REPORT FROM THE COMMISSION Belgium, Czechia, Estonia, Spain, France, Italy, Hungary, Malta, Poland, Slovenia, Slovakia and Finland Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union
Date: 2024-06-19
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, 19.6.2024  COM(2024) 598 final  REPORT FROM THE COMMISSION Belgium, Czechia, Estonia, Spain, France, Italy, Hungary, Malta, 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, Czechia, Estonia, Spain, France, Italy, Hungary, Malta, 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 lays down the excessive 
deficit procedure. That procedure is further set out in Council Regulation (EC) No 1467/97 on 
speeding  up and clarifying the implementation  of the excessive deficit  procedure1, which  is 
part of the Stability and Growth Pact.  

In accordance with Article 126(3) TFEU, this report assesses the situation of several Member 
States  vis-à-vis  the  deficit  criterion.  The  format  of  this  ‘Omnibus’  Report  helps  in  the 
comparability of the several cases, while the case of each Member State is considered on its 
own merits.  

Regulation (EU) 2024/1264 amending Regulation (EC) 1467/97 entered into force on 30 April 
2024. This amending Regulation is part of a package together with Regulation (EU) 2024/12632 
and  Council  Directive  (EU)  2024/12653.  Together,  these  three  acts  reform  the  economic 
governance framework of the Union. The objectives of the reformed framework are public debt 
sustainability,  and  sustainable  and  inclusive  growth  through  reforms  and  investments.  The 
framework also promotes national ownership, and has a greater medium-term focus, combined 
with a more effective and coherent enforcement. 

The legislative amendment to Regulation (EC) No 1467/97 has fundamentally kept unchanged 
the  assessment  of  compliance  with  the  deficit  criterion.  Differently,  the  assessment  of 
compliance with the debt criterion has been substantially modified (see below). 

This report, which is the first report under Article 126(3) TFEU after the deactivation of the 
general  escape  clause  at  the  end  of  2023,  is  in  accordance  with  the  rules  of  the  reformed 
framework.4  

The deficit and debt criteria 

The deficit criterion is fulfilled if the general government deficit for the previous year (2023) 
and planned deficit for the current year (2024) do not exceed 3% of GDP. If either does, the 

1   Council Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive 
deficit procedure (OJ L 209, 2.8.1997) as last amended by Council Regulation (EU) 2024/1264 of 29 April 
2024 (OJ L, 2024/1264, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1264/oj). 

2   Regulation  (EU)  2024/1263  of  the  Parliament  and  of  the  Council  of  29  April  2024  on  the  effective 
coordination of economic policies and on multilateral budgetary surveillance and repealing Regulation (EC) 
No 1466/97 (OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj). 

frameworks 

3   Council Directive (EU) 2024/1265 of 29 April 2024 amending Directive 2011/85/EU on requirements for 
30.4.2024,  ELI: 

budgetary 
http://data.europa.eu/eli/dir/2024/1265/oj). 
This is to the extent that the new rules are already put into practice. Some elements of the amended regulation 
are yet to be implemented e.g. the net expenditure path as set by  the Council, which is referred to in the 
context of the relevant factors laid down in Article 2(3) of Regulation (EC) No 1467/97. 

the  Member  States 

2024/1265, 

(OJ  L, 

of 

4  

1 

 
 
 
 
Commission  examines  whether  the  deficit  ratio  has  declined  substantially  and  continuously 
and comes close to the reference value. It also examines whether the deficit in excess over the 
reference value is exceptional and temporary, and remains close to the reference value (section 
2).  Relevant  factors  are  to  be  considered  by  the  Commission  and  the  Council  in  the  steps 
leading to the decision on the existence of an excessive deficit, 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).  

According to the Treaty, the debt criterion is fulfilled if the general government gross debt 
does not exceed 60% of GDP, unless the ratio is sufficiently diminishing and approaching the 
reference value at a satisfactory pace. According to Article 2(2) of Regulation (EC) No 1467/97 
(as  amended),  the  debt-to-GDP  ratio  shall  be  considered  sufficiently  diminishing  and 
approaching the reference value at a satisfactory pace if the Member State concerned respects 
its net expenditure path as set by the Council under Regulation (EU) 2024/1263.5 Since the 
Council has not yet set a net expenditure path for the Member States6, the debt criterion cannot 
be fully assessed at this stage in accordance with the criteria of the new framework.7  

Main data underlying and motivating this report 

In the assessment of the deficit criterion, the Commission takes into account the actual 2023 
deficit ratio based on notified outturn data by Eurostat. The planned deficit ratio in 2024 is 
based  on  government  plans  reported  to  Eurostat  in  the  context  of  the  Spring  2024  fiscal 
notification.8 Moreover, the assessment of compliance with the deficit criterion also considers 
the Commission Spring 2024 Forecast. This report also compares the government deficit with 
government  investment  expenditure  and  takes  into  account  all  other  relevant  factors,  in 
accordance with Article 2 of Regulation (EC) No 1467/97. 

This report assesses compliance with the deficit criterion in twelve Member States: Belgium, 
Czechia, Estonia, Spain, France, Italy, Hungary, Malta, Poland, Slovenia, Slovakia and 
Finland. Specifically (see also Table 1): 
-  According  to  the  data  published  by  Eurostat  on  22  April  20249,  the  2023  general 
government  deficit  exceeded  3%  of  GDP  in  ten  Member  States:  Belgium,  Czechia, 
Estonia, Spain, France, Italy, Hungary, Malta, Poland, and Slovakia.10 Actual deficits 

7  
8   

5   Relevant factors would be always taken into account when assessing compliance with the debt criterion. 
6  

In accordance with Article 17 of Regulation (EU) 2024/1264, the net expenditure path will be defined in the 
Council Recommendation endorsing the national medium-term fiscal-structural plan to be submitted by each 
Member State and assessed by the Commission. According to the transitional provisions under Article 36, 
Member States shall submit their first national medium-term fiscal-structural plans by 20 September 2024, 
unless the Member State and the Commission agree to extend the deadline by a reasonable period. 
Figures on general government debt-to-GDP ratio are presented in section 3.  
In the absence of data reported to Eurostat in the context of the fiscal notification, the source of planned 
deficits for 2024 is the Stability/Convergence Programme. In the present report, all the concerned Member 
States with the exception of France submitted their planned deficits for 2024 to Eurostat in the context of the 
spring 2024 fiscal notification.      
Eurostat Euro Indicators of 22 April 2024. 

9 
10   Romania’s government deficit also exceeded 3% of GDP in 2023 and it is planned to be above the reference 
value also in 2024. 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. The latest Council Recommendation with a view to 
bringing an end to the situation of an excessive  government deficit in Romania is of  18 June 2021. The 
Commission has today recommended the Council to adopt a Decisions establishing that Romania has taken 
no effective action in response to the Council Recommendation of 18 June 2021 (COM(2024)597).  

2 

 
 
for  2023  above  3%  of  GDP  provide  prima  facie  evidence  of  the  existence  of  excessive 
deficits in each of those Member States.  

- 

In  addition,  according  to  the spring 2024 fiscal  notification, Finland and Slovenia plan 
their government deficits to exceed 3% of GDP in 2024.11 These planned deficits for 2024 
are also prima facie evidence of the existence of excessive deficits in each of those two 
Member  States.  Planned  deficits  are  not  validated  by  Eurostat  and  are  surrounded  by 
uncertainty. 

As indicated above, the debt criterion cannot be fully assessed at this stage in accordance with 
the criteria of the new framework. The general government gross debt ratio-to-GDP at the end 
of  2023  exceeded  the  60%  reference  value  in  thirteen  Member  States:  Belgium,  Germany, 
Greece,  Spain,  France,  Croatia,  Italy,  Cyprus,  Hungary,  Austria,  Portugal,  Slovenia  and 
Finland (see Table 3). 

Economic context of recent fiscal policy recommendations  

During the most acute phase of the pandemic, economic activity in the EU contracted strongly 
in  2020  (by  5.6%)  as  day-to-day  life  was  heavily  affected  by  containment  measures  and 
business  activity  was  additionally  restrained  by  supply  bottlenecks.  The  EU  economy 
rebounded strongly amid the fast rollout of vaccines, a strong summer tourism season and a 
better  adaptation  to  then  less  stringent  health  measures  in  2021.  However,  the  synchronous 
global pickup in economic activity increased material shortages and led to an increase in energy 
prices already in 2021. Headwinds to growth then mounted further with the start of Russia’s 
war of aggression against Ukraine, leading to further energy price surges as well as a rise in 
uncertainty. The EU economy remained resilient with real GDP growth slowing down to 3.5% 
in 2022 from 6.0% in 2021.  

Over the same period,  fiscal  policy recommendations as adopted by the  Council have been 
evolving to respond to the changing economic context. Coordinated policy action at EU and 
national  levels  cushioned  the  impact  of  the  COVID-19  pandemic  on  Member  States’ 
economies  and  opened  the  way  to  a  vigorous  post-pandemic  rebound  in  2021  and  2022. 
NextGenerationEU and its centerpiece, the Recovery and Resilience Facility played a decisive 
role  in  protecting  and  promoting  the  Union’s  economic,  social  and  territorial  cohesion, 
supporting economic sentiment and maintaining private and public investment. The European 
economy  has  managed  to  contain  the  adverse  impact  of  Russia’s  war  of  aggression  against 
Ukraine, weathering the energy crisis thanks to a rapid diversification of supply and a sizeable 
fall  in  gas  consumption.  Through  the  REPowerEU  plan  Member  States  have  committed  to 
critical reforms and investments to address the energy crisis by diversifying energy supplies 
and  accelerate  the  production  of  renewable  energy.  In  2023, economic  activity  in  the  EU 
slowed down, with growth held back by a high cost of living, monetary tightening, the partial 
withdrawal of fiscal support and falling external demand. Better-than-expected growth at the 
start of 2024 and the ongoing reduction in inflation set the scene for a gradual expansion of 
activity  over  the  forecast  horizon.  Based  on  Commission’s  Spring  2024  forecast,  real  GDP 
growth in the EU is projected at 1.0% in 2024 and to improve to 1.6% in 2025, largely driven 
private consumption growth on the back of real wage and employment gains. 

In view of the deactivation of the general escape clause at the end of 2023, fiscal guidance for 
2024  by  the  Council  was  characterized  by  a  resumption  of  differentiated  country-specific 

11   The  complete 

set  of 

tables 

reported 

to  Eurostat  by  Member  States 

is  available  at: 

https://ec.europa.eu/eurostat/web/government-finance-statistics/excessive-deficit-procedure/edp-
notification-tables. 

