COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN CENTRAL BANK on the 2023 Draft Budgetary Plans: Overall Assessment
Date: 2022-11-22
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Croatia, budget deficit, budget estimate, draft budget, economic forecasting, euro area, public debt, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 22.11.2022  COM(2022) 900 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN CENTRAL BANK on the 2023 Draft Budgetary Plans: Overall Assessment  
 
 
Executive summary 

This Communication summarises the Commission’s assessment of the 2023 Draft Budgetary Plans 
submitted by euro area Member States as well as Croatia, 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 considers the macroeconomic shock related to Russia’s invasion of 
Ukraine, as well as its long-term implications for the EU’s energy security needs and the continued 
application of the general escape clause of the Stability and Growth Pact in 2023. The assessment is 
based on the fiscal policy recommendations adopted by the Council on 12 July 2022. This guidance 
can be summarised as follows. For 2023, Member States with high debt should ensure a prudent 
fiscal policy, in particular by limiting the growth of nationally financed primary current expenditure 
below medium-term potential output growth. Member States with low/medium debt should ensure 
that the growth of nationally financed primary current expenditure is in line with an overall neutral 
policy stance. In both cases, the assessment of compliance with the fiscal guidance should take into 
account continued temporary and targeted support to households and firms most vulnerable to energy 
price hikes and to people fleeing Ukraine. All Member States were asked to stand ready to adjust 
current spending to the evolving situation. They were also recommended to expand public investment 
for the green and digital transitions, and for energy security taking into account the REPowerEU 
initiative, including by making use of the Recovery and Resilience Facility (RRF) and other Union 
funds. 

The  2023  Draft  Budgetary  Plans and  the assessment of the  fiscal  stance for the  euro  area can  be 
summarised as follows:  

1.  According to the Commission 2022 autumn forecast, economic growth is projected to attain 
a  meagre,  but  still  positive,  0.3%  in  the  euro  area  in  2023,  amid  high  inflation  and  the 
normalisation of fiscal and monetary policies. The Draft Budgetary Plans tend to have more 
favourable macroeconomic scenarios. 

2.  In 2022, government deficits have continued declining substantially from the peaks reached 
in 2020 (7% of GDP in the euro area), due to the strong economic recovery and the phasing 
out of COVID-19 temporary emergency measures. Nonetheless, in 2022, deficits are set to 
be above the 2019 pre-pandemic levels in all euro area Member States (3.5% of GDP for the 
euro  area).  This  results  from  residual  pandemic-related  temporary  measures,  recovery 
measures, other non-temporary expansionary measures and from the new measures adopted 
to mitigate the impact of high energy prices. The net budgetary cost of the latter is estimated 
at 1.3% of GDP. Only less than 30% of these measures are targeted. Roughly two-thirds of 
the  energy  measures  are  price  measures,  which  may  reduce  incentives  to  lower  energy 
consumption and increase energy efficiency.  The deficit is expected to stay above 3% of 
GDP in ten euro area Member States in 2022. 

3.  In 2023, while the Draft Budgetary Plans point to a further deficit decrease in the euro area, 
to 3.2% of GDP, the Commission forecast projects an increase to 3.7%. This difference also 
reflects a timing issue, as some Plans were prepared well before the Commission forecast.  

4.  The net budgetary cost of energy measures for 2023 is currently forecast at 0.9% of GDP in 
the euro area. This projection is largely driven by the significant full-year policy packages 
that were announced by a few large Member States. At the same time, some Member States 
have  not  yet  announced  any  energy  measures  for  2023  or  their  measures  have  been 
announced as expiring in early 2023. If the already announced energy measures were to be 
kept in place for the full year, their net cost could increase by approximately 1% of GDP. 

5.  The debt-to-GDP ratio is expected to continue declining in the euro area to around 92% in 
2023  (against  99%  in  2020),  according  to  both  the  Draft  Budgetary  Plans  and  the 

1 

 
 
 
Commission forecast. In the near term, the high nominal growth that results from the high 
inflation is supporting the decline in the debt ratio. The interest-growth differential becomes 
more favourable, especially in high-debt Member States, as higher interest rates feed into 
higher interest expenditure only gradually due to the long maturity of public debts. In 2023, 
six euro area Member States are projected to continue to have a debt ratio above 100% of 
GDP (Belgium, Greece, Spain, France, Italy and Portugal), with a further increase projected 
only for Belgium. 

6.  The euro area fiscal stance is projected to remain clearly expansionary in 2022, by around 
2¼% of GDP, following an expansionary policy in 2020 (¼ % of GDP) and 2021 (1¼% of 
GDP). The fiscal stance is measured as the change in net primary expenditure relative to 
medium-term  potential  growth.  It  includes  all  energy-related  measures  that  have  been 
announced by the euro area Member States but excludes COVID-19 temporary emergency 
measures. Most of this expansionary stance (close to 2 pps of GDP) is due to the increase in 
net  primary  current  expenditure,  two-thirds  of  which  reflecting  the  above-mentioned 
measures to mitigate the impact of high energy prices.  

7.  Further support to the recovery and the green and digital transitions is expected in 2022 from 
nationally financed investment and expenditure financed by RRF grants and other EU funds 
(around ¼ pps of GDP).  

8.  For  2023,  the  euro  area  fiscal  stance  is  projected  to  be  broadly  neutral,  following  a 
cumulative fiscal expansion of 3¾% of GDP in the 2020-2022 period. Net primary current 
expenditure is  set to  provide  a  slightly  contractionary  contribution to  the  euro area fiscal 
stance in 2023, due to the lower net impact of energy-related measures compared to 2022. 

9.  Nationally financed investment and expenditure financed by RRF grants and other EU funds 
are  set  to  provide  further  support  to  the  euro  area  growth  in  2023  (by  ¼  pps  of  GDP), 
contributing to the green and digital transitions and energy security. 

10.  The projected 2023 euro area fiscal stance, as well as the underlying developments of net 
primary  current  expenditure  and  of  investment  are  broadly  in  line  with  the  Council 
recommendations of 12 July 2022 and the Eurogroup statement on the fiscal policy response 
to high energy prices and inflationary pressures of 3 October2022. The latter statement called 
for refraining from policies that would add to the inflationary pressures. However, given the 
uncertainty regarding the development of energy prices and the absence of information on 
the possible prolongation of energy measures into 2023 for most Member States, there is a 
risk that the fiscal stance may eventually turn more expansionary than currently projected 

The  Commission  Opinions  on  the  2023  Draft  Budgetary  Plans  focus on  the consistency  with the 
Council Recommendations of 12 July 2022. The Commission is not publishing an Opinion on the 
no-policy change 2023 Draft Budgetary Plan for Italy that was submitted by the outgoing government 
on 10 October. Instead, the Commission will publish in due course an opinion on the updated Draft 
Budgetary Plan for 2023 that the new government is expected to submit shortly. The following is a 
summary of the Commission Opinions, which are based on the Commission 2022 autumn forecast: 

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

  For France, Greece and Spain, the growth of nationally financed primary current expenditure 
is  projected  to  be  below  the  medium-term  potential  output  growth,  taking  into  account 
temporary  and  targeted  support  to  households  and  firms  most  vulnerable  to  energy  price 
hikes and the cost to assist people fleeing Ukraine, as recommended by the Council. That is 
not  the  case  for  Belgium,  where  the  growth  of  nationally  financed  current  expenditure 
exceeds potential growth, taking into account temporary and targeted support to households 
and firms most vulnerable to energy price hikes and to people fleeing Ukraine. For Portugal, 
the  growth  of  nationally  financed  current  expenditure  is  projected  to  be  close  to  the 

2 

 
 
 
medium-term  potential  output  growth,  assuming  the  planned  reduction  in  measures  in 
response to high energy prices, including in temporary and targeted support to vulnerable 
households and firms.   

  All Member States plan to finance public investment for the green and digital transitions and 
for  energy  security,  including  by  making  use  of  the  RRF  and  other  EU  funds,  as 
recommended by the Council. Total public investment as a percentage of GDP is set to either 
increase or remain stable in 2023 with respect to 2022 in all Member States but France and 
Greece. Belgium, France, Greece, Portugal and Spain plan to preserve nationally financed 
investment, as it is projected to increase or remain stable from 2022 to 2023. The contribution 
of  expenditure  financed  by  RRF  grants  and  EU  funds  to  the  overall  fiscal  stance  is 
expansionary or neutral in all Member States, except in France and Greece.  

  Overall, the Commission is of the Opinion that the Draft Budgetary Plans for France, Greece 
and Spain are in line with the fiscal guidance contained in the Council Recommendation of 
12 July 2022, while that of Belgium is partly in line with the Recommendation, and that of 
Portugal risks being only partly in line with the Recommendation. 

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

  The overall fiscal policy stance in 2023 varies across Member States:  

o  Contractionary (between +0.5% and +2.3% of GDP – by convention, a negative sign 

indicates an expansionary stance): Latvia, Ireland, Cyprus and Malta  

o  Broadly neutral (between -0.1% and -0.2% of GDP): Croatia, Austria and Finland  

o  Expansionary  (between  -0.4%  and  -2.6%  of  GDP):  Lithuania,  Germany,  Estonia, 

Luxembourg, the Netherlands, Slovenia and Slovakia  

  The  contribution  of  their  nationally  financed  current  expenditure  (net  of  new  revenue 

measures) to the overall fiscal stance in 2023 also varies across Member States:  

o  Contractionary (between +0.4 and +1.7 percentage points): Croatia, Latvia, Ireland, 

Cyprus and Malta  

o  Broadly neutral (around zero percentage points): Finland and the Netherlands 

o  Expansionary  (between  -0.3%  and  -1.7  percentage  points):  Austria,  Lithuania, 
Germany, Estonia, Luxembourg, Slovenia and Slovakia. In all cases, this is not the 
result of temporary and targeted support to households and firms most vulnerable to 
energy price hikes and to people fleeing Ukraine.  

  All Member States plan to finance public investment for the green and digital transitions and 
for  energy  security,  including  by  making  use  of  the  RRF  and  other  EU  funds,  as 
recommended by the Council. Total public investment as a percentage of GDP is set to either 
increase  or  remain  stable  in  2023  with  respect  to  2022  in  all  low/medium  debt  Member 
States. All Member States are planning to preserve nationally financed investment, with the 
exception of Cyprus, Latvia and Malta where it is projected to decrease from 2022 to 2023. 
The contribution of expenditure financed by RRF grants and EU funds to the overall fiscal 
stance is expansionary or neutral in all Member States, except Germany.  

  Overall,  the  Commission  is  of  the  Opinion  that  the  Draft  Budgetary  Plans  for  Croatia, 
Cyprus, Finland, Ireland, Latvia and Malta are in line with the fiscal guidance contained in 
the  Council  Recommendation  of  12  July  2022.  The  Draft  Budgetary  Plans  of  Austria, 
Lithuania,  Germany,  Estonia,  Luxembourg,  the  Netherlands,  Slovenia  and  Slovakia  are 
partly in line with the Recommendation. 

3 

 
 
 
While Member States rapidly deployed energy measures as part of the emergency policy response to 
the exceptional energy price hikes, a prolongation of existing and/or an enactment of new support 
measures  in  response  to  high  energy  prices  would  contribute  to  higher  growth  in  net  nationally 
financed current expenditure and to an increase in the projected government deficit and debt in 2023. 
Therefore,  it  is  important  that  Member  States  better  focus  such  measures  to  the  most  vulnerable 
households and exposed firms, to preserve incentives to reduce energy demand, and to be withdrawn 
as energy price pressures diminish.  

4 

 
 
 
 
 
 
Introduction  

I. 
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.  Those  plans  summarise  the  draft  budgets  that 
governments intend to submit to national parliaments. The Commission provides an Opinion 
on  each  plan,  assessing  whether  the  plan  is  compliant  with  the  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 helping the adoption of 
budgets compliant with EU fiscal rules and Council recommendations. Croatia will become a 
euro area Member States on 1 January 2023 and has decided, on a voluntary basis, to submit 
its Draft Budgetary Plan for 2023. Croatia’s plan is thus included in this Communication and 
the  Commission  provided  an  Opinion  on  it.  The  outgoing  governments  of  Italy  and  Latvia 
submitted Draft Budgetary Plans based on unchanged policies; therefore, the 2023 budgetary 
figures for these countries presented in this Communication do not represent policy targets. 
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  fiscal  recommendations  adopted  by  the 
Council on 12 July 2022. Heightened uncertainty and strong downside risks to the economic 
outlook  in  the  context  of  war  in  Europe,  unprecedented  energy  price  hikes  and  continued 
supply-chain disturbances have warranted the extension through 2023 of the general escape 
clause  of  the  Stability  and  Growth  Pact,  which  was  activated  by  the  Commission  and  the 
Council in March 2020.2 In this context, the Council fiscal recommendations were formulated 
in  qualitative  terms  with  a  quantitative  underpinning,  with  some  important  differentiations 
based on Member States’ public debt challenges.  

For 2023, the Council recommendations focus on the overall direction and composition of the 
fiscal stance, including expenditure funded by the Recovery and Resilience Facility (RRF) and 
other  EU  funds.  COVID-19  temporary  emergency  measures  are  excluded  from  the  fiscal 
stance. The Council recommended that Member States with high debt (Belgium, Greece, Spain, 
France, Italy and Portugal) should ensure a prudent fiscal policy, in particular by limiting the 
growth  of  nationally  financed  primary  current  expenditure  below  medium-term  potential 
output. Member States with low/medium debt were recommended to ensure that the growth of 
nationally financed primary current expenditure is in line with an overall neutral policy stance. 
In both  cases, the recommendations called for taking into account continued temporary and 
targeted support to households and firms most vulnerable to energy price hikes and to people 
fleeing  Ukraine.  All  Member  States  should  stand  ready  to  adjust  current  spending  to  the 

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 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.  On  23  May  2022,  the  Commission  extended  the  activation  of  the  General  Escape  Clause  of  the 
Stability and Growth Pact through 2023. 

5 

 
 
 
                                                           
evolving situation. All Member States were also recommended to expand public investment 
for  the  green  and  digital  transitions,  and  for  energy  security,  taking  into  account  the 
REPowerEU initiative, including by making use of the RRF and other Union funds. 

