgetary Plans (DBP) and the Commission 2021 autumn forecast (COM) 

35