3 

 
 
recommendations  formulated  in  quantitative  terms.  On  14  July  2023,  the  Council 
recommended12  to  Member  States,  which  were  not  projected  to  be  at  their  medium-term 
budgetary objective (MTO), to limit net nationally financed primary expenditure in 2024 to 
differentiated growth rates that would ensure prudent fiscal policy. Member States projected at 
the MTO were recommended to maintain a sound fiscal position in 2024,  although without 
such  a  quantitative  limit.  All  Member  States  were  recommended  to  wind  down  the  energy 
support measures as soon as possible in 2023 and 2024 and, if not at the MTO, to use the related 
savings  to  reduce  the  government  deficit.  The  Council  also  recommended  that  all  Member 
States should preserve nationally financed investment and ensure the effective absorption of 
the Recovery and Resilience Facility (RRF) and other EU funds, in particular to foster the green 
and  digital  transitions.  For  the  euro  area  Member  States,  the  Commission  assessed,  and 
provided opinions on the Member States’ draft budgetary plans in the light of those Council 
Recommendations.13 
In  2023,  the  Commission  announced  on  several  occasions14,  that  it  would  propose  to  the 
Council to open deficit-based excessive deficit procedures in spring 2024, inviting Member 
States to take account of this when executing their 2023 budgets and when conducting their 
fiscal policies in 2024. 
On 12 April 2024, the Council Recommendation on the economic policy of the euro area15 
insists that the euro area Member States adopt coordinated and prudent fiscal policies to keep 
debt at prudent levels or put debt ratios on a plausibly downward path – while remaining agile 
in view of the prevailing uncertainty – leading to an overall restrictive fiscal stance in the euro 
area. Member States are recommended as well to wind down energy-related emergency support 
measures as soon as possible in 2024 and use the related savings to reduce deficits.16 

12  
13  

14  

15  

16  

 Council Recommendations of 14 July 2023 (2023/C 312/01 to 2023/C 312/27, OJ C 312, 1.9.2023, p. 1). 
Commission Opinions on the 2024 Draft Budgetary Plans of 21.11.2023 (C(2023) 9501 final to C(2023) 
9520 final), Commission Opinion on the updated 2024 Draft Budgetary Plan of Slovakia of 16.01.2024 
(C(2024) 343 final) and Commission Opinion on the updated 2024 Draft Budgetary Plan of Luxembourg 
of 18.04.2024 (C(2024) 2626 final). 
Communication of 8 March 2023 on fiscal policy guidance for 2024 (COM(2023) 141 final). See also 
the Communication on the 2024 Draft Budgetary Plans: Overall Assessment (COM(2023) 900 final). 
Council Recommendation of 12 April 2024 on the economic policy of the euro area (OJ C, C/2024/2807, 
23.04.2024, ELI: http://data.europa.eu/eli/C/2024/2807/oj). 
In  the  same  context,  the  Council  also  recommended  the  euro  area  Member  States  to  develop  fiscal 
strategies  to  achieve  a  prudent  medium-term  fiscal  position  and  strengthen  debt  sustainability  where 
necessary, through determined, differentiated, gradual and realistic consolidation, combined with high-
quality  public  investments  and  reforms,  notably  to  deliver  higher  sustainable  growth  and  boost  the 
resilience of the euro area in the face of future challenges. Where needed, Member States should include 
in such strategies measures to further increase the efficiency and quality of public expenditure and to 
improve the sustainability and adequacy of the pension, healthcare and long-term care systems. 

4 

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

Actual deficit 
not exceeding (✓) / 
exceeding () 
3% of GDP in 
2023 

Planned deficit 
not exceeding (✓) /  
exceeding () 
3% of GDP in 2024 

Debt ratio  
not exceeding 
(✓) / exceeding 
() 60% of GDP 
at end-2023 

Belgium 
Czechia  
Estonia 
Spain 
France 
Italy  
Hungary  
Malta  
Poland  
Slovenia 
Slovakia 
Finland 

 
 
 
 
 
 
 
 
 
✓ 
 
✓ 

Member States not considered in this report 

Bulgaria 

Denmark 

Germany 

Ireland 

Greece 

Croatia 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Netherlands 

Austria 

Portugal 
Romania (*) 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

 

 
✓ 
✓ 
✓ 
17 
 
 
 
 
 
 
 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

 

 
✓ 
✓ 
 
 
 
 
✓ 
✓ 
 
✓ 
 

✓ 

✓ 

 

✓ 

 

 

 

✓ 

✓ 

✓ 

✓ 

 

 

✓ 

Sweden 
Source: Eurostat (press release 22 April 2024 and spring 2024 fiscal notification) (*) In excessive deficit 
procedure since 2020. 

✓ 

✓ 

✓ 

17  

France  did not  submit  a  planned  deficit for 2024  to  Eurostat  in  the  context  of  the  spring  2024  fiscal 
notification. However, France published its stability programme for 2024-2027 in April 2024, according 
to which the deficit for 2024 is planned at 5.1% of GDP. 

5 

 
 
 
 
 
 
 
 
2. 

GENERAL GOVERNMENT BALANCE  

Belgium, Czechia,  Estonia,  Spain, France, Italy, Hungary, Malta, Poland  and Slovakia 
exceeded the deficit reference value in 2023. Among them, Belgium, France, Italy, Hungary, 
Malta, Poland and Slovakia also plan their deficits for 202418 to be above 3% of GDP. 

Slovenia and Finland had government deficits below the reference value in 2023, but plan 
deficits for 202419 exceeding 3% of GDP. 

In all the Member States whose deficits exceeded 3% of GDP in 2023 with the exception of 
Estonia, the government deficits were above and not close to the reference value (see Table 2). 
For Estonia, the deficit was above but close to the reference value.  
For Finland, the planned deficit for 2024 is above and close to 3% of GDP20. For Slovenia, the 
planned deficit for 202421 is 3.6% of GDP, whereas the Commission Spring 2024 Forecast22 
projects the deficit at 2.8% of GDP and hence below the 3% reference value. Therefore, the 
planned  breach  of  the  reference  value  in  2024  in  the  sense  of  Article  126(3)  TFEU  is  not 
confirmed for Slovenia.  

According  to  the  Commission  Spring  2024  Forecast,  the  government  deficits  in  Belgium, 
Estonia,  France,  Italy,  Hungary,  Malta,  Poland,  and  Slovakia  are  projected  to  continue 
exceeding  3%  of  GDP  both  in  2024  and  in  2025.  Therefore,  the  deficits  in  excess  of  the 
reference value  for those  Member States  are  expected to  be  not temporary. Differently, the 
government deficits in Czechia, Spain and Slovenia are presently projected not to exceed the 
reference  value  in  2024  and  2025,  and  therefore  the  excess  deficits  are  expected  to  be 
temporary. For Finland, the government deficit is projected to be above the reference value in 
2024 but not in 2025; thus, the excess deficit is expected to be temporary.  

The general escape clause of the Stability and Growth Pact was deactivated at the end of 2023, 
as announced by the Commission on various occasions.23 The general escape clause remained 
activated throughout 2023, based on the Commission’s ex ante assessment of the economic 
circumstances in Spring 2022.24 Specifically, heightened uncertainty and strong downside risks 
to  the  economic  outlook  in  the  context  of  Russia’s  war  of  aggression  against  Ukraine, 
unprecedented  energy  price  hikes  and  continued  supply  chain  disturbances  were  found  to 
warrant the activation in 2023. The EU economy weathered the successive shocks better than 
initially  expected  thanks  to  the  strong  coordinated  policy  reaction  leading  to  a  fast 
diversification of energy sources as well as on the back of a resilient labour market. In addition, 

18  

19  
20  

21  
22  

23  

24  

As reported to Eurostat in the context of the spring 2024 fiscal notification with the only exception of 
France,  for  which  the  stability  programme  is  the  relevant  source  for  planned  data  for  2024  (see 
footnote17). 
As reported to Eurostat in the context of the spring 2024 fiscal notification.  
The planned deficit for 2024 as reported to Eurostat in the context of the spring 2024 fiscal notification 
amounts to 3.5% of GDP. However, in its  Stability Programme submitted on 25 April 2024, Finland 
revised  its  planned  deficit  for  2024  slightly  downwards,  to  3.4%,  based  on  additional  consolidation 
measures amounting to 1% of GDP that the government has committed to  deliver in a supplementary 
budget in spring 2024. 
As reported to Eurostat in the context of the spring 2024 fiscal notification. 
Unless  stated  otherwise,  the  source  for  the  figures  for  2024  and  2025  provided  in  this  report  is  the 
Commission’s Spring 2024 Forecast (European Economy Institutional Papers 286). 
See Commission Communication to the Council on Fiscal policy guidance for 2024, COM(2023) 141 
final. See European Commission ‘A Green Deal Industrial Plan for the Net-Zero Age’, COM(2023) 62 
final  of  1  February  2023.  See  European  Commission  ‘2022  European  Semester  -  Spring  Package,’ 
COM(2022) 600 final of 23 May 2022.  
COM(2022) 600 final. 

6 

 
 
some of the downside risks have not materialised. As a result, in 2023, the measures taken to 
cushion the economic and social impact of energy prices were progressively phased out in most 
Member  States,  as  recommended  by  the  Council25.  Furthermore,  the  costs  of  temporary 
measures related to the COVID-19 pandemic were no longer of macroeconomic relevance.26 
Based on these considerations27, deficits in excess over the reference value in 2023 cannot in 
general be qualified as due to exceptional economic circumstances.  

In the specific case of Estonia, the deficit in excess of the reference value in 2023 is directly 
due  to  exceptional  economic  circumstances  and  is  thus  considered  to  be  exceptional.28  The 
economy contracted by 0.5% in 2022 and by a further 3.0% 2023. Based on the Commission 
Spring 2024 Forecast, it is expected to contract by 0.5% in 2024, bringing the economy into a 
three-year recession.  

In sum, this analysis suggests that the deficit criterion is not fulfilled by twelve Member States 
before the consideration of the relevant factors: Belgium, Czechia, Estonia, Spain, France, 
Italy, Hungary, Malta, Poland, Slovenia, Slovakia and Finland. 

25  
26  

27  
28  

Council Recommendations of 14 July 2023 (2023/C 312/01 to 312/27), OJ C 312, 1.9.2023, p.1. 
In the EU, the budgetary cost of COVID-19 temporary emergency measures is estimated to have fallen 
from 3.3% of GDP in both 2020 and 2021 to 0.7% in 2022. Pandemic-related measures were phased out 
in 2023. The costs of humanitarian assistance to refugees fleeing the Russian war of aggression against 
Ukraine – which has been specifically mentioned in the fiscal recommendations adopted by the Council 
in  2022  – did not  exceed  0.1%  of  GDP  in  2023  in  the  EU.  The  cost  of  the  measures  to  mitigate  the 
economic and social impact of high energy prices amounted to 1.2% of GDP in 2022 and decreased to 
0.9% of GDP in 2023. In 2024, the budgetary impact is expected to fall to 0.2% of GDP in the EU. 
Further country-specific considerations are discussed in section 4.2. 
According to Article 2(1) of Regulation 1467/97, the excess of the government deficit over the reference 
value shall be considered exceptional, in accordance with the second indent of point (a) of Article 126(2) 
of the Treaty on the Functioning of the European Union (TFEU), if it results from the existence of a 
severe  economic  downturn  in  the  euro  area  or  the  Union  as  a  whole  established  by  the  Council  in 
accordance with Article 25 of Regulation (EU) 2024/1263 or from exceptional circumstances outside the 
control of the government with a major impact on the public finances of the Member State concerned, in 
accordance with Article 26 of that Regulation. In 2022 and 2023, economic activity in Estonia contracted 
by  0.5%  and  3.0%,  which  contributed  to  increase  the  government  deficit  in  2023.  Regulation  (EU) 
2024/1263 entered into force on 30 April 2024 and no procedures under Articles 25 and 26 are launched 
to date. However, the Commission considers that exceptional circumstances outside the control of the 
government have a major impact on the public finances of Estonia which justify considering the excess 
of  the  government  deficit  over  the  reference  value  as  exceptional.  The  Commission  considers  this 
approach  warranted,  taking  into  account  the  recent  transition  to  the  newly  established  framework. 
Nevertheless, this conclusion does not constitute a precedent. 