For the period beyond 2023, all Member States were recommended to pursue a fiscal policy 
aimed at achieving prudent medium-term fiscal positions. High-debt Member States were also 
recommended  to  ensure  credible  and  gradual  debt  reduction  and  fiscal  sustainability  in  the 
medium term through gradual consolidation, investment and reforms.  

The  objective  of  this  Communication  is  twofold.  First,  it  provides  an  aggregate  picture  of 
budgetary policy at the  euro area level, building on a cross-country assessment of the 2023 
Draft Budgetary Plans. Second, it provides an overview of the Draft Budgetary Plans at country 
level and explains the Commission’s approach to assessing them, with a particular focus on the 
budgetary measures to mitigate the impact of high energy prices taken, or credibly announced, 
by governments, and on the quality of energy measures. 

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 Table 1: Summary of assessment of the 2023 Draft Budgetary Plans’ consistency with the 
Council Recommendations 

Overall 
fiscal 
stance 

Contribution of 
nationally 
financed 
primary current 
expenditure to 
the fiscal stance 

Taking into account 
targeted energy and 
refugee related costs: 
no change in 
conclusion 

Growth of 
nationally 
financed 
primary 
current 
expenditure 
below medium-
term potential 
output growth 

Taking into account 
targeted energy and 
refugee related 
costs: no change in 
conclusion 

Public 
investment 
for the 
green and 
digital 
transitions, 
and for 
energy 
security 

Overall 
Assessment 

Preservation 
of nationally 
financed 
investment 

Contributio
n of 
expenditure 
financed by 
RRF grants 
and EU 
funds 

Low/medium debt Member States 
Austria 
Croatia 
Cyprus 
Estonia 
Finland 
Germany 
Ireland 
Latvia 
Lithuania 
Luxembour
g 
Malta 
Netherlands 
Slovenia 
Slovakia 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

* 
* 
* 
* 
* 
* 
* 
* 
* 
* 
* 
* 
* 
* 





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









 
 
 
 
 
 
 
 
 
 
 
 
 
 

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

* 
* 
* 
* 
* 

* 
* 
* 
* 
* 

High-debt Member States 
Belgium 
France 
Greece 
Portugal 
Spain 
* Only the elements relevant for Member States’ consistency with the Council Recommendations were included in this table. For low/medium debt 
Member States the Recommendation does not concern the growth of nationally financed primary current expenditure below medium-term potential 
output growth, while for high debt Member States the Recommendation does not refer to the overall fiscal stance nor the contribution of nationally 
financed primary current expenditure to the fiscal stance.  
1 For Portugal, the growth of nationally financed current expenditure is projected to be close to the medium-term potential output growth, assuming 
the planned reduction in measures in response to high energy prices, including in temporary and targeted support to vulnerable households and 
firms.




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 
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1 
 

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 
 

7 

 
 
 
 
 
 
 
II. Main euro area findings  

Economic outlook 

Graph 2.1 

to  rising 

Euro area: real GDP growth, 2019-2023 (%) 

The  euro  area  economy  has  continued  its  strong  post-pandemic  recovery  in  2022,  but 
economic  activity  is  set  to  decelerate  sharply  in  2023,  amid  high  inflation.  In  quarterly 
terms, the euro area real GDP reached its pre-pandemic level (last quarter of 2019) already in 
the third quarter of 2021, thanks to the improved health situation and effective policy support 
at national and EU level. Economic activity 
remained resilient up to the third quarter of 
2022,  despite  significant  headwinds.  The 
fallout of Russia’s war of aggression against 
Ukraine, with the cut of natural  gas supply 
by  Russia  to  Europe,  added  to  the  pre-
existing  bottlenecks  and  disruptions 
in 
global  supply  chains.  Skyrocketing  energy 
prices have led the euro area HICP inflation 
to  exceptionally  high  levels  (10.6%  in 
October  2022)  and 
inflation 
differentials  among  Member  States  due  to 
different national energy mixes and uneven 
fiscal  policy  measures.  Despite  high 
inflation, private consumption has continued 
to recover in the first three quarters of 2022, 
thanks  to  the  reopening  of  all  contact 
services, the pent-up demand related to  the 
historically high savings accumulated in 2020 and 2021 and governments’ support to mitigate 
the impact of high energy prices. Nonetheless, the energy price shock is significantly affecting 
the terms of trade of the euro area economy and, in turn, households’ real disposable incomes 
and  firms’  real  profits.  This  is  forecast  to  translate  into  lower  private  consumption  and 
investment in the coming quarters. Investment had already started to slow down due to high 
uncertainty and less favourable financing conditions, while the recovery of foreign tourism has 
supported  exports.  Available  indicators  point  to  an  ongoing  loss  of  momentum,  and  the 
Commission 2022 autumn forecast pencils a technical recession, with two negative readings of 
real GDP in the last quarter of 2022 and the first quarter of 2023. In 2022 as a whole, the euro 
area economy is forecast to grow by 3.2%, following the 5.3% rebound recorded in 2021. As 
a result, in 2022, the annual real GDP level is expected to be more than 2 pps above the 2019 
pre-pandemic level.  

Note:  France did not submit the 2022 Stability Programmes, so it is 
not included in the aggregate euro area SP2022 figures. 
Sources:  2023  Draft  Budgetary  Plans  (DBP  2023),  European 
Commission  2022  autumn  forecast  (AF2022),  and  2022  Stability 
Programmes (SP2022) 

The  macroeconomic  projections  underlying  the  Draft  Budgetary  Plans  and  the 
Commission  2022  autumn  forecast  are  close  for  2022  but differ  significantly  for  2023.    
The projections for euro area real GDP growth at 3.4% in 2022 in the Draft Budgetary Plans 
are only slightly more favourable than in the Commission 2022 autumn forecast (Graph 2.1 
and  Annex  Table  IV.1).  For  2023,  while  the  Commission  forecast  expects  the  euro  area 
economy to broadly stagnate, with a growth of only by 0.3%, the Draft Budgetary Plans still 
project economic activity to continue to show solid growth, albeit at a much lower pace (1.6%) 

8 

-6.5-5.5-4.5-3.5-2.5-1.5-0.50.51.52.53.54.55.520192020202120222023SP2022DBP2023AF2022 
 
 
 
 
than  in  2022.    The  2022  Stability  Programmes  were  even  more  optimistic,  with  economic 
growth projected at 2.6% in 2023.  

Risks for economic growth in  2023 are tilted to the downside, due to high inflationary 
pressures,  energy  supply  constraints  and  tightening  financing  conditions.  Geopolitical 
tensions, and especially Russia’s war of aggression against Ukraine, imply high uncertainty for 
the  euro  area  economy.  Gas  supply  should  be  sufficient  for  the  coming  winter,  but  lasting 
energy security and accelerating the green transition will require further investment. Inflation 
could become more entrenched and weigh on the recovery, while rising borrowing costs could 
amplify pre-existing financial vulnerabilities in the corporate sector, with a potential impact on 
growth. Furthermore, potential inconsistency between fiscal and monetary policy objectives 
could have adverse consequences. Finally, risks stemming from the global economy remain 
important.  

Fiscal outlook 

Graph 2.2 

Euro area: headline deficit, 2019-2023 (% of GDP) 

The  Draft  Budgetary  Plans  project  a  further  decline  in  the  euro  area  deficit  in  2023, 
whereas  the  Commission  forecast  expects  a  mild  increase  (Graph  2.2  and  Annex  Table 
IV.2). After falling from 7% of GDP in 2020 to 5.1% in 2021, the euro area deficit is projected 
to decline again in 2022 by both the Draft 
Budgetary  Plans  and  the  Commission 
forecast  (to  3.9%  and  3.5%  of  GDP, 
respectively).  The  2022  deficit  would 
however remain well above the 2019 pre-
pandemic level  in  the euro area (0.6% of 
GDP),  also  due 
to  additional  non-
temporary  current  expenditure  adopted 
after  the  pandemic.  For  2023,  the  Draft 
Budgetary Plans point to a further 0.7 pps 
of GDP deficit reduction in the euro area, 
to 3.2%. However, this deficit projection is 
more  favourable  than  the  Commission 
forecast, which instead projects a 0.2 pps 
of GDP deficit increase next year, to 3.7%. 
This mild increase is driven by automatic 
fiscal stabilisers in the face of the expected 
economic slowdown, higher interest expenditure and revenue shortfalls due to a less tax-rich 
composition of growth.3 These deficit-increasing factors are set to more than offset the lower 
net budgetary costs of the energy-related measures - conditional on the discontinuation of part 
of the energy-related measures in the course of the 2023 being confirmed (from 1.3% of GDP 
in 2022 to 0.9% in 2023) - and the complete phasing out of COVID-19 temporary emergency 
measures (estimated at 0.9% of GDP in 2022 – Annex Table IV.4). The majority of euro area 

Note:    The  aggregate  euro  area  SP2022  figures  does  not  include 
data  for  France,  given  that  France  did  not  submit  a  Stability 
Programme in 2022. 
Sources:  2023  Draft  Budgetary  Plans  (DBP  2023),  European 
Commission  2022  autumn  forecast  (AF2022),  and  2022  Stability 
Programmes (SP2022) 

3 Revenue windfalls (shortfalls) are estimated through the increase (decrease) in the revenue-to-GDP ratio that is 
not explained by discretionary measures or transfers from the EU budget. For the euro area, the Commission 2022 
autumn  forecast estimates revenue  windfalls of ¾% of GDP in 2021, and ½%  in 2022. Revenue shortfalls of 
around ¾% of GDP are projected for 2023.  

9 

0123456720192020202120222023SP2022DBP2023AF2022 
 
 
 
                                                           
 
Member States plan a lower deficit in 2023 compared to 2022. Declines above 1 pp of GDP 
are  planned  in  Greece  (by  2.1 pps,  to  2.1%),  Germany  (by  1.6  pps,  to  2%),  and  Spain  (by 
1.1 pps, to 3.9%). The higher projections in the Commission forecast also reflect a timing issue, 
as  some  Draft  Budgetary  Plans  were  prepared  well  before  the  Commission  2022  autumn 
forecast. Ten euro area Member States project a deficit above 3% of GDP in 2023, including 
four high-debt Member States (Belgium, Spain, France and Italy). 

Graph 2.3 

Euro area: public debt, 2019-2023 (% of GDP) 

The  Draft  Budgetary  Plans  and  the 
Commission  forecast  both  point  to  a 
decline in the debt-to-GDP ratio in 2022 
and  2023  (Graph  2.3  and  Annex  Table 
IV.3).  The  Draft  Budgetary  Plans  project 
the  debt  ratio 4  to  reach  94%  of  GDP  in 
2022  (down  from  97%  in  2021)  and 
decrease further in 2023, to around 92%.5 
This projection is essentially the same as in 
the  Commission  2022  autumn  forecast. 
The primary deficit will continue to weigh 
on debt dynamics in the euro area in 2023 
(Graph 2.4).  

Note:  France did not submit the 2022 Stability Programmes, so it is 
not included in the aggregate euro area SP2022 figures. 
Sources:  2023  Draft  Budgetary  Plans  (DBP  2023),  European 
Commission  2022  autumn  forecast  (AF2022),  and  2022  Stability 
Programmes (SP2022) 

Due  to  the  high  inflation,  the  interest 
rate-growth differential is set to remain 
favourable  in  2023,  contributing  to 
decreasing debt. The high inflation surprise (measured with the GDP deflator) is increasing 
the  denominator  of  the  debt-to-GDP  ratio,  whereas  higher  interest  rates  are  affecting  the 
numerator through higher interest expenditure only gradually, due to the rather long maturity 
of public debts in the euro area. 6 This debt-decreasing ‘snow-ball’7 effect is particularly strong 
in high-debt Member States. In 2023, significant declines in the debt-to-GDP ratio are forecast 
in  Greece,  Portugal,  Cyprus  and  Ireland,  countries  that  are  also  expected  to  show  primary 
surpluses. Six Member States are projected to have a debt ratio above 100% of GDP in 2023 
(Belgium, Greece, Spain, France, Italy and Portugal), with the debt ratio projected to increase 
only in the case of Belgium. 

The  debt  projections  for  the  upcoming  years  are  subject  to  heightened  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 87% and 98% of 
GDP in  2023, and between 80% and 102% of  GDP in  2027 (Annex III). On the one hand, 

4 These debt data are not consolidated for intergovernmental loans. 

5 The Member States with projected increases in their debt ratios in 2023 are Belgium, Estonia, Latvia, Lithuania, 
Luxembourg, Malta and Finland. Most Member States that had the highest pre-crisis debt ratios project their debt 
ratio declining in 2023. 

6  The  average  maturity  in  the  euro  area  is  currently  8.1  years  (data  for  September  2022, source:  Government 
finance statistics, ECB). 

7 The so-called ‘snowball effect’ captures the impact of interest expenditure on the annual accumulation of debt, 
as well as the impact of real GDP growth and inflation (GDP deflator) on the debt ratio. 

10 

758085909510010520192020202120222023AF2022DBP2023SCP22 
 
 
                                                           
 
several factors weigh on fiscal sustainability. In particular, the high inflationary environment 
is expected to negatively affect long-term public debt dynamics. In the short term, debt-to-GDP 
ratios are projected to fall because of the higher nominal GDP growth. In the longer term, the 
increase in interest rates will eventually feed into the debt dynamics. Against the background 
of uncertain  growth prospects,  this risks being  detrimental  to  long-term  debt  developments, 
pointing  to  the  importance  of  implementing  reforms  and  investment  to  relaunch  growth 
potential and pursuing responsible fiscal policies. In addition, contingent liabilities arising from 
the provision of public guarantees, including those granted in the context of the COVID-19 
pandemic, could adversely affect public debt and deficits if called.8 Overall, the recourse to 
guaranteed loans has been heterogeneous across Member States with some countries displaying 
already important amounts of the state guaranteed loans before the pandemic outbreak (Box 
1). On the other hand, several factors mitigate fiscal sustainability risks. These factors include 
the lengthening of government debt maturities in recent years (see footnote 6), stable financing 
sources and EU initiatives such as the European instrument for temporary Support to mitigate 
Unemployment Risks in an Emergency (SURE) and, more importantly, Next Generation EU 
and  the  Recovery  and  Resilience  Facility  (RRF)  by  financing  investments  and  growth-
enhancing reforms. Moreover, large shares of government debt, in the range of 10% to 35% 
for most euro area countries9, are held by the European System of Central Banks. 

