REPORT FROM THE COMMISSION Belgium, Bulgaria, Czechia, Germany, Estonia, Spain, France, Italy, Latvia, Hungary, Malta, Austria, Poland, Slovenia, Slovakia and Finland Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union
Date: 2023-05-24
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU Member State, budget deficit, budget policy, budgetary control, budgetary expenditure, gross domestic product, macroeconomics, public debt, stability pact, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 631 final  REPORT FROM THE COMMISSION Belgium, Bulgaria, Czechia, Germany, Estonia, Spain, France, Italy, Latvia, Hungary, Malta, Austria, Poland, Slovenia, Slovakia and Finland   Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union  
 
 
REPORT FROM THE COMMISSION 

Belgium, Bulgaria, Czechia, Germany, Estonia, Spain, France, Italy, Latvia, Hungary, 
Malta, Austria, Poland, Slovenia, Slovakia and Finland  

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

1. 

INTRODUCTION 

Article 126 of the Treaty on the Functioning of the European Union (the Treaty) lays down the 
excessive deficit procedure. That procedure is further set out in Council Regulation (EC) No 
1467/97  of  7  July  1997  on  speeding  up  and  clarifying  the  implementation  of  the  excessive 
deficit procedure1, which is part of the Stability and Growth Pact.  

This  report  in  accordance  with  Article  126(3)  of  the  Treaty  examines  Member  States’ 
compliance with the deficit and debt criteria of the Treaty. 

Main data underlying, and motivating, this report 

In the assessment of the deficit criterion, the Commission takes into account the actual 2022 
deficit ratio and the planned ratio for 2023. The deficit criterion under Article 126 of the Treaty 
is fulfilled if the general government deficit in the previous year (2022) and planned deficit for 
the current year (2023) do not exceed 3% of GDP. If either does, the Commission examines 
whether the deficit ratio has declined substantially and continuously and comes close to the 
reference  value.  It  also  examines  whether  the  excess  over  the  reference  value  is  only 
exceptional  and  temporary  and  remains  close  to  the  reference  value  (section  2).  Relevant 
factors are considered if either i) the government debt does not exceed 60% of GDP or ii) if the 
debt  exceeds  60%  of  GDP,  but  the  deficit  is  close  to  3%  of  GDP  and  the  excess  over  it  is 
temporary (section 4).  

The debt criterion is fulfilled if the general government gross debt does not exceed 60% of 
GDP  at  the  end  of  the  previous  year  (2022).  If  it  exceeds  60%  of  GDP,  the  Commission 
considers whether the debt ratio is sufficiently diminishing and approaching the reference value 
at a satisfactory pace by respecting the debt reduction benchmark2 (section 3). Member States 
that  respect  that  benchmark  and  comply  with  the  deficit  criterion  are  not  discussed  in  this 
report. Relevant factors are always taken into account when assessing compliance with the debt 
criterion (section 4).  

1  
2  

OJ L 209, 2.8.1997, p. 6, as amended. 
The debt reduction benchmark is stipulated in Article 2(1a) of Council Regulation (EC) No 1467/97, 
which provides that the government debt ratio is considered sufficiently diminishing and approaching 
the 60% of GDP reference value at a satisfactory pace if the differential with respect to the reference 
value has decreased over the previous three years for which the data is available at an average rate of at 
least one twentieth per year as a  benchmark. The  requirement is also considered to be fulfilled if the 
budgetary forecasts of the Commission indicate that the required reduction in the differential will occur 
over the three-year period encompassing the two  years  following the final  year  for  which the data  is 
available. 

1 

 
 
 
                                                           
This report also compares the government deficit with government investment expenditure and 
takes  into  account  all  other  relevant  factors,  including  the  medium-term  economic  and 
budgetary positions of Member States.3 

This  report  discusses  compliance  with  the  deficit  and  debt  criteria  in  16  Member  States: 
Belgium, Bulgaria,  Czechia, Germany, Estonia,  Spain, France,  Italy, Latvia, Hungary, 
Malta, Austria, Poland, Slovenia, Slovakia and Finland, for the following reasons (see also 
Table 1): 
-  According to data validated by Eurostat on 21 April 20234, the 2022 general government 
deficit exceeded the 3% of GDP in 10 Member States: Belgium, Czechia, Spain, France, 
Italy, Latvia, Hungary, Malta, Austria, and Poland.5 Actual deficits for 2022 above 3% 
of  GDP  provide  prima  facie  evidence  of  the  existence  of  an  excessive  deficit  in  those 
Member States6.  

- 

In addition, according to the 2023 Stability or Convergence Programmes7, the government 
deficits in Bulgaria, Germany, Estonia, Slovenia and Slovakia are planned to exceed 3% 
of GDP in 2023. These planned deficits for 2023 in those programmes provide prima facie 
evidence of the existence of an excessive deficit in those five Member States.  

-  General  government  gross debt  at the end of 2022 exceeded the 60% of GDP reference 
value  in  Belgium,  Germany,  Greece,  Spain,  France,  Croatia,  Italy,  Cyprus,  Hungary, 
Austria,  Portugal,  Slovenia  and  Finland.  In  France,  Italy  and  Finland,  the  general 
government gross debt did not respect the debt reduction benchmark. This provides prima 
facie evidence of the existence of an excessive deficit on the basis of the debt criterion in 
those three Member States. 

Policy recommendations in the context of persistently high uncertainty 

Fiscal policy recommendations as adopted by the Council have been evolving in recent years 
to respond to the changing economic context. Coordinated policy action at EU and national 
levels has cushioned the impact of the COVID-19 pandemic on Member States’ economies and 
opened the way to a strong recovery. Against the new environment created by the Russia’s war 
of  aggression  against  Ukraine,  the  European  economy  has  managed  to  contain  its  adverse 
impact, weathering the energy crisis thanks to a rapid diversification of supply and a sizeable 
fall in gas consumption. 

3  

4 

5  

6  
7  

Unless  stated  otherwise,  the  source  for  the  figures  provided  in  this  report  is  the  Commission’s  2023 
spring forecast (European Economy-Institutional Papers 173). 
Eurostat Euro Indicators 47/2023 of 21 April 2023. Eurostat is expressing a reservation on the quality of 
data  reported  by  France  for  the  year  2022.  Eurostat,  in  close  cooperation  with  the  French  statistical 
authorities, is clarifying the recording of the capital increase by the State into the public energy company 
EDF (Électricité de France), as well as the application of the super-dividend test for the dividends paid 
by some public corporations to the French State. The deficit for 2022 might be underestimated by up to 
0.2 percentage points of GDP. 
Romania’s government deficit also exceeded 3% of GDP in 2022. However, Romania is not covered in 
this report since the Council decided on the existence of an excessive deficit in Romania on 3 April 2020.  
In all these cases the deficits for 2023 are also planned to be above 3% of GDP. 
For  the  Stability  or  Convergence  Programmes  submitted  by  Member  States  in  spring  2023,  see: 
https://commission.europa.eu/content/2023-european-semester-national-reform-programmes-and-
stabilityconvergence-programmes_en. 

2 

 
 
                                                           
The activation of the general escape clause8 of the Stability and Growth Pact in March 2020 
enabled  large-scale  fiscal  support  in  all  Member  States  in  response  to  the  coronavirus 
pandemic. It allowed Member States to undertake measures to deal adequately with the crisis, 
while departing from some budgetary requirements that would normally apply under the EU 
fiscal  framework.  In  2020  and  2021,  coordinated  policy  action  successfully  cushioned  the 
macroeconomic impact of the COVID-19 pandemic. In 2022 fiscal policy also mitigated the 
social and economic impact of the sudden rise in energy prices and allowed the provision of 
humanitarian  assistance  to  those  fleeing  Ukraine.  The  Commission  has  considered  that  the 
conditions to maintain the general escape clause in 2023 and to deactivate it as of end-2023 
were met.9 

On 20 July 2020, the Council recommended Member States to take all necessary measures in 
2020  and  2021  to  effectively  address  the  COVID-19  pandemic,  sustain  the  economy  and 
support  the  ensuing  recovery.10  Member  States  were  also  recommended,  when  economic 
conditions so allowed, to pursue fiscal policies aimed at achieving prudent medium-term fiscal 
positions and ensuring debt sustainability, while enhancing investment.  

A year later, on 18 June 2021, the Council adopted differentiated fiscal policy guidance in the 
recommendations  for  2022:  Member  States  with  low  and  medium  debt-to-GDP  ratios  were 
asked to pursue or maintain a supportive fiscal stance, while Member States with high debt 
ratios  were  asked  to  use  the  Recovery  and  Resilience  Facility  (RRF)  to  finance  additional 
investment in support of the recovery, while pursuing a prudent fiscal policy.11 All Member 
States were recommended to preserve nationally financed investment. In a similar spirit, the 
Council Recommendation of 5 April 2022 on the economic policy of the euro area asked to 
maintain a moderately supportive fiscal stance in 2022 across the euro area, taking into account 
both  national  budgets  and  the  funding  provided  by  the  RRF.12  Fiscal  policies  were 
recommended to be differentiated taking into account the strength of the recovery, the need of 
ensuring fiscal sustainability and of enhancing investments, while bearing in mind the need to 
reduce divergences among Member States. 

8 

9 
10  

11  

12 

The clause, as set out in Articles 5(1), 6(3), 9(1) and 10(3) of Council Regulation (EC) 1466/97 of 7 July 
1997  on  the  strengthening  of  the  surveillance  of  budgetary  positions  and  the  surveillance  and 
coordination of economic policies (OJ L 209, 2.8.1997, p. 1) and Articles 3(5) and 5(2) of Regulation 
(EC) 1467/97, facilitates the coordination of budgetary policies in times of severe economic downturn. 
It does not suspend the procedures of the Stability and Growth Pact. However, its activation has granted 
Member States budgetary flexibility to deal with the crisis, by allowing for a temporary departure from 
the adjustment path towards the medium-term budgetary objective of each Member State, provided this 
does not endanger fiscal sustainability in the medium term.  
COM(2022) 600 final of 23.5.2022, and COM (2023) 141 final of 8.3.2023.  
Council Recommendations of 20 July 2020 (2020/C 282/01 to 2020/C 282/27), OJ C 282, 26.8.2020, 
p. 1. 
Council  Recommendations of  18 June  2021 (2021/C 304/01 to 2021/C 304/28, OJ C 304, 29.7.2021 
p. 1). In the case of Romania the Council adopted, on the same day, an updated Recommendation with a 
view to bringing an end to the situation of an excessive government deficit (2021/C 304/24, OJ C 304, 
29.7.2021 p. 111). 
Council Recommendation of 5 April 2022 on the economic policy of the euro area, OJ C 153, 7.4.2022, 
p. 1. 

3 

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

Actual deficit 
not exceeding () / 
exceeding () 
3% of GDP in 
2022 

Planned deficit 
not exceeding () / 
exceeding () 
3% of GDP in 
2023 

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

Belgium 
Bulgaria 
Czechia 
Germany 
Estonia 
Spain 
France 
Italy 
Latvia 
Hungary 
Malta 
Austria 
Poland 
Slovenia 
Slovakia 
Finland 
p.m.: Member States not considered in this report 
Denmark 
Ireland 
Greece 
Croatia 
Cyprus 
Lithuania 
Luxembourg 
Netherlands 
Portugal 
Sweden 
Romania* 

 
 
 
 
 
 
 
 
 
 
 

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

 
 
 
 
 
 
 
 
 
 
 

Debt ratio not exceeding () 
60% of GDP at end-2022 / 
exceeding 60% of GDP but 
respecting the debt reduction 
benchmark () / 
not respecting the debt reduction 
benchmark () 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 

(*) In excessive deficit procedure since 2020. 
Source: Eurostat, Commission 2023 spring forecast and 2023 Stability and Convergence Programmes 

4 

 
 
 
 
 
 
 
  
 
 
 
 
On 12 July 2022, the Council again adopted differentiated fiscal policy guidance for 2023.13 
Member States with low and medium debt-to-GDP ratios were asked to ensure that the growth 
of nationally financed primary current expenditure was in line with an overall neutral policy 
stance. Member States with high debt ratios were recommended to ensure prudent fiscal policy 
by limiting the growth of nationally financed primary current expenditure below medium-term 
potential output growth. Beyond 2023, the latter were asked to ensure credible and gradual debt 
reduction  through  gradual  consolidation,  investment  and  reforms.  All  Member  States  were 
recommended to stand ready to adjust current spending to the evolving situation, to expand 
public investment for the green and digital transitions and for energy security, and to achieve 
prudent medium-term fiscal positions beyond 2023. 
On 16 May 2023, the Council Recommendation on the economic policy of the euro area14 has 
called for refraining from broad-based support to aggregate demand, and for better targeting 
fiscal measures to address the impact of high energy prices on vulnerable households and viable 
companies. Member States have been asked to preserve debt sustainability and to facilitate the 
task of monetary policy  to  ensure timely  return of inflation to  the ECB’s  2% medium-term 
target.  The  recommendation  has  called  to  define  appropriately  differentiated  medium-term 
fiscal strategies, through gradual and sustainable consolidation, as well as through investments 
and reforms, to achieve prudent medium-term fiscal positions. Member States should raise the 
growth  potential  of  their  economies,  sustain  a  high  level  of  public  investment  and  promote 
private investments, which are needed to boost economic and social resilience and support the 
green and digital transition.  
In its Communication of 8 March 2023 on fiscal policy guidance for 2024,15 the Commission 
already announced that it would not propose the opening of new excessive deficit procedures 
in  spring  2023,  taking  into  consideration  the  persistently  high  uncertainty  for  the 
macroeconomic and budgetary outlook at this juncture. 

The Commission will propose to the Council to open deficit-based excessive deficit procedures 
in spring 2024 on the basis of the outturn data for 2023.  

13  
14  
15  

Council Recommendations of 12 July 2022 (2022/C 334/01 to 2022/C 334/27, OJ C 334, 1.9.2022, p. 1).  
https://www.consilium.europa.eu/en/meetings/ecofin/2023/05/16/ 
COM(2023) 141 final.  

5 

 
 
 
 
                                                           
2. 

DEFICIT CRITERION  

Belgium, Bulgaria,  Czechia, Germany, Estonia,  Spain, France,  Italy, Latvia, Hungary, 
Malta, Austria, Poland, Slovenia and Slovakia exceeded the deficit reference value in 2022 
or plan to exceed it in 2023. 