7 

 
 
 
  
Table 2: General government balance 

Percentage of GDP 

2020 

2021 

2022  2023 

2024 

2025 

2024 fiscal 
notification 
-4.4 
-2.3 
-2.9 
-3.0 
- 
-4.3 
-4.5 
-4.5 
-5.1 
-3.6 
-6.0 
-3.5 

-4.4 
-3.7 
-3.4 
-3.6 
-5.5 
-7.4 
-6.7 
-4.9 
-5.1 
-2.5 
-4.9 
-2.7 

-5.4 
-5.1 
-2.5 
-6.7 
-6.6 
-8.7 
-7.2 
-7.6 
-1.8 
-4.6 
-5.2 
-2.8 

-4.4 
-2.4 
-3.4 
-3.0 
-5.3 
-4.4 
-5.4 
-4.3 
-5.4 
-2.8 
-5.9 
-3.4 

-4.7 
-1.9 
-4.3 
-2.8 
-5.0 
-4.7 
-4.5 
-3.9 
-4.6 
-2.2 
-5.4 
-2.8 

-3.6 
-3.2 
-1.0 
-4.7 
-4.8 
-8.6 
-6.2 
-5.5 
-3.4 
-3.0 
-1.7 
-0.4 

-9.0 
-5.8 
-5.4 
-10.1 
-8.9 
-9.4 
-7.6 
-9.4 
-6.9 
-7.6 
-5.3 
-5.6 

Belgium 
Czechia 
Estonia 
Spain 
France 
Italy 
Hungary 
Malta 
Poland 
Slovenia 
Slovakia 
Finland 
Member States not considered in this report 
-2.9 
Bulgaria 
1.4 
Denmark 
-1.2 
Germany 
1.2 
Ireland 
-0.8 
Greece 
-2.6 
Croatia 
2.9 
Cyprus 
-2.9 
Latvia 
-2.2 
Lithuania 
-1.9 
Luxembourg 
-2.1 
Netherlands 
-2.9 
Austria 
0.5 
Portugal 
Romania (*) 
-7.0 
Sweden 
-0.9 
Source: Eurostat (data from 2020 to 2023 and 2024 fiscal notification) and Commission Spring 2024 Forecast 
(data for 2024 and 2025)29. (*) In excessive deficit procedure since 2020. 

-2.9 
3.3 
-2.5 
1.7 
-2.5 
0.1 
2.7 
-4.6 
-0.6 
-0.3 
-0.1 
-3.3 
-0.3 
-6.3 
1.2 

-3.0 
1.5 
-1.8 
1.5 
-1.1 
-1.9 
3.2 
-2.8 
-2.9 
-1.2 
-2.1 
-2.9 
0.2 
-4.9 
-1.2 

-2.8 
2.4 
-1.6 
1.3 
-1.2 
-2.6 
2.9 
-2.8 
-1.8 
-1.7 
-2.0 
-3.1 
0.4 
-6.9 
-1.4 

-3.8 
0.3 
-4.3 
-5.0 
-9.8 
-7.2 
-5.7 
-4.4 
-6.5 
-3.4 
-3.7 
-8.0 
-5.8 
-9.3 
-2.8 

-1.9 
3.1 
-2.5 
1.7 
-1.6 
-0.7 
3.1 
-2.2 
-0.8 
-1.3 
-0.3 
-2.7 
1.2 
-6.6 
-0.6 

-3.9 
4.1 
-3.6 
-1.5 
-7.0 
-2.5 
-1.8 
-7.2 
-1.1 
0.5 
-2.2 
-5.8 
-2.9 
-7.2 
0.0 

3. 

GENERAL GOVERNMENT DEBT 

Among the Member States discussed in this Report, the general government gross debt at end-
2023 exceeded 60% of GDP and hence the reference value in seven Member States: Belgium, 
Spain, France, Italy, Hungary, Slovenia and Finland (see Table 3). 30 
for 
Spain, France, Italy, Hungary and Slovenia, the government debt-to-GDP ratio decreased in 

 Moreover, 

29  
30  

COM(2024) 601  PO/2024/4130.  
As for the other Member States, government gross debt also exceeded the 60% reference value at end-
2023  in  Germany,  Greece,  Croatia,  Cyprus,  Austria  and  Portugal,  and  in  each  of  them,  the  ratio 
declined from the end of the previous year. 

8 

 
 
 
  
 
  
  
 
 
 
2023 compared to the previous year; differently, the ratio in 2023 turned out to be higher than 
in 2022 for Belgium and Finland. Among the Member States concerned by this Report and 
based on the Commission Spring 2024 Forecast, the debt-to-GDP ratio is projected to increase 
both in 2024 and 2025 for Czechia, Estonia, France, Italy, Malta, Poland, Slovakia and Finland 
compared to 2023. Differently, for Spain and Slovenia, the ratio of general government debt to 
GDP is projected to decline in 2024 and even further in 2025 compared to 2023. In Belgium, 
the debt-to-GDP ratio in 2024 is projected to marginally decrease compared to 2023 and then 
to increase in 2025, whereas for Hungary it is expected first to increase (in 2024 compared to 
2023) and then to decline in 2025, however remaining higher than in 2023. 

9 

 
 
Percentage of GDP 

Table 3: General government debt 

2020 

2021 

2022 

2023 

2024 fiscal 
notification 

2024 

2025 

105.2 
44.0 
19.6 
107.7 
110.6 
137.3 
73.5 
50.4 
49.6 
69.2 
56.0 
75.8 

111.9 
37.7 
18.6 
120.3 
114.9 
155.0 
79.3 
52.2 
57.2 
79.6 
58.8 
74.7 

104.3 
44.2 
18.5 
111.6 
111.9 
140.5 
74.1 
51.6 
49.2 
72.5 
57.7 
73.5 

105.0 
45.2 
21.4 
105.5 
112.4 
138.6 
74.3 
52.0 
53.7 
68.1 
58.5 
80.5 

106.6 
45.5 
24.6 
104.8 
113.8 
141.7 
73.8 
52.6 
57.7 
66.4 
59.9 
82.4 

105.2 
45.5 
20.9 
105.6 
 - 
137.8 
73.2 
54.2 
53.6 
68.6 
58.3 
79.1 

107.9 
Belgium 
42.0 
Czechia 
17.8 
Estonia 
116.8 
Spain 
113.0 
France 
147.1 
Italy 
76.7 
Hungary 
53.9 
Malta 
53.6 
Poland 
74.4 
Slovenia 
61.1 
Slovakia 
Finland 
72.6 
Member States not considered in this report 
24.6 
23.9 
Bulgaria 
25.1 
36.0 
Denmark 
62.2 
69.0 
Germany 
41.3 
54.4 
Ireland 
149.3 
195.0 
Greece 
59.1 
77.5 
Croatia 
65.4 
99.3 
Cyprus 
46.3 
44.4 
Latvia 
41.6 
43.4 
Lithuania 
28.5 
24.5 
Luxembourg 
48.4 
51.7 
Netherlands 
77.8 
82.5 
Austria 
91.5 
124.5 
Portugal 
Romania (*) 
53.9 
48.5 
31.3 
36.7 
Sweden 
Source: Eurostat (data from 2020 to 2023) and Commission Spring 2024 Forecast (data for 2024 and 2025)31. 
(*) In excessive deficit procedure since 2020. 

25.0 
29.1 
64.0 
41.4 
154.2 
58.0 
70.6 
41.0 
39.8 
27.2 
46.8 
77.5 
95.1 
49.0 
31.8 

22.6 
29.8 
66.1 
44.4 
172.7 
67.8 
85.6 
41.8 
38.1 
24.7 
50.1 
78.4 
112.4 
47.5 
33.2 

24.8 
26.5 
62.9 
42.5 
153.9 
59.5 
70.6 
44.5 
38.9 
27.1 
47.1 
77.7 
95.6 
50.9 
32.0 

24.6 
42.3 
68.8 
58.1 
207.0 
86.1 
114.9 
42.7 
46.2 
24.6 
54.7 
82.9 
134.9 
46.7 
40.2 

23.1 
29.3 
63.6 
43.7 
161.9 
63.0 
77.3 
43.6 
38.3 
25.7 
46.5 
77.8 
99.1 
48.8 
31.2 

31  

COM(2024) 601  PO/2024/4130.  

10 

 
 
 
  
 
 
 
 
 
4. 

RELEVANT FACTORS WHEN ASSESSING COMPLIANCE WITH THE DEFICIT CRITERION  

Article 126(3) of the Treaty provides that, for each Member State, this report shall “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 and refer to:  

a)  the  medium-term  debt  position,  i.e.,  the  degree  of  public  debt  challenges,  the 
evolution of the government debt position and its financing, and the related risk factors, 
in  particular  the  maturity  structure,  the  currency  denomination  of  the  debt  and 
contingent  liabilities,  including  any  implicit  liabilities  related  to  ageing  and  private 
debt; 

b) the medium-term budgetary position, including, in particular, the size of the actual 
deviation from the net expenditure path as set by the Council, in annual and cumulative 
terms as measured by the control account; 

c)  the  medium-term  economic  position,  including  potential  growth,  inflation 
developments and cyclical developments compared to the assumptions underlying the 
net expenditure path as set by the Council; 

d) the implementation of reforms and investments, including in particular policies to 
prevent and correct macroeconomic imbalances and policies to implement the common 
growth  and  employment  strategy  of  the  Union,  including  those  supported  by  the 
Recovery  and  Resilience  Facility,  and  the  overall  quality  of  public  finances,  in 
particular the effectiveness of national budgetary frameworks,  

e) the  increase  of  government  investment  in  defence,  where  applicable,  considering 
also the time of recording of military equipment expenditure. 

More specifically, the increase in government investment in defence has been included among 
the relevant factors, as a result of the reform of the economic governance framework.  

Article 2(3) of Regulation (EC) No 1467/97 provides also 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 this report.  

Furthermore, in accordance with Article 2(4), the presence of substantial public debt challenges 
shall be considered as a key aggravating factor.  

As regards the assessment of compliance with the deficit criterion, Article 2(4) of Regulation 
(EC) No 1467/97 provides that the relevant factors can be taken into account by the Council 
and the Commission in the steps leading to the decision on the existence of an excessive deficit, 
but only when: 

a)  the government debt-to-GDP ratio does not exceed the 60% reference value, or 
b)  if  the  government  debt-to-GDP  ratio  exceeds  the  60%  reference  value,  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. 

11 

 
Among the Member States considered in this report, the debt-to-GDP ratio does not exceed the 
60% of GDP reference value in Czechia, Estonia, Malta, Poland and Slovakia. Therefore, 
for these five Member States, relevant factors can be taken into account by the Council and the 
Commission in the subsequent steps leading to the decision on the existence of an excessive 
deficit (paragraphs 4, 5 and 6 of Article 126 TFEU). 

As for the remaining Member States concerned by the report, in Belgium, Spain, France, Italy 
and Hungary, the debt-to-GDP ratio exceeds the 60% of GDP reference value and the double 
condition necessary for relevant factors to be taken into account (closeness and temporariness) 
is not met. Therefore, for these Member States relevant factors cannot be taken into account by 
the Council and the Commission in the steps leading to the decision on the existence of an 
excessive deficit (paragraphs 4, 5 and 6 of Article 126 TFEU). Differently, the double condition 
is met for Slovenia and Finland.  

According to established practice and in line with Article 2(4) of Regulation (EC) No 1467/97, 
the relevant factors are discussed hereunder even for the Member States where they cannot be 
taken into account by the Council and the Commission in the subsequent steps leading to the 
decision on the existence of an excessive deficit on the basis of the deficit criterion.  

4.1. 