Graph 2.4 

Decomposition of the change in the debt ratio, 2023 (pps of GDP) 

Source: European Commission 2022 autumn forecast 

8 Contingent liabilities would in general be reflected in public debt and deficits only if called except in case of 
standardised guarantees. In some cases, governments issued standardised guarantees in response to the COVID-
19 crisis and for such guarantees an estimated deficit impact is recorded from the outset in line with ESA 2010 
rules.  

9 Data for 2021, source: Government finance statistics, ECB. 

11 

-12-10-8-6-4-202468ELPTCYIEHRSKATESDEITFRSIEEFILVLUBENLMTLTEA20Primary balanceStock-flow adjustmentsInterest expenditureReal GDP growthGDP deflatorChange in the debt ratiodebt decreasingdebt increasing 
 
 
 
 
 
 
 
                                                           
Box 1. Guarantees in the 2023 Draft Budgetary Plans  

Government  guarantees  and  other  forms  of  liquidity  support,  notably  tax  deferrals  and  loans,  constituted  an 
important part of support measures in response to the  COVID-19 crisis. The  reporting  in the Draft  Budgetary 
Plans highlights that most of these short-term measures have now expired; furthermore, the amount of actually 
issued guarantees typically remained lower (and often substantially lower) than the initially announced maximum 
size  of  the  guarantee  schemes.  The  cumulative  issuance  of  guarantees  linked  to  COVID-19  since  2020  is 
considerably lower than during the global financial crisis. Nevertheless, the issuance of guarantees in 2020 and 
2021,  whether  directly  linked  to  the  COVID-19  crisis  or  not,  has  visibly  affected  the  level  of  outstanding 
contingent liabilities in some euro area Member States, particularly in Italy, Spain, France, Germany and Finland 
(see graph B1.1).  

Graph B1.1 Euro area: Stock of government guarantees, 2019-2021 (% of GDP) 

There are currently no indications in the Draft Budgetary Plans of widespread liquidity measures triggered by the 
energy crisis and the Russian war of aggression against Ukraine. Nevertheless, some Member States have reported 
such measures in their plans: for example, Finland has decided to issue guarantees, loans and similar arrangements 
for  the  energy  sector,  Slovenia  plans  to  issue  guarantees  to  support  state-owned  companies  operating  on 
international energy markets and Luxembourg has decided to put in place a loan guarantee scheme to mitigate 
adverse repercussions of energy prices on companies. 

12 

 
 
 
 
 
 
 
 
Fiscal  response  to  the  economic  repercussions  of  Russia’s  military  aggression  against 
Ukraine 

Member States have taken sizeable fiscal measures in response to the Russian invasion of 
Ukraine and the ensuing energy crisis in 2022.  Member States  have deployed a range of 
policies to mitigate the direct economic and social impact of skyrocketing energy prices on 
households  and  firms.  In  this  context  a  key  policy  objective  is  to  protect  low-income 
households  and  to  shield  energy  intensive  industries  from  this  sudden  price  volatility.  The 
Commission  forecast  estimates  the  net  budgetary  cost  of  new  discretionary  measures  to 
mitigate the short-term economic and social impact of high energy prices at 1.3% of GDP in 
the euro area (Annex Table IV.5). Most of these measures have been announced as temporary. 
Nevertheless, while around one-third (or 0.4% of GDP in the euro area) of these measures are 
targeted  (for  more  details  on  how  these  measures  are  defined  see  section  III,  chapter 
Assessment  of  measures  to  households  and  firms  most  vulnerable  to  energy  price  hikes)  at 
households and firms most vulnerable to energy prices hikes, two-thirds of them (or 0.9% of 
GDP  in  the  euro  area,  net  of  revenues  on  windfall  profits  by  energy  companies)  are  not 
considered to be well targeted. In 2022, the budgetary cost of sheltering and integrating people 
fleeing Ukraine, following Russia’s war of aggression, is estimated at 0.1% of GDP in the euro 
area as a whole, with differences across Member States. 

The  projected  gradual  roll-back  of  energy  related  measures  in  2023  is  based  on  the 
measures announced in the Draft Budgetary Plans and subject to uncertainty linked to 
developments  in  energy  prices,  while  the  budgetary  cost  of  sheltering  refugees  from 
Ukraine  should  continue  to  be  rather  limited.  In  2023,  according  to  the  Commission 
forecast, the net budgetary cost of energy-related measures is forecast to decrease to 0.9% GDP 
in the euro area, as some Member States have adopted (or announced) measures only for some 
months of next  year  or  no measures at all. Thus, the extension or adoption of new  energy-
related  measures  would  likely  increase  the  net  budgetary  costs  of  these  measures  in  2023, 
despite additional taxes levied on the extra profits of energy companies, by an additional 1% 
of GDP in the euro area, reaching close to 2% of GDP in 2023 (for more details see section III, 
chapter  Assessment  of  measures  to  households  and  firms  most  vulnerable  to  energy  price 
hikes).  The  budgetary  cost  of  sheltering  and  integrating  people  fleeing  Ukraine,  following 
Russia’s war of aggression, is estimated to remain at 0.1% of GDP in the euro area. 

13 

 
 
 
 
Assessment of the euro area fiscal stance 10 

The euro area fiscal stance has been very expansionary in 2022.  Based on the Commission 
2022 autumn forecast, the euro area fiscal stance has continued to be expansionary in 2022, by 
around 2¼% of GDP, after expansions of 1¼% and ¼% of GDP recorded in 2021 and 2020, 
respectively  (Graph  2.5).  The  fiscal  stance  includes  the  impulse  from  both  the  national  and  EU 
budgets,  but  it  excludes  COVID-19  temporary 
emergency  measures. 11  All  energy-related 
measures  are  included  in  the  fiscal  stance. 
the  Council 
However, 
line  with 
this 
recommendations  of  12  July  2022, 
Communication 
its 
takes 
assessment  temporary  and  targeted  support  to 
households and firms most vulnerable to energy 
price hikes and to people fleeing Ukraine. 

Euro area fiscal stance and components, 2020-2023 
(% of GDP) 

into  account 

Graph 2.5 

in 

in 

been 

is  expected 

Overall,  in  2022,  the  development  in  net 
primary  current  spending  appears  to 
expansionary. 
strongly 
have 
Nationally  financed  net  primary  current 
expenditure 
to  contribute 
significantly  to  the  expansionary  stance  in 
2022, by close to 2 pps of GDP. Around two-
thirds  of  the  expansionary  contribution  is 
related to measures taken by governments to 
mitigate the impact of high energy prices on 
households and firms. Those measures appear, to a large extent, broad-based, not targeted to 
vulnerable groups. The remainder one-third is related to the increase in underlying net current 
spending,  especially  social  transfers,  at  a  rate  above  medium-term  potential  growth.  This 
expansionary trend has contributed to supporting domestic demand while adding to inflationary 
pressures and weighing on the fiscal position of several Member States, including high-debt 
Member States.  Further  expansionary contributions (around ¼ pps of GDP) are expected in 
2022  from  nationally  financed  investment  and  spending  paid  for  by  the  Recovery  and 
Resilience Facility and other EU funds.   

Source: European Commission 2022 autumn forecast  

Following three years of fiscal expansion, the fiscal stance for 2023 is currently projected 
to be broadly neutral, conditional on the planned roll-back of energy-related measures. 

10 The fiscal stance measures the short-term impulse to the economy from discretionary fiscal policy. In line with 
the approach used since the Council recommendations on the 2021 Stability Programmes, this Communication 
assesses the fiscal stance by looking at the annual increase in net primary expenditure relative to 10-year potential 
growth. For more details see Box: Indicators used in the assessment of the 2023 Draft Budgetary Plans in the 
Statistical Annex.  

11 COVID-19 temporary emergency measures mainly consist of transfers necessary to keep afloat households and 
firms hit by the pandemic. These  measures are excluded from the  fiscal stance because their direct impact on 
economic growth is assumed to be limited at the time of disbursement, due to the pandemic-related restraints on 
economic activity (e.g., widespread lockdowns, travel restrictions, etc.). The historically high households’ saving 
rates in 2020 and 2021 and the resilient private consumption in 2022 corroborate this assumption. If COVID-19 
temporary emergency measures had not been excluded, the euro area fiscal stance would have appeared strongly 
expansionary in 2020 (by around 3.5% of GDP) and would have remained similarly expansionary in 2021 (by 
1¼%), while it would have appeared broadly neutral in 2022 and contractionary in 2023 (by around 1%).   

14 

-2.25-2.00-1.75-1.50-1.25-1.00-0.75-0.50-0.250.000.250.500.751.002020202120222023RRF grants / EU funds contributionNationally financed investmentOther capital expenditureNationally financed net primary current expenditureFiscal stanceExpansionaryContractionary 
 
 
                                                           
 
The  Commission  forecast,  which  incorporates  information  provided  in  the  Draft  Budgetary 
Plans, indicates that the euro area fiscal stance would become broadly neutral in 2023. This 
stance should be considered in the context of a cumulative expansion of 3¾% of GDP in the 
2020-2022 post-pandemic period. Moreover, this neutral fiscal stance assumes a partial roll-
back of energy-related  measures  relative to  2022, which is  subject  to  uncertainty (for more 
details  see  section  III,  chapter  Assessment  of  measures  to  households  and  firms  most 
vulnerable to energy price hikes).   

Nationally financed investment and expenditure financed by the RRF grants and other 
EU funds are set to expand further in 2023. This additional increase in growth-enhancing 
spending (by around ¼% of GDP) will contribute to reducing reliance on imported fossil-fuel 
energy, in particular from Russia. Moreover, the expected fiscal support for public and private 
investments as well as productivity-enhancing reforms will have a positive impact on potential 
growth and thus on fiscal sustainability in the medium term.  

Net primary  current spending would provide a slightly contractionary contribution in 
2023.  The  lower  estimated  net  impact  of  energy-related  measures  in  the  euro  area  largely 
explains this contractionary contribution of around ½ pps of GDP. However, this assessment 
may be revised if existing measures were prolonged or further support deployed in the case of 
persistently high energy prices.  

The  projected  euro  area  fiscal  stance,  as  well  as  the  underlying  development  of  net 
primary  current  expenditure  and  investment,  appear  to  be  consistent  with  the  fiscal 
recommendation for 2023. Overall, planned fiscal policies for 2023 are currently not expected 
to contribute to inflationary pressures on the demand side and would enhance the supply side 
of the euro area economy, complementing the ongoing normalisation of monetary policy by 
the ECB.  

Monetary Policy Stance  

Monetary  policy  normalisation  is  implying  a  rapid  increase  in  policy  rates  amid 
unprecedentedly high inflation. Historically high inflation, which reached 10.7% in the euro 
area in October 2022, has prompted a rapid increase in policy rates, which have risen by 2 pps 
since July. The normalisation of policy rates started shortly after the end of net asset purchases 
by the Eurosystem at the beginning of July. Going forward, policy rates are expected to edge 
up  further  (Graph  2.6).  At  the  same  time,  maturing  securities  acquired  under  the  Pandemic 
Emergency Purchase Programme should continue to be reinvested until year-end 2024, while 
the principles governing the unwinding of the Asset Purchase Programme should be announced 
at the December ECB meeting. At its October meeting, the ECB also decided to provide banks 
with incentives for an early repayment of funding obtained under the Targeted Longer-Term 
Refinancing Operations programme, with a view to draining excess liquidity from the financial 
system. 

While  inflation  entails  temporarily  low  real  rates,  nominal  financial  conditions  have 
tightened significantly. Market-based financial conditions have tightened, as have the credit 
standards of euro area banks. A composite measure of financing costs12 shows a strong upward 

12 I.e., the composite credit cost indicator (CCCI) calculated by the Commission services, which is a synthetic 
measure  of  the  external  financing  costs  for  the  euro  area  corporate  sector  and  households.  The  CCCI  of 

15 

 
 
 
 
                                                           
trend since the end of last year for households and, particularly, for non-financial corporations. 
The normalisation of monetary policy has come along with increased sovereign bond yields as 
well as a widening in the spreads between the interest rates paid by the less indebted and the 
more indebted euro area Member States. While high inflation means that shorter-term real rates 
are currently negative, real financial conditions are expected to tighten in the future due to an 
easing  of  inflation  and  the  progressive  pass-through  of  higher  policy  rates  to  commercial 
lending rates.  

Graph 2.6 

ECB policy rates 

In  a  context  of  high  and  persistent  inflation,  it  is  crucial  to  maintain  a  consistent 
monetary-fiscal  policy  mix.  In  2020-2021, 
policy 
accommodative  monetary 
very 
contributed  to  expand  the  fiscal  space  of 
Member States, which was used to counter the 
negative effects of the COVID-19 pandemic. 
Conversely,  fiscal  policy  contributed  to  the 
smooth 
transmission  of  monetary  policy 
through  the  extension  of  guarantees  on  bank 
lending.  The  ongoing  monetary  policy 
normalisation is now reducing fiscal space in 
a context of high and persistent inflation. This 
calls  for  a  judicious  use  of  fiscal  policy 
to 
measures,  which  should  be 
vulnerable  households  and  companies,  while 
maintaining  the  price  signal  and  avoiding 
fanning inflationary dynamics. 

targeted 

Note: Deposit facility rate projections based on forward €STER OIS 
rates. 
Source: Bloomberg, own calculations 

non-financial corporations includes the costs of credit provided by both banks and financial markets. The CCCI 
of households includes the cost of bank loans granted for consumption, house purchase and other purposes. 