For all those Member States, the actual deficits in excess over the reference value in 2022, or 
the planned excesses in 2023, are exceptional. In 2022, the measures taken by Member States 
to  cushion  the  economic  and  social  impact  of  energy  prices  and  to  provide  humanitarian 
assistance to those fleeing Ukraine following the invasion by Russia contributed to the higher 
deficits.  The  increase  in  energy  prices  and  the  humanitarian  assistance  are  unusual  events 
outside the control of the Member States and with major impacts on the financial position of 
general government. While the cost of COVID-19 temporary emergency measures fell in 2022, 
the cost of such measures remained significant in many Member States and the impact of the 
economic downturn triggered by the outbreak of the COVID-19 pandemic was still visible in 
the public finances of most Member States.  

The government deficits were above and not close to the reference value in 2022 in Belgium, 
Czechia, Spain, France, Italy, Latvia, Hungary, Malta and Poland (see Table 2). 

In Austria, the government deficit was above but close to the reference value in 2022 and is 
planned in the Stability Programme to be above but close to the reference value in 2023, while 
the Commission’s forecast even foresees a deficit under 3% of GDP. 

Bulgaria, Germany, Estonia, Slovenia and Slovakia had government deficits not exceeding 
the Treaty reference value in 2022, but report planned deficits above and not close to 3% of 
GDP  in  2023.  This  is  confirmed  by  the  Commission’s  forecast  in  the  case  of  Bulgaria, 
Slovenia  and  Slovakia.  For  Germany,  the  Commission’s  forecast  indicates  a  deficit  ratio 
below 3% of GDP in 2023, while for Estonia the Commission’s forecasts is for a deficit above 
but close to the reference value.  

According  to  the  Commission’s  forecasts,  the  government  deficits  in  Czechia,  Germany, 
Estonia,  Latvia,  Austria  and  Slovenia  are  projected  not  to  exceed  3%  of  GDP  in  2024. 
Therefore, the deficits in excess over the reference value are expected to be temporary. These 
deficit forecasts for 2024 are based on a no policy change assumption. 

In sum, this  analysis suggests  that the deficit  criterion is  not  fulfilled by  14 Member States 
before  the  consideration  of  the  relevant  factors:  Belgium,  Bulgaria,  Czechia,  Germany, 
Estonia,  Spain,  France,  Italy,  Latvia,  Hungary,  Malta,  Poland,  Slovenia  and  Slovakia. 
Instead, the deficit criterion is respected by Austria, as the excess over the reference value is 
exceptional and temporary, and the deficit remains close to the reference value. 

6 

 
 
 
 
 
 
 
 
 
 
Table 2: General government balance 

Percentage of GDP 

2024 
-4,7 
-4,8 
-3,0 
-1,2 
-2,7 
-3,3 
-4,3 
-3,7 
-2,7 
-4,4 
-4,5 
-1,3 
-3,7 
-2,9 
-4,8 
-2,6 

2023 
SCP 
-5,1 
-6,1 
-3,5 
-4 ¼ 
-4,3 
-3,9 
-4,9 
-4,5 
-4,0 
-3,9 
-5,0 
-3,2 
-4,7 
-4,1 
-6,3 
-2,6 

2022 
-3,9 
-2,8 
-3,6 
-2,6 
-0,9 
-4,8 
-4,7 
-8,0 
-4,4 
-6,2 
-5,8 
-3,2 
-3,7 
-3,0 
-2,0 
-0,9 

2023 
-5,0 
-4,8 
-3,6 
-2,3 
-3,1 
-4,1 
-4,7 
-4,5 
-3,8 
-4,0 
-5,1 
-2,4 
-5,0 
-3,7 
-6,1 
-2,6 

2021 
-5,5 
-3,9 
-5,1 
-3,7 
-2,4 
-6,9 
-6,5 
-9,0 
-7,1 
-7,1 
-7,8 
-5,8 
-1,8 
-4,6 
-5,4 
-2,8 

2019 
-2,0 
2,1 
0,3 
1,5 
0,1 
-3,1 
-3,1 
-1,5 
-0,6 
-2,0 
0,5 
0,6 
-0,7 
0,7 
-1,2 
-0,9 

2020 
-9,0 
-3,8 
-5,8 
-4,3 
-5,5 
-10,1 
-9,0 
-9,7 
-4,4 
-7,5 
-9,7 
-8,0 
-6,9 
-7,7 
-5,4 
-5,6 

Belgium 
Bulgaria 
Czechia 
Germany 
Estonia 
Spain 
France 
Italy 
Latvia 
Hungary 
Malta 
Austria 
Poland 
Slovenia 
Slovakia 
Finland 
p.m.: Member States not considered in this report 
Denmark 
Ireland 
Greece 
Croatia 
Cyprus 
Lithuania 
Luxembourg 
Netherlands 
Portugal 
Sweden 
Romania* 
(*) In excessive deficit procedure since 
2020. 
Source: Eurostat, Member States’ stability and convergence programmes (2023 SCP) and Commission 2023 
spring forecast  

3,6 
-1,6 
-7,1 
-2,5 
-2,0 
-1,2 
0,7 
-2,4 
-2,9 
0,0 
-7,1 

2,3 
1,7 
-1,3 
-0,5 
1,8 
-1,7 
-1,7 
-2,1 
-0,1 
-0,9 
-4,7 

4,1 
0,5 
0,9 
0,2 
1,3 
0,5 
2,2 
1,8 
0,1 
0,6 
-4,3 

0,2 
-5,0 
-9,7 
-7,3 
-5,8 
-6,5 
-3,4 
-3,7 
-5,8 
-2,8 
-9,2 

3,3 
1,6 
-2,3 
0,4 
2,1 
-0,6 
0,2 
0,0 
-0,4 
0,7 
-6,2 

NA 
1,8 
-1,8 
-0,7 
2,0 
-2,2 
-1,5 
-3,0 
-0,4 
-0,4 
-4,4 

1,3 
2,2 
-0,6 
-1,3 
2,1 
-1,4 
-1,5 
-1,7 
-0,1 
-0,5 
-4,4 

7 

 
 
 
 
 
 
 
 
  
  
  
  
 
 
 
 
 
 
 
 
 
 
3. 

DEBT CRITERION  

Among the countries discussed in this report, the general government gross debt at end-2022 
exceeded  60%  of  GDP  in  nine  Member  States:  Belgium,  Germany,  Spain,  France,  Italy, 
Hungary, Austria, Slovenia and Finland (see Table 3).16 Compared to the previous year, the 
government debt ratio decreased in all those Member States except in Finland.  

Table 3: General government debt 

Percentage of GDP 

2019 
2021 
2020 
97,6  112,0  109,1 
23,9 
24,5 
20,0 
42,0 
37,7 
30,0 
69,3 
68,7 
59,6 
8,5 
17,6 
18,5 
98,2  120,4  118,3 
97,4  114,6  112,9 
134,1  154,9  149,9 
43,7 
42,0 
36,5 
76,6 
79,3 
65,3 
55,1 
52,9 
40,3 
82,3 
82,9 
70,6 
53,6 
57,2 
45,7 
74,5 
79,6 
65,4 
61,0 
58,9 
48,0 
72,6 
74,7 
64,9 

2022 
105,1 
Belgium 
22,9 
Bulgaria 
44,1 
Czechia 
66,3 
Germany 
18,4 
Estonia 
113,2 
Spain 
111,6 
France 
144,4 
Italy 
40,8 
Latvia 
73,3 
Hungary 
53,4 
Malta 
78,4 
Austria 
49,1 
Poland 
69,9 
Slovenia 
57,8 
Slovakia 
73,0 
Finland 
p.m.: Member States not considered in this report 
30,1 
Denmark 
44,7 
Ireland 
171,3 
Greece 
68,4 
Croatia 
86,5 
Cyprus 
38,4 
Lithuania 
24,6 
Luxembourg 
51,0 
Netherlands 
113,9 
Portugal 
33,0 
Sweden 
Romania* 
47,3 
(*) In excessive deficit procedure since 2020. 

36,7 
42,2 
33,7 
57,0 
55,4 
58,4 
180,6  206,3  194,6 
71,0 
78,4 
87,0 
90,8  113,8  101,2 
43,7 
46,3 
35,8 
24,5 
24,5 
22,4 
48,5 
52,5 
54,7 
116,6  134,9  125,4 
36,5 
39,8 
35,5 
48,6 
46,9 
35,1 

2023 
106,0 
25,0 
42,9 
65,2 
19,5 
110,6 
109,6 
140,4 
39,8 
70,7 
54,8 
75,4 
50,5 
69,1 
58,3 
73,9 

30,1 
40,4 
160,2 
63,0 
80,4 
37,1 
25,9 
49,3 
106,2 
31,4 
45,6 

2024 
107,3 
28,1 
43,1 
64,1 
21,3 
109,1 
109,5 
140,3 
40,5 
71,1 
56,1 
72,7 
53,0 
66,6 
58,7 
76,2 

28,8 
38,3 
154,4 
61,8 
72,5 
36,6 
27,0 
48,8 
103,1 
30,7 
46,1 

Source: Eurostat and Commission 2023 spring forecast  

16  

In Greece, Croatia, Cyprus and Portugal, the general government gross debt also exceeded 60% of 
GDP at the end of 2022, but these Member States are not considered in this report, given that they respect 
the deficit criterion and the debt reduction benchmark. 

8 

 
 
 
 
 
 
 
 
  
  
  
 
 
 
 
 
                                                           
Data show that, in 2022, the debt reduction benchmark was respected in Belgium, Germany, 
Spain, Hungary, Austria and Slovenia (see Table 4). It was not respected in France, Italy 
and Finland. As noted in its Communication of 2 March 2022 and in line with last year’s 126.3 
report, the Commission considers, within its assessment of all relevant factors, that compliance 
with the debt reduction benchmark could imply a too demanding frontloaded fiscal effort that 
could  risk  to  jeopardise  economic  growth.  Therefore,  in  the  view  of  the  Commission, 
compliance with the debt reduction benchmark is not warranted under the prevailing economic 
conditions. 

In sum, the analysis thus suggests that, among the Member States discussed in this report, the 
debt  criterion  is  fulfilled  by  Belgium,  Germany,  Spain,  Hungary,  Austria,  and  Slovenia, 
while it appears not to have been fulfilled, before the consideration of the relevant factors, by 
France, Italy and Finland.  

Table 4: Gap to the debt reduction benchmark* 

A negative gap means compliance with the debt reduction benchmark 

Percentage of GDP 

2021 
2,0 
-2,0 
   n.r. 
1,7 
-0,5 
-4,0 
-3,7 
-3,9 
1,8 

2022  2023f  2024f 
5,1 
2,0 
-0,7 
-2,1 
-2,0 
-2,1 
0,4 
-1,1 
-6,2 
3,2 
1,7 
1,4 
3,8 
-0,5 
1,8 
-2,5 
-4,0 
-3,3 
-4,1 
-3,7 
-4,1 
-3,4 
-3,9 
-3,4 
1,4 
1,4 
0,4 

Belgium 
Germany 
Spain 
France 
Italy 
Hungary 
Austria 
Slovenia 
Finland 
p.m.: Member States not considered in this report 
Greece 
Croatia 
Cyprus 
Portugal 
Source: Commission 2023 spring forecast and Commission calculations. 
f: forecast 
*  According  to  Council  Regulation  (EC)  No  1467/97,  the  government  debt  ratio  is  considered  sufficiently  diminishing  and 
approaching the 60% of GDP reference value at a satisfactory pace if the differential with respect to the  reference value has 
decreased over the previous three years for which data is available at an average rate of at least one twentieth per year. The 
requirement is also considered to be fulfilled if the budgetary forecasts of the Commission indicate that the required reduction 
in the differential will occur over the three-year period encompassing the two years following the final year for which the data 
is available. In implementing the debt ratio adjustment benchmark, account is also taken of the influence of the business cycle 
on the pace of debt reduction. 
The debt reduction benchmark, for the Member States with a debt in excess of 60% of GDP, is computed over a three-year 
horizon,  under  different  options:  backward-looking,  forward-looking,  and  adjusted  for  the  cycle  (see  Vade  Mecum  on  the 
Stability  and  Growth  Pact  –  2019  edition,  European  Economy-Institutional  Papers,  101).  The  table  shows  the  minimum 
difference  between  the  (actual  and  cyclically  adjusted)  debt-to-GDP  ratio  and  the  (backward-  and  forward-looking)  debt 
benchmark(s). If the value is negative, the projected debt-to-GDP ratio complies with the debt reduction benchmark. In that case, 
the differential with respect to the reference value decreased over a three-year horizon (forward- or backward-looking) at least 
at an average rate of 1/20th. 

-9,3 
-6,9 
-13,8 
-6,4 

-17,3 
-12,9 
-15,8 
-11,9 

-10,4 
-8,7 
-13,8 
-11,4 

-17,3 
-12,9 
-15,8 
-11,9 

9 

 
 
 
 
 
 
  
 
 
 
 
 
 
4. 

RELEVANT FACTORS WHEN ASSESSING COMPLIANCE WITH THE DEFICIT AND DEBT 
CRITERIA  

Article  126(3)  of  the  Treaty  provides  that  this  report  must  “take  into  account  whether  the 
government deficit exceeds government investment expenditure and take into account all other 
relevant factors, including the medium-term economic and budgetary position of the Member 
State”. Those factors are further clarified in Article 2(3) of Regulation (EC) No 1467/97, which 
also provides that “any other factors which, in the opinion of the Member State concerned, are 
relevant in order to comprehensively assess compliance with the deficit and debt criteria and 
which the Member State has put forward to the Council and the Commission” need to be given 
due consideration. In particular, that Article indicates that the medium-term debt position can 
also be considered as a relevant factor.  

Hence,  in  addition  to  cross-country  relevant  factors  (section  4.1),  country-specific  relevant 
factors (section 4.2) are considered. The latter include the medium-term economic position, the 
medium-term  budgetary  position  (including  public  investment),  the  medium-term  debt 
position, whether the Member State is experiencing macroeconomic imbalances or excessive 
macroeconomic imbalances,17 and any other factors put forward by the Member States.   

As already explained under 1 and specified in Article 2(4) of Regulation (EC) No 1467/97, as 
regards compliance with the deficit criterion, relevant factors can be taken into account in the 
steps leading to the decision on the existence of an excessive deficit on the basis of the deficit 
criterion, but only if: 

a)  the government debt-to-GDP ratio does not exceed the 60% reference value, or 
b)  if it does, a double condition is met – i.e. that the deficit remains close to the reference 

value and that the excess over the reference value is temporary. 