CROSS-COUNTRY RELEVANT FACTORS  

The EU economy was faced with a series of formidable shocks in recent years. The COVID-
19 crisis gave rise to global supply-side disruptions as demand increased vigorously during the 
strong post-pandemic rebound. Russia’s war of aggression against Ukraine steepened the surge 
of energy prices, that had already started in 2021, and economic effects across Member States 
varied depending on the proximity to the region at war, the structure of energy markets and 
supply routes, as well as the structure of a Member State’s trade relations. HICP inflation was 
pushed to two-digit rates in October 2022 in the EU, with inflation in central and eastern Europe 
being markedly higher. This led to a sharp erosion of household purchasing power and a shift 
in consumer sentiment. These factors, in addition to the COVID-19 support and emergency 
energy support measures played a role in budgetary developments of Member States, via e.g. 
automatic indexation mechanisms, increased expenditure for defensive and border safety. 

Economic activity in the EU broadly stagnated in 2023, with GDP growth slowing down to 
0.4% in 2023 amid weak domestic demand and little support from the external environment. 
More recently, the conflict in the Middle East added to downside risks for the EU and global 
economy, with potential ramifications for the EU and global economy. Meanwhile, inflation 
has continued declining, decreasing from 9.2% in 2022 to 6.4% in 2023. In the first quarter of 
2024, economic activity picked up in the EU as inflation cooled further.   

The fall in the EU government deficit came to a halt in 2023 as economic activity weakened. 
After  a  sizeable  reduction  in  2021  and  2022  from  very  high  levels  in  2020,  the  general 
government deficit of the EU aggregate increased marginally to 3.5% of GDP in 2023 and is 
projected to  fall to 3.0% of GDP in 2024.  For the Member States considered in this report, 
deficit developments in 2024 are projected to be more divergent, as the deficit ratio is forecast 
to  increase  compared  to  2023  for  Poland,  Slovenia,  Slovakia  and  Finland,  stay  stable  for 
Belgium and Estonia, and decrease in Czechia, Spain, France, Italy, Hungary and Malta. 

At the end of 2023, the EU public debt-to-GDP ratio stood at 82.9% (from 84.8% at the end of 
2022), around 9 pps. lower than the 92% peak recorded at the end of 2020. However, it remains 
around 4 pps. above the pre-COVID-19 level. The debt ratio is projected to stabilise in 2024. 
Among the Member States considered in the report, the debt ratio did not decrease in 2023 for 
Belgium, Estonia, Poland and Finland.   

12 

 
After an overall expansion estimated at around 3½% of GDP for 2020-22, the EU fiscal stance32 
became neutral in 2023. This neutral stance was the result of some decline in the budgetary 
cost of the energy-related measures, implying a contractionary contribution from net primary 
current expenditure, which was offset by the expansionary contribution provided by nationally 
financed investment, expenditure financed by RRF grants and other EU funds, and other capital 
expenditure. A contractionary EU fiscal stance - slightly above ½% of GDP - is projected for 
2024, mainly driven by the expected decline in governments’ subsidies to private investment 
(other capital expenditure) and the almost complete phase-out of energy-related measures. For 
2025, the no-policy-change forecast points to a neutral EU fiscal stance. However, the need to 
reduce  budget  deficits  and  put  debt  ratios  back  on  a  declining  path  could  lead  to  a  more 
restrictive fiscal stance in 2025 than currently projected. 

4.2. 

COUNTRY-SPECIFIC RELEVANT FACTORS  

This section provides an assessment of country-specific relevant factors for each Member State. 
These factors include the medium-term macroeconomic outlook, the medium-term budgetary 
position (including public investment; see Table 4), the medium-term debt position, the overall 
quality of public finances, the implementation of reforms and investments (including policies 
to prevent and correct macroeconomic imbalances and to implement the common growth and 
employment strategy of the Union, including those supported by the Recovery and Resilience 
Facility), the increase in government investment in defence, and any other relevant factors put 
forward by each Member State.   

Concerning  the  increase  in  government  investment  in  defence,  this  report  considers  the 
breakdown  of  government  expenditure  according  to  the  Classification  of  the  Functions  of 
Government (COFOG), specifically gross fixed capital formation used for defence purposes. 
These are official data published by Eurostat and adhere to the usual recording conventions as 
also used for notified EDP data. However, COFOG data become available with a time lag33 and 
they are currently only available until 2022. Additional information and preliminary estimates 
on expenditure and/or investment in defence for 2023 and 2024 as presented in the country-
specific sections has been provided by Member States. 

While  the  country-specific  sections  refer  to  key  information  on  the  medium-term 
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  Spring 2024 Forecast. Further information regarding the budgetary 
measures, the fiscal stance and the debt sustainability analysis discussed for each Member State 
hereunder is included in the Commission recommendation for Council Recommendation on 

32  

33  

The fiscal stance aims to assess the economic impulse stemming from fiscal policies, both those that are 
nationally financed and those that are financed by the EU budget. 
The respective reporting deadline in the ESA Transmission Programme is t+12 months, to be advanced 
to t+11 months from September 2024. Taking into account the need for Eurostat to validate and process 
the data, this implies that the data become publicly available in January-February of year t+2. 

13 

 
 
the economic, social, employment, structural and budgetary policies, as  well as in the 2024 
Country Reports. 34  

34  

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 2024 Spring package (COM (2024) 600 
final), and the Commission Recommendations for Council Recommendations (COM(2024) 601 to 627). 
For the latest assessment by the Commission of Member States experiencing imbalances or excessive 
imbalances,  see  the  respective  in-depth  reviews  (SWD(2024)  80  to  85  and  100  to  105).  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(2024) 601 to 627). 

14 

 
 
Percentage of GDP 

Table 4: Public investment 

2020 

2021 

2022 

2023 

2024 

2025 

3.1 
4.9 
7.0 
3.1 
4.3 
3.2 
4.6 
3.7 
5.1 
5.8 
4.1 
4.2 

2.7 
4.7 
5.1 
2.8 
4.2 
2.7 
5.4 
3.4 
3.8 
5.4 
3.1 
4.2 

2.8 
4.7 
5.6 
2.7 
4.1 
2.9 
6.3 
3.9 
4.1 
4.7 
3.1 
4.2 

2.8 
4.8 
5.7 
2.6 
4.2 
2.6 
6.5 
3.9 
4.5 
4.1 
3.4 
4.8 

2.9 
4.9 
6.9 
3.1 
4.2 
3.5 
4.7 
3.9 
5.4 
5.4 
4.5 
4.7 

2.9 
5.0 
6.3 
3.0 
4.3 
3.2 
5.1 
3.5 
5.0 
5.3 
4.7 
4.0 

Belgium 
Czechia 
Estonia 
Spain 
France 
Italy 
Hungary 
Malta 
Poland 
Slovenia 
Slovakia 
Finland 
Member States not considered in this report 
3.5 
2.7 
Bulgaria 
3.3 
3.2 
Denmark 
2.9 
2.6 
Germany 
2.7 
2.1 
Ireland 
4.3 
3.6 
Greece 
5.6 
4.6 
Croatia 
3.7 
2.6 
Cyprus 
6.1 
5.4 
Latvia 
4.0 
3.2 
Lithuania 
4.9 
4.1 
Luxembourg 
3.2 
3.4 
Netherlands 
3.4 
3.6 
Austria 
3.4 
2.6 
Portugal 
Romania (*) 
4.8 
4.2 
Sweden 
5.3 
4.7 
Source: Eurostat (data from 2020 to 2023) and  Commission Spring 2024 Forecast  (for 
2024 and 2025). (*) In excessive deficit procedure since 2020. 

3.5 
3.2 
2.7 
2.3 
3.9 
5.4 
3.5 
4.2 
4.2 
4.7 
3.1 
3.5 
2.5 
5.3 
5.0 

2.3 
3.1 
2.6 
2.1 
3.7 
3.7 
2.6 
3.9 
3.2 
4.2 
3.2 
3.4 
2.4 
4.4 
4.8 

3.3 
3.6 
2.7 
2.4 
3.1 
5.5 
2.8 
5.7 
4.5 
4.7 
3.7 
3.3 
2.3 
4.6 
5.0 

2.5 
3.3 
2.8 
2.6 
4.4 
5.5 
3.6 
5.5 
4.4 
4.6 
3.2 
3.5 
3.1 
5.2 
5.2 

15 

 
 
 
 
 
 
 
 
 
 
 
  
  
  
4.2.1.  MEMBER STATES  FOR WHICH RELEVANT FACTORS CAN BE TAKEN INTO ACCOUNT 

CZECHIA 

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  5.5%  in  2020.  After  an 
expansion of 3.6% in 2021, real GDP grew by 2.4% in 2022, before contracting by 0.3% in 
2023. It is expected to grow by 1.2% in 2024 and 2.8% in 2025. Growth in 2024 is set to be 
mainly driven by private consumption and net exports. 

Medium-term budgetary position, including investment. The government deficit has been 
above 3% of GDP since 2020; it decreased from 5.1% of GDP in 2021 to 3.2% of GDP in 
2022, before rising to 3.7% in 2023. It is projected to be at 2.4% and 1.9% of GDP in 2024 and 
2025,  respectively.  Government  investment  stayed  at  4.7%  of  GDP  in  2021  and  2022,  and 
increased to 5.0% in 2023, being larger than the government deficit in 2022 and 2023. In 2024 
and  2025  government  investment  is  projected  to  stay  at  4.9%  of  GDP,  still  larger  than  the 
government deficit in the same years.  

In 2023, according to the Commission estimates, the fiscal stance was contractionary, by 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  provided  a  contractionary 
contribution to the fiscal stance of 0.7% of GDP. This includes the reduced cost of the targeted 
emergency 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  in  2023  was  in  line  with  the  Council  recommendation.  Expenditure 
financed by Recovery and Resilience Facility grants and other EU funds amounted to 1.1% of 
GDP in 2023. Nationally financed investment amounted to 4.4% of GDP in 2023, representing 
an  increase  of  0.5  percentage  points  as  compared  to  2022.  Czechia  financed  additional 
investment through the Recovery and Resilience Facility and other EU funds, including public 
investment  for  the  green  and  digital  transitions,  and  for  energy  security,  such  as  energy 
efficiency renovations and installation of renewables, modernisation and increased safety of 
railways  and  project  preparation  for  electrification,  flood  protection  and  water  retention  of 
lands and municipalities, projects of Czech companies aiming at reducing water consumption 
and  applying  circular  solutions  for  businesses,  public-private  partnerships  in  research  and 
innovation, or provision of digital devices for schools, which are partly funded by the Recovery 
and Resilience Facility and other EU funds.  

Based on the Commission’s estimates, the fiscal stance is projected to be contractionary by 
2.3%  of  GDP  in  2024.  According  to  the  Commission  Spring  2024  Forecast,  Czechia’s  net 
nationally financed primary expenditure is projected to decrease by 1.1% in 2024, which is 
below the recommended maximum growth rate. This is in line with what was recommended 
by the Council. According to the Commission 2024 Spring Forecast, the net budgetary cost of 
energy support measures is estimated at 1.2% of GDP in 2023 and projected at -0.2% in 2024, 
and  0.0%  in  2025.  If  the  related  savings  were  used  to  reduce  the  government  deficit,  as 
recommended by the Council, these projections would imply a fiscal adjustment of 1.4% of 
GDP in 2024, whereas net nationally financed primary expenditure provides a contractionary 
contribution to the fiscal stance of 2.2% of GDP in that year. The emergency energy support 
measures are projected to be wound down as soon as possible in 2023 and 2024. This is in line 
with what was recommended by the Council. Moreover, the related savings are projected to be 
fully  used  to  reduce  the  government  deficit.  This  is  also  in  line  with  the  Council 
recommendation.  According  to  the  Commission  Spring  2024  Forecast,  nationally  financed 
public investment is projected to decrease to 4.2% of GDP in 2024 from 4.4% of GDP in 2023. 