16 

 
 
 
 
 
 
 
 
 
 
                                                           
  
 
III. Overview of the Draft Budgetary Plans 
Assessment of Member States’ fiscal stance  

Fiscal stance in 2022  

In 2022, an expansionary fiscal stance is projected in almost all euro area Member States, 
including high-debt Member States for which the Council recommended a prudent fiscal 
policy (Graph 3.1). Estonia is  the only country  with  an estimated contractionary stance this 
year,  based  on  the  Commission  2022  autumn  forecast,  while  Finland  and  Ireland  display  a 
broadly neutral stance. For Estonia, the exceptional - and partly unanticipated - increase in the 
GDP deflator that is forecast for 2022 (14.3%) is one of the reasons behind the contractionary 
outcome, as some government expenditure (e.g. social transfers or public sector wages) may 
reflect high inflation with one-year delay. Very strong GDP deflator increases (above 10%) are 
also  projected  for  Lithuania  (16.5%)  and  Latvia  (11.0%),  while  the  forecast  for  the  GDP 
deflator inflation in the euro area aggregate is 4.6%. A supportive fiscal stance for 2022 was 
recommended by the Council on 18 June 2021 only to low/medium-debt Member States. All 
high-debt Member States, which were recommended to implement a prudent fiscal policy and 
preserve nationally financed investment, show a very expansionary stance this year, with net 
primary  current  expenditure  being  the  main  driver  in  most  cases.13  In  spring  2023,  the 
Commission will assess, based on the outturn data for 2022, compliance with the fiscal country-
specific recommendations addressed to the Member States by the Council. 

Graph 3.1 

Fiscal stance and components of euro area Member States, 2022 (% of GDP) 

Source: European Commission 2022 autumn forecast 

Capital expenditure has been supported by both national and EU funding in the majority 
of Member States. The Council recommendations of 18 June 2021 invited all Member States 
to preserve nationally financed investment in 2022, and to use the Recovery and Resilience 
Facility to support the recovery. Nationally financed investment is set to have been preserved 

13 The Council recommended Italy and Portugal to limit the growth of nationally financed current expenditure in 
2022,  while  Bulgaria,  Croatia,  Latvia,  Lithuania  were  recommended  to  keep  it  under  control.  These  Member 
States were projected at the time (in spring 2021) to register in 2022 a significant supportive contribution from 
such expenditure to the fiscal stance (more than 0.5 pps of GDP). 

17 

-4.5-4.0-3.5-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.5Nationally financed net primary current expenditureOther capital expenditureNationally financed investmentRRF grants and EU fundsFiscal stanceContractionaryExpansionaryLow/Medium debt countriesHigh debt countries 
 
 
 
 
 
                                                           
in  most  euro  area  Member  States.  Italy,  Latvia,  Croatia,  Lithuania,  and  Estonia  are  the 
exception, with an expected decline of more than 0.1 pp of GDP in this fiscal stance component 
in 2022. However, the absorption of RRF grants is planned to increase for those Member States. 
Expenditure  financed  by  Recovery  and  Resilience  Facility  grants  and  other  EU  funds  is 
estimated to have increased or broadly stabilised in all euro area countries this year, except for 
Portugal, Malta and Cyprus due to lower spending related to other EU funds (Graph 3.1).   

In  2022,  energy-related  measures  have  been  the  main  but  not  sole  driver  behind  the 
expansionary  developments  in  net  primary  current  spending  in  most  Member  States 
(Graph  3.2).  In  most  euro  area  Member  States,  the  growth  of  nationally  financed  primary 
current expenditure (net of discretionary revenue measures) is projected to have exceeded the 
rate  of  medium-term  potential  growth.  Only  in  Finland,  Ireland,  and  Estonia  would  this 
contribution have been (slightly) contractionary. During 2022, all euro area governments have 
taken measures to mitigate the impact of high energy prices. However, in most cases, those 
measures  have  not  been  targeted  at  households  and  firms  most  vulnerable  to  energy  prices 
hikes. Moreover, most high-debt Member States and several low/medium-debt countries have 
expanded net current spending not related to energy measures in 2022 (see dark blue bar in 
Graph 3.2),  mainly  because  of  significant  increases  in  underlying  social  transfers  and,  in 
Belgium and Italy, in public sector wages. As a result, even after taking account of the targeted 
energy-related  measures  and  the  support  to  people  fleeing  Ukraine,  the  contribution  of  this 
component would remain significantly expansionary (above 0.5 pps of GDP), in all high-debt 
Member States and in several low/medium-debt countries, as shown in Graph 3.2.  

Graph 3.2 

Nationally financed net primary current expenditure: contribution to fiscal stance and 
drivers, 2022 (pps of GDP) 

Source: European Commission 2022 autumn forecast 

18 

-4.0-3.5-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.0ITESPTBEFRELLTHRLVDESIMTNLATCYLUSKFIIEEEEA20UA refugee costsTargeted energy measuresNon-targeted energy net of revenues on windfall profitsOther primary current expendituresTotalTotal excl. targeted energy/refugeeExpansionaryContractionaryHigh debt countriesLow/Medium debt countries 
 
 
 
 
Fiscal stance in 2023 

In 2023, the fiscal stance is forecast to differ across Member States (Graph 3.3). Based on 
the Commission 2022 autumn forecast, which incorporates information provided in the Draft 
Budgetary Plans, the fiscal stance in 2023 is projected to be (slightly) expansionary in half of 
the euro area Member States and broadly neutral or contractionary in the other half. This is 
largely explained by some governments having already announced energy-related measures for 
the entire year 2023, while others have included in their Plans those measures only for the first 
months of 2023 or no measures at all. The resulting broadly neutral fiscal stance for the euro 
area aggregate in 2023 is therefore subject to uncertainty and may eventually turn out more 
expansionary than currently projected.     

Graph 3.3 

Fiscal stance and components of euro area Member States, 2023 (% of GDP) 

Source: European Commission 2022 autumn forecast 

The  projected  decline  in  energy-related  measures  shape  planned  developments  in  net 
primary  current  expenditure  in  2023,  while  other  current  expenditure  continues 
increasing in around half of the countries (Graph 3.4). Among high-debt Member States, in 
2023, the projected decline in energy-related measures drives the contractionary contribution 
of net primary current spending in Spain, Italy and Greece, and the broadly neutral contribution 
of this component in Portugal. The decline instead does not change the overall expansionary 
contribution of net primary current spending expected in Belgium. Taking into account only 
the targeted energy-related measures and the support to people fleeing Ukraine, net primary 
current expenditure would increase above medium-term potential output growth, providing an 
expansionary contribution to the fiscal stance, in both Belgium and Portugal (Graph 3.4). Net 
primary  current  spending  excluding  energy  related  measures  is  projected  to  grow  at  a  rate 
above medium-term potential growth in all high-debt Member States but France (see dark blue 
bar in Graph 3.4), mainly related to significant increases in underlying social transfers. As for 
low/medium-debt countries, only Finland and the Netherlands are projected to have a broadly 
neutral contribution to the fiscal stance of net primary current expenditure. Taking into account 
the  targeted  energy-related  measures  and  the  support  to  people  fleeing  Ukraine,  this 
contribution would remain broadly neutral only in Finland. Slovakia, Lithuania, Luxembourg, 
Estonia,  and  Austria  are  expected  to  have  a  sizeable  expansionary  contribution  (more  than 
0.5 pps of GDP) of net primary current spending in 2023. This could fuel further inflationary 
pressures in those countries. The expansionary contribution of this component is expected to 
be smaller (¼ pps of GDP) in Germany. A contractionary contribution to the fiscal stance of 
19 

-2.75-2.25-1.75-1.25-0.75-0.250.250.751.251.752.252.753.25Nationally financed net primary current expenditureNationally financed investmentOther capital expenditureRRF grants and EU fundsFiscal stanceContractionaryExpansionaryLow/Medium debt countriesHigh debt countries 
 
 
 
 
net primary current spending is projected in Malta, Ireland and Latvia, and, to a lesser extent, 
in Croatia and Cyprus. This appears justified by the evolving economic situation, in particular 
the high inflation.  

Graph 3.4 

Nationally financed net primary current expenditure: contribution to fiscal stance and 
drivers, 2023 (pps of GDP) 

Source: European Commission 2022 autumn forecast 

Nationally financed investment as well as investment financed via RRF or other EU funds 
is  set  to  stabilise  or  expand  in  most  euro  area  Member  States  in  2023.  Based  on  the 
Commission 2022 autumn forecast, the contribution of nationally financed investment is set to 
be neutral or positive in all Member States with the exceptions of Cyprus, Malta and Latvia 
(Graph 3.3).14 At the same time, the absorption of RRF and other EU funds helps to preserve 
or increase  overall  public investment in  2023 also  in  Cyprus, Malta and Latvia.  Looking at 
developments  relative  to  the  pre-pandemic  2019  levels,  in  2023  all  euro  area  countries  are 
expected to preserve or increase nationally financed investment, with the exception of Croatia 
and Latvia (Graph 3.6).  

Overall public investment developments 

Public investment in the euro area is  projected to continue  increasing.  In contrast  with 
previous  macroeconomic  shocks,  public  investment  remained  robust  during  the  COVID-19 
pandemic  and  the  current  energy  crisis.  Public  investment-to  GDP  ratio  in  the  euro  area 
increased from 2.8% in 2019 to 3% in 2020 and 2021. It is projected to have increased to 3.1% 
in 2022 and further to 3.2% in 2023 (Graph 3.5).15  

14 Note however that the public investment-to-GDP ratio in Latvia is well above the euro area average. 

15 These figures refer to gross fixed capital formation, whereas, after considering the consumption of fixed capital, 
net fixed capital formation of the general government sector in the euro area would increase from 0.1% of GDP 
in 2019 to 0.6% in 2023 (Graph 3.5).  

20 

-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.53.0BEPTFRESITELSKLTLUEEATSIDEFINLHRCYMTIELVEA20UA refugee costsTargeted energy measuresNon-targeted energy net of revenues on windfall profitsOther primary current expendituresTotalTotal excl. targeted energy/refugeeExpansionaryContractionaryHigh debt countriesLow/Medium debt countries 
 
 
 
 
 
 
                                                           
Public  investment  is  expected  to  increase  in  2023  in  most  euro  area  Member  States 
(Graph 3.6).  The  Council  recommendation  of  12  July  2022  invited  all  Member  States  to 
“…expand  public  investment  for  the  green  and  digital  transitions,  and  for  energy  security 
taking into account the REPowerEU initiative, including by making use of the Recovery and 
Resilience  Facility  and  other  Union  funds”.  The  Commission’s  assessment  is  based  on  the 
evolution of total gross fixed capital formation, while taking into account projects aiming to 
achieve the green and digital transitions and to increase energy security. In 2023, total public  

Graph 3.5 

Euro area:  gross and net public investment, 1995-
2023 (% of GDP)  

investment  is  set  to  increase  by  more  than 
0.1 pp  of  GDP  relative  to  2022  in  12  euro 
(Cyprus,  Spain, 
area  Member  States 
Portugal, 
Italy,  Lithuania,  Netherlands, 
Luxembourg,  Slovakia,  Croatia,  Latvia, 
Estonia  and  Slovenia),  to  remain  broadly 
stable  in  seven  Member  States  (Ireland, 
Germany,  Belgium,  Austria,  France,  Malta 
and  Finland).  Public  investment  is  forecast 
to  decline  only  in  Greece  in  2023  due  to 
lower 
but 
remaining  above  4%  of  GDP  after  the 
significant increase projected for 2022.   

EU-financed 

investment 

Source: European Commission 2022 autumn forecast 

A substantial part of the increase in public 
investment  between  2019  and  2023  is 
supported  by  EU  financing.  RRF  grants  will  fund  investment  projects  and  productivity-
enhancing reforms without giving rise to higher deficits and debt in national budgets.16 The 
RRF-financed public investments will cover part of substantial investment needs for the green 
and digital transition, and to strengthen energy security. In some Member States, RRF grants 
also support investments by households and firms for the green and digital transition, like the 
digitalisation of the public administration, the digitalisation of schools and SMEs, or projects 
related to digital literacy, cybersecurity and 5G connectivity. 

Many euro area Member States plan investments to support the green transition and to 
increase energy security and efficiency in 2023. A number of Draft Budgetary Plans include 
projects  related to  improving the energy efficiency of buildings (Belgium,  Croatia, Estonia, 
France, Greece, Lithuania and Spain). Other areas include investments in sustainable mobility, 
in  particular in  rail networks (Belgium, Estonia, Italy and Slovenia); the decarbonisation of 
energy-intensive  industries  (Austria  and  Portugal);  hydrogen  (Italy  and  the  Netherlands); 
support to households to move towards more sustainable energy systems (Austria); and solar 
panels (Greece and Spain).  

The  Draft  Budgetary  Plans  also  incorporate  public  investments  supporting  the  digital 
transition.  Projects  focus  on  the  digitalisation  of  the  public  administration  in  a  number  of 
Member  States  (Belgium,  Croatia,  Cyprus,  France  and  Italy).  The  digitalisation  of  schools 
(Ireland and Portugal) and SMEs (Greece, France and Slovenia) are also important areas of 
investment in 2023. Projects also concern training and improving the digital literacy of students 

16 Expenditure funded by loans from the RRF are included in nationally financed expenditure. 

21 

-0.50.00.51.01.52.02.53.03.54.0200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023GFCFNFCF 
 
 
                                                           
 
(France and the Netherlands); cybersecurity and 5G connectivity (Spain); gigabit infrastructure 
(Slovenia); as well as digital diagnostics and equipment in hospitals (Croatia).  