Of the Member States exceeding the deficit reference value in 2022, or planning to exceed 
that value in 2023, the debt ratio did not exceed the 60% of GDP reference value in the case of 
seven  Member  States:  Bulgaria,  Czechia,  Estonia,  Latvia,  Malta,  Poland  and  Slovakia. 
Relevant factors can thus be taken into account for these seven Member States. 

In the remaining eight Member States exceeding, or planning to exceed, the 3% of GDP deficit 
reference value – i.e. Belgium, Germany18, Spain, France, Italy, Hungary, Austria and Slovenia 
– the double condition necessary for relevant factors to be taken into account (closeness and 
temporariness) is met only in Austria, so relevant factors can be taken into account for Austria 
as well. 

As already explained under 1 and specified in Article 2(4) of Regulation (EC) No 1467/97, as 
regards compliance with the debt criterion, relevant factors shall always be taken into account. 

The relevant factors are discussed hereunder even for countries where they cannot be taken 
into account in the steps leading to the decision on the existence of an excessive deficit on the 
basis of the deficit criterion.  

17  

18  

In the sense of the macroeconomic imbalances procedure provided for in Regulation (EU) No 1174/2011 
of the European Parliament and of the Council of 16 November 2011 on enforcement measures to correct 
excessive macroeconomic imbalances in the euro area (OJ L 306, 23.11.2011, p. 8). 
The  German  Stability  Programme  reports  a  planned  a  deficit  above  3%  of  GDP  in  2023.  The 
Commission's forecast, which was produced afterwards, projects a deficit below 3% in 2023, taking into 
account more updated assumptions on energy price developments. 

10 

 
 
                                                           
4.1. 

CROSS-COUNTRY RELEVANT FACTORS 

In the recent years, the EU has been hit by a series of negative shocks. A key factor to take into 
consideration for all the Member States covered in this report is the macroeconomic impact of 
the increase in energy prices, and of the  invasion of Ukraine by Russia.  The war has led to 
extraordinary  economic  uncertainty  in  2022  and  2023.  The  EU  is  among  the  most  exposed 
economies, due to its geographical proximity to the war and heavy reliance on imports of fossil 
fuels. Russia’s invasion of Ukraine also drove up prices of other raw materials and food, and 
increased  supply  disruptions.  In  2022,  the  terms-of-trade  shock19  made  its  way  through  the 
economy, leading, among others, to the sharp erosion of the purchasing power of households, 
which has shifted consumers’ sentiment dramatically. Member States adopted a series of fiscal 
measures to mitigate the economic and social impact of the increase in energy prices, with a 
sizeable effect on general government balance. Because of the need for a fast policy response, 
many  of  those  measures  were  not  targeted  and  did  not  preserve  the  price  signal.  The  net 
budgetary cost of these measures is estimated at 1.2% of GDP in 2022 and a similar amount in 
2023.20  The  general  government  balance  has  been  also  affected  by  the  budgetary  cost  of 
temporary protection to displaced persons from Ukraine, estimated at 0.1% of GDP in 2022 
and 2023. All these factors together put pressure on public finances. 

It  also  needs  to  be  taken  into  account  that  these  disruptions  happened  when  the  European 
economy  was  still  recovering  from  the  economic  and  budgetary  impact  of  the  COVID-19 
pandemic, and public debt ratios substantially increased as result of the pandemic.  

High inflation is another factor that needs to be taken into account, since it can ultimately weigh 
on public finances in  the medium  term.  In 2022, increases in  the price of energy and other 
commodities were fuelling high inflation, which with time has broadened across the economy. 
Inflation is expected to remain elevated in 2023. In the short term high inflation may improve 
the  government  accounts,  by  increasing  tax  revenue,  and  reducing  the  debt-to-GDP  ratios. 
However, such improvement could be short-lived as the increase in tax collection fades out, 
expenditure  items  are  affected  by  the  higher  level  of  prices  with  a  lag,  and  the  increase  in 
interest rates feeds into a higher debt burden at a speed depending on the average debt maturity. 
Also the fact that inflation was to a large extent driven by supply factors favours requests for 
compensatory measures, which – if not targeted to the most vulnerable groups – could lead to 
broad-based fiscal support and an excessively expansionary stance, making the central bank’s 
task of reducing inflation harder, and ultimately contributing to tighter monetary policy with 
interest rates staying higher for longer.  

The  war  has  dramatically  changed  the  picture,  by  bringing  renewed  disruptions  in  global 
supply, fuelling further commodity price pressures and heightening uncertainty. According to 
the Commission’s forecast, real GDP growth in the EU is set to slow from an estimated 3.5% 
in 2022 to 1% in 2023 and then recover to 1.7% in 2024. Despite broadening price pressures, 
inflation is projected to decrease from 9.2% in 2022 to 6.7% in 2023 and 3.1% in 2024.  

Overall, fiscal policy in the EU is turning from a supportive to a slightly contractionary fiscal 
stance. The fiscal stance21 in the EU as a whole – including public expenditure financed by 

19  
20  
21  

This is, the changes in the relative prices of exports and imports. 
See COM(2023) 600 final, 24.5.2023. 
Following the approach in the Council Recommendation of 18 June 2021, the fiscal stance is currently 
best measured as the change in primary expenditure (net of discretionary revenue measures), excluding 

11 

 
 
                                                           
grants from the Recovery and Resilience Facility22 and other EU funds – is estimated to have 
been  expansionary  by  1.9%  of  GDP  in  2022,  while  it  is  forecast  to  turn  to  slightly 
contractionary by 0.4% in 2023. In 2022, the government deficit for the EU and euro area as a 
whole decreased to 3.4% of GDP and 3.6% respectively (a reduction of around 1.5 percentage 
points of GDP, in both cases). It is projected to continue to decrease to 3.1% and 3.2% of GDP 
in 2023 for the EU and euro area as a whole.23 The government deficit is forecast to decrease 
further in 2024 to 2.4% of GDP.  

The deficit decrease in 2022 was mainly due to the economic recovery and the unwinding of 
much  of  the  discretionary  policy  support  activated  to  combat  the  effects  of  the  COVID-19 
pandemic crisis. Moreover, revenue developments were favourable in 2022.  In 2023, deficit 
developments among the Member States considered in this report will be more divergent, as 
the  deficit  ratio  is  forecast  to  increase  for  Belgium,  Bulgaria,  Estonia,  Poland,  Slovenia, 
Slovakia and Finland, stay stable in Czechia and France, and decrease in Germany, Spain, Italy, 
Latvia, Hungary, Malta and Austria. 

Following  the  deficit-decreasing  trend  and  the  economic  recovery,  the  government  debt  is 
expected to decrease over the forecast horizon for the EU and euro area as a whole. The debt-
to-GDP ratio in the EU fell from 89.5% in 2021 to 85.3% in 2022 (97.3% and 93.2% for the 
euro area, respectively), and is projected to decrease further to 83.4% and 82.6% in 2023 and 
2024 (90.8% and 89.9% for the euro area, respectively). Among the Member States considered 
in  this  report,  the  government  debt  ratio  did  not  decrease  in  2022  for  Estonia,  Czechia  and 
Finland. 

4.2. 

COUNTRY-SPECIFIC RELEVANT FACTORS  

This section provides an assessment of country-specific relevant factors. These factors include 
the  medium-term  macroeconomic  outlook,  the  medium-term  budgetary  position  (including 
public investment; see Table 5), the medium-term debt position, whether the Member State is 
experiencing  macroeconomic  imbalances  or  excessive  macroeconomic  imbalances,  and  any 
other relevant factors put forward by Member States.   

COVID-19  crisis-related  temporary  emergency  measures  but  including  expenditure  financed  by  non-
repayable support (grants) from  the  Recovery and Resilience Facility and  other EU funds, relative to 
medium-term potential growth. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 
This development in 2023 is driven by the sharp drop in Italy’s government deficit as a result of the 
statistical treatment of tax credits (see section 4.2.8). 

22  

23  

12 

 
 
 
 
 
 
 
 
 
                                                           
Percentage of GDP 

Table 5: Public investment 

2022 
2,7 
3,0 
4,6 
2,6 
5,2 
2,8 
3,7 
2,7 
3,8 
5,3 
3,3 
3,3 
4,0 
5,2 
3,3 
4,1 

2,6 
3,3 
4,4 
2,4 
5,0 
2,2 
3,7 
2,3 
5,1 
6,3 
3,8 
3,1 
4,3 
3,8 
3,6 
4,4 

2021 
2,7 
2,6 
4,7 
2,6 
5,6 
2,7 
3,6 
2,9 
5,2 
6,3 
3,8 
3,6 
4,1 
4,7 
3,1 
4,2 

2019  2020 
2,7 
3,3 
4,8 
2,7 
5,7 
2,6 
3,7 
2,6 
5,7 
6,5 
4,2 
3,3 
4,5 
4,1 
3,4 
4,8 

Belgium 
Bulgaria 
Czechia 
Germany 
Estonia 
Spain 
France 
Italy 
Latvia 
Hungary 
Malta 
Austria 
Poland 
Slovenia 
Slovakia 
Finland 
p.m.: Member States not considered in this report 
Denmark 
Ireland 
Greece 
Croatia 
Cyprus 
Lithuania 
Luxembourg 
Netherlands 
Portugal 
Sweden 
Romania* 
(*) In excessive deficit procedure since 2020. 

3,2 
2,3 
2,5 
4,3 
2,5 
3,1 
4,1 
3,4 
1,8 
4,9 
3,5 

3,6 
2,3 
3,1 
5,5 
2,8 
4,4 
4,7 
3,7 
2,3 
5,0 
4,6 

3,4 
2,0 
3,6 
4,7 
2,7 
3,1 
4,1 
3,4 
2,6 
4,8 
4,2 

3,1 
2,0 
3,5 
3,8 
2,6 
3,0 
4,1 
3,2 
2,5 
4,9 
4,2 

Source: Eurostat and Commission 2023 spring forecast  

2023 
2,9 
3,8 
4,7 
2,7 
5,0 
2,9 
3,7 
3,1 
5,5 
5,3 
3,8 
3,4 
4,1 
6,1 
4,9 
4,5 

3,3 
2,0 
3,9 
4,7 
3,0 
3,6 
4,3 
3,3 
3,1 
4,9 
5,2 

2024 
3,1 
3,0 
4,3 
2,9 
4,8 
2,9 
3,8 
3,5 
6,1 
5,1 
3,1 
3,3 
4,2 
5,0 
4,1 
4,4 

3,2 
2,0 
4,6 
4,6 
2,8 
3,6 
4,3 
3,3 
3,2 
4,8 
4,4 

the  country-specific  sections 

While 
the  medium-term 
include  key 
macroeconomic position, including on the contributions to growth, and on the medium-term 
budgetary  and  debt  positions,  more  detail  on  the  macroeconomic  and  fiscal  outlook  can  be 
found in the Commission’s 2023 spring forecast. Further information regarding the budgetary 
measures, the fiscal stance24 and the debt sustainability analysis discussed for each Member 

information  on 

24  

The fiscal stance is measured as the difference between (i) the medium-term potential growth and (ii) the 
change  in  primary  expenditure  net  of  discretionary  revenue  measures  (and  excluding  temporary 
emergency  measures  related  to  the  COVID-19  crisis)  and  including  expenditure  financed  by  non-

13 

 
 
 
 
 
 
 
  
  
  
 
 
 
 
 
                                                           
for  Council 
State  hereunder 
Recommendations providing Opinions on the 2023 Stability or Convergence Programmes and 
the accompanying Fiscal Statistical Tables, as well as in the 2023 Country Reports. 25   

the  Commission  Recommendations 

included 

in 

is 

4.2.1.  BELGIUM 

Medium-term macroeconomic position: After a contraction of 5.4% in 2020, the economy 
grew by 6.3% in 2021 and 3.2% in 2022. The economy is expected to grow by 1.2% in 2023 
and 1.4% in 2024. Growth in 2023 is mainly driven by private consumption and investment. 
Economic activity exceeded its annual 2019 level in 2021. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 9% in 2020 to 5.5% of GDP in 2021 and 3.9% in 2022. It is projected to widen to 5% and 
4.7%  of  GDP  in  2023  and  2024,  respectively.  After  increasing  to  2.7%  of  GDP  in  2020, 
government investment remained stable in 2021 and 2022. It is projected to increase to 2.9% 
of GDP in 2023.  

According to the Commission estimates, the fiscal stance in 2022 was supportive, at -2% of 
GDP.  As  recommended  by  the  Council,  Belgium  continued  to  support  the  recovery  with 
investments financed by the Recovery and Resilience Facility (RRF). Expenditure financed by 
Recovery and Resilience Facility grants and other EU funds amounted to 0.2% of GDP in 2022 
(0.2% of GDP in 2021). Nationally financed investment provided a neutral contribution to the 
fiscal stance. Belgium therefore preserved nationally financed investment, as recommended by 
the Council. At the same time, the growth in nationally financed primary current expenditure 
(net of new revenue measures) provided an expansionary contribution of 1.9 percentage points 
to the fiscal stance. The significant expansionary contribution of nationally financed current 
expenditure was only partially due to the fiscal policy measures to address the economic and 
social impact of the increase in energy prices, as well as the costs to offer temporary protection 
to displaced persons from Ukraine. Belgium therefore did not sufficiently limit the growth in 
nationally financed current expenditure.  

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary (-1.1% of GDP), in a context of high inflation. The growth in nationally financed 
primary current  expenditure (net of discretionary revenue measures) in 2023 is projected to 
provide an expansionary contribution of 0.7% of GDP to the fiscal stance. This includes the 
reduced  cost  of  the  targeted  support  measures  to  households  and  firms  most  vulnerable  to 
energy  price  hikes  by  0.1%  of  GDP.  The  growth  of  nationally  financed  primary  current 
expenditure in excess of the medium-term potential output growth is therefore not due to the 
targeted support to households and firms most vulnerable to energy price hikes and to people 

25  

repayable support (grants) from the Recovery and Resilience Facility and other Union funds. A negative 
(positive) sign of the indicator indicates an expansionary (contractionary) fiscal policy. 
The  debt  sustainability  analysis  has  been  updated  compared  to  the  2021  Fiscal  Sustainability  Report 
(European Economy-Institutional Papers 171) by reflecting the latest Commission’s forecast. 
See the Communication on the main elements of the European Semester 2023 Spring package (COM 
(2023) 600  final,  24.5.2023),  and  the  Commission  Recommendations  for  Council  Recommendations 
(COM(2023) 601 to 626). For the latest assessment by the Commission of Member States experiencing 
imbalances or excessive imbalances, see the respective in-depth reviews (SWD(2023) 628 to 643). For 
the  assessment  of  debt  sustainability  risks  in  all  the  Member  States  discussed  in  this  report,  see  the 
annexes on Debt Sustainability Analysis in the country reports (SWD(2023) 601 to 626). 