16 

 
 
This  decrease  is  driven  by  the  end  of  the  2014-2020  programming  period  of  EU  structural 
funds, for which funds were available until 2023. Taking into account this additional factor, 
public  investment  in  2024  is  assessed  as  respecting  the  Council  recommendation.  In  turn, 
public expenditure financed from revenues from EU funds, including Recovery and Resilience 
Facility grants, is expected to decrease to 1.0% of GDP in 2024 from 1.1% of GDP in 2023. 
This  decrease  is  driven  by  the  end  of  the  2014-2020  programming  period  of  EU  structural 
funds, for which funds were available until 2023. 

Debt challenges and medium-term debt position. Government debt increased from 37.7% 
of GDP at the end of 2020 to 42% at the end of 2021. It further increased to 44.2% of GDP at 
the end of 2022 before marginally declining to 44.0% in 2023. It is projected at 45.2% and 
45.5% at the end of 2024 and 2025, respectively.  

Overall,  the  debt  sustainability  analysis  indicates  medium  risks  over  the  medium  term. 
According  to  the  baseline  10-year  projection,  the  general  government  debt  ratio  would  rise 
slightly  to  48%  of  GDP  in  2034.  The  baseline  debt  trajectory  is  relatively  sensitive  to 
macroeconomic shocks. According to the stochastic projections, which simulate a large range 
of possible temporary shocks to macroeconomic variables, there is a low likelihood that the 
debt ratio in 2028 will be higher than in 2023.  

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the one hand, risk-increasing factors are related to the recent increase in interest rates and the 
significant  share  of  short-term  debt.  On  the  other  hand,  risk-mitigating  factors  include  the 
stability of debt maturity in recent years, relatively stable financing sources (with a diversified 
and large investor base) and the currency denomination of debt.   

structural 

reforms  and 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included  in  the  Recovery  and  Resilience  Plan  of  Czechia  is  underway,  however  timely 
completion requires increased efforts.  

investments  under 

National  budgetary  framework.  The  responsibilities  of  independent  fiscal  institutions  are 
fulfilled by two legally established bodies, the Fiscal Council and the Committee on Budgetary 
Forecasts.  At  the  same  time,  there  remains  room  for  the  improving  institution’s  access  to 
information and evaluation tasks. Some budgetary practices in Czechia (e.g., changes to the 
parameters underpinning the fiscal rules and the use of State entities outside the regular budget) 
tend to weaken the fiscal framework. 

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 1.0% of GDP in 2022. 
Of this, government investment in defence represented 0.2% of GDP in 2022, which was 0.1 
percentage  points  higher  than  in  2019.  According  to  preliminary  estimates  provided  by 
Czechia, expenditure on defence increased by 0.3 pp of GDP in 2023 (no specific figure on 
investment in defence is provided). 

Other  factors  put  forward  by  the  Member  State:  Czechia  brought  forward  that  it  took 
consolidation  measures  in  2024  with  a  total  impact  of  around  1.5%  of  GDP.  According  to 
Czechia, these measures should translate into a year-on-year reduction in the deficit to 2.3% of 
GDP, i.e. well bellow 3% of GDP in 2024.  

17 

 
ESTONIA 

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  1.0%  in  2020.  After  an 
expansion of 7.2% in 2021, real GDP contracted by 0.5% in 2022 and even further in 2023 (by 
3.0%). It is expected to contract by 0.5% in 2024, bringing the economy into a recession of 
three years. Only as of 2025, positive growth of 3.1% is forecasted. The contraction in 2024 is 
set to be mainly driven by the reduction in both private and public consumption. 

Medium-term budgetary position, including investment. The government deficit decreased 
from 5.4% in 2020 to 2.5% of GDP in 2021 and 1.0% in 2022, before increasing to 3.4% of 
GDP in 2023, where it is projected to stand also in 2024. In 2025, the deficit is expected to rise 
to 4.3% of GDP. After increasing to 5.7% of GDP in 2020, government investment decreased 
to 5.6% of GDP in 2021 and to 5.1% in 2022, before rising to 6.3% in 2023, always larger than 
the government deficit in the same years. It is projected to rise further to 7.0% of GDP in 2024 
and to decrease marginally to 6.9% in 2025, remaining larger than the government deficit in 
both years.  

In 2023, according to the Commission estimates, the fiscal stance was expansionary by 1.6% 
of  GDP,  in  a  context  of  high  inflation.  The  growth  in  nationally  financed  primary  current 
expenditure  (net  of  discretionary  revenue  measures)  in  2023  provided  an  expansionary 
contribution to the fiscal stance of 1.0% of GDP. This includes the reduced cost of the targeted 
emergency 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  0.2%  of  GDP).  The  expansionary  contribution  of  nationally  financed  net 
primary current expenditure in  2023 was therefore only  partly due to the  support to  people 
fleeing Ukraine. The expansionary growth in nationally financed primary current expenditure 
(net  of  discretionary  revenue  measures)  was  driven  by  higher  public  wage  spending  and 
pensions coupled  with  further new permanent spending  programmes for  defence,  education 
and  child  benefits,  not  matched  by  proportional  increases  on  the  revenue  side.  In  sum,  the 
growth  of nationally financed primary current  expenditure  in  2023 was  not  in  line with  the 
Council  recommendation.  Expenditure  financed  by  Recovery  and  Resilience  Facility  grants 
and  other  EU  funds  amounted  to  1.4%  of  GDP  in  2023.  Nationally  financed  investment 
amounted to 5.8% of GDP in 2023, with an annual increase of 1.4 percentage points from 2022. 
Estonia financed additional investment through the Recovery and Resilience Facility and other 
EU  funds,  including  public  investment  for  the  green  and  digital  transitions,  and  for  energy 
security,  such  as  the  development  of  event  services  and  digital  gateway  for  entrepreneurs, 
capitalisation of the Green Fund (which makes investments in venture capital funds and equity 
investments  in  enterprises)  and  strengthening  of  the  electricity  grid  to  increase  renewable 
energy production capacity and adapt to climate change, which are funded by the Recovery 
and Resilience Facility. 

Based on the Commission’s estimates, the fiscal stance is projected to be broadly neutral at 
0.1% of GDP in 2024. According to the Commission Spring 2024 Forecast, Estonia’s structural 
balance is projected at -0.7% of GDP in 2024 (from -1.3% in 2023), thereby at the country’s 
medium-term budgetary objective (MTO) of a structural balance of -0.75% of GDP. Estonia is 
therefore assessed as being in line with what was recommended by the Council. According to 
the Commission Spring 2024 Forecast, the net budgetary cost of emergency energy support 
measures is estimated at 0.2% of GDP in 2023 and projected at 0.0% in 2024 and 2025. The 
emergency energy support measures are projected to be wound down as soon as possible in 
2023 and 2024. This is in line with the Council recommendation. According to the Commission 
Spring 2024 Forecast, nationally financed public investment is projected to increase to 6.3% 

18 

 
of GDP in 2024 from 5.8% of GDP in 2023. This is in line with what was recommended by 
the Council. 

Debt challenges and medium-term debt position. After a decline from 18.6% of GDP at the 
end of 2020 to 17.8% of GDP at the end of 2021, government debt increased to 18.5% of GDP 
at the end of 2022 and 19.6% at the end of 2023. The upward trend is projected to continue, 
with the debt-to-GDP ratio estimated at 21.4% at the end of 2024 and 24.6% at the end of 2025.  

Overall,  the  debt  sustainability  analysis  indicates  medium  risks  over  the  medium  term. 
According to the baseline 10-year projection, the general government debt ratio would rise to 
around 27% of GDP in 2034. The baseline debt trajectory is not 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 likelihood that the debt ratio in 
2028 will be higher than in 2023. 

Other factors need to be taken into account 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 and the large share of government debt held by non-residents. On the other 
hand, risk-mitigating factors include the low gross financing needs and the fact that the overall 
still low government debt is fully denominated in euro.   

structural 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included in the Recovery and Resilience Plan of Estonia is well underway.  

investments  under 

reforms  and 

National budgetary framework. The national fiscal framework underwent a comprehensive 
reform  in  2014,  when  the  Estonian  Fiscal  Council  was  established.  The  cornerstone  of  the 
national fiscal framework is the structural balance rule. It was amended in 2017 and 2024, with 
the latter amendment softening the rules and allowing structural deficits up to 1% of GDP, as 
long as the debt level does not exceed 30% of GDP. The Estonian Fiscal Council endorses the 
macroeconomic and fiscal forecasts and assesses compliance with the budget balance rule.  

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 2.2% of GDP in 2022. 
Of this, government investment in defence represented 0.7% of GDP in 2022, which was 0.2 
percentage points higher than in 2019. According to preliminary estimates provided by Estonia, 
defence investment would increase by 0.45% of GDP in 2023 and 0.44% in 2024. 

Other  factors  put  forward  by  the  Member  State.  On  17  May  2024,  Estonia  provided 
additional  relevant  factors  not  already  mentioned  above.  These  relate  to  a  strong  economic 
contraction in the order of 3% in 2023, and to plans to adopt additional budgetary measures in 
the form of expenditure cuts that should decrease the deficit to below 3% of GDP in 2024.  In 
addition,  following  their  letter,  the  Estonian  authorities  informed  the  Commission  that  the 
government agreed to, and sent to the Parliament on 5 June 2024, a supplementary budget for 
2024 (State 2024 Additional Budget Act 456 SE35), which passed the first reading in Parliament 
on 10 June, the second on 14 June and is expected to pass the third reading on 19 June. This 

35 

https://www.riigikogu.ee/tegevus/eelnoud/eelnou/a17529fc-9cd3-46a0-bc61-2f0ef5c7edb4/2024.-aasta-
lisaeelarve-seadus/ 

19 

 
 
supplementary budget is expected to reduce the nominal deficit by 0.4% of GDP (of which, 
most are permanent expenditure cuts, but also includes revenue-increasing measures).36 

MALTA 

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  8.2%  in  2020.    After  an 
expansion of 12.5% in 2021, real GDP grew by 5.6% in 2021 and 4.6% in 2023. It is expected 
to  grow by  4.6% in  2024  and 4.3% in  2025. Growth in  2024 is  set  to  be  mainly  driven by 
private consumption and net exports.  

Medium-term budgetary position, including investment. The government deficit has been 
above 3% of GDP since 2020; it decreased from 7.6% in 2021 to 5.5% of GDP in 2022 and 
4.9% in 2023. It is projected to further decrease to 4.3% and 3.9% of GDP in 2024 and 2025, 
respectively.  After  standing  at  3.9%  of  GDP  in  2021,  government  investment  decreased  to 
3.4% of GDP in 2022, before marginally rising to 3.5% in 2023. It is projected to amount to 
3.7% of GDP in 2024 and to 3.9% of GDP in 2025. 