Graph 3.6 

Public investment, 2019, 2022 and 2023 (% of GDP) 

Source: European Commission 2022 autumn forecast 

Assessment of measures to mitigate the impact of high energy prices on households and 
firms  

The  fiscal  projections  are  impacted  by  a  series  of  budgetary  measures  aimed  at 
mitigating the impact of high energy prices on households and firms. The net budgetary 
cost of these measures is estimated, by the Commission services, at 1.3% of GDP in 2022 and 
0.9%  in  2023  for  the  euro  area  as  a  whole  (Annex  Table  IV.5).  For  the  purposes  of  this 
estimation, 'energy measures' are defined as: (1) measures that have a direct impact on the 
marginal  cost  of  energy  consumption  for  households  and/or  firms  (‘price  measures’);  (2a) 
measures that provide temporary income support to households (hence, permanent increases 
in wages and salaries, pensions or other social benefits are not considered here as they are not 
expected  to  be  reversed  when  energy  prices  decrease  again);  (2b)  measures  that  provide 
compensation  to  firms  (other  than  price  measures)  in  energy-intensive  industries  (both 
‘income measures’); and (3) revenues from (new taxes or levies on) windfall profits by energy 
companies.17  

Most  of  the  adopted  measures  are  not  sufficiently  targeted  to  the  most  vulnerable 
households and firms. Targeted measures are measures from which only the most vulnerable 
strata of the population will benefit, involve a degree of means-testing and are selective on the 
basis of the income or specific social needs. Typical examples of such measures are: top-ups 
to minimum income allowances or to lower pensions, lump-sum discounts deducted from the 
energy bill for low-income households, or a reduced price per kWh of energy for low-income 

17 Revenue from (taxes or levies on) windfall profits form a special category as this is does not constitute a support 
measure, but rather a source of funding. This particular type of revenue is included in the estimates given the very 
direct link with increased energy prices, and because many Member States are already using or are contemplating 
the use of this revenue source to fund support measures. 

22 

 
 
 
 
 
 
                                                           
households.  Conversely,  untargeted  measures  are  broad-based  measures  that  apply  to  the 
majority of the population without (much) differentiation based on income or specific needs. 
For 2023, around 90% of the budgetary impact is due to the measures that are not targeted. 

Most of the adopted measures distort the price signal and reduce incentives to contain 
energy  consumption  and  increase  energy  efficiency.  The  income  measures,  as  defined 
above, provide temporary support to households or firms, in the form of transfers or subsidies, 
without affecting the marginal cost of energy consumption. Price measures have an impact on 
the  marginal  cost  of  energy  consumption,  and  therefore  reduce  incentives  to  lower  energy 
consumption and to increase energy efficiency. For 2023, around two-thirds of the budgetary 
impact is due to the measures that distort the price signal. 

If energy prices remain high in 2023, the ultimate budgetary costs are likely to exceed 
estimates based on the currently announced measures. These costs differ across Member 
States, reflecting country-specific factors such as the design of their national policy packages 
and energy mix. Importantly, in their Draft Budgetary Plans, some Member States had not yet 
announced which energy measures they plan for 2023. To estimate the budgetary cost of the 
energy measures for 2023 the Commission services considered when the measures announced 
or decided by the  government enter into force and their  announced expiry  date.  In several 
Member States, energy measures are planned to expire in the course of 2023 (some as early 
as the end of the first quarter of the year).18 Yet, if energy prices remain high, Member States 
may decide to prolong existing measures or to implement new ones. As a result, for the euro 
area as a whole and for a number of Member States, the budgetary cost of energy measures in 
2023 may be underestimated.  

Graph 3.7 

Budgetary cost of energy measures in 2022-2023 (% of GDP) 

Source: European Commission 2022 autumn forecast 

18 The current projection for the budgetary cost of measures related to the high energy prices is largely driven by 
a few large Member States that have already announced significant full-year policy packages. 

23 

 
 
 
 
 
 
                                                           
The  Commission  services  have  estimated  the  potential  additional  budgetary  cost  of 
energy measures if the existing measures were to be extended throughout 2023. This is 
necessarily  a  highly  stylised  exercise,  using  the  autumn  forecast  as  a  starting  point,  and 
disregarding the impact that the extension of energy measures could have on economic activity 
and inflation. This exercise indicates that, if energy measures had to be kept in place for the 
full year 2023, their cost could increase by an additional 1% of GDP in the euro area, reaching 
close to 2% of GDP in 2023, significantly higher than in 2022 (Graph 3.7).19 The picture differs 
across Member States, depending on the specificities of the measures known to date (in force, 
adopted  or  announced),  including  their  generosity  and  stated  expiry  dates.  This  exercise 
illustrates how energy  measures  may impact  fiscal  developments  and raises attention to  the 
importance of Member States adopting measures that are fiscally affordable, targeted to the 
most vulnerable and providing incentives to reduce energy consumption. 

19 For  some  specific  Member  States,  this  estimate  also  assumes  the  effective  use  of  budgetary  appropriations 
currently foreseen by some governments to finance additional energy measures in 2023, the details of which have 
not  yet  been  specified.  Its  budgetary  impact  has  already  been  reflected  in  the  projections  for  the  general 
government deficit and debt in 2023 underlying this autumn forecast, but  not in the overall budgetary cost of 
energy measures in that year. 

24 

 
 
 
 
 
                                                           
Commission assessment of the 2023 Draft Budgetary Plans 

Most euro area Member States submitted their Draft Budgetary Plans by 15 October, in 
line with Article 6 of Regulation (EU) No 473/2013.20 The Draft Budgetary Plans of Italy 
and Latvia were submitted by the outgoing governments on the basis of unchanged policies in 
view  of  their  political  cycle  (elections  on  25  September  and  1  October,  respectively). 
Therefore, the figures shown for the 2023 government deficit and other fiscal variables in those 
two Draft Budgetary Plans do not represent policy targets. In the case of Italy, the Commission 
is  not  publishing  an  Opinion  on  the  no-policy  change  2023  Draft  Budgetary  Plan  that  was 
submitted by the outgoing government on 10 October. Instead, the Commission will publish in 
due course an opinion on the updated Draft Budgetary Plan for 2023 that the new government 
is  expected  to  submit  shortly.  Latvia  is  invited  to  submit  to  the  Commission  and  to  the 
Eurogroup an updated Draft Budgetary Plan as soon as possible, and at least one month before 
the draft budget law is planned to be adopted by the national parliament.  

This was the first time the Commission has assessed a Draft Budgetary Plan of Croatia. 
Since Croatia will join the euro area in a matter of weeks, on 1 January 2023, the Commission 
welcomes  the  decision  by  Croatia  to  have  transmitted  its  Draft  Budgetary  Plan  as  if  it  was 
already a euro area member. 

The  Commission  assessed  the  consistency  of  the  2023  Draft  Budgetary  Plans  with  the 
Council Recommendations of 12 July 2022. The Council recommended that Member States’ 
fiscal policy should take into account continued temporary and targeted support to households 
most vulnerable to energy price hikes and to people fleeing Ukraine. In addition, the Council 
recommended Member States to expand public investment for the green and digital transitions, 
and for energy security taking into account the REPowerEU initiative, including by making 
use of the RRF and other Union funds. Member States should also stand ready to adjust current 
spending to the evolving situation. Moreover, the Council Recommendations distinguished the 
Member States on the basis of their fiscal space as illustrated by their debt levels: 

  High debt Member States were recommended to ensure prudent fiscal policy, in particular 
by limiting the growth of nationally financed primary current expenditure below medium-
term potential output growth. For the period beyond 2023, high debt Member States were 
recommended  to  pursue  a  fiscal  policy  aimed  at  achieving  prudent  medium-term  fiscal 
positions and ensuring credible and gradual debt reduction and fiscal sustainability in the 
medium term through gradual consolidation, investment and reforms.  

  Low and medium-term debt Member States should ensure that in  2023 the growth  of 
nationally  financed  primary  current  expenditure  is  in  line  with  an  overall  neutral  policy 
stance. For the period beyond 2023, they should pursue a fiscal policy aimed at achieving 
prudent medium-term fiscal positions. 

20 In accordance with Article 6(3)(d) of Regulation 473/2013, Greece, Ireland and the Netherlands provided in 
their DBPs quantitative estimates on the distributional effects of the planned budgetary measures. Malta presented 
distributional  analysis  of  the  measures  already  implemented  with  the  aim  of  cushioning  the  impact  of  high 
inflation.  

25 

 
 
 
                                                           
The following is a summary of the Commission Opinions.21 The Opinions are based on the 
Commission  2022  autumn  forecast  including  the  information  incorporated  in  the  Draft 
Budgetary Plans:  

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

  For  France,  Greece  and  Spain,  the  growth  of  nationally  financed  primary  current 
expenditure is projected to be below the medium-term potential output growth, taking 
into account temporary and targeted support to households and firms most vulnerable 
to energy price hikes and the cost to assist people fleeing Ukraine, as recommended by 
the Council. That is not the case for Belgium, where the growth of nationally financed 
current  expenditure  exceeds  potential  growth,  taking  into  account  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and to 
people  fleeing  Ukraine.  For  Portugal,  the  growth  of  nationally  financed  current 
expenditure  is  projected  to  be  close  to  the  medium-term  potential  output  growth, 
assuming  the  planned  reduction  in  measures  in  response  to  high  energy  prices, 
including in temporary and targeted support to vulnerable households and firms.   

  All Member States plan to finance public investment for the green and digital transitions 
and for energy security, including by making use of the RRF and other EU funds, as 
recommended by the Council. Total public investment as a percentage of GDP is set to 
either increase or remain stable in 2023 with respect to 2022 in all Member States but 
France  and  Greece.  Belgium,  France,  Greece,  Portugal  and  Spain  plan  to  preserve 
nationally financed investment, as it is projected to increase or remain stable from 2022 
to 2023. The contribution of expenditure financed by RRF grants and EU funds to the 
overall fiscal stance is expansionary or neutral in all Member States, except in France 
and Greece.  

  Overall, the Commission is of the Opinion that the Draft Budgetary Plans for France, 
Greece  and  Spain  are  in  line  with  the  fiscal  guidance  contained  in  the  Council 
Recommendation  of  12  July  2022,  while  that  of  Belgium  is  partly  in  line  with  the 
Recommendation,  and  that  of  Portugal  risks  being  only  partly  in  line  with  the 
Recommendation. 

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

  The overall fiscal policy stance in 2023 varies across Member States:  

o  Contractionary (between +0.5% and +2.3% of GDP) 22: Latvia, Ireland, Cyprus 

and Malta  

o  Broadly  neutral  (between  -0.1%  and  -0.2%  of  GDP):  Croatia,  Austria  and 

Finland  

21 The Opinions are accompanied by a Statistical Annex, including the necessary information to assess Member 
States’ plans. 

22 A negative (positive) sign corresponds to an excess (shortfall) of primary expenditure growth compared with 
medium-term potential, indicating an expansionary (contractionary) fiscal policy. 

26 

 
 
 
                                                           
o  Expansionary  (between  -0.4%  and  -2.6%  of  GDP):  Lithuania,  Germany, 

Estonia, Luxembourg, the Netherlands, Slovenia and Slovakia  

  The contribution of their nationally financed current expenditure (net of new revenue 

measures) to the overall fiscal stance in 2023 also varies across Member States:  

o  Contractionary  (between  +0.4  and  +1.7  percentage  points):  Croatia,  Latvia, 

Ireland, Cyprus and Malta  

o  Broadly neutral (around zero percentage points): Finland and the Netherlands 

o  Expansionary (between -0.3% and -1.7 percentage points): Austria, Lithuania, 
Germany, Estonia, Luxembourg, Slovenia and Slovakia. In all cases, this is not 
the  result  of  temporary  and  targeted  support  to  households  and  firms  most 
vulnerable to energy price hikes and to people fleeing Ukraine.23  

  All Member States plan to finance public investment for the green and digital transitions 
and for energy security, including by making use of the RRF and other EU funds, as 
recommended by the Council. Total public investment as a percentage of GDP is set to 
either increase or remain stable in 2023 with respect to 2022 in all low/medium debt 
Member  States.  All  Member  States  are  planning  to  preserve  nationally  financed 
investment,  with  the  exception  of  Cyprus,  Latvia  and  Malta  where  it  is  projected  to 
decrease from 2022 to 2023. The contribution of expenditure financed by RRF grants 
and  EU  funds  to  the  overall  fiscal  stance  is  expansionary  or  neutral  in  all  Member 
States, except Germany.  

  Overall, the Commission is of the Opinion that the Draft Budgetary Plans for Croatia, 
Cyprus, Finland, Ireland, Latvia and Malta are in line with the fiscal guidance contained 
in the Council Recommendation of 12 July 2022. The Draft Budgetary Plans of Austria, 
Lithuania, Germany, Estonia, Luxembourg, the Netherlands, Slovenia and Slovakia are 
partly in line with the Recommendation. 

While  Member  States  rapidly  deployed  energy  measures  as  part  of  the  emergency  policy 
response to the exceptional energy price hikes, a prolongation of existing and/or an enactment 
of new support measures in response to high energy prices would contribute to higher growth 
in net nationally financed current expenditure and to an increase in the projected government 
deficit  and  debt  in  2023.  Therefore,  it  is  important  that  Member  States  better  focus  such 
measures to the most vulnerable households and exposed firms, to preserve incentives to reduce 
energy demand, and to be withdrawn as energy price pressures diminish. 

The  Commission 
invites  Belgium,  Portugal,  Austria,  Lithuania,  Germany,  Estonia, 
Luxembourg, the Netherlands, Slovenia and Slovakia to take the necessary measures within 
the  national  budgetary  process  to  ensure  that  the  2023  budget  is  consistent  with  the 
Recommendations adopted by the Council on 12 July 2022. 

The  Draft  Budgetary  Plans  generally  include  measures  that  go  in  the  direction  of 
strengthening  the  quality  and  composition  of  public  finances  and  contributing  to  a 
sustainable and inclusive recovery. This includes growth-enhancing investment, in particular 

23 In the cases of Slovakia and Slovenia, the energy support measures in Draft Budgetary Plans are not sufficiently 
specified. Hence, the expansionary stance cannot at this stage be considered the result of temporary and targeted 
support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine. 