14 

 
 
 
                                                           
 
fleeing Ukraine. The expansionary growth in nationally financed primary current expenditure 
(net of discretionary revenue measures) is also driven by permanent increases in public sector 
wages and social benefits (due to the indexation of public sector wages and social benefits), 
structurally  rising  current  expenditure  resulting  from  demographic  ageing,  and  a  reform  of 
residential energy contract taxation, and to a temporary decrease in firm’s social contributions 
during  the  first  half  of  2023.  In  sum,  the  projected  growth  of  nationally  financed  primary 
current expenditure is not in line with the Council recommendation. Expenditure financed by 
Recovery and Resilience Facility grants and other EU funds are projected to amount to 0.3% 
of GDP in 2023, while nationally financed investment is projected to provide an expansionary 
contribution to the fiscal stance of 0.1 percentage points. 

Medium-term debt position: The government debt increased from 97.6% of GDP at the end 
of 2019 to 112% at the end of 2020. It stood at 105.1% of GDP at the end of 2022 and it is 
projected at 106% and 107.3% at the end of 2023 and 2024, respectively.  

Overall, the debt sustainability analysis indicates high risks over the medium term. According 
to the baseline 10-year projection, the general government debt ratio would rise continuously 
to about 126% of GDP in 2033. The baseline debt trajectory is sensitive to macroeconomic 
shocks.  According  to  the  stochastic  projections,  which  simulate  a  large  range  of  possible 
temporary shocks to macroeconomic variables, it is probable that the debt ratio in 2027 would 
be higher than in 2022. 

There are other factors relevant for an overall assessment of debt sustainability. On the one 
hand, risk-increasing factors relate to the recent increase in interest rates, the share of short-
term debt, high gross financing needs, the large share of government debt held by non-residents 
and the lack of fiscal coordination among the different government levels, with several of the 
federated entities displaying specific vulnerabilities. On the other hand, risk-mitigating factors 
include  the  lengthening  of  debt  maturity  in  recent  years,  which  allows  for  a  gradual  pass 
through of increasing interest rates on the debt burden after benefitting from historically low 
borrowing  costs  for  long,  relatively  stable  financing  sources  (with  a  diversified  and  large 
investor base), and government debt being fully denominated in euro. In addition, the structural 
reforms  under  the  NextGenerationEU  (NGEU)/Recovery  and  Resilience  Facility  (RRF),  if 
fully implemented, could have a further positive impact on GDP growth in the coming years, 
and therefore help to mitigate debt sustainability challenges. 

Other  factors  put  forward  by  the  Member  State:  On  9  May  2023,  Belgium  provided 
additional relevant factors not mentioned above, namely a government project for a reform of 
the  tax  and  benefit  system  aiming  at  boosting  employment  and  economic  activity,  thereby 
fostering the sustainability of public finances, a pension reform (as foreseen in the Recovery 
and  Resilience  Plan,  RRP)  to  improve  the  financial  sustainability  of  the  pensions  system, 
various  initiatives  to  foster  labour  market  participation,  the  implementation  of  spending 
reviews,  and a commitment to step up public investment to accelerate the green and digital 
transition (including through the implementation of the RRP). 

15 

 
 
 
4.2.2.  BULGARIA  

Medium-term  macroeconomic  position:  After  a  contraction  of  4%  in  2020,  the  economy 
grew by 7.6% in 2021 and 3.4% in 2022. It is expected to grow by 1.5% in 2023 and 2.4% in 
2024. Growth in 2023 is mainly driven by private and public consumption. Economic activity 
returned to its annual 2019 level in 2021. 

Medium-term budgetary position, including investment: The government deficit increased 
from 3.8% in 2020 to 3.9% of GDP in 2021, before falling to 2.8% in 2022. It is projected to 
be at 4.8% of GDP in both 2023 and 2024. This projection takes into account Bulgaria’s 2023 
draft  budget  and  medium  term  fiscal  strategy,  which  include  a  baseline  no-policy-change 
budgetary plan driven by measures legislated in previous years such as increases in wages and 
pensions  and  reductions  of  some  taxes.  These  documents  have  not  yet  been  approved  by 
Parliament. Government investment decreased from 3.3% in 2020 to 2.6% of GDP in 2021, 
before increasing to 3% in 2022, and being larger than the government deficit in 2022.  

According to the Commission estimates, the fiscal stance in 2022 was supportive, at -1.2% of 
GDP, as recommended by the Council. As recommended by the Council, Bulgaria continued 
to support the recovery with investments to be financed by the Recovery and Resilience Facility 
and other EU funds. Expenditure financed by Recovery and Resilience Facility grants and other 
EU  funds  amounted  to  0.8%  of  GDP  in  2022  (0.9%  of  GDP  in  2021).  Nationally  financed 
investment provided an expansionary contribution of 0.5 percentage points to the fiscal stance. 
Bulgaria therefore preserved nationally financed investment, as recommended by the Council. 
At the same time, the growth in nationally financed primary current expenditure (net of new 
revenue measures) provided an expansionary contribution 0.8 percentage points to the fiscal 
stance. This expansionary contribution included the additional impact of fiscal policy measures 
to  mitigate  the  economic  and  social  impact  of  the  increase  in  energy  prices  (additional  net 
budgetary cost of 0.9% of GDP), as well as the costs to offer temporary protection to displaced 
persons from Ukraine (0.1% of GDP). Bulgaria therefore sufficiently kept under control the 
growth in nationally financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary – 3.1% of GDP, in a context of high inflation. The growth in nationally financed 
primary current  expenditure (net of discretionary revenue measures) in 2023 is projected to 
provide an expansionary contribution of 1.9% of GDP to the fiscal stance. The expansionary 
contribution  of  nationally  financed  net  primary  current  expenditure  is  not  due  to  a  targeted 
support to households and firms most vulnerable to energy price hikes and to people fleeing 
Ukraine. In sum, the projected growth of nationally financed primary current expenditure is 
not  in  line  with  the  Council  recommendation.  Bulgaria  is  projected  to  finance  additional 
investment through the Recovery and Resilience Facility and other EU funds, and to preserve 
nationally  financed  investment.  Expenditure  financed  by  Recovery  and  Resilience  Facility 
grants and other EU funds is projected to amount to 1.9% of GDP in 2023, while nationally 
financed investment is projected to provide an expansionary contribution to the fiscal stance of 
0.1 percentage points. 

Medium-term debt position: The government debt increased from 20% of GDP at the end of 
2019 to 24.5% at the end of 2020. It stood at 22.9% of GDP at the end of 2022 and it is projected 
at 25% and 28.1% at the end of 2023 and 2024, respectively. Overall, the debt sustainability 
analysis indicates medium risks over the medium term. In addition, the structural reforms under 
the NGEU/RRF, if fully implemented, could have a further positive impact on GDP growth in 
the coming years, and therefore help to mitigate debt sustainability challenges. 

16 

 
 
Other factors put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Bulgaria on 11 May 2023. Bulgarian 
authorities also informed that, as part of the ongoing discussions on the draft budget for 2023, 
the leading parties represented in Parliament have publicly committed to reducing the deficit 
to 3% of GDP in 2023. 

4.2.3.  CZECHIA 

Medium-term macroeconomic position: After a contraction of 5.5% in 2020, the economy 
grew by 3.6% in 2021 and 2.5% in 2022. It is expected to grow by 0.2% in 2023 and 2.6% in 
2024.  Growth  in  2023  is  mainly  driven  by  investment  and  net  exports.  Economic  activity 
exceeded its annual 2019 level in 2022. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 5.8% in 2020 to 5.1% of GDP in 2021 and 3.6% in 2022. It is projected to be at 3.6% and 
3%  of  GDP  in  2023  and  2024,  respectively.  After  increasing  to  4.8%  of  GDP  in  2020, 
government investment decreased to 4.7% of GDP in 2021 and 4.6% in 2022. It is projected to 
increase to 4.7% of GDP in 2023, and to be larger than the government deficit in 2022 and 
2023.  

According  to  the  Commission  estimates,  the  fiscal  stance  in  2022  was  broadly  neutral,  at               
-0.1% of GDP, as recommended by the Council. As recommended by the Council, Czechia 
continued to support the recovery including with investments financed by the Recovery and 
Resilience Facility. Expenditure financed by Recovery and Resilience Facility grants and other 
EU  funds  amounted  to  1.1%  of  GDP  in  2022  (1.1%  of  GDP  in  2021).  Nationally  financed 
investment provided a neutral contribution to the fiscal stance. At the same time, the growth in 
nationally  financed  primary  current  expenditure  (net  of  new  revenue  measures)  provided  a 
contractionary  contribution  of  0.3  percentage  points  to  the  fiscal  stance.  Czechia  therefore 
sufficiently kept under control the growth in nationally financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
contractionary  (+1.4%  of  GDP),  in  a  context  of  high  inflation.  The  growth  in  nationally 
financed  primary  current  expenditure  (net  of  discretionary  revenue  measures)  in  2023  is 
projected to provide a contractionary contribution of 1.2% of GDP to the fiscal stance. This 
includes  the  reduced  cost  of  the  targeted  support  measures  to  households  and  firms  most 
vulnerable  to  energy  price  hikes  by  0.1%  of  GDP.  This  also  includes  lower  costs  to  offer 
temporary  protection  to  displaced  persons  from  Ukraine  (by  0.1%  of  GDP).  In  sum,  the 
projected growth of nationally financed primary current expenditure is in line with the Council 
recommendation. Expenditure financed by Recovery and Resilience Facility grants and other 
EU funds is projected to amount to 1.6% of GDP in 2023, while nationally financed investment 
is  projected  to  provide  a  contractionary  contribution  to  the  fiscal  stance  of  0.5  percentage 
points. Therefore, Czechia plans to  finance additional investment through the Recovery and 
Resilience Facility and other EU funds, and it is not projected to preserve nationally financed 
investment. 

Medium-term debt position: The government debt increased from 30% of GDP at the end of 
2019 to 37.7% at the end of 2020. It stood at 44.1% of GDP at the end of 2022 and it is projected 
at 42.9% and 43.1% at the end of 2023 and 2024, respectively. Overall, the debt sustainability 
analysis indicates medium risks over the medium term. In addition, the structural reforms under 

17 

 
 
 
the NGEU/RRF, if fully implemented, could have a further positive impact on GDP growth in 
the coming years, and therefore help to mitigate debt sustainability challenges. 

Assessment  under  the  macroeconomic  imbalances  procedure:  Czechia  is  not  found  to 
experience imbalances. Vulnerabilities relate to  price competitiveness  and  house prices, but 
seem  limited  going  forward  as  household  debt  is  contained  and  inflation  is  expected  to 
decelerate significantly faster than the EU average. 

Other factors put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Czechia on 9 May 2023. 

4.2.4.  GERMANY 

Medium-term macroeconomic position: After a contraction of 3.7% in 2020, the economy 
grew by 2.6% in 2021 and 1.8% in 2022. It is expected to grow by 0.2% in 2023 and 1.4% in 
2024. Growth in 2023 is mainly driven by  net exports. Economic activity exceeded its annual 
2019 level in 2022. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 4.3% in 2020 to 3.7% of GDP in 2021 and 2.6% in 2022. It is projected to be at 2.3% and 
1.2%  of  GDP  in  2023  and  2024,  respectively.  After  increasing  to  2.7%  of  GDP  in  2020, 
government investment decreased to 2.6% of GDP in both 2021 and 2022. It is projected to 
increase to 2.7% of GDP in 2023, and to be larger than the government deficit in 2023.  

According to the Commission estimates, the fiscal stance in 2022 was supportive, at -2.7% of 
GDP, as recommended by the Council. As recommended by the Council, Germany continued 
to  support the recovery  with  investments  financed by the Recovery and  Resilience Facility. 
Expenditure financed by Recovery and Resilience Facility grants and other EU funds amounted 
to 0.2% of GDP in 2022 (0.3% of GDP in 2021). Nationally financed investment provided a 
neutral  contribution  to  the  fiscal  stance.  Germany  therefore  preserved  nationally  financed 
investment,  as  recommended  by  the  Council.  At  the  same  time,  the  growth  in  nationally 
financed primary current expenditure (net of new revenue measures) provided an expansionary 
contribution  of  2.4  percentage  points  to  the  fiscal  stance.  This  significant  expansionary 
contribution included the additional impact of fiscal policy measures to mitigate the economic 
and social impact of the increase in energy prices (additional net budgetary cost of 1.2% of 
GDP), as well as the costs to offer temporary protection to displaced persons from Ukraine 
(0.1%  of  GDP).  At  the  same  time,  tax  reductions  in  income  taxation  lowered  government 
revenues and also contributed (0.1% of GDP) to the growth in net primary current expenditure. 
The significant expansionary contribution of nationally financed current expenditure was only 
partially  due  to  the  measures  to  address  the  economic  and  social  impact  of  the  increase  in 
energy  prices,  as  well  as  the  costs  to  offer  temporary  protection  to  displaced  persons  from 
Ukraine. Germany therefore did not sufficiently keep under control the growth in nationally 
financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
contractionary  (+0.5%  of  GDP),  in  a  context  of  high  inflation.  The  growth  in  nationally 
financed  primary  current  expenditure  (net  of  discretionary  revenue  measures)  in  2023  is 
projected to provide a contractionary contribution of 0.3% of GDP to the fiscal stance. This 
includes  the  increased  cost  of  the  targeted  support  measures  to  households  and  firms  most 
vulnerable to energy price hikes by 0.2% of GDP. In sum, the projected growth of nationally 
financed primary current expenditure is in line with the Council recommendation. Expenditure 

18 

 
 
 
financed by Recovery and Resilience Facility grants and other EU funds is projected to amount 
to 0.2% of GDP in 2023, while nationally financed investment is projected to provide a neutral 
contribution to the fiscal stance. Therefore, Germany plans to finance additional investment 
through the Recovery and Resilience Facility and other EU funds, and it is projected to preserve 
nationally financed investment. 

Medium-term debt position: The government debt increased from 59.6% of GDP at the end 
of 2019 to 69.3% at the end of 2021. It stood at 66.3% of GDP at the end of 2022 and it is 
projected  at  65.2%  and  64.1%  at  the  end  of  2023  and  2024,  respectively.  Overall,  the  debt 
sustainability analysis indicates medium risks over the medium term. In addition, the structural 
reforms under the NGEU/RRF, if fully implemented, could have a further positive impact on 
GDP growth in the coming years, and therefore help to mitigate debt sustainability challenges. 