In 2023, according to the Commission estimates, the fiscal stance was contractionary, by 0.6% 
of  GDP,  in  a  context  of  high  inflation.  The  growth  in  nationally  financed  primary  current 
expenditure  (net  of  discretionary  revenue  measures)  in  2023  provided  a  contractionary 
contribution to the fiscal stance of 1.6% of GDP. This includes the increased cost of the targeted 
emergency support measures to households and firms most vulnerable to energy price hikes by 
less than 0.1% of GDP. The growth of nationally financed primary current expenditure in 2023 
was  in  line  with  the  Council  recommendation.  Expenditure  financed  by  Recovery  and 
Resilience Facility grants and other EU funds amounted to 0.9% of GDP in 2023. Nationally 
financed  investment  amounted  to  2.6%  of  GDP  in  2023,  representing  an  increase  of  0.1 
percentage  points  as  compared  to  2022.  Malta  financed  additional  investment  through  the 
Recovery and Resilience Facility and other EU funds, including public investment for the green 
and digital transitions, and for energy security, such as the renovation of private and public 
buildings including hospitals and schools, the electrification of the transport sector and projects 
related to the digitalisation of the public administration and the private sector, which are partly 
funded by the Recovery and Resilience Facility and other EU funds. 

Based on the Commission’s estimates, the fiscal stance is projected to be contractionary, by 
1.3%  of  GDP,  in  2024.  According  to  the  Commission  Spring  2024  Forecast,  Malta’s  net 
nationally  financed  primary  expenditure  is  projected  to  increase  by  5.5%  in  2024,  which  is 
below the recommended maximum growth rate. However, net expenditure in 2023 was higher 
than  expected  at  the  time  of  the  recommendation  (by  0.8%  of  GDP).  Therefore,  as  the 
recommendation for 2024 was formulated as a growth rate, the assessment of compliance also 
needs to take into account the base effect from 2023. Had net expenditure in 2023 been the 
same  as  expected  at  the  time  of  the  recommendation,  the  resulting  growth  rate  of  net 
expenditure in 2024 would have been above the recommended growth rate by 0.7% of GDP. 
Therefore, net nationally financed primary expenditure is assessed as at risk of not being fully 
in line with the recommendation. According to the Commission Spring 2024 Forecast, the net 
budgetary cost of emergency energy support measures is estimated at 1.7% of GDP in 2023 
and projected at 2.0% in 2024, and 1.0% in 2025. The emergency energy support measures are 
not projected to be wound down as soon as possible in 2023 and 2024. This risks being not in 

36  

At  the  moment  this  report  is published,  there  are  exchanges  between  the  Estonian  national  statistical 
office and Eurostat  regarding the time of recording of military spending. An independent decision by 
Eurostat on this matter is pending.  

20 

 
 
 
line with what was recommended by the Council. Consequently, there are no related savings 
to be used to reduce the government deficit as recommended by the Council. According to the 
Commission  Spring  2024  Forecast,  nationally  financed  public  investment  is  projected  to 
increase to 2.8% of GDP in 2024 from 2.6% of GDP in 2023. This is in line with what was 
recommended by the Council. In turn, public expenditure financed from  revenues  from  EU 
funds, including Recovery and Resilience Facility grants, is expected to remain stable at 0.9% 
of GDP in 2024.  

Debt challenges and medium-term debt position. Government debt increased from 52.2% 
of GDP at the end of 2020 to 53.9% at the end of 2021, before declining to 51.6% of GDP and 
50.4% of GDP at the end of 2022 and 2023 respectively. It is projected to increase to 52.0% of 
GDP at the end of 2024 and to 52.6% at the end of 2025.  

Overall,  the  debt  sustainability  analysis  indicates  medium  risks  over  the  medium  term. 
According to the baseline 10-year projection, the general government debt ratio would rise to 
56% of GDP in 2034. The baseline debt trajectory is not sensitive to macroeconomic shocks. 
According to the stochastic projections, which simulate a large range of possible temporary 
shocks to macroeconomic variables, there is overall a medium sensitivity of the projections to 
plausible unforeseen events.  

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the one hand, risk-increasing factors relate to the high share of short-term debt. On the other 
hand, risk-mitigating factors include the high share of domestically-held debt as well as the 
sharp decrease in both gross and net debt ratios between 2010 and 2022. 

structural 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included in the Recovery and Resilience Plan of Malta is well underway. 

investments  under 

reforms  and 

National budgetary framework. The Maltese Fiscal Advisory Council is a small independent 
fiscal institution. The Fiscal Responsibility Act of 2014 requires that the general government 
budget in structural terms be balanced or in surplus and that the government debt ratio be kept 
below  60%,  or  decreases  if  above.  Malta’s  medium-term  budgetary  strategy  sets  forth  the 
Government’s fiscal  objectives and strategic priorities and indicative fiscal  targets,  together 
with  a  description  of  underlying  assumptions.  Overall,  Malta  has  a  relatively  robust  fiscal 
framework. 

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 0.5% of GDP in 2022. 
Of this, government investment in defence represented 0.1% of GDP in 2022, which was 0.1 
percentage points lower than in 2019. 

Other  factors  put  forward  by  the  Member  State.  On  16  May  2024,  Malta  provided  one 
additional  relevant  factor  not  already  mentioned  above,  namely  related  to  the  costs  of  the 
national airline restructuring estimated at 0.7% of GDP in 2023.  

21 

 
 
POLAND 

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  2.0%  in  2020.    After  an 
expansion of 6.9% in 2021, real GDP grew by 5.6% in 2022 and 0.2% in 2023. It is expected 
to grow by 2.8% in 2024 and 3.4% in 2025. Growth in 2024 is set to be mainly driven by both 
private and public consumption.  

Medium-term budgetary position, including investment. The government deficit increased 
from 1.8% of GDP in 2021 to 3.4% of GDP in 2022 and 5.1% of GDP in 2023. It is projected 
to  be  at  5.4%  and  4.6%  of  GDP  in  2024  and  2025,  respectively.  Government  investment 
declined to 3.8% of GDP in 2022 from 4.1% of GDP in 2021, before increasing to 5.0% in 
2023. It is projected to increase to 5.1% of GDP in 2024 and to 5.4% of GDP in 2025, being 
larger than the government deficit in the latter year.  

In 2023, according to Commission estimates, the fiscal stance  was expansionary, by 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  provided  a  broadly  neutral 
contribution  to  the  fiscal  stance  of  0.0%  of  GDP,  which  is  in  line  with  the  Council 
recommendation.  The  broadly  neutral  contribution  of  nationally  financed  primary  current 
expenditure was  due to  the reduced  costs of the  emergency support measures (targeted  and 
untargeted) to households and firms in response to energy price hikes (by 1.2 percentage points 
of GDP). The main drivers of growth in nationally financed primary current expenditure (net 
of revenue measures) were increases in public sector wages and pensions. Expenditure financed 
by Recovery and Resilience Facility grants and other EU funds amounted to 1.5% of GDP in 
2023.  Nationally  financed  investment  amounted  to  3.8%  of  GDP  in  2023,  with  an  annual 
increase of 0.8 percentage points from 2022. Poland financed additional investment through 
the Recovery and Resilience Facility and other EU funds, and it preserved nationally financed 
investment.  Poland financed public investment  for the green  and digital  transitions,  and for 
energy security, such as support for the transmission and distribution grids and deployment of 
renewables, for offshore wind energy plants and for energy-efficient renovation of buildings 
and green and smart mobility, which are funded by the Recovery and Resilience Facility and 
other EU funds. 

Based on the Commission’s estimates, the fiscal stance is projected to be expansionary by 2.4% 
of GDP in 2024. According to the Commission Spring 2024 Forecast, Poland’s net nationally 
financed primary expenditure is projected to increase by 12.8% in 2024, which is above the 
recommended maximum growth rate. This risk being not in line with what was recommended 
by the Council. According to the Commission Spring 2024 Forecast, the net budgetary cost of 
emergency  energy  support  measures  is  estimated  at  0.6%  of  GDP  in  2023  and  projected  at 
0.5%  in  2024,  and  less  than  0.1%  in  2025.  If  the  related  savings  were  used  to  reduce  the 
government deficit, as recommended by the Council, these projections would imply a fiscal 
adjustment  of  0.2%  of  GDP  in  2024,  whereas  net  nationally  financed  primary  expenditure 
provides an expansionary contribution to the fiscal stance of 2.0% of GDP in that year. The 
emergency energy support measures are not projected to be wound down as soon as possible 
in 2023 and 2024. This risks being not in line with what was recommended by the Council. 
Moreover, the related savings are not projected to be used to reduce the government deficit. 
This  also  risks  being  not  in  line  with  the  Council  recommendation.  According  to  the 
Commission  Spring  2024  Forecast,  nationally  financed  public  investment  is  projected  to 
increase to 4.0% of GDP in 2024 from 3.8% of GDP in 2023. This is in line with what was 
recommended by the Council. In turn, public  expenditure financed from  revenues  from  EU 
funds, including Recovery and Resilience Facility grants, is expected to increase to 1.9% of 
GDP in 2024, from 1.5% of GDP in 2023 

22 

 
Debt challenges and medium-term debt position. Government debt decreased from 57.2% 
of GDP at the end of 2020 to 53.6% at the end of 2021 and to 49.2% at the end of 2022. It rose 
to 49.6% of GDP in 2023 and it is projected to increase further to 53.7% and 57.7% of GDP at 
the end of 2024 and 2025, respectively.  

Overall, the debt sustainability analysis indicates high risks over the medium term. According 
to the baseline 10-year projections, the general government debt ratio would rise countinuously 
to about 85% of GDP in 2034. The debt trajectory is relatively sensitive to macroeconomic 
shocks.  According  to  the  stochastic  projections,  which  simulate  a  large  range  of  possible 
temporary shocks to macroeconomic variables, there is a moderate probability that the debt 
ratio would be higher in 2028 than in 2023.   

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the one hand, risk-increasing factors are related to the recent increase in interest rates. On the 
other  hand,  risk-mitigating  factors  include  relatively  stable  financing  sources  (  with  large 
domestic  investor  base)  and  the  currency  denomination  of  debt  (about  three-quarters  of 
outstanding debt is denominated in local currency). 

structural 

reforms  and 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included  in  the  Recovery  and  Resilience  Plan  of  Poland  is  underway,  however  timely 
completion requires increased efforts. 

investments  under 

National budgetary framework. The fiscal framework in Poland has been strengthened in the 
last  two  years,  including  via  measures  included  in  the  Recovery  and  Resilience  Plan.  The 
numerical fiscal rules remain at the centre of the framework. While the debt ceilings anchored 
in  the  Constitution  cover  the  central  government,  a  separate  debt  rule  concerns  local 
government  units.  The  stabilising  expenditure  rule  was  recently  strengthened  by  covering 
additional units and special purpose funds and the government has proposed adjustments to 
bring it in line with the reformed EU requirements. The government also plans to establish an 
independent Fiscal Council to bring together the monitoring of fiscal rules and other relevant 
responsibilities, which are currently scattered across several bodies.  

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 1.6% of GDP in 2022. 
Of  this,  government  investment  in  defence  represented  0.3%  of  GDP  in  2022,  remaining 
unchanged compared to 2019. According to preliminary estimates provided by Poland, total 
COFOG  military  expenditures  in  2023  amounted  to  2.1%  of  GDP,  including  deliveries  of 
military equipment and other military investments estimated at 0.7% of GDP. According to 
Poland, as the accounting rules register military expenditure not at the moment of payment but 
upon delivery, the current high cash-based military expenditure will appear in accrual terms in 
the following years, when the military equipment is delivered. Concretely, Poland expects that 
defence expenditure will double in the next four years, as it is estimated to reach 2.8% of GDP 
in 2024, 3.2% of GDP in 2025, 3.7% of GDP in 2026, 4.3% of GDP in 2027 and 4.1% of GDP 
in 2028. 