27 

 
 
 
                                                           
supporting  the  green  and  digital  transition  as  well  as  energy  security.  A  comprehensive 
description  of  progress  made  with 
the  country-specific 
recommendations will be made in the 2023 Country Report and assessed in the context of the 
country-specific recommendations to be proposed by the Commission in spring 2023. 

implementation  of 

the 

28 

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

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft Budgetary Plan of  Austria, the overall fiscal policy stance is estimated to be  broadly 
neutral. This includes an expansionary contribution to the overall fiscal stance from nationally 
financed current expenditure. This expansionary contribution is not the result of temporary and 
targeted support to households and firms most vulnerable to energy price hikes and the cost to 
assist  people  fleeing  Ukraine.  Overall,  the  growth  of  nationally  financed  primary  current 
expenditure is not in line with the recommendation of the Council. Austria plans to finance 
additional investment through the RRF and other EU funds and it also  preserves nationally-
financed investment. It plans to finance public investment for the green and digital transitions, 
and for energy security. Overall, the Commission is of the opinion that the Draft Budgetary 
Plan  for  Austria  is  partly  in  line  with  the  fiscal  guidance  contained  in  the  Council 
recommendation  of  12  July  2022.  The  Commission  invites  Austria  to  take  the  necessary 
measures within the national budgetary process to ensure that the 2023 budget is consistent 
with  the  recommendation  adopted  by  the  Council  on  12  July  2022.  While  Austria  rapidly 
deployed energy measures as part of the emergency policy response to the exceptional energy 
price  hikes,  a  prolongation  of  existing  and/or  an  enactment  of  new  support  measures  in 
response to high energy prices would contribute to higher growth in net  nationally financed 
current expenditure and to an increase in the projected government deficit and debt in 2023. 
Therefore, it is important that Member States better focus such measures to the most vulnerable 
households  and  exposed  firms,  to  preserve  incentives  to  reduce  energy  demand,  and  to  be 
withdrawn  as  energy  price  pressures  diminish.  The  Commission  is  also  of  the  opinion  that 
Austria has made some progress with regard to the structural part of the fiscal recommendations 
contained  in  the  Council  Recommendation  of  12  July  2022  in  the  context  of  the  European 
Semester and thus invites the authorities to accelerate progress. A comprehensive description 
of progress made with the implementation of the country-specific recommendations will be 
made  in  the  2023  Country  Report  and  assessed  in  the  context  of  the  country-specific 
recommendations to be proposed by the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft Budgetary Plan of Belgium, the growth of nationally-financed current expenditure is not 
projected  to  be  below  the  medium-term  potential  output  growth.  This  is  not  the  result  of 
temporary and targeted support to households and firms most vulnerable to energy prices and 
the cost to assist people fleeing Ukraine. Therefore, the growth of nationally financed primary 
current expenditure is not in line with the recommendation of the Council. Belgium plans to 
finance  additional  investment  through  the  RRF  and  other  EU  funds  and  it  also  preserves 
nationally-financed investment. It plans to finance public investment for the green and digital 
transitions, and for energy security. Overall, the Commission is of the opinion that the Draft 
Budgetary Plan for Belgium is partly in line with the fiscal guidance contained in the Council 
recommendation  of  12  July  2022.  The  Commission  invites  Belgium  to  take  the  necessary 
measures within the national budgetary process to ensure that the 2023 budget is consistent 
with  the  recommendation  adopted  by  the  Council  on  12  July  2022.  While  Belgium  rapidly 
deployed energy measures as part of the emergency policy response to the exceptional energy 
price  hikes,  a  prolongation  of  existing  and/or  an  enactment  of  new  support  measures  in 
response to high energy prices would contribute to higher growth in net nationally financed 
current expenditure and to an increase in the projected government deficit and debt in 2023. 
Therefore, it is important that Member States better focus such measures to the most vulnerable 

29 

 
 
 
households  and  exposed  firms,  to  preserve  incentives  to  reduce  energy  demand,  and  to  be 
withdrawn  as  energy  price  pressures  diminish.  The  Commission  is  also  of  the  opinion  that 
Belgium  has  made  limited  progress  with  regard  to  the  structural  part  of  the  fiscal 
recommendations contained in the Council Recommendation of 12 July 2022 in the context of 
the European Semester and thus invites the authorities to accelerate progress. A comprehensive 
description  of  progress  made  with 
the  country-specific 
recommendations will be made in the 2023 Country Report and assessed in the context of the 
country-specific recommendations to be proposed by the Commission in spring 2023. 

implementation  of 

the 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft Budgetary Plan of  Croatia, the overall fiscal policy stance is estimated to be broadly 
neutral. This includes a contractionary contribution to the overall fiscal stance from nationally 
financed  current  expenditure.  Overall,  given  the  evolving  situation,  in  particular  the 
expansionary fiscal stance in 2022 and the high inflationary pressures, the growth of nationally 
financed  primary  current  expenditure  is  in  line  with  the  recommendation  of  the  Council. 
Croatia plans to finance additional investment through RRF and other EU funds, and it also 
preserves nationally financed investment. It plans to finance public investment and investment 
grants for the green and digital transitions, and for energy security. Overall, the Commission is 
of  the  opinion  that  the  Draft  Budgetary  Plan  for  Croatia  is  in  line  with  the  fiscal  guidance 
contained in  the Council recommendation of 12  July 2022.  While Croatia rapidly deployed 
energy measures as part of the emergency policy response to the exceptional energy price hikes, 
a prolongation of existing and/or an enactment of new support measures in response to high 
energy prices would contribute to higher growth in net nationally financed current expenditure 
and  to  an  increase  in  the  projected  government  deficit  and  debt  in  2023.  Therefore,  it  is 
important that Member States better focus such measures to the most vulnerable households 
and exposed firms, to preserve incentives to reduce energy demand, and to be withdrawn as 
energy  price  pressures  diminish.  A  comprehensive  description  of  progress  made  with  the 
implementation of the country-specific recommendations will be made in the 2023 Country 
Report and assessed in the context of the country-specific recommendations to be proposed by 
the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Cyprus,  the  overall  fiscal  policy  stance  is  estimated  to  be 
contractionary.  This  includes  a  contractionary  contribution  to  the  overall  fiscal  stance  from 
nationally-financed current expenditure. Overall, given the evolving situation, in particular the 
expansionary fiscal stance in 2022 and the high inflationary pressures, the growth of nationally 
financed  primary  current  expenditure  is  in  line  with  the  recommendation  of  the  Council. 
Cyprus plans to finance additional investment through the RRF and other EU funds, while it 
does not preserve nationally financed investment. It plans to finance public investment for the 
green and digital transitions, and for energy security. Overall, the Commission is of the opinion 
that the Draft Budgetary Plan for Cyprus is in line with the fiscal guidance contained in the 
Council recommendation of 12 July 2022. A comprehensive description of progress made with 
the implementation of the country-specific recommendations will be made in the 2023 Country 
Report and assessed in the context of the country-specific recommendations to be proposed by 
the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Estonia,  the  overall  fiscal  policy  stance  is  estimated  to  be 
expansionary.  This  includes  an  expansionary  contribution  to  the  overall  fiscal  stance  from 

30 

 
 
 
nationally-financed  current  expenditure.  This  expansionary  contribution  is  not  the  result  of 
temporary and targeted support to households and firms most vulnerable to energy price hikes 
and  the  cost  to  assist  people  fleeing  Ukraine.  Overall,  the  growth  of  nationally-financed 
primary current expenditure is not in line with the recommendation of the Council.  Estonia 
plans to finance additional investment through the RRF and other EU funds, and it also plans 
to preserve nationally-financed investment. It plans to finance public investment for the green 
and digital transitions, and for energy security. Overall, the Commission is of the opinion that 
the Draft Budgetary Plan for Estonia is partly in line with the fiscal guidance contained in the 
Council  recommendation  of  12  July  2022.  The  Commission  invites  Estonia  to  take  the 
necessary measures within the national  budgetary  process  to  ensure that the 2023 budget  is 
consistent with the recommendation adopted by the Council on 12 July 2022. While Estonia 
rapidly deployed energy measures as part of the emergency policy response to the exceptional 
energy price hikes, a prolongation of existing and/or an enactment of new support measures in 
response to high energy prices would contribute to higher growth in net nationally-financed 
current expenditure and to an increase in the projected government deficit and debt in 2023. 
Therefore, it is important that Member States better focus such measures to the most vulnerable 
households  and  exposed  firms,  to  preserve  incentives  to  reduce  energy  demand,  and  to  be 
withdrawn as energy price pressures diminish. A comprehensive description of progress made 
with the implementation of the country-specific recommendations will be made in the 2023 
Country  Report  and  assessed  in  the  context  of  the  country-specific  recommendations  to  be 
proposed by the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft Budgetary Plan of Finland, the overall fiscal policy stance is estimated to be broadly 
neutral. This includes an equally neutral contribution to the overall fiscal stance from nationally 
financed  current  expenditure.  Overall,  the  growth  of  nationally  financed  primary  current 
expenditure  is  in  line  with  the  recommendation  of  the  Council.  Finland  plans  to  finance 
additional investment through the RRF and other EU funds, and it also preserves nationally 
financed investment. The country plans to finance public investment for the green transition, 
and for energy security. Overall, the Commission is of the opinion that the Draft Budgetary 
Plan for Finland is in line with the fiscal guidance contained in the Council recommendation 
of 12 July 2022. While Finland rapidly deployed energy measures as part of the emergency 
policy  response  to  the  exceptional  energy  price  hikes,  a  prolongation  of  existing  and/or  an 
enactment  of  new  support  measures  in  response  to  high  energy  prices  would  contribute  to 
higher growth in net nationally financed current expenditure and to an increase in the projected 
government deficit and debt in 2023. Therefore, it is important that Member States better focus 
such measures to the most vulnerable households and exposed firms, to preserve incentives to 
reduce  energy  demand,  and  to  be  withdrawn  as  energy  price  pressures  diminish.  The 
Commission is also of the opinion that Finland has not yet made progress with regard to the 
structural part of the fiscal recommendations contained in the Council Recommendation of 12 
July 2022 in the context of the European Semester and thus invites the authorities to accelerate 
progress.  A  comprehensive  description  of  progress  made  with  the  implementation  of  the 
country-specific recommendations will be made in the 2023 Country Report and assessed in 
the  context  of  the  country-specific  recommendations  to  be  proposed  by  the  Commission  in 
spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  France,  the  growth  of  nationally  financed  current  expenditure  is 

31 

 
 
 
projected  to  be  below  the  medium-term  potential  output  growth.  Therefore,  the  growth  of 
nationally  financed  primary  current  expenditure  is  in  line  with  the  recommendation  of  the 
Council. France plans to finance additional investment through the Recovery and Resilience 
Facility and other EU funds and it also preserves nationally financed investment.  It plans to 
finance public investment for the green and digital transitions, and for energy security. Overall, 
the Commission is of the opinion that the Draft Budgetary Plan for France is in line with the 
fiscal  guidance  contained  in  the  Council  recommendation  of  12  July  2022.  While  France 
rapidly deployed energy measures as part of the emergency policy response to the exceptional 
energy price hikes, a prolongation of existing and/or an enactment of new support measures in 
response to high energy prices would contribute to higher growth in net nationally financed 
current expenditure and to an increase in the projected government deficit and debt in 2023. 
Therefore, it is important that Member States better focus such measures to the most vulnerable 
households  and  exposed  firms,  to  preserve  incentives  to  reduce  energy  demand,  and  to  be 
withdrawn  as  energy  price  pressures  diminish.  The  Commission  is  also  of  the  opinion  that 
France  has  not  yet  made  progress  with  regard  to  the  structural  part  of  the  fiscal 
recommendations contained in the Council Recommendation of 12 July 2022 in the context of 
the European Semester and thus invites the authorities to accelerate progress. A comprehensive 
the  country-specific 
description  of  progress  made  with 
recommendations will be made in the 2023 Country Report and assessed in the context of the 
country-specific recommendations to be proposed by the Commission in spring 2023. 

implementation  of 

the 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Germany,  the  overall  fiscal  policy  stance  is  estimated  to  be 
expansionary in a situation of high inflation. This includes an expansionary contribution to the 
overall  fiscal  stance  from  nationally  financed  current  expenditure.  This  expansionary 
contribution is not the result of temporary and targeted support to households and firms most 
vulnerable  to  energy  price  hikes  and  the  cost  to  assist  people  fleeing  Ukraine.  Overall,  the 
growth  of  nationally  financed  primary  current  expenditure  is  not  in  line  with  the 
recommendation of the Council. Germany plans to finance additional investment through the 
RRF  and  other  EU  funds  and  it  also  preserves  nationally  financed  investment.  It  plans  to 
finance investment grants and various other measures including tax incentives  for the green 
and digital transitions, and for energy security. Overall, the Commission is of the opinion that 
the Draft Budgetary Plan for Germany is partly in line with the fiscal guidance contained in the 
Council  recommendation  of  12  July  2022.  The  Commission  invites  Germany  to  take  the 
necessary measures within the national  budgetary  process  to  ensure that the 2023 budget  is 
consistent with the recommendation adopted by the Council on 12 July 2022. While Germany 
rapidly deployed energy measures as part of the emergency policy response to the exceptional 
energy price hikes, a prolongation of existing and/or an enactment of new support measures in 
response to high energy prices would contribute to higher growth in net nationally financed 
current expenditure and to an increase in the projected government deficit and debt in 2023. 
Therefore, it is important that Member States better focus such measures to the most vulnerable 
households  and  exposed  firms,  to  preserve  incentives  to  reduce  energy  demand,  and  to  be 
withdrawn  as  energy  price  pressures  diminish.  The  Commission  is  also  of  the  opinion  that 
Germany  has  made  limited  progress  with  regard  to  the  structural  part  of  the  fiscal 
recommendations contained in the Council Recommendation of 12 July 2022 in the context of 
the European Semester and thus invites the authorities to accelerate progress. A comprehensive 
the  country-specific 
description  of  progress  made  with 

implementation  of 

the 

32 

 
 
 
recommendations will be made in the 2023 Country Report and assessed in the context of the 
country-specific recommendations to be proposed by the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Greece,  the  growth  of  nationally-financed  current  expenditure  is 
projected  to  be  below  the  medium-term  potential  output  growth.    Therefore,  the  growth  of 
nationally  financed  primary  current  expenditure  is  in  line  with  the  recommendation  of  the 
Council. Greece plans to finance additional investment through the RRF and other EU funds 
and it plans to preserve nationally-financed investment. It plans to finance public investment 
for the green and digital transitions. Overall, the Commission is of the opinion that the Draft 
Budgetary  Plan  for  Greece  is  in  line  with  the  fiscal  guidance  contained  in  the  Council 
recommendation of 12 July 2022. While Greece rapidly deployed energy measures as part of 
the  emergency  policy  response  to  the  exceptional  energy  price  hikes,  an  enactment  of  new 
support measures in response to high energy prices would contribute to higher growth in net 
nationally financed current expenditure and to an increase in the projected government deficit 
and debt in 2023. Therefore, it is important that Member States better focus such measures to 
the most vulnerable households and  exposed firms,  to  preserve incentives to  reduce energy 
demand, and to be withdrawn as energy price pressures diminish. The Commission is also of 
the opinion that Greece has made some progress with regard to the structural part of the fiscal 
recommendations contained in the Council Recommendation of 12 July 2022 in the context of 
the European Semester and thus invites the authorities to accelerate progress. A comprehensive 
the  country-specific 
description  of  progress  made  with 
recommendations will be made in the 2023 Country Report and assessed in the context of the 
country-specific recommendations to be proposed by the Commission in spring 2023. 