Assessment  under  the  macroeconomic  imbalances  procedure:  Germany  continues  to 
experience imbalances. The persistent large current account surplus, reflecting also  subdued 
investment relative to savings, which has cross-border relevance, has been gradually reduced, 
most recently amid the energy crisis, but is expected to increase markedly. 

Other factors put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Germany on 9 May 2023. Germany also 
confirmed that, based on the current trend of lower energy prices, the 2023 deficit  might be 
lower than planned in the Stability Programme. 

4.2.5.  ESTONIA 

Medium-term macroeconomic position: After a contraction of 0.6% in 2020, the economy 
grew by 8% in 2021 and contracted by 1.3% in 2022. It is expected to contract further by 0.4% 
in 2023 and to return to growth of 3.1% in 2024. Inventories and net exports are expected to 
grow in 2023. Economic activity exceeded its annual 2019 level in 2021. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 5.5% in 2020 to 2.4% of GDP in 2021 and 0.9% in 2022. It is projected to be at 3.1% and 
2.7%  of  GDP  in  2023  and  2024,  respectively.  After  increasing  to  5.7%  of  GDP  in  2020, 
government investment decreased to 5.6% of GDP in 2021 and 5.2% in 2022. It is projected to 
decline further to 5% of GDP in 2023, and to remain larger than the government deficit in 2022 
and 2023.  

According to the Commission estimates, the fiscal stance in 2022 was contractionary, at 1.3% 
of GDP, which was appropriate in a context of high inflation. As recommended by the Council, 
Estonia  continued  to  support  the  recovery  with  investments  financed  by  the  Recovery  and 
Resilience Facility, as recommended by the Council. Expenditure financed by Recovery and 
Resilience Facility grants and other EU funds amounted to 1.4% of GDP in 2022 (1.6% of GDP 
in 2021). The decrease in expenditures financed by Recovery and Resilience Facility grants 
and other EU funds in 2022 was due to the rapid and unforeseen rise in construction prices. 
Nationally financed investment provided a contractionary contribution of 0.6 percentage points 
to the fiscal stance. Estonia therefore did not preserve nationally financed investment, which is 
not  in  line  with  the  Council  recommendation.  At  the  same  time,  the  growth  in  nationally 
financed primary current expenditure (net of new revenue measures) provided a contractionary 
contribution of 0.8 percentage points to the fiscal stance. Estonia therefore sufficiently limited 
the growth in nationally financed current expenditure. 

19 

 
 
 
In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary (-0.8% of GDP), in a context of high inflation. The growth in nationally financed 
primary current  expenditure (net of discretionary revenue measures) in 2023 is projected to 
provide an expansionary contribution of 1.2% of GDP to the fiscal stance. This includes the 
reduced  cost  of  the  targeted  support  measures  to  households  and  firms  most  vulnerable  to 
energy  price  hikes  by  0.1%  of  GDP.  This  also  includes  higher  costs  to  offer  temporary 
protection  to  displaced  persons  from  Ukraine  (by  0.1%  of  GDP).  The  expansionary 
contribution of nationally financed net primary current expenditure is therefore not due to the 
targeted support to households and firms most vulnerable to energy price hikes and to people 
fleeing Ukraine. The expansionary growth in nationally financed primary current expenditure 
(net  of  discretionary  revenue  measures)  is  mainly  driven  by  social  spending,  public  wages, 
education  and  defence  expenditure.  In  sum,  the  projected  growth  of  nationally  financed 
primary  current  expenditure  is  not  in  line  with  the  Council  recommendation.  Expenditure 
financed by Recovery and Resilience Facility grants and other EU funds is projected to amount 
to  1.8%  of  GDP  in  2023,  while  nationally  financed  investment  is  projected  to  provide  a 
contractionary  contribution  to  the  fiscal  stance  of  0.3  percentage  points.  Therefore,  Estonia 
plans to finance additional investment through the Recovery and Resilience Facility and other 
EU funds, and it is not projected to preserve nationally financed investment. 

Medium-term debt position: The government debt increased from 8.5% of GDP at the end 
of 2019 to 18.5% at the end of 2020. It stood at 18.4% of GDP at the end of 2022 and it is 
projected  at  19.5%  and  21.3%  at  the  end  of  2023  and  2024,  respectively.  Overall,  the  debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  In  addition,  the  structural 
reforms under the NGEU/RRF, if fully implemented, could have a further positive impact on 
GDP growth in the coming years, and therefore help to mitigate debt sustainability challenges. 

Assessment  under  the  macroeconomic  imbalances  procedure:  Estonia  is  not  found  to 
experience 
to  competitiveness  and  house  price 
developments have recently increased but overall seem to be contained at present.  

imbalances.  Vulnerabilities  relating 

Other factors put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Estonia on 5 May 2023.  

4.2.6.  SPAIN 

Medium-term macroeconomic position: After a contraction of 11.3% in 2020, the economy 
grew by 5.5% annually in both 2021 and 2022. It is expected to grow by 1.9% in 2023 and 
2.0% in 2024. Growth in 2023 is mainly driven by net exports and, to a lesser extent, private 
investment. Economic activity is forecast to return to its annual 2019 level in 2023. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 10.1% in 2020 to 6.9% of GDP in 2021 and 4.8% in 2022. It is projected to be at 4.1% 
and 3.3% of GDP in 2023 and 2024, respectively. After increasing to 2.6% of GDP in 2020, 
government  investment  increased  further  to  2.7%  of  GDP  in  2021  and  2.8%  in  2022.  It  is 
projected to reach 2.9% in 2023.  

According to the Commission estimates, the fiscal stance in 2022 was supportive, at - 2.5% of 
GDP.  As  recommended  by  the  Council,  Spain  continued  to  support  the  recovery  with 
investments to be financed by the Recovery and Resilience Facility. Expenditure financed by 
Recovery and Resilience Facility grants and other EU funds amounted to 1.1% of GDP in 2022 
(1.2% of GDP in 2021). Nationally financed investment provided an expansionary contribution 

20 

 
 
 
of  0.3  percentage  points  to  the  fiscal  stance.  Spain  therefore  preserved  nationally  financed 
investment,  as  recommended  by  the  Council.  At  the  same  time,  the  growth  in  nationally 
financed primary current expenditure (net of new revenue measures) provided an expansionary 
contribution  of  2.7  percentage  points  to  the  fiscal  stance.  This  significant  expansionary 
contribution included the additional impact of fiscal policy measures to mitigate the economic 
and social impact of the increase in energy prices (additional net budgetary cost of 1.5% of 
GDP). At the same time, higher spending on intermediate consumption and social transfers in 
kind also contributed to the growth in net primary current expenditure. Spain therefore did not 
sufficiently limit the growth in nationally financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary (- 0.3% of GDP). The growth in nationally financed primary current expenditure 
(net  of  discretionary  revenue  measures)  in  2023  is  projected  to  provide  a  broadly  neutral 
contribution of 0.2 % of GDP to the fiscal stance. Therefore, the projected growth of nationally 
financed primary current expenditure is in line with the recommendation of the Council. The 
projected broadly neutral  contribution  of nationally financed primary current  expenditure is 
due, in substance, to the reduced net costs of the (targeted and untargeted) support measures to 
households and firms in response to energy price hikes (by 1.0% of GDP). The main drivers of 
growth in nationally financed primary current expenditure (net of new revenue measures) are 
the increase in social transfers, driven by the relinking of pensions to past inflation, and higher 
spending  on  intermediate  consumption.  Expenditure  financed  by  Recovery  and  Resilience 
Facility  grants  and  other  EU  funds  is  projected  to  amount  to  1.6%  of  GDP  in  2023,  while 
nationally  financed  investment  is  projected  to  provide  an  expansionary  contribution  to  the 
fiscal stance of 0.1 percentage points. Therefore, Spain plans to finance additional investment 
through the Recovery and Resilience Facility and other EU funds, and it is projected to preserve 
nationally financed investment.  

Medium-term debt position: The government debt increased from 98.2% of GDP at the end 
of 2019 to 120.4% at the end of 2020. It stood at 113.2% of GDP at the end of 2022 and it is 
projected at 110.6% and 109.1% at the end of 2023 and 2024, respectively.  

Overall, the debt sustainability analysis indicates high risks over the medium term. According 
to the baseline 10-year projection, the general  government debt ratio would slightly decline 
before increasing again to around 106% of GDP in 2033. The debt trajectory is sensitive to 
macroeconomic shocks. According to the stochastic projections, which simulate a large range 
of  possible  temporary  shocks  to  macroeconomic  variables,  it  is  probable  that  the  debt  ratio 
would be higher in 2027 than in 2022.  

There are other factors relevant for an overall assessment of debt sustainability. On the one 
hand, risk-increasing factors relate to the recent increase in interest rates and the elevated level 
of  external  and  private  debt,  which  may  amplify  the  adverse  impact  of  the  tightening  of 
financial  conditions  on  households’  and  firms’  financial  position.  On  the  other  hand,  risk-
mitigating factors include the lengthening of debt maturity in recent years, which allows for a 
gradual  pass  through  of  increasing  interest  rates  on  the  debt  burden  after  benefitting  from 
historically low borrowing costs for long, relatively stable financing sources featuring a well-
diversified  and  large  investor  base  and  the  currency  denomination  of  debt.  In  addition,  the 
structural reforms under the NGEU/RRF, if fully implemented, could have a further positive 
impact on GDP growth in the coming years, and therefore help to mitigate debt sustainability 
challenges. 

21 

 
 
Assessment  under  the  macroeconomic  imbalances  procedure:  Spain  continues  to 
experience imbalances. Vulnerabilities related to high private, government and external debt, 
which have cross-border relevance, are receding but remain present. 

Other factors put forward by the Member State: On 9 May 2023, Spain provided additional 
relevant  factors  not  mentioned  above,  namely  the  structural  transformation  of  the  Spanish 
economy  that  is  yielding  results  in  terms  of  sustained  improvement  in:  employment  rates 
(Social Security enrolment stands at its highest level), the net international investment position 
(and the external sector at large, with a current account surplus for the tenth year in a row) and 
public  finances  (with  a  significant  increase  in  public  revenues  underpinned  by  important 
behavioural changes of economic agents and measures taken). 

4.2.7.  FRANCE 

Medium-term macroeconomic position: After a contraction of 7.8% in 2020, the economy 
grew by 6.8% in 2021 and 2.6% in 2022. It is expected to grow by 0.7% in 2023 and 1.4% in 
2024.  Growth  in  2023  is  mainly  driven  by  investment  and  public  consumption.  Economic 
activity exceeded its annual 2019 level in 2022. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 9% in 2020 to 6.5% of GDP in 2021 and 4.7% in 2022. It is projected to be at 4.7% and 
4.3%  of  GDP  in  2023  and  2024,  respectively.  After  remaining  at  3.7%  of  GDP  in  2020, 
government investment decreased to 3.6% of GDP in 2021, to reach back 3.7% in 2022. It is 
projected to remain stable in 2023.  

According to the Commission estimates, the fiscal stance in 2022 was supportive, at - 2.0% of 
GDP.  As  recommended  by  the  Council,  France  continued  to  support  the  recovery  with 
investments  financed  by  the  Recovery  and  Resilience  Facility.  Expenditure  financed  by 
Recovery and Resilience Facility grants and other EU funds amounted to 0.6% of GDP in 2022 
(0.7%  of  GDP  in  2021).  The  marginal  decrease  in  expenditure  financed  by  Recovery  and 
Resilience  Facility  grants  and  other  EU  funds  in  2022  was  due  to  the  frontloaded 
implementation of the plan over its first two years. Nationally financed investment provided 
an  expansionary  contribution  of  0.1  percentage  points  to  the  fiscal  stance.  France  therefore 
preserved nationally financed investment, as recommended by the Council. At the same time, 
the growth in nationally financed primary current expenditure (net of new revenue measures) 
provided  an  expansionary  contribution  of  1.7  percentage  points  to  the  fiscal  stance.  This 
significant expansionary contribution included the additional impact of fiscal policy measures 
to  mitigate  the  economic  and  social  impact  of  the  increase  in  energy  prices  (additional  net 
budgetary cost of 0.8% of GDP). At the same time, the indexation of pensions, social benefits 
and  public  wages  also  contributed  (0.4%  of  GDP)  to  the  growth  in  net  primary  current 
expenditure.  France  therefore  did  not  sufficiently  limit  the  growth  in  nationally  financed 
current expenditure.  

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
contractionary  (+0.5%  of  GDP),  in  a  context  of  high  inflation.  The  growth  in  nationally 
financed  primary  current  expenditure  (net  of  discretionary  revenue  measures)  in  2023  is 
projected to provide a contractionary contribution of 0.6 % of GDP to the fiscal stance. This 
includes  the  increased  cost  of  the  targeted  support  measures  to  households  and  firms  most 
vulnerable to energy price hikes by 0.1% of GDP. In sum, the projected growth of nationally 
financed primary current expenditure is in line with the Council recommendation. Expenditure 

22 

 
 
 
financed by Recovery and Resilience Facility grants and other EU funds amounted to 0.4% of 
GDP in 2023, while nationally financed investment provided a neutral contribution to the fiscal 
stance.  Therefore,  France  plans  to  finance  additional  investment  through  the  Recovery  and 
Resilience Facility and other EU funds, and it plans to preserve nationally financed investment. 

Medium-term debt position: The government debt increased from 97.4% of GDP at the end 
of 2019 to 114.6% at the end of 2020. It stood at 111.6% of GDP at the end of 2022 and it is 
projected at 109.6% and 109.5% at the end of 2023 and 2024, respectively.  

Overall, the debt sustainability analysis indicates high risks over the medium term. According 
to the baseline 10-year projection, the general government debt ratio would increase over the 
next  10  years,  reaching  around 125.6% of GDP  in  2033. The debt  trajectory  is  sensitive to 
macroeconomic shocks. According to the stochastic projections, which simulate a large range 
of  possible  temporary  shocks  to  macroeconomic  variables,  it  is  probable  that  the  debt  ratio 
would be higher in 2027 than in 2022.  

There are other factors relevant for an overall assessment of debt sustainability.  On the one 
hand, risk-increasing factors relate to the recent increase in interest rates, the expected increase 
in gross financing needs over the medium term and the contingent liability risks stemming from 
the private sector, including via the possible materialisation of state guarantees granted to firms 
and  self-employed  during  the  COVID-19  crisis.  On  the  other  hand,  risk-mitigating  factors 
include  the  lengthening  of  debt  maturity  in  recent  years,  which  allows  for  a  gradual  pass 
through of increasing interest rates on the debt burden after benefitting from historically low 
borrowing costs for long, and relatively stable financing sources (with a diversified and large 
investor base). In addition, the structural reforms under the NGEU/RRF, if fully implemented, 
could have a further positive impact on GDP growth in the coming years, and therefore help to 
mitigate debt sustainability challenges. 