Other  factors  put  forward  by  the  Member  State.  On  17  May  2024,  Poland  provided 
additional relevant factors not already mentioned above, namely information on the budgetary 
impact  of strengthening  the EU external  border  with  Russia,  Belarus and Ukraine  (0.3% of 
GDP) and extraordinary support for farmers (0.4% of GDP). In addition, Poland highlights that 
it spends the highest amount on defence among EU Member States, thus serving the broader 
objective of strengthening security of Europe and helping to deliver a common public good for 

23 

 
Europeans. Poland also confirmed its commitment to fiscal discipline and to keeping the debt 
ratio below 60%. On 30 April 2024, the government adopted the Multiannual Financial Plan 
of the State for 2024-2027, with a commitment to fiscal consolidation of at least 0.5% of GDP 
per year; the deficit would gradually decline from 5.1% of GDP in 2024 to 4.6% in 2025, 4.0% 
in 2026, 3.5% in 2027 and 2.9% in 2028. 

SLOVENIA 

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  4.2%  in  2020.  After  an 
expansion of 8.2% in 2021, real GDP grew by 2.5% in 2022 and 1.6% in 2023. It is expected 
to grow by 2.3% in 2024 and 2.6% in 2025. Growth in 2024 is set to be mainly driven by public 
consumption and inventories. 

Medium-term budgetary position, including investment. The government deficit decreased 
from 4.6% in 2021 to 3.0% of GDP in 2022 and 2.5% in 2023. It is projected to amount to 
2.8% and 2.2% of GDP in 2024 and 2025, respectively. After increasing to 4.7% of GDP in 
2021 and to 5.4% in 2022, government investment marginally decreased to 5.3% of GDP in 
2023. It is projected to rise to 5.8% of GDP in 2024, before slightly declining to 5.4% of GDP 
in 2025. From 2021, government investment has been larger than the government deficit.  

In 2023, according to the Commission estimates, the fiscal stance was contractionary, by 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  provided  a  contractionary 
contribution to the fiscal stance of 0.4% of GDP. This includes the reduced cost of the targeted 
emergency support measures to households and firms most vulnerable to energy price hikes by 
0.3% of GDP. The growth of nationally financed primary current expenditure in 2023 was in 
line  with  the  Council  recommendation.  Expenditure  financed  by  Recovery  and  Resilience 
Facility grants and other EU funds amounted to 1.3% of GDP in 2023. Nationally financed 
investment  amounted  to  4.6%  of  GDP  in  2023,  representing  an  annual  decrease  of  0.2 
percentage points as compared to 2022. Slovenia financed additional investment through the 
Recovery and Resilience Facility and other EU funds, including public investment for the green 
and digital transitions, and for energy security, for example in railway infrastructure, renewable 
sources of energy and prevention of natural disasters, which are partly funded by the Recovery 
and Resilience Facility and other EU funds. 

Based on the Commission’s estimates, the fiscal stance is projected to be contractionary by 
0.2%  of  GDP  in  2024. According  to  the  Commission  Spring  2024  Forecast,  Slovenia’s  net 
nationally  financed  primary  expenditure  is  projected  to  increase  by  5.6%  in  2024,  which  is 
above the recommended maximum growth rate. This risks being not fully in line with what 
was recommended by the Council. According to the Commission Spring 2024 Forecast, the 
net budgetary cost (37) of emergency energy support measures is estimated at 1.4% of GDP in 
2023 and projected at  0.1% in  2024, and 0.0% in 2025. If the related savings were used to 
reduce the government deficit, as recommended by the Council, these projections would imply 
a  fiscal  adjustment  of  1.3%  of  GDP  in  2024,  whereas  net  nationally  financed  primary 
expenditure provides a contractionary contribution to the fiscal stance of 0.1% of GDP in that 
year.  The  emergency  energy  support  measures  are  projected  to  be  wound  down  as  soon  as 
possible  in  2023  and  2024.  This  is  in  line  with  what  was  recommended  by  the  Council. 
However, the related savings are not projected to be fully used to reduce the government deficit. 

(37) 

The figure represents the level of the annual budgetary cost of those measures, including revenue and 
expenditure and, where applicable, net of the revenue from taxes on windfall profits of energy suppliers. 

24 

 
 
 
This risks being not in line with the Council recommendation. According to the Commission 
Spring 2024 Forecast, nationally financed public investment is projected to increase to 5.3% 
of GDP in 2024 (from 4.6% of GDP in 2023). This is in line with what was recommended by 
the  Council.  In  turn,  public  expenditure  financed  from  revenues  from  EU  funds,  including 
Recovery and Resilience Facility grants, is expected to remain stable at 1.3% of GDP in 2024 
from 1.3% of GDP in 2023. 

Debt challenges and medium-term debt position. Government debt decreased from 79.6% 
of GDP at the end of 2020 to 74.4% at the end of 2021. It declined further to 72.5% and 69.2% 
of GDP at the end of 2022 and 2023 respectively. It is projected at 68.1% and 66.4% at the end 
of 2024 and 2025 respectively. 

Overall,  the  debt  sustainability  analysis  indicates  medium  risks  over  the  medium  term. 
According to the baseline 10-year projection, the general government debt ratio would rise to 
about  74%  of  GDP  in  2034.  The  baseline  debt  trajectory  is  relatively  sensitive  to 
macroeconomic shocks. According to the stochastic projections, which simulate a large range 
of possible temporary shocks to macroeconomic variables, there is a moderate likelihood that 
the debt ratio in 2028 will be higher than in 2023.  

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the one hand, risk-increasing factors are related to the recent increase in interest rates and the 
large share of government debt held by non-residents. In addition, risks stem from the housing 
sector due to fast increasing house prices. On the other-hand, risk-mitigating factors include 
the stabilisation of debt maturity at high levels in recent years and relatively stable financing 
sources with a diversified and large investor base and a high share of debt held by the domestic 
central bank. 

structural 

reforms  and 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included  in  the  Recovery  and  Resilience  Plan  of  Slovenia  is  underway,  however  timely 
completion requires increased efforts.  

investments  under 

National  budgetary  framework.  The  Slovenian  Fiscal  Council  is  one  of  Slovenia's  two 
independent fiscal institutions and focuses on the monitoring of compliance with fiscal rules 
and  assessing  the  fiscal  forecast  of  the  government.  Slovenia  has  a  fiscal  rule  targeting  the 
structural balance in place, while there is no rule to constrain public debt at national level. The 
medium-term budgetary plan is detailed and covers a large share of the general government, 
but the plan’s binding nature and its link to the annual budget is not particularly strong: each 
year, new figures can be introduced for all years covered by the plan and annual budgets can 
deviate from previously adopted medium-term plans.  

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 1.2% of GDP in 2022. 
Of  this,  government  investment  in  defence  represented  0.1%  of  GDP  in  2022,  remaining 
unchanged  compared  to  2019.  According  to  preliminary  estimates  provided  by  Slovenia, 
defence investment would increase by 0.1% of GDP in 2023 and a further 0.25% in 2024.  

Other factors put forward by the Member State. On 16 May 2024, Slovenia provided an 
additional relevant factor not already mentioned above, namely the budgetary impact of the 
floods  in  2023.  This  consisted  of  immediate  assistance  to  those  affected  by  the  floods  and 
comprehensive  measures  for  reconstruction,  development  and  protection  against  floods  and 
landslides. Disaster-related expenditure was lower than expected in 2023 and is expected to 
account  for  1.7%  of  GDP  in  2024.  According  to  Slovenia,  disaster  recovery  measures 

25 

 
amounting in 2024 should be considered as one-off.38 Slovenia also refers to the government’s 
plans to reduce the general  government  deficit and debt in  the coming years.  The deficit is 
projected to fall below the 3% of GDP reference value in 2025 and decline further to 1.9% of 
GDP in 2027. Government debt is also projected to decline over this period, from 69.2% of 
GDP in 2023 to 64.3% of GDP in 2027. 

SLOVAKIA 

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  3.3%  in  2020.  After  an 
expansion of 4.8% in 2021, real GDP grew by 1.9% in 2022 and 1.6% in 2023. It is expected 
to  grow by  2.2% in  2024  and 2.9% in  2025. Growth in  2024 is  set  to  be  mainly  driven by 
inventories and public consumption.  

Medium-term budgetary position, including investment. The government deficit decreased 
from  5.2%  of  GDP  in  2021  to  1.7%  in  2022,  before  rising  to  4.9%  of  GDP  in  2023.  It  is 
projected to further increase to 5.9% in 2024 and slighlty decline to 5.4% of GDP in 2025. 
After standing at 3.1% of GDP in both 2021 and 2022, government investment increased to 
4.7% of GDP in 2023. It is projected to decrease to 4.1% of GDP in 2024, before increasing to 
4.5% of GDP in 2025.  

In 2023, according to the Commission estimates, the fiscal stance  was expansionary, by 6.1% 
of  GDP,  in  a  context  of  high  inflation.  The  growth  in  nationally  financed  primary  current 
expenditure  (net  of  discretionary  revenue  measures)  in  2023  provided  an  expansionary 
contribution to the fiscal stance of 3.8% of GDP. This includes the reduced cost of the targeted 
emergency 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 primary 
current expenditure in excess of medium-term potential output growth was therefore not due 
to  the targeted emergency 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)  was  driven  by  untargeted 
emergency energy measures, permanent increases in public sector wages and social benefits, 
higher spending on healthcare and the reduction in VAT rates on selected items. In sum, the 
growth  of nationally financed primary current  expenditure in  2023 was  not  in  line with  the 
Council  recommendation.  Expenditure  financed  by  Recovery  and  Resilience  Facility  grants 
and  other  EU  funds  amounted  to  3.2%  of  GDP  in  2023.  Nationally  financed  investment 
amounted to 3.2% of GDP in 2023, representing an annual increase of 0.8 percentage points as 
compared  to  2022.  Slovakia  financed  additional  investment  through  the  Recovery  and 
Resilience Facility and other EU funds, including public investment for the green and digital 
transitions, and for energy security, such as investments in energy infrastructure and transport 
with  zero  emissions  and  energy  efficiency  of  buildings,  which  are  partly  funded  by  the 
Recovery and Resilience Facility and other EU funds. 

Based on the Commission’s estimates, the fiscal stance is projected to be contractionary by 
1.4%  of  GDP  in  2024. According  to  the  Commission  Spring  2024  Forecast,  Slovakia’s  net 
nationally  financed  primary  expenditure  is  projected  to  increase  by  6.2%  in  2024,  which  is 
above the recommended maximum growth rate. This risks being not fully in line with what 
was recommended by the Council. According to the Commission Spring 2024 Forecast, the 

38  According  to  the  Commission  2024  Spring  Forecast  for  Slovenia,  nationally-financed  expenditures  for 

reconstruction after the floods in August 2023 amount to 0.7% of GDP.  

26 

 
 
 
net budgetary cost of emergency energy support measures is estimated at 2.1% of GDP in 2023 
and projected at 0.4% in 2024, and 0.0% in 2025. If the related savings were used to reduce the 
government deficit, as recommended by the Council, these projections would imply a fiscal 
adjustment of 1.7% of GDP in 2024, whereas net nationally financed primary expenditure39 
provides a contractionary contribution to the fiscal stance of 0.2% of GDP in that year.  The 
emergency energy support measures are not projected to be wound down as soon as possible 
in 2023 and 2024. This risks being not in line with what was recommended by the Council. 
Moreover,  the  related  savings  are  not  projected  to  be  fully  used  to  reduce  the  government 
deficit. This also risks being not in line with the Council recommendation. According to the 
Commission  Spring  2024  Forecast,  nationally  financed  public  investment  is  projected  to 
decrease to 3.0% of GDP in 2024, from 3.2% of GDP in 2023. This decrease is driven by the 
end  of  the  2014-2020  programming  period  of  EU  structural  funds,  for  which  funds  were 
available until 2023. This is also due to the postponement of a delivery of military equipment 
until 2025. Taking into account these additional factors, public investment in 2024 is assessed 
as respecting the Council recommendation. In turn, public expenditure financed from revenues 
from EU funds, including Recovery and Resilience Facility grants, is expected to decrease to 
2.0% of GDP in 2024 from 3.2% of GDP in 2023. This decrease is driven by the end of the 
2014-2020 programming period of EU structural funds, for which funds were available until 
2023. 