implementation  of 

the 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Ireland,  the  overall  fiscal  policy  stance  is  estimated  to  be 
contractionary.  This  includes  a  contractionary  contribution  to  the  overall  fiscal  stance  from 
nationally financed current expenditure. Overall, given the evolving situation, in particular the 
expansionary fiscal stance in 2022 and the high inflationary pressures, the growth of nationally 
financed primary current expenditure is in line with the recommendation of the Council. Ireland 
plans  to  finance  additional  investment  through  the  RRF  and  other  EU  funds  and  it  also 
preserves nationally financed investment. It plans to finance public investment for the green 
and digital transitions, and for energy security. Overall, the Commission is of the opinion that 
the Draft Budgetary Plan for Ireland is in line with the fiscal guidance contained in the Council 
recommendation of 12 July 2022. While Ireland rapidly deployed energy measures as part of 
the emergency policy response to the exceptional energy price hikes, a prolongation of existing 
and/or  an  enactment  of  new  support  measures  in  response  to  high  energy  prices  would 
contribute to higher growth in net nationally financed current expenditure and to an increase in 
the  projected  government  deficit  and  debt  in  2023.  Therefore,  it  is  important  that  Member 
States  better  focus  such  measures  to  the  most  vulnerable  households  and  exposed  firms,  to 
preserve incentives to reduce energy demand, and to be withdrawn as energy price pressures 
diminish. The Commission is also of the opinion that Ireland has not yet made progress with 
regard  to  the  structural  part  of  the  fiscal  recommendations  contained  in  the  Council 
Recommendation of 12 July 2022 in the context of the European Semester and thus invites the 
authorities  to  accelerate  progress.  A  comprehensive  description  of  progress  made  with  the 
implementation of the country-specific recommendations will be made in the 2023 Country 

33 

 
 
 
Report and assessed in the context of the country-specific recommendations to be proposed by 
the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Latvia,  the  overall  fiscal  policy  stance  is  estimated  to  be 
contractionary. This  included a  contractionary contribution  to  the overall  fiscal  stance from 
nationally-financed current expenditure. Overall, given the evolving situation, in particular the 
expansionary fiscal stance in 2022 and the high inflationary pressures, the growth of nationally 
financed primary current expenditure is in line with the recommendation of the Council.  Latvia 
plans to finance additional investment through the RRF and other EU funds, while it does not 
preserve nationally financed investment. It plans to finance public investment for the green and 
digital transitions. Overall, the Commission is of the opinion that the Draft Budgetary Plan for 
Latvia, which is based on a no-policy-change assumption, is in line with the fiscal guidance 
contained  in  the  Council  recommendation  of  12  July  2022.  While  Latvia  rapidly  deployed 
energy measures as part of the emergency policy response to the exceptional energy price hikes, 
a prolongation of existing and/or an enactment of new support measures in response to high 
energy prices would contribute to higher growth in net nationally financed current expenditure 
and  to  an  increase  in  the  projected  government  deficit  and  debt  in  2023.  Therefore,  it  is 
important that Member States better focus such measures to the most vulnerable households 
and exposed firms, to preserve incentives to reduce energy demand, and to be withdrawn as 
energy price pressures diminish. The Commission is also of the opinion that Latvia has made 
limited progress with regard to the structural part of the fiscal recommendations contained in 
the Council Recommendation of 12 July 2022 in the context of the European Semester and 
thus  invites  the  authorities  to  accelerate  progress.  A  comprehensive  description  of  progress 
made with the implementation of the country-specific recommendations will be made in the 
2023 Country Report and assessed in the context of the country-specific recommendations to 
be proposed by the Commission in spring 2023. 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, Latvia is invited to submit to the Commission and to the Eurogroup an 
updated Draft Budgetary Plan.  

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Lithuania,  the  overall  fiscal  policy  stance  is  estimated  to  be 
expansionary, in a situation of high inflation. This includes an expansionary contribution to the 
overall  fiscal  stance  from  nationally  financed  current  expenditure.  This  expansionary 
contribution is not the result of temporary and targeted support to households and firms most 
vulnerable  to  energy  price  hikes  and  the  cost  to  assist  people  fleeing  Ukraine.  Overall,  the 
growth  of  nationally  financed  primary  current  expenditure  is  not  in  line  with  the 
recommendation of the Council. Lithuania plans to finance additional investment through the 
RRF  and  other  EU  funds  and  it  also  preserves  nationally  financed  investment.  It  plans  to 
finance public investment for the green and digital transitions, and for energy security. Overall, 
the Commission is of the opinion that the Draft Budgetary Plan for Lithuania is partly in line 
with  the  fiscal  guidance  contained  in  the  Council  recommendation  of  12  July  2022.  The 
Commission invites Lithuania to take the necessary measures within the national budgetary 
process to ensure that the 2023 budget is consistent with the recommendation adopted by the 
Council on 12 July 2022. While Lithuania rapidly  deployed  energy measures  as part of the 
emergency policy response to the exceptional energy price hikes,  a prolongation of existing 
and/or  an  enactment  of  new  support  measures  in  response  to  high  energy  prices  would 

34 

 
 
 
contribute to higher growth in net nationally financed current expenditure and to an increase in 
the  projected  government  deficit  and  debt  in  2023.  Therefore,  it  is  important  that  Member 
States  better  focus  such  measures  to  the  most  vulnerable  households  and  exposed  firms,  to 
preserve incentives to reduce energy demand, and to be withdrawn as energy price pressures 
diminish. The Commission is also of the opinion that Lithuania has made some progress with 
regard  to  the  structural  part  of  the  fiscal  recommendations  contained  in  the  Council 
Recommendation of 12 July 2022 in the context of the European Semester and thus invites the 
authorities  to  accelerate  progress.  A  comprehensive  description  of  progress  made  with  the 
implementation of the country-specific recommendations will be made in the 2023 Country 
Report and assessed in the context of the country-specific recommendations to be proposed by 
the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Luxembourg,  the  overall  fiscal  policy  stance  is  estimated  to  be 
expansionary in a situation of high inflation. This includes an expansionary contribution to the 
overall  fiscal  stance  from  nationally  financed  current  expenditure.  This  expansionary 
contribution is not the result of temporary and targeted support to households and firms most 
vulnerable  to  energy  price  hikes  and  the  cost  to  assist  people  fleeing  Ukraine.  Overall,  the 
growth  of  nationally  financed  primary  current  expenditure  is  not  in  line  with  the 
recommendation of the Council. Luxembourg plans to finance additional investment through 
the RRF and other EU funds and it also preserves nationally financed investment. It plans to 
finance public investment for the green and digital transitions. Overall, the Commission is of 
the  opinion  that  the  Draft  Budgetary  Plan  for  Luxembourg  is  partly  in  line  with  the  fiscal 
guidance contained in the Council recommendation of 12 July 2022. The Commission invites 
Luxembourg to take the necessary measures within the national budgetary process to ensure 
that the 2023 budget is consistent with the recommendation adopted by the Council on 12 July 
2022. While Luxembourg rapidly deployed energy measures as part of the emergency policy 
response to the exceptional energy price hikes, a prolongation of existing and/or an enactment 
of new support measures in response to high energy prices would contribute to higher growth 
in net nationally financed current expenditure and to an increase in the projected government 
deficit  and  debt  in  2023.  Therefore,  it  is  important  that  Member  States  better  focus  such 
measures to the most vulnerable households and exposed firms, to preserve incentives to reduce 
energy demand, and to be withdrawn as energy price pressures diminish. The Commission is 
also of the opinion that Luxembourg has made limited progress with regard to the structural 
part of the fiscal recommendations contained in the Council Recommendation of 12 July 2022 
in the context of the European Semester and thus invites the authorities to accelerate progress. 
A comprehensive description of progress made with the implementation of the country-specific 
recommendations will be made in the 2023 Country Report and assessed in the context of the 
country-specific recommendations to be proposed by the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Malta,  the  overall  fiscal  policy  stance  is  estimated  to  be 
contractionary.  This  includes  a  contractionary  contribution  to  the  overall  fiscal  stance  from 
nationally financed current expenditure. Overall, given the evolving situation, in particular the 
expansionary fiscal stance in 2022 and the high inflationary pressures, the growth of nationally 
financed primary current expenditure is in line with the recommendation of the Council. Malta 
plans to finance additional investment through the Recovery and Resilience Facility and other 
EU funds, while it does not preserve nationally financed investment. It plans to finance public 

35 

 
 
 
investment  for  the  green  and  digital  transitions,  and  for  energy  security.  Overall,  the 
Commission is of the opinion that the Draft Budgetary Plan for Malta is in line with the fiscal 
guidance  contained  in  the  Council  recommendation  of  12  July  2022.  While  Malta  rapidly 
deployed energy measures as part of the emergency policy response to the exceptional energy 
price  hikes,  a  prolongation  of  existing  and/or  an  enactment  of  new  support  measures  in 
response to high energy prices would contribute to higher growth in net nationally financed 
current expenditure and to an increase in the projected government deficit and debt in 2023. 
Therefore, it is important that Member States better focus such measures to the most vulnerable 
households  and  exposed  firms,  to  preserve  incentives  to  reduce  energy  demand,  and  to  be 
withdrawn as energy price pressures diminish. A comprehensive description of progress made 
with the implementation of the country-specific recommendations will be made in the 2023 
Country  Report  and  assessed  in  the  context  of  the  country-specific  recommendations  to  be 
proposed by the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft Budgetary Plan of the Netherlands, the overall fiscal policy stance is estimated to be 
expansionary in a situation of high inflation.  This expansionary fiscal stance is not the result 
of temporary and targeted support to  households and firms  most vulnerable to  energy price 
hikes and the cost to assist people fleeing Ukraine. Overall, the expansionary fiscal stance is 
not in line with the recommendation of the Council. The Netherlands plans to finance additional 
investment through the RRF and other EU funds and it plans to preserve nationally-financed 
investment.  It  plans  to  finance  investment  for  the  green  and  digital  transitions,  including 
through dedicated funds. Overall, the Commission is of the opinion that the Draft Budgetary 
Plan  for  the  Netherlands  is  partly  in  line  with  the  fiscal  guidance  contained  in  the  Council 
recommendation  of  12  July  2022.  The  Commission  invites  the  Netherlands  to  take  the 
necessary measures within the national  budgetary  process  to  ensure that the 2023 budget  is 
consistent  with  the  recommendation  adopted  by  the  Council  on  12  July  2022.  While  the 
Netherlands rapidly deployed energy measures as part of the emergency policy response to the 
exceptional energy price hikes, a prolongation of existing and/or an enactment of new support 
measures in response to high energy prices would contribute to higher growth in net nationally 
financed current expenditure and to an increase in the projected government deficit and debt in 
2023. Therefore, it is  important  that Member States better focus such measures to  the most 
vulnerable households and exposed firms, to preserve incentives to reduce energy demand, and 
to be withdrawn as energy price pressures diminish. The Commission is also of the opinion 
that the Netherlands has made limited progress with regard to the structural part of the fiscal 
recommendations contained in the Council Recommendation of 12 July 2022 in the context of 
the European Semester and thus invites the authorities to accelerate progress. A comprehensive 
description  of  progress  made  with 
the  country-specific 
recommendations will be made in the 2023 Country Report and assessed in the context of the 
country-specific recommendations to be proposed by the Commission in spring 2023. 

implementation  of 

the 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary Plan of  Portugal, the growth  of nationally  financed current  expenditure is 
projected  to  be  close  to  the  medium-term  potential  output  growth,  assuming  the  planned 
reduction in measures in response to high energy prices, including in temporary and targeted 
support  to  vulnerable  households  and  firms.  Therefore,  the  growth  of  nationally  financed 
primary current expenditure risks not being in line with the recommendation of the Council. 
Portugal plans to finance additional investment through the RRF and other EU funds and it also 