Assessment  under  the  macroeconomic  imbalances  procedure:  France  continues  to 
experience imbalances. Vulnerabilities related to high government debt, and competitiveness 
and  low  productivity  growth,  which  have  cross-border  relevance,  remain  present  but  have 
shown signs of reduction. 

Other  factors  put  forward  by  the  Member  State:  On  9  May  2023,  France  provided 
additional relevant factors not mentioned above, namely the investment efforts deployed as of 
2021 to support the green and digital transitions  in addition to the Recovery and Resilience 
Facility grants, as well as the reduction in production taxes to enhance firms’ competitiveness. 

4.2.8. 

ITALY 

Medium-term  macroeconomic  position:  After  a  contraction  of  9%  in  2020,  the  economy 
grew by 7% in 2021 and 3.7% in 2022. It is expected to grow by 1.2% in 2023 and 1.1% in 
2024.  Growth  in  2023  is  mainly  driven  by  investment  and  net  exports.  Economic  activity 
exceeded its annual 2019 level in 2022. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 9.7% in 2020 to 9% of GDP in 2021 and 8% in 2022. Both 2021 and 2022 levels include 
the deficit-increasing impact of the new statistical treatment of some housing renovation tax 
credits, now recorded as capital transfers and mostly accrued to 2021-2022. The government 
deficit  is  projected  to  be  at  4.5%  and  3.7%  of  GDP  in  2023  and  2024,  respectively.  After 

23 

 
 
 
increasing to 2.6% of GDP in 2020, government investment further increased to 2.9% of GDP 
in 2021, before decreasing to 2.7% in 2022. It is projected to reach 3.1% of GDP in 2023.  

According to the Commission estimates, the fiscal stance in 2022 was supportive, at - 3.2% of 
GDP.  As  recommended  by  the  Council,  Italy  continued  to  support  the  recovery  with 
investments  financed  by  the  Recovery  and  Resilience  Facility.  Expenditure  financed  by 
Recovery and Resilience Facility grants and other EU funds amounted to 0.9% of GDP in 2022 
(0.4% of GDP in 2021). Nationally financed investment provided a neutral contribution to the 
fiscal stance. Italy therefore preserved nationally-financed investment, as recommended by the 
Council. At the same time, the growth in nationally-financed primary current expenditure (net 
of new revenue measures) provided an expansionary contribution of 2.4 percentage points to 
the fiscal stance. This significant expansionary contribution included the additional impact of 
fiscal policy measures to mitigate the economic and social impact of the increase in energy 
prices (additional net budgetary cost of 2.2% of GDP), as well as the costs to offer temporary 
protection to displaced persons from Ukraine (0.1% of GDP). Italy therefore sufficiently kept 
under control the growth in national financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
contractionary  (+2.6%  of  GDP),  in  a  context  of  high  inflation.  The  growth  in  nationally 
financed  primary  current  expenditure  (net  of  discretionary  revenue  measures)  in  2023  is 
projected  to  provide  a  contractionary  contribution  of  0.9%  of  GDP  to  the  fiscal  stance. 
Therefore, the projected growth of nationally financed primary current expenditure is in line 
with  the  Council  recommendation.  The  projected  contractionary  contribution  of  nationally 
financed  primary  current  expenditure  is  due,  in  substance,  to  the  reduced  costs  (by  1.5 
percentage points of GDP) of the support measures (targeted and untargeted) to households 
and firms in response to energy price hikes. The main drivers of growth in nationally financed 
primary  current  expenditure  (net  of  new  revenue  measures)  are  the  increase  in  pension 
expenditure due to the indexation to previous-year inflation and the recently adopted additional 
cuts to the labour tax wedge for low- and medium-income earners. Expenditure financed by 
Recovery and Resilience Facility grants and other EU funds is projected to amount to 1.4% of 
GDP in 2023, while nationally financed investment is projected to provide an expansionary 
contribution  to  the  fiscal  stance  of  0.1  percentage  points.  Therefore,  Italy  plans  to  finance 
additional investment through the Recovery and Resilience Facility and other EU funds, and it 
is projected to preserve nationally financed investment. 

Medium-term debt position: The government debt increased from 134.1% of GDP at the end 
of 2019 to 154.9% at the end of 2020. It stood at 144.4% of GDP at the end of 2022 and it is 
projected at 140.4% and 140.3% at the end of 2023 and 2024, respectively. 

Overall, the debt sustainability analysis indicates high risks over the medium term. According 
to the baseline 10-year projection, the general government debt ratio increases continuously, 
reaching  about  156.5%  of GDP in  2033. The debt  trajectory is  sensitive  to  macroeconomic 
shocks.  According  to  the  stochastic  projections,  which  simulate  a  large  range  of  possible 
temporary shocks to macroeconomic variables, there is a high probability that the debt ratio 
would be higher in 2027 than in 2022.  

There are other factors relevant for an overall assessment of debt sustainability.  On the one 
hand,  risk-increasing  factors  are  related  to  the  recent  increase  in  interest  rates,  the  share  of 
short-term government debt and to contingent liability risks stemming from the private sector, 
including via the possible materialisation of COVID-19 crisis related state guarantees. On the 
other  hand,  risk-mitigating  factors  include  the  lengthening  of  debt  maturity  in  recent  years, 

24 

 
 
which allows for a gradual pass through of increasing interest rates on the debt burden after 
benefitting from historically low borrowing costs for long, relatively stable financing sources 
(with  a  diversified  and  large  investor  base)  and  the  positive  net  international  investment 
position. In addition, the structural reforms under the NGEU/RRF, if fully implemented, could 
have  a  further  positive  impact  on  GDP  growth  in  the  coming  years,  and  therefore  help  to 
mitigate debt sustainability challenges. 

Assessment under the macroeconomic imbalances procedure: Italy continues to experience 
excessive  imbalances.  While  there  have  been  some  improvements  vulnerabilities  related  to 
high government debt and weak productivity growth, in a context of labour market fragilities 
and some weaknesses in financial markets, which carry cross-border relevance, persist.  

Other factors put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Italy on 11 May 2023. 

4.2.9.  LATVIA 

Medium-term macroeconomic position: After a contraction of 2.3% in 2020, the economy 
grew by 4.3% in 2021 and 2.8% in 2022. It is expected to grow by 1.4% in 2023 and 2.8% in 
2024.  Growth  in  2023  is  mainly  driven  by  private  consumption  and  net  exports.  Economic 
activity exceeded its annual 2019 level in 2021. 

Medium-term  budgetary  position,  including  investment:  After  increasing  from  4.4%  in 
2020 to 7.1% of GDP in 2021, the government deficit decreased to 4.4% in 2022. It is projected 
to be at 3.8% and 2.7% of GDP in 2023 and 2024, respectively. After increasing to 5.7% of 
GDP in 2020, government investment decreased to 5.2% of GDP in 2021 and 3.8% in 2022. It 
is projected to increase to 5.5% of GDP in 2023, and to be larger than the government deficit.  

According  to  the  Commission  estimates,  the  fiscal  stance  in  2022  was  neutral,  which  was 
appropriate in a context of high inflation. As recommended by the Council, Latvia continued 
to  support the recovery  with  investments  financed by the Recovery and  Resilience Facility. 
Expenditure financed by Recovery and Resilience Facility grants and other EU funds amounted 
to  1.1% of GDP in  2022 (1.3% of GDP  in  2021).  Due to  capacity constraints and a rise in 
construction prices, some investments financed by Recovery and Resilience Facility grants and 
other EU funds in 2022 were delayed, leading to the small decrease in expenditure. Nationally 
financed  investment  provided  a  contractionary  contribution  of  1.2  percentage  points  to  the 
fiscal stance. Latvia therefore did not preserve nationally financed investment which is not in 
line with the Council recommendation. At the same time, the growth in  nationally financed 
primary  current  expenditure  (net  of  new  revenue  measures)  provided  a  contractionary 
contribution of 0.3 percentage points to the fiscal stance. Latvia therefore kept under control 
the growth in nationally financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary (- 0.9% of GDP), in a context of high inflation. The growth in nationally financed 
primary current  expenditure (net of discretionary revenue measures) in 2023 is projected to 
provide an expansionary contribution of 0.5 % of GDP to the fiscal stance. This includes the 
reduced  cost  of  the  targeted  support  measures  to  households  and  firms  most  vulnerable  to 
energy  price  hikes  by  0.4%  of  GDP.  This  also  includes  higher  costs  to  offer  temporary 
protection  to  displaced  persons  from  Ukraine  (by  0.1%  of  GDP).  The  expansionary 
contribution of nationally financed net primary current expenditure is therefore not due to the 
targeted support to households and firms most vulnerable to energy price hikes and to people 

25 

 
 
 
fleeing Ukraine. The expansionary growth in nationally financed primary current expenditure 
(net of discretionary revenue measures) is driven by expenditure measures included in the 2023 
budget package, such as wage increase for administration and medical personnel, additional 
current expenditure financing oncology, science and research and other discretionary current 
expenditure for national administration as well as higher spending for pensions and allowances. 
In sum, the projected growth of nationally financed primary current expenditure is not in line 
with the Council recommendation. Expenditure financed by Recovery and Resilience Facility 
grants and other EU funds is projected to amount to 2.2% of GDP in 2023, while nationally 
financed investment is projected to provide an expansionary contribution to the fiscal stance of 
1.0  percentage  points.  Therefore,  Latvia  plans  to  finance  additional  investment  through  the 
Recovery and Resilience Facility and other EU funds, and it is projected to preserve nationally 
financed investment. 

Medium-term debt position: The government debt increased from 36.5% of GDP at the end 
of 2019 to 42.0% at the end of 2020. It stood at 40.8% of GDP at the end of 2022 and it is 
projected  at  39.8%  and  40.5%  at  the  end  of  2023  and  2024,  respectively.  Overall,  the  debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  In  addition,  the  structural 
reforms under the NGEU/RRF, if fully implemented, could have a further positive impact on 
GDP growth in the coming years, and therefore help to mitigate debt sustainability challenges. 

Assessment  under  the  macroeconomic  imbalances  procedure:  Latvia  is  not  found  to 
experience  imbalances.  Vulnerabilities  relating  to  external  borrowing  and  housing  remain 
mild; risks to competitiveness are pertinent, but overall seem contained in the near future. 

Other factors put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Latvia on 8 May 2023. 

4.2.10.  HUNGARY 

Medium-term macroeconomic position: After a contraction of 4.5% in 2020, the economy 
grew by 7.2% in 2021 and 4.6% in 2022. It is expected to grow by 0.5% in 2023 and 2.8% in 
2024. Growth in 2023 is mainly driven by net exports. Economic activity exceeded its annual 
2019 level in 2021. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 7.5% in 2020 to 7.1% of GDP in 2021 and 6.2% in 2022. It is projected to be at 4% and 
4.4%  of  GDP  in  2023  and  2024,  respectively.  After  increasing  to  6.5%  of  GDP  in  2020, 
government investment decreased to 6.3% of GDP in 2021 and 5.3% in 2022. It is projected to 
be at 5.3% of GDP also in 2023, thus larger than the general government deficit.  

According to the Commission estimates, the fiscal stance in 2022 was supportive, at -0.4% of 
GDP, as recommended by the Council. As recommended by the Council, Hungary continued 
to  support  the  recovery  with  investments  to  be  financed  by  the  Recovery  and  Resilience 
Facility. Expenditure financed by Recovery and Resilience Facility grants and other EU funds 
amounted  to  1.5%  of  GDP  in  2022  (2.1%  of  GDP  in  2021).  The  decrease  in  expenditure 
financed by Recovery and Resilience Facility grants and other EU funds in 2022 was due to 
lower  absorption  of  the  European  structural  and  investment  funds.  Nationally  financed 
investment provided a contractionary contribution of 0.2 percentage points to the fiscal stance. 
Hungary therefore did not preserve nationally financed investment, which is not in line with 
the  Council  recommendation.  At  the  same  time,  the  growth  in  nationally  financed  primary 
current expenditure (net of new revenue measures) provided a contractionary contribution of 

26 

 
 
 
0.6 percentage points to the fiscal stance. Hungary therefore sufficiently kept under control the 
growth in nationally financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
contractionary  (+4.2%  of  GDP),  in  a  context  of  high  inflation.  The  growth  in  nationally 
financed  primary  current  expenditure  (net  of  discretionary  revenue  measures)  in  2023  is 
projected  to  provide  a  contractionary  contribution  of  2.2%  of  GDP  to  the  fiscal  stance. 
Therefore, the projected growth of nationally financed primary current expenditure is in line 
with the Council recommendation. Expenditure financed by Recovery and Resilience Facility 
grants and other EU funds is projected to amount to 2.3% of GDP in 2023, while nationally 
financed investment is projected to provide a contractionary contribution to the fiscal stance of 
0.6 percentage points. Therefore, Hungary plans to finance additional investment through the 
Recovery and Resilience Facility and other EU funds, although it is not projected to preserve 
nationally financed investment.  

Medium-term debt position: The government debt increased from 65.3% of GDP at the end 
of 2019 to 79.3% at the end of 2020. It stood at 73.3% of GDP at the end of 2022 and it is 
projected at 70.7% and 71.1% at the end of 2023 and 2024, respectively.  

Overall, the debt sustainability analysis indicates high risks over the medium term. According 
to the baseline 10-year projection, the general government debt ratio would overall stabilise 
over the next five years. However, as of 2027, the debt ratio would start to increase, reaching 
72.5% of GDP in 2033. According to the stochastic projections, which simulate a large range 
of possible temporary shocks to macroeconomic variables, there is a high probability that the 
debt ratio would be higher in 2027 than in 2022.  

There are other factors relevant for an overall assessment of debt sustainability. On the one 
hand,  risk-increasing  factors  are  related  to  the  recent  increase  in  interest  rates,  Hungary’s 
negative net international investment position, the rising share of short-term and foreign debt, 
and to contingent liability risks stemming from the private sector, including via the possible 
materialisation of COVID-19 crisis related state guarantees. On the other hand, risk-mitigating 
factors include the lengthening of debt maturity in recent years and relatively stable financing 
sources. In addition, the measures under the NGEU/RRF, if fully implemented, could have a 
further positive impact on GDP growth in the coming years, and therefore help to mitigate debt 
sustainability challenges. 

Assessment  under  the  macroeconomic  imbalances  procedure:  Hungary  is  experiencing 
imbalances. Vulnerabilities related to very strong price pressures and external and government 
financing needs have increased and are significant.  

Other  factors  put  forward  by  the  Member  State:  On  9  May  2023,  Hungary  provided 
additional  relevant  factors  not  mentioned  above,  namely  that  Hungary  is  experiencing 
increased risk premia on the capital markets in view of the uncertainty about when Hungary 
will fulfil the necessary conditions to gain full access to EU funds. 

27 

 
 
 
4.2.11.  MALTA 

Medium-term macroeconomic position: After a contraction of 8.6% in 2020, the economy 
grew by 11.8% in 2021 and 6.9% in 2022. It is expected to grow by 3.9% in 2023 and 4.1% in 
2024.  Growth  in  2022  is  mainly  driven  by  net  exports  and  private  consumption.  Economic 
activity exceeded its annual 2019 level in 2021. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 9.7% in 2020 to 7.8% of GDP in 2021 and 5.8% in 2022. It is projected to be at 5.1% and 
4.5%  of  GDP  in  2023  and  2024,  respectively.  After  increasing  to  4.2%  of  GDP  in  2020, 
government investment decreased to 3.8% of GDP in 2021 and 3.3% in 2022. It is projected to 
be at 3.8% of GDP in 2023.  

According to the Commission estimates, the fiscal stance in 2022 was broadly neutral, at - 0.2% 
of GDP, as recommended by the Council. As recommended by the Council, Malta continued 
to  support  the  recovery  with  investments  to  be  financed  by  the  Recovery  and  Resilience 
Facility. Expenditure financed by Recovery and Resilience Facility grants and other EU funds 
amounted  to  0.9%  of  GDP  in  2022  (1.1%  of  GDP  in  2021).  The  decrease  in  expenditures 
financed by Recovery and Resilience Facility grants and other EU funds in 2022 was due to a 
lower absorption of other EU funds. Nationally financed investment provided a contractionary 
contribution  of  0.2  percentage  points  to  the  fiscal  stance.  Malta  therefore  did  not  preserve 
nationally financed investment which was not in line with the Council recommendation. At the 
same time, the growth in nationally financed primary current expenditure (net of new revenue 
measures) provided an expansionary contribution of 0.9 percentage points to the fiscal stance. 
However, this significant expansionary contribution included the additional impact of fiscal 
policy measures to mitigate the economic and social impact of the increase in energy prices 
(additional  net  budgetary  cost  of  1.9%  of  GDP),  as  well  as  the  costs  to  offer  temporary 
protection to displaced persons from Ukraine (0.1% of GDP). Malta therefore sufficiently kept 
under control the growth in nationally financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
contractionary  (+ 0.4%  of  GDP),  in  a  context  of  high  inflation.  The  growth  in  nationally 
financed  primary  current  expenditure  (net  of  discretionary  revenue  measures)  in  2023  is 
projected to provide a contractionary contribution of 0.8 % of GDP to the fiscal stance. In sum, 
the  projected  growth  of  nationally  financed  primary  current  expenditure  is  in  line  with  the 
Council  recommendation.  Expenditure  financed  by  Recovery  and  Resilience  Facility  grants 
and other EU funds amounted to 1.6% of GDP in 2023, while nationally financed investment 
provided a contractionary contribution to the fiscal stance of 0.3 percentage points. Therefore, 
Malta plans to finance additional investment through the Recovery and Resilience Facility and 
other EU funds, but it is not projected to preserve nationally financed investment.   

Medium-term debt position: The government debt increased from 40.3% of GDP at the end 
of 2019 to 52.9% at the end of 2020. It stood at 53.4% of GDP at the end of 2022 and it is 
projected  at  54.8%  and  56.1%  at  the  end  of  2023  and  2024,  respectively.  Overall,  the  debt 
sustainability analysis indicates medium risks over the medium term. In addition, the structural 
reforms under the NGEU/RRF, if fully implemented, could have a further positive impact on 
GDP growth in the coming years, and therefore help to mitigate debt sustainability challenges. 

Other factors put forward by the Member State: On 5 May 2023, Malta provided additional 
relevant  factors  not  mentioned  above,  namely  the  cost  incurred  in  2022  related  to  the 
restructuring of the national airline and the early retirement of its employees. 

28 

 
 
4.2.12.  AUSTRIA 

Medium-term macroeconomic position: After a contraction of 6.5% in 2020, the economy 
grew by 4.6% in 2021 and 5% in 2022. It is expected to grow by 0.4% in 2023 and 1.6% in 
2024. Growth in 2023 is mainly driven by private consumption. Economic activity exceeded 
its annual 2019 level in 2022. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 8% in 2020 to 5.8% of GDP in 2021 and 3.2% in 2022. It is projected to be at 2.4% and 
1.3%  of  GDP  in  2023  and  2024,  respectively.  After  increasing  to  3.3%  of  GDP  in  2020, 
government investment increased further to 3.6% of GDP in 2021, before declining to 3.3% in 
2022. It is projected to reach 3.4% in 2023, and to be larger than the government deficit in both 
2022 and 2023.  

According to the Commission estimates, the fiscal stance in 2022 was supportive, at - 2.8% of 
GDP,  as  recommended  by  the  Council.  Also  as  recommended  by  the  Council,  Austria 
continued to support the recovery with investments financed by the Recovery and Resilience 
Facility. Expenditure financed by Recovery and Resilience Facility grants and other EU funds 
amounted to 0.2% of GDP in 2022 (0.2% of GDP in 2021). Nationally financed investment 
provided  a  contractionary  contribution  of  0.1  percentage  point  to  the  fiscal  stance.  Austria 
therefore did not preserve nationally financed investment, which is not in line with the Council 
recommendation.  At  the  same  time,  the  growth  in  nationally  financed  primary  current 
expenditure  (net  of  new  revenue  measures)  provided  an  expansionary  contribution  of  1.8 
percentage points to the fiscal stance. This significant expansionary contribution included the 
additional impact of fiscal policy measures to mitigate the economic and social impact of the 
increase in energy prices (additional net budgetary cost of 1.5% of GDP), as well as the costs 
to  offer  temporary  protection  to  displaced  persons  from  Ukraine  (0.2%  of  GDP).  Austria 
therefore sufficiently kept under control the growth in nationally financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
contractionary  (+ 1.0%  of  GDP),  in  a  context  of  high  inflation.  The  growth  in  nationally 
financed  primary  current  expenditure  (net  of  discretionary  revenue  measures)  in  2023  is 
projected to provide a contractionary contribution of 0.3 percentage points to the fiscal stance. 
This includes the increased cost of the targeted support measures to households and firms most 
vulnerable to energy price hikes by 0.2% of GDP. In sum, the projected growth of nationally 
financed primary current expenditure is in line with the Council recommendation. Expenditure 
financed by Recovery and Resilience Facility grants and other EU funds is projected to amount 
to  0.3%  of  GDP  in  2023,  while  nationally  financed  investment  is  projected  to  provide  an 
expansionary contribution to the fiscal stance of 0.1 percentage points. Therefore, Austria plans 
to finance additional investment through the Recovery and Resilience Facility and other EU 
funds, and it is projected to preserve nationally financed investment. 

Medium-term debt position: The government debt increased from 70.6% of GDP at the end 
of 2019 to 82.9% at the end of 2020. It stood at 78.4% of GDP at the end of 2022 and it is 
projected  at  75.4%  and  72.7%  at  the  end  of  2023  and  2024,  respectively.  Overall,  the  debt 
sustainability  analysis  indicates  low  risks  over  the  medium  term.  In  addition,  the  structural 
reforms under the NGEU/RRF, if fully implemented, could have a further positive impact on 
GDP growth in the coming years, and therefore help to mitigate debt sustainability challenges. 

29 

 
 
 
Other factors put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Austria on 8 May 2023. 

4.2.13.  POLAND 

Medium-term  macroeconomic  position:  After  a  contraction  of  2%  in  2020,  the  economy 
grew by 6.9% in 2021 and 5.1% in 2022. It is expected to grow by 0.7% in 2023 and 2.7% in 
2024.  Growth  in  2023  is  mainly  driven  by  net  exports  and  investment.  Economic  activity 
exceeded its annual 2019 level in 2021. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 6.9% in 2020 to 1.8% of GDP in 2021, before increasing to 3.7% in 2022. It is projected 
to be at 5% and 3.7% of GDP in 2023 and 2024, respectively. After increasing to 4.5% of GDP 
in  2020,  government  investment  contracted  to  4.1%  of  GDP  in  2021  and  4%  in  2022.  It  is 
projected to increase to 4.1% of GDP in 2023, being larger than the government deficit in 2021 
and 2022, but not in 2023.  
According to the Commission estimates, the fiscal stance in 2022 was supportive, at – 3.0% of 
GDP, as recommended by the Council. As recommended by the Council, Poland continued to 
support  the  recovery  with  investments  financed  by  the  Recovery  and  Resilience  Facility. 
Expenditure financed by Recovery and Resilience Facility grants and other EU funds amounted 
to 1.0% of GDP in 2022 (1.3% of GDP in 2021). Nationally financed investment provided an 
expansionary  contribution  of  0.2  percentage  points  to  the  fiscal  stance.  Poland  therefore 
preserved nationally financed investment, as recommended by the Council. At the same time, 
the growth in nationally financed primary current expenditure (net of new revenue measures) 
provided  an  expansionary  contribution  of  2.3  percentage  points  to  the  fiscal  stance.  This 
significant expansionary contribution included the additional impact of fiscal policy measures 
to  mitigate  the  economic  and  social  impact  of  the  increase  in  energy  prices  (additional  net 
budgetary cost of 1.9% of GDP), as well as the costs to offer temporary protection to displaced 
persons  from  Ukraine  (0.5%  of  GDP).  Poland  therefore  sufficiently  kept  under  control  the 
growth in nationally financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary (- 0.8% of GDP), in a context of high inflation. The growth in nationally financed 
primary current  expenditure (net of discretionary revenue measures) in 2023 is projected to 
provide an expansionary contribution of 0.8 % of GDP to the fiscal stance. This includes the 
increased cost of the targeted support measures to households and firms most vulnerable to 
energy  price  hikes  by  0.1%  of  GDP.  This  also  includes  lower  costs  to  offer  temporary 
protection  to  displaced  persons  from  Ukraine  (by  0.2%  of  GDP).  The  expansionary 
contribution of nationally financed net primary current expenditure is therefore not due to the 
targeted support to households and firms most vulnerable to energy price hikes and to people 
fleeing Ukraine. The expansionary growth in nationally financed primary current expenditure 
is  driven by untargeted  energy measures, higher spending on defence and health as well as 
permanent increases in public sector wages and social benefits. In sum, the projected growth 
of  nationally  financed  primary  current  expenditure  is  not  in  line  with  the  Council 
recommendation. Expenditure financed by Recovery and Resilience Facility grants and other 
EU funds is projected to amount to 1.8% of GDP in 2023, while nationally financed investment 
is  projected  to  provide  a  contractionary  contribution  to  the  fiscal  stance  of  0.2  percentage 
points.  Therefore,  Poland  plans  to  finance  additional  investment  through  the  Recovery  and 

30 

 
 
 
Resilience Facility and other EU funds, and it is not projected to preserve nationally financed 
investment. 

Medium-term debt position: The government debt increased from 45.7% of GDP at the end 
of 2019 to 57.2% at the end of 2020. It stood at 49.1% of GDP at the end of 2022 and it is 
projected  at  50.5%  and  53%  at  the  end  of  2023  and  2024,  respectively.  Overall,  the  debt 
sustainability analysis indicates medium risks over the medium term. In addition, the structural 
reforms under the NGEU/RRF, if fully implemented, could have a further positive impact on 
GDP growth in the coming years, and therefore help to mitigate debt sustainability challenges. 

Other  factors  put  forward  by  the  Member  State:  On  9  May  2023,  Poland  provided 
additional relevant factors not mentioned above, namely a significant increase in expenditure 
focused  on  modernization  of  the  armed  forces  due  to  the  war  in  Ukraine  and  in  local 
government  investments.  The  Act  of  11  March  2022  on  the  Defence  of  the  Homeland  has 
increased the expenditure on national defence from the planned 2.2% of GDP in 2022 to 3% 
of  GDP  in  2023.  Due  to  the  increase  in  defence  expenditure  and  in  local  government 
investments  (by  about  21%  y-o-y  in  nominal  terms),  the  dynamics  of  public  investments 
accelerated in 2022 (by 14.3% y-o-y in nominal terms) and in relation to GDP reached the level 
of 4.0%. It is expected to increase further in 2023, to approximately 4.2% of GDP. 

4.2.14.  SLOVENIA 

Medium-term macroeconomic position: After a contraction of 4.3% in 2020, the economy 
grew by 8.2% in 2021 and 5.4% in 2022. It is expected to grow by 1.2% in 2023 and 2.2% in 
2024. Growth in 2023 is mainly driven by domestic demand. Economic activity exceeded its 
annual 2019 level in 2021. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 7.7% in 2020 to 4.6% of GDP in 2021 and 3% in 2022. It is projected to be at 3.7% and 
2.9%  of  GDP  in  2023  and  2024,  respectively.  After  increasing  to  4.1%  of  GDP  in  2020, 
government  investment  expanded  further  to  4.7%  of  GDP  in  2021  and  5.2%  in  2022.  It  is 
projected  to  continue  growing  to  reach  6.1%  of  GDP  in  2023,  and  to  be  larger  than  the 
government deficit for a third consecutive year in a row counting from 2021.  