36 

 
 
 
preserves nationally financed investment. The country plans to finance public investment in 
the green and digital transitions, and for energy security. Overall, the Commission is of the 
opinion that the Draft Budgetary Plan for Portugal risks being only partly in line with the fiscal 
guidance contained in the Council recommendation of 12 July 2022. The Commission invites 
Portugal to take the necessary measures within the national budgetary process to ensure that 
the  2023  budget  is  consistent  with  the  recommendation  adopted  by  the  Council  on  12  July 
2022.  While  Portugal  rapidly  deployed  energy  measures  as  part  of  the  emergency  policy 
response to the exceptional energy price hikes, a prolongation of existing and/or an enactment 
of new support measures in response to high energy prices would contribute to higher growth 
in net nationally financed current expenditure and to an increase in the projected government 
deficit  and  debt  in  2023.  Therefore,  it  is  important  that  Member  States  better  focus  such 
measures to the most vulnerable households and exposed firms, to preserve incentives to reduce 
energy demand, and to be withdrawn as energy price pressures diminish. The Commission is 
also of the opinion that Portugal has made limited progress with regard to the structural part of 
the fiscal recommendations contained in the Council Recommendation of 12 July 2022 in the 
context  of  the  European  Semester  and  thus  invites  the  authorities  to  accelerate  progress.  A 
comprehensive description of progress made with the implementation of the country-specific 
recommendations will be made in the 2023 Country Report and assessed in the context of the 
country-specific recommendations to be proposed by the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Slovakia,  the  overall  fiscal  policy  stance  is  estimated  to  be 
expansionary in a situation of high inflation. This includes an expansionary contribution to the 
overall fiscal stance from nationally financed current expenditure, also reflecting the above-
mentioned sizeable budgetary appropriations for government support to mitigate the impact of 
high  energy  prices  that  were  not  sufficiently  specified  in  the  Draft  Budgetary  Plan.  The 
expansionary stance  cannot  at  this stage be considered the  result of temporary  and targeted 
support to households and firms most vulnerable to energy price hikes and the cost to assist 
people fleeing Ukraine. Overall, the growth of nationally financed primary current expenditure 
is  not  in line with  the recommendation of the Council. Slovakia  plans to finance additional 
investment  through  the  RRF  and  other  EU  funds  and  it  also  preserves  nationally  financed 
investment. It plans to finance public investment for the green and digital transitions, and for 
energy security. Overall, the Commission is of the opinion that the Draft Budgetary Plan for 
Slovakia is partly in line with the fiscal guidance contained in the Council recommendation of 
12  July  2022.  The  Commission  invites  Slovakia  to  take  the  necessary  measures  within  the 
national  budgetary  process  to  ensure  that  the  2023  budget  is  consistent  with  the 
recommendation adopted by the Council on 12 July 2022. While Slovakia rapidly deployed 
energy measures as part of the emergency policy response to the exceptional energy price hikes, 
a prolongation of existing and/or an enactment of new support measures in response to high 
energy prices would contribute to higher growth in net nationally financed current expenditure 
and  to  an  increase  in  the  projected  government  deficit  and  debt  in  2023.  Therefore,  it  is 
important that Member States better focus such measures to the most vulnerable households 
and exposed firms, to preserve incentives to reduce energy demand, and to be withdrawn as 
energy price pressures diminish. The Commission is also of the opinion that Slovakia has not 
yet made progress with regard to the structural part of the fiscal recommendations contained in 
the Council Recommendation of 12 July 2022 in the context of the European Semester and 
thus  invites  the  authorities  to  accelerate  progress.  A  comprehensive  description  of  progress 
made with the implementation of the country-specific recommendations will be made in the 

37 

 
 
 
2023 Country Report and assessed in the context of the country-specific recommendations to 
be proposed by the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Slovenia,  the  overall  fiscal  policy  stance  is  estimated  to  be 
expansionary in a situation of high inflation. This includes an expansionary contribution to the 
overall  fiscal  stance  from  nationally  financed  current  expenditure.  This  expansionary 
contribution reflects the above-mentioned sizeable budgetary appropriations for government 
support to mitigate the impact of high energy prices for companies. As a result of the lack of 
sufficient specification of these measures in the Draft Budgetary Plan, the expansionary stance 
cannot at this stage be considered the result of temporary and targeted support to households 
and firms most vulnerable to energy price hikes and the cost to assist people fleeing Ukraine. 
Overall, the growth of nationally financed primary current expenditure is not in line with the 
recommendation of the Council. Slovenia plans to finance additional investment through the 
RRF  and  other  EU  funds,  and  it  also  preserves  nationally  financed  investment.  Slovenia  is 
planning to finance public investment for the green and digital transitions (including by making 
use of the Recovery and Resilience Facility and other EU funds). Overall, the Commission is 
of  the  opinion  that  the  Draft  Budgetary  Plan  for  Slovenia  is  partly  in  line  with  the  fiscal 
guidance contained in the Council recommendation of 12 July 2022. The Commission invites 
Slovenia to take the necessary measures within the national budgetary process to ensure that 
the  2023  budget  is  consistent  with  the  recommendation  adopted  by  the  Council  on  12  July 
2022.  While  Slovenia  rapidly  deployed  energy  measures  as  part  of  the  emergency  policy 
response to the exceptional energy price hikes, a prolongation of existing and/or an enactment 
of new support measures in response to high energy prices would contribute to higher growth 
in net nationally financed current expenditure and to an increase in the projected government 
deficit  and  debt  in  2023.  Therefore,  it  is  important  that  Member  States  better  focus  such 
measures to the most vulnerable households and exposed firms, to preserve incentives to reduce 
energy demand, and to be withdrawn as energy price pressures diminish. The Commission is 
also of the opinion that Slovenia has made limited progress with regard to the structural part of 
the fiscal recommendations contained in the Council Recommendation of 12 July 2022 in the 
context  of  the  European  Semester  and  thus  invites  the  authorities  to  accelerate  progress.  A 
comprehensive description of progress made with the implementation of the country-specific 
recommendations will be made in the 2023 Country Report and assessed in the context of the 
country-specific recommendations to be proposed by the Commission in spring 2023. 

In 2023, based on the Commission’s forecast and including the information incorporated in the 
Draft  Budgetary  Plan  of  Spain,  the  growth  of  nationally-financed  current  expenditure  is 
projected  to  be  below  the  medium-term  potential  output  growth.  Therefore,  the  growth  of 
nationally  financed  primary  current  expenditure  is  in  line  with  the  recommendation  of  the 
Council. Spain plans to finance additional investment through the RRF and other EU funds, 
and it also preserves nationally-financed investment. It plans to finance public investment for 
the green and digital transitions, and for energy security. Overall, the Commission is of the 
opinion that the Draft Budgetary Plan for Spain is in line with the fiscal guidance contained in 
the Council recommendation of 12 July 2022. While Spain deployed energy measures as part 
of  the  emergency  policy  response  to  the  exceptional  energy  price  hikes,  a  prolongation  of 
existing and/or an enactment of new support measures in response to high energy prices would 
contribute to higher growth in net nationally financed current expenditure and to an increase in 
the  projected  government  deficit  and  debt  in  2023.  Therefore,  it  is  important  that  Member 

38 

 
 
 
States  better  focus  such  measures  to  the  most  vulnerable  households  and  exposed  firms,  to 
preserve incentives to reduce energy demand, and to be withdrawn as energy price pressures 
diminish.  A  comprehensive  description  of  progress  made  with  the  implementation  of  the 
country-specific recommendations will be made in the 2023 Country Report and assessed in 
the  context  of  the  country-specific  recommendations  to  be  proposed  by  the  Commission  in 
spring 2023. 

39 

 
 
 
 
 
ANNEX  II:  The  methodology  and  assumptions  underpinning  the  Commission 
2022 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  2022 
autumn forecast, which is produced independently by Commission staff, are explained in the 
forecast document itself.24 

Budgetary data up to 2021 are based on data notified by Member States to the Commission 
before 1 October 2022 and validated by Eurostat on 21 October 2022. Eurostat has made no 
amendments  to, and  has no reservations on,  the data reported by Member States during the 
autumn 2022 notification round.  

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 2023, budgets adopted or presented to national parliaments and all other measures known 
in  sufficient  detail  are  taken  into  consideration.  All  the  information  included  in  the  Draft 
Budgetary Plans submitted by mid-October is reflected in the autumn forecast. For 2024, 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  2022-2024  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  2022-24  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 

24  
https://economy-finance.ec.europa.eu/system/files/2022-11/ip187_en_0.pdf 

Methodological assumptions underlying the Commission 2022 autumn economic forecast, available at: 

25  
20093--final-.pdf. 

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

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.  

40 

 
 
 
 
 
 
                                                           
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  2023-2027:  the  Commission  2022  autumn  forecast  scenario  and  the 
2023 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 2023, the simulations suggest that, with an 80% probability, the euro area debt ratio will 
be between 87% and 98% of GDP under the Commission scenario and under the DBP scenario. 
By 2027, there would be a 50% probability of a debt ratio higher than around 90% of GDP 
under the Commission scenario and under the DBP scenario as well.  

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. 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  2022  autumn  forecast  incorporates  fiscal  policy  measures  that  were  adopted  or  at  least 
credibility announced and information that was available as of 31 October 2022. Beyond 2024 (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. 

41 

 
 
 
 
                                                           
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  

42 

 
 
 
 
 
 
 
 
 
ANNEX IV: Tables 

Table IV.1: Real GDP growth (%) according to the Stability Programmes (SP), the 
Draft Budgetary Plans (DBP) for 2023 and the Commission 2022 autumn forecast 
(COM) 

Note:  France did not submit the 2022 Stability Programmes, so it is not included in the 
aggregate euro area SP2022 figures. 

43 

CountrySPDBPCOMSPDBPCOMBE3.02.62.81.90.50.2DE42.21.62.32.5-0.6EE-1.01.0-0.11.20.50.7IE6.410.07.94.44.73.2EL3.15.36.04.82.11.0ES4.34.44.53.52.11.0FR2.72.61.00.4HR3.05.76.04.40.71.0IT3.13.33.82.40.60.3CY2.75.75.63.83.01.0LV2.12.81.92.51.0-0.3LT1.61.62.52.51.40.5LU1.42.51.52.92.01.0MT4.46.05.73.93.52.8NL3.64.64.61.71.50.6AT3.94.84.62.00.20.3PT5.06.56.63.31.30.7SI4.25.06.23.01.40.8SK2.11.91.95.30.60.5FI1.51.72.31.70.50.2EA3.63.43.22.61.60.320222023 
 
 
 
 
 
 
Table IV.2: Headline balance (% of GDP) in the 2022 Stability Programmes (SP), the 
2023 Draft Budgetary Plans (DBP) and the Commission 2022 autumn forecast (COM) 

Note:  France did not submit the 2022 Stability Programmes, so it is not included in the 
aggregate euro area SP2022 figures. 

44 

 CountrySPDBPCOMSPDBPCOMBE-5.2-5.2-5.2-3.6-5.8-5.8DE-4-3 ½-2.3-2-2.0-3.1EE-5.3-2.7-2.3-4.8-3.9-3.7IE-0.40.20.20.21.10.8EL-4.4-4.2-4.1-1.4-2.1-1.8ES-5.0-5.0-4.6-3.9-3.9-4.3FR-5.0-5.0-5.0-5.3HR-2.8-1.5-1.6-1.6-2.3-2.4IT-5.6-5.1-5.1-3.9-3.4-3.6CY0.01.21.10.41.71.1LV-6.5-7.0-7.1-2.8-3.3-3.4LT-4.9-2.0-1.9-2.4-4.9-4.4LU-0.7-0.4-0.1-0.4-2.2-1.7MT-5.4-5.8-6.0-4.6-5.5-5.7NL-2.5-0.9-1.1-2.3-3.0-4.0AT-3.1-3.5-3.4-1.5-2.9-2.8PT-1.9-1.9-1.9-0.7-0.9-1.1SI-4.1-3.8-3.6-3.0-5.0-5.2SK-5.1-5.0-4.2-2.4-6.4-5.8FI-2.2-1.4-1.4-1.7-2.2-2.3EA-4.0-3.9-3.5-2.5-3.2-3.720222023 
 
 
 
 
 
 
 
Table IV.3: Debt-to-GDP ratio (% of GDP) in the 2022 Stability Programmes (SP), the 
2023 Draft Budgetary Plans (DBP) and the Commission 2022 autumn forecast (COM) 

Note:  France did not submit the 2022 Stability Programmes, so it is not included in the 
aggregate euro area SP2022 figures. 

45 

 CountrySPDBPCOMSPDBPCOMBE108.0105.3106.2108.8108.2107.9DE6767 ¾67.47466 ¾66.3EE20.718.818.724.119.819.3IE50.145.244.746.341.141.2EL180.2169.1171.1168.6161.6161.9ES115.2115.2114.0112.4112.4112.5FRn.a.111.5111.7n.a.111.2110.8HR76.271.370.071.769.067.2IT147.0145.4144.6145.2143.2143.6CY93.989.389.688.283.384.0LV45.742.042.445.243.044.0LT43.339.138.043.743.041.0LU25.424.624.325.826.326.0MT58.657.057.459.459.159.9NL53.149.850.352.749.552.4AT80.078.378.577.176.776.6PT120.8115.0115.9115.4110.8109.1SI73.371.569.971.571.069.6SK61.659.859.658.059.057.4FI66.271.270.766.972.772.0EA90.693.993.690.192.592.320222023 
 
 
 
 
 
 
Table IV.4: COVID-19 temporary emergency measures (levels as % of GDP)  

Source: Commission 2022 autumn forecast 

46 

2020202120222023AT4.74.41.00.0BE4.53.00.50.0CY3.52.90.30.0DE2.64.21.40.0EE1.11.40.00.0EL7.67.21.80.0ES3.23.10.40.0FI2.81.70.20.0FR3.32.50.50.0HR3.61.80.40.0IE3.32.50.50.0IT4.43.41.10.0LT3.92.81.00.0LU2.30.80.10.0LV2.75.01.30.0MT6.04.91.80.0NL3.02.20.60.0PT2.32.20.90.0SI4.94.10.80.0SK2.33.51.00.0EA3.33.30.90.0 
 
 
 
 
 
 
Table IV.5: Budgetary cost of energy measures in 2022-2023 (levels as % of GDP) 

Source: Commission 2022 autumn forecast 

47 

20222023202220232022202320222023AT0.50.21.10.80.00.01.61.1BE0.20.20.70.50.10.20.90.4CY0.20.00.50.00.00.00.70.1DE0.30.10.81.70.00.01.11.8EE0.10.00.80.30.00.00.90.3EL0.4-0.15.15.93.25.32.30.5ES0.50.01.10.20.00.11.60.0FI0.00.10.20.30.00.00.20.4FR0.20.21.31.80.71.30.80.7HR0.30.10.51.00.00.00.81.1IE0.20.00.10.20.00.00.30.2IT1.50.01.50.00.40.02.60.0LT0.00.01.41.50.00.01.51.5LU0.80.40.40.60.00.01.21.0LV0.50.11.51.30.00.02.01.5MT0.10.02.83.50.00.02.93.5NL0.10.70.91.20.00.01.01.9PT0.60.01.50.90.00.02.10.9SI0.50.00.40.10.00.00.90.2SK0.20.00.30.00.00.10.5-0.1EA0.50.11.11.10.20.41.30.91. Targeted support measures2. Untargeted support measures3. Revenues from (taxes on) windfall profits of energy companies4. Total impact of energy measures = 1 + 2 - 3