According to the Commission estimates, the fiscal stance in 2022 was supportive, at –1.2% of 
GDP, as recommended by the Council. As recommended by the Council, Slovenia continued 
to  support  the  recovery  with  investments  to  be  financed  by  the  Recovery  and  Resilience 
Facility. Expenditure financed by Recovery and Resilience Facility grants and other EU funds 
amounted to 0.7% of GDP in 2022 (0.8% of GDP in 2021). Nationally financed investment 
provided an expansionary contribution of 0.7 percentage points to the fiscal stance. Slovenia 
therefore preserved nationally financed investment, as recommended by the Council. At the 
same time, the growth in nationally financed primary current expenditure (net of new revenue 
measures) provided an expansionary contribution of 0.4 percentage points to the fiscal stance. 
This  significant  expansionary  contribution  included  the  additional  impact  of  fiscal  policy 
measures to mitigate the economic and social impact of the increase in energy prices (additional 
net  budgetary  cost  of  1.0%  of  GDP),  as  well  as  the  costs  to  offer  temporary  protection  to 
displaced  persons  from  Ukraine  (0.1%  of  GDP).  Slovenia  therefore  sufficiently  kept  under 
control the growth in nationally financed current expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary (-1.2% of GDP), in a context of high inflation. The growth in nationally financed 

31 

 
 
 
primary current  expenditure (net of discretionary revenue measures) in 2023 is projected to 
provide an expansionary contribution of 0.3% of GDP to the fiscal stance. This is despite the 
reduced  cost  of  the  targeted  support  measures  to  households  and  firms  most  vulnerable  to 
energy price hikes by 0.5% of GDP. The expansionary contribution of nationally financed net 
primary current expenditure is therefore not due to the targeted support to households and firms 
most vulnerable to energy price hikes and to people fleeing Ukraine. The expansionary growth 
in nationally financed primary current expenditure (net of discretionary revenue measures) is 
driven by higher subsidies and an increase in the public sector wage bill. In sum, the projected 
growth  of  nationally  financed  primary  current  expenditure  is  not  in  line  with  the  Council 
recommendation. Expenditure financed by Recovery and Resilience Facility grants and other 
EU funds amounted to 1.6% of GDP in 2023, while nationally financed investment provided 
an expansionary contribution to the fiscal stance of 0.1 percentage points. Therefore, Slovenia 
plans to finance additional investment through the Recovery and Resilience Facility and other 
EU funds, and it is projected to preserve nationally financed investment. 

Medium-term debt position: The government debt increased from 65.4% of GDP at the end 
of 2019 to 79.6% at the end of 2020. It stood at 69.9% of GDP at the end of 2022 and it is 
projected  at  69.1%  and  66.6%  at  the  end  of  2023  and  2024,  respectively.  Overall,  the  debt 
sustainability analysis indicates medium risks over the medium term. In addition, the structural 
reforms under the NGEU/RRF, if fully implemented, could have a further positive impact on 
GDP growth in the coming years, and therefore help to mitigate debt sustainability challenges. 

Other  factors  put  forward  by  the  Member  State:  On  8  May  2023,  Slovenia  provided 
additional  relevant  factors  not  mentioned  above,  namely  the  2023  statutory  adjustment  of 
pensions and social transfers with wage growth and inflation in 2022. 

4.2.15.  SLOVAKIA 

Medium-term macroeconomic position: After a contraction of 3.3% in 2020, the economy 
grew by 4.9% in 2021 and 1.7% in 2022. It is expected to grow by 1.7% in 2023 and 2.1% in 
2024.  Growth  in  2023  is  mainly  driven  by  investment  and  public  consumption.  Economic 
activity exceeded its annual 2019 level in 2021. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 5.4% of GDP in 2020 and 2021 to 2% in 2022. It is projected to be at 6.1% and 4.8% of 
GDP in 2023 and 2024, respectively. After decreasing to 3.4% of GDP in 2020 and 3.1% in 
2021, government investment increased to 3.3% of GDP in 2022. It is projected to increase 
further to 4.9% of GDP in 2023, and to be larger than the government deficit in 2022, but not 
in 2023.  

According to the Commission estimates, the fiscal stance in 2022 was contractionary, at 1.3% 
of GDP, which was appropriate in a context of high inflation. As recommended by the Council, 
Slovakia continued to support the recovery with investments to be financed by the Recovery 
and Resilience Facility. Expenditure financed by Recovery and Resilience Facility grants and 
other EU funds amounted to 1.2% of GDP in 2022 (1.3% of GDP in 2021). The decrease in 
expenditure financed by Recovery and Resilience Facility grants and other EU funds in 2022 
was due to the low absorption of the structural EU funds and postponements of the realised 
expenditures from the Recovery and Resilience Facility grants. Nationally financed investment 
provided an expansionary contribution of 0.2 percentage points to the fiscal stance. Slovakia 
therefore preserved nationally financed investment, as recommended by the Council. At the 

32 

 
 
 
same time, the growth in nationally financed primary current expenditure (net of new revenue 
measures) provided a contractionary contribution of 1.3 percentage points to the fiscal stance. 
Slovakia  therefore  sufficiently  kept  under  control  the  growth  in  nationally  financed  current 
expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary (- 6.2% of GDP), in a context of high inflation. The growth in nationally financed 
primary current  expenditure (net of discretionary revenue measures) in 2023 is projected to 
provide an expansionary contribution of 4.4 % of GDP to the fiscal stance. This includes the 
reduced  cost  of  the  targeted  support  measures  to  households  and  firms  most  vulnerable  to 
energy  price  hikes  by  0.2%  of  GDP.  This  also  includes  lower  costs  to  offer  temporary 
protection  to  displaced  persons  from  Ukraine  (by  0.1%  of  GDP).  The  expansionary 
contribution of nationally financed net primary current expenditure is therefore not due to the 
targeted support to households and firms most vulnerable to energy price hikes and to people 
fleeing Ukraine. The expansionary growth in nationally financed primary current expenditure 
(net of discretionary revenue measures) is driven by untargeted energy measures, permanent 
wage increases for healthcare professionals, and the reduction in VAT rates on the food and 
leisure sectors. In sum, the projected growth of nationally financed primary current expenditure 
is  not  in  line  with  the  Council  recommendation.  Expenditure  financed  by  Recovery  and 
Resilience Facility grants and other EU funds is projected to amount to 2.8% of GDP in 2023, 
while nationally financed investment is projected to provide an expansionary contribution to 
the  fiscal  stance  of  0.1  percentage  points.  Slovakia  plans  to  finance  additional  investment 
through the Recovery and Resilience Facility and other EU funds, and it projects to preserve 
nationally financed investment. 

Medium-term debt position: The government debt increased from 48% of GDP at the end of 
2019 to 61% at the end of 2021. It stood at 57.8% of GDP at the end of 2022 and it is projected 
at 58.3% and 58.7% at the end of 2023 and 2024, respectively.  

Overall, the debt sustainability analysis indicates high risks over the medium term. According 
to  the  baseline  10-year  projection,  the  general  government  debt  ratio  would  increase 
continuously over the next years, reaching 84.7% of GDP in 2033. According to the stochastic 
projections,  which  simulate  a  large  range  of  possible  temporary  shocks  to  macroeconomic 
variables, it is probable that the debt ratio would be higher in 2027 than in 2022.  

There are other factors relevant for an  overall assessment of debt sustainability. On the one 
hand,  risk-increasing  factors  are  related  to  the  recent  increase  in  interest  rates,  Slovakia’s 
negative net international investment position, the share of short-term government debt held 
by non-residents, and to contingent liability risks stemming from the private sector, including 
via the possible materialisation of COVID-19 crisis related state guarantees. On the other hand, 
risk-mitigating factors include the lengthening of debt maturity in recent years, which allows 
for a gradual pass through of increasing interest rates on the debt burden after benefitting from 
historically  low  borrowing  costs  for  long,  and  relatively  stable  financing  sources  (with  a 
diversified and large investor base). In addition, the structural reforms under the NGEU/RRF, 
if fully implemented, could have a further positive impact on GDP growth in the coming years, 
and therefore help to mitigate debt sustainability challenges. 

Assessment  under  the  macroeconomic  imbalances  procedure:  Slovakia  is  not  found  to 
experience imbalances.  Vulnerabilities relating to competitiveness,  housing, household  debt 
and external balance have been increasing, but overall seem contained in the near future and 
are expected to ease as economic conditions normalise.  

33 

 
 
Other factors put forward by the Member State: The analysis presented in  the previous 
sections already covers the key factors put forward by Slovakia on 9 May 2023. 

4.2.16.  FINLAND 

Medium-term macroeconomic position: After a contraction of 2.4% in 2020, the economy 
grew by 3% in 2021 and 2.1% in 2022. It is expected to grow by 0.2% in 2023 and 1.4% in 
2024.  Growth  in  2023  is  mainly  driven  by  net  exports  and  public  consumption.  Economic 
activity exceeded its annual 2019 level in 2021. 

Medium-term budgetary position, including investment: The government deficit decreased 
from 5.6% in 2020 to 2.8% of GDP in 2021 and 0.9% in 2022. It is projected to be at 2.6% in 
both 2023 and 2024. After increasing to 4.8% of GDP in 2020, government investment declined 
to 4.2% of GDP in 2021 and 4.1% in 2022. It is projected to increase to 4.5% of GDP in 2023, 
and to be larger than the government deficit for a third consecutive year counting from 2021.  

According  to  the  Commission  estimates,  the  fiscal  stance  in  2022  was  broadly  neutral,  at              
-0.1% of GDP,  as recommended by the Council. As recommended by the Council, Finland 
continued  to  support  the  recovery  with  investments  to  be  financed  by  the  Recovery  and 
Resilience Facility. Expenditure financed by Recovery and Resilience Facility grants and other 
EU  funds  amounted  to  0.3%  of  GDP  in  2022  (0.2%  of  GDP  in  2021).  Nationally  financed 
investment provided a neutral contribution of 0.0 percentage points to the fiscal stance. Finland 
therefore preserved nationally financed investment, as recommended by the Council. At the 
same time, the growth in nationally financed primary current expenditure (net of new revenue 
measures) provided a broadly neutral contribution of 0.1 percentage points to the fiscal stance. 
Finland  therefore  sufficiently  kept  under  control  the  growth  in  nationally  financed  current 
expenditure. 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary (-1.0% of GDP), in a context of high inflation. The growth in nationally financed 
primary current  expenditure (net of discretionary revenue measures) in 2023 is projected to 
provide an expansionary contribution of 0.6% of GDP to the fiscal stance. This includes the 
broadly stable costs of the targeted support measures to households and firms most vulnerable 
to  energy  price  hikes.  This  also  includes  the  higher  costs  to  offer  temporary  protection  to 
displaced  persons  from  Ukraine  (by  0.2%  of  GDP).  The  expansionary  contribution  of 
nationally financed net primary current expenditure is therefore only partly due to the targeted 
support to households and firms most vulnerable to energy price hikes and to people fleeing 
Ukraine. The expansionary growth in nationally financed primary current expenditure (net of 
discretionary  revenue  measures)  is  also  driven  by  the  indexation  of  social  benefits,  central 
government  funding  to  local  authorities,  as  well  as  additional  defence  spending  and  R&D-
related  investments.  In  sum,  the  projected  growth  of  nationally  financed  primary  current 
expenditure is not in line with the Council recommendation. Expenditure financed by Recovery 
and Resilience Facility grants and other EU funds amounted to 0.4% of GDP in 2023, while 
nationally financed investment provided an expansionary contribution to the fiscal stance of 
0.4 percentage points. Therefore, Finland plans to finance additional investment through the 
Recovery and Resilience Facility and it is projected to preserve nationally financed investment. 

Medium-term debt position: The government debt increased from 64.9% of GDP at the end 
of  2019  to  74.7%  at  the  end  of  2020.  It  stood  at  73%  of  GDP  at  the  end  of  2022  and  it  is 
projected  at  73.9%  and  76.2%  at  the  end  of  2023  and  2024,  respectively.  Overall,  the  debt 

34 

 
 
 
sustainability analysis indicates medium risks over the medium term. In addition, the structural 
reforms under the NGEU/RRF, if fully implemented, could have a further positive impact on 
GDP growth in the coming years, and therefore help to mitigate debt sustainability challenges. 

Other  factors  put  forward  by  the  Member  State:  On  9  May  2023,  Finland  provided 
additional relevant factors not mentioned above, namely the fact that, due to the parliamentary 
elections  held  in  Finland  on  2  April  2023,  a  no-policy  change  Stability  Programme  was 
submitted  on  23  March  2023.  Finland’s  new  government  will  present  its  target  for  public 
finances  in  the  Stability  Programme  to  be  submitted  in  the  autumn,  along  with  the  Draft 
Budgetary Plan, as part of the  General Government Fiscal Plan. 

5. 

CONCLUSIONS 

15 EU Member States exceeded the deficit reference value in 2022 or plan to exceed it in 2023: 
Belgium, Bulgaria, Czechia, Germany, Estonia, Spain, France, Italy, Latvia, Hungary, Malta, 
Austria, Poland, Slovenia and Slovakia. 

In Austria the deficit ratio in 2022 and the planned deficit ratio in 2023 are above but close to 
the 3% of GDP. For the remaining 14 Member States considered in this report and exceeding 
the deficit Treaty reference value in 2022 or planning to exceed it in 2023, the deficit was, or 
is planned to be, above and not close to 3% of GDP. 

In  all  the  15  Member  States  the  excess  over  the  Treaty  reference  value  is  considered  to  be 
exceptional as defined by the Treaty. However, for Belgium, Bulgaria, Spain, France, Italy, 
Hungary, Malta, Poland and Slovakia, the excess over the reference value is not expected to be 
temporary.  

Overall, taking into account all relevant factors as appropriate, the analysis in this report shows 
that the deficit criterion as defined in the Treaty and in Regulation (EC) No 1467/1997 is not 
fulfilled by Belgium, Bulgaria, Czechia, Germany, Estonia, Spain, France, Italy, Latvia, 
Hungary, Malta, Poland, Slovenia and Slovakia. 

Nine Member States had general government gross debt exceeding 60% of GDP at the end of 
2022:  Belgium,  Germany,  Spain,  France,  Italy,  Hungary,  Austria,  Slovenia  and  Finland. 
Among  these  Member  States,  the  debt  reduction  benchmark  was  respected  in  Belgium, 
Germany, Spain, Hungary, Austria and Slovenia, while it was not respected by France, Italy 
and Finland.  

Overall, taking into account all relevant factors, the analysis in this report shows that the debt 
criterion as defined in the Treaty and in Regulation (EC) No 1467/1997 is  not fulfilled by 
France, Italy and Finland. Nevertheless, the Commission considers, within its assessment of 
all  relevant  factors,  that  compliance  with  the  debt  reduction  benchmark  could  imply  a  too 
demanding frontloaded fiscal effort that would risk to jeopardise economic growth. Therefore, 
in  the  view  of  the  Commission,  compliance  with  the  debt  reduction  benchmark  is  not 
warranted under the prevailing economic conditions. 

Taking into account the persistently high uncertainty for the macroeconomic and budgetary 
outlook  at  this  juncture,  the  Commission  has  already  announced  in  March  2023  that  it 
would not propose the opening of new excessive deficit procedures in spring 2023. At the 
same time, the monitoring of deficit and debt developments will continue, and the Commission 
will propose to the Council to open deficit-based excessive deficit procedures in spring 2024 
on the basis of the outturn data for 2023. 

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