Debt challenges and medium-term debt position. Government debt increased from 58.8% 
of GDP at the end of 2020 to 61.1% at the end of 2021, and then decreased to 57.7% of GDP 
at the end of 2022 and 56.0% at the end of 2023. It is projected to increase to 58.5% and 59.9% 
at the end of 2024 and 2025, respectively. 

Overall, the debt sustainability analysis indicates high risks over the medium term. According 
to  the  baseline  10-year  projections,  the  general  government  debt  ratio  would  increase 
continuously over the next  years, reaching  about  106% of  GDP in  2034.  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, there is  a 
moderate probability that the debt ratio would be higher in 2028 than in 2023.   

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the  one  hand,  risk-increasing  factors  are  related  to  Slovakia’s  negative  net  international 
investment position . On the other hand, risk-mitigating factors are related to the structure of 
debt. In particular, the low share of short-term government debt and the fact that the totality of 
government debt is denominated in euro (thus excluding currency risks) help to mitigate debt 
sustainability risks. 

structural 

reforms  and 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included  in  the  Recovery  and  Resilience  Plan  of  Slovakia  is  underway,  however  timely 
completion requires increased efforts.   

investments  under 

Assessment  under  the  macroeconomic  imbalances  procedure.  Slovakia  is  experiencing 
macroeconomic  imbalances.  In  particular,  Slovakia  faces  vulnerabilities  related  to  cost 

39   This  contribution  is  measured  as  the  change  in  general  government  primary  expenditure,  net  of  (i)  the 
incremental  budgetary  impact  of  discretionary  revenue  measures,  (i)  one-offs,  (iii)  cyclical  unemployment 
expenditure and (iv) expenditure financed by non-repayable support (grants) from the Recovery and Resilience 
Facility and other EU funds, relative to the medium-term (10-year) average potential nominal GDP growth 
rate, expressed as a ratio to nominal GDP. 

27 

 
 
competitiveness, external balance, housing market and household debt, and  policy action has 
not been forthcoming. 

National budgetary framework. The Slovak Council for Budget Responsibility (CBR) has a 
broad mandate and a wide media presence but its dialogue with the government and parliament 
is  not  particularly  strong.  The  Slovak  Constitution  and  accompanying  laws  introduced  a 
balanced-budget rule in structural terms and a debt rule, both covering the general government, 
as well as a balanced-budget and a debt rule applying to local governments. Slovakia also has 
in place a medium-term budgetary strategy outlining the Government’s fiscal objectives and 
medium-term priorities over three years and following an indicative rolling planning window. 
Overall, Slovakia has a fairly robust national fiscal framework. 

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 1.5% of GDP in 2022. 
Of  this,  government  investment  in  defence  represented  0.2%  of  GDP  in  2022,  remaining 
unchanged  compared  to  2019.  According  to  preliminary  information  provided  by  Slovakia, 
defence investment would increase driven by deliveries of military equipment. 

Other factors put forward by the Member State. On 16 May 2024, Slovakia provided one 
additional  relevant  factors  not  already  mentioned  above,  namely  the  recent  rise  in  interest 
expenditure. Slovakia further confirmed its commitment  to  reduce the headline deficit by 1 
percentage point per year from 2025 onwards. 

28 

 
 
FINLAND 

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  2.4%  in  2020.  After  an 
expansion of 2.8% in 2021, real GDP grew by 1.3% in 2022 and then contracted by 1.0% in 
2023. Output  is  projected to  stay almost  unchanged in  2024 and to  grow by 1.4% in  2025. 
Growth in 2024 is set to be mainly driven by private consumption and investment. 

Medium-term budgetary position, including investment. The government deficit decreased 
from 2.8% in 2021 to 0.4% of GDP in 2022, before rising to 2.7% in 2023. It is projected to be 
at 3.4% in 2024 and at 2.8% in 2025. Government investment stood at 4.2% of GDP in 2021 
and 2022, and slightly declined to 4.0% in 2023. It is projected to increase to 4.1% of GDP in 
2024, and then increase to 4.5% in 2025, being larger than the government deficit for a fifth 
consecutive year counting from 2021.  

In 2023, according to the Commission estimates, the fiscal stance was expansionary, by 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  provided  an  expansionary 
contribution to the fiscal stance of 0.8% of GDP. This includes 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 in 2023 was therefore only 
partly due to people fleeing Ukraine. The expansionary growth in nationally financed primary 
current expenditure (net of discretionary revenue measures) was also driven by the continued 
and  rapid  rise  in  prices  and  costs  –  especially  those  of  purchased  services  and  personnel 
expenses in local government, as well as the rise in preparedness-related expenses that were 
taken  in  response  to  Russia’s  war  of  aggression  against  Ukraine.  In  sum,  the  growth  of 
nationally  financed  primary  current  expenditure  in  2023  was  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. Nationally financed investment amounted to 
4.0% of GDP in 2023, representing a decrease of 0.2 percentage points as compared to 2022. 
Finland financed additional investment through the Recovery and Resilience Facility and other 
EU  funds,  including  public  investment  for  the  green  and  digital  transitions,  and  for  energy 
security, such as renewable energy infrastructure and low-emission hydrogen, which are partly 
funded by the Recovery and Resilience Facility and other EU funds. 

Based on the Commission’s estimates, the fiscal stance is projected to be expansionary by 0.7% 
of GDP in 2024. According to the Commission Spring 2024 Forecast, Finland’s net nationally 
financed  primary  expenditure  is  projected  to  increase  by  4.0%  in  2024,  which  is  above  the 
recommended maximum growth rate. This risks being not in line with what was recommended 
by the Council. According to the Commission Spring 2024 Forecast, the net budgetary cost of 
emergency  energy  support  measures  is  estimated  at  0.2%  of  GDP  in  2023  and  projected  at 
0.0% in 2024 and 2025. If the related savings were used to reduce the government deficit, as 
recommended by the Council, these projections would imply a fiscal adjustment of 0.2% of 
GDP in 2024, whereas net nationally financed primary expenditure provides an expansionary 
contribution to the fiscal stance of 0.7% of GDP in that year. The emergency energy support 
measures are projected to be wound down as soon as possible in 2023 and 2024. This is in line 
with what was recommended by the Council. However, the related savings are not projected to 
be fully used to reduce the government deficit. This risks being not in line with the Council 
recommendation.    According  to  the  Commission  Spring  2024  Forecast,  nationally  financed 
public investment is projected to increase to 4.1% of GDP in 2024 from 4.0% of GDP in 2023. 
This is in line with what was recommended by the Council. In turn, public expenditure financed 
from revenues from EU funds, including Recovery and Resilience Facility grants, is expected 
to remain stable at 0.4% of GDP in 2024. 

29 

 
Debt challenges and medium-term debt position. Government debt decreased from 74.7% 
of GDP at the end of 2020 to 72.6% at the end of 2021, and then gradually increased, standing 
at 73.5% of GDP at the end of 2022 and at 75.8% of GDP at the end of 2023. It is projected to 
further increase to 80.5% at the end of 2024 and 82.4% of GDP at the end of 2025.  

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  96%  of  GDP  in  2034.  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, there is a high likelihood that the debt ratio in 
2028 will be higher than in 2023.  

Other factors need to be taken into account 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 risks from the real estate and the housing markets. On the 
other  hand,  risk-mitigating  factors  include  the  lengthening  of  debt  maturity  in  recent  years, 
relatively  stable  financing  sources  (with  a  diversified  and  large  investor  base)  and  the  very 
large share of debt denominated in euro. 

structural 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included in the Recovery and Resilience Plan of Finland is delayed.   

investments  under 

reforms  and 

National  budgetary  framework.  Finland  introduced  a  balanced-budget  rule  in  structural 
terms covering the general government, while a debt rule is rather set by political agreement. 
Balanced-budget rules by political agreement also govern the local governments and the social 
security  sector.  A  binding  expenditure  rule  is  also  in  place:  at  the  beginning  of  the 
parliamentary term, the government decides on the spending limits and the rules governing the 
procedure  for  the  entire  4-year  term.  Finland  also  has  in  place  a  medium-term  budgetary 
strategy  outlining  the  government’s  fiscal  objectives  and  medium-term  priorities,  which 
follows a rolling planning window. Overall, Finland has a relatively robust fiscal framework. 

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 1.3% of GDP in 2022. 
Of this, government investment in defence represented 0.3% of GDP in 2022, which was 0.1 
percentage point higher than in 2019. According to preliminary estimates provided by Finland, 
defence-related  investment  would  increase  by  about  0.5%  of  GDP  in  2024,  reflecting 
substantial defence-related investment as well as replacement investment into defence materiel 
due to the assistane to Ukraine; however, according to Finland, part of these investments, while 
comparable to defence, is likely to be included in another COFOG division (notably “Public 
order and safety”). 

Other  factors  put  forward  by  the  Member  State.  The  analysis  presented  in  the  previous 
sections already covers the relevant factors put forward by Finland on 17 May 2024. 

30 

 
 
4.2.2.  MEMBER  STATES  FOR  WHICH  RELEVANT  FACTORS  CANNOT  BE  TAKEN  INTO 

ACCOUNT 

BELGIUM 

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  5.3%  in  2020.  After  an 
expansion of 6.9% in 2021, real GDP grew by 3.0% in 2022 and 1.4% in 2023. The economy 
is expected to grow by 1.3% in 2024 and 1.4% in 2025. Growth in 2024 is set to be mainly 
driven by private consumption and investment.  

Medium-term budgetary position, including investment. The government deficit has been 
above 3% of GDP since 2020; it decreased from 5.4% of GDP in 2021 to 3.6% of GDP in 
2022, before rising again up to 4.4% of GDP in 2023. It is projected to remain at 4.4% of GDP 
in 2024 and to increase to 4.7% of GDP in 2025. Government investment amounted to 2.8% 
of GDP in 2021 before decreasing to 2.7% in 2022 and rising to 2.9% in 2023. It is projected 
to further increase to 3.1% of GDP in 2024 and then to marginally reduce to 2.9% in 2025.  

In 2023, according to the Commission estimates, the fiscal stance was expansionary, by 0.7% 
of  GDP,  in  a  context  of  high  inflation.  The  growth  in  nationally  financed  primary  current 
expenditure  (net  of  discretionary  revenue  measures)  in  2023  provided  an  expansionary 
contribution to the fiscal stance of 0.4% of GDP. This includes the reduced cost of the targeted 
emergency 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 
medium-term  potential  output  growth  was  therefore  not  due  to  the  targeted  support  to 
households  and  firms  most  vulnerable  to  energy  price  hikes.  The  expansionary  growth  in 
nationally financed primary current expenditure (net of discretionary revenue measures) was 
driven by permanent increases in public sector wages and social benefits resulting from the 
mechanism of automatic indexation, a temporary reduction in employers’ social contributions 
in  2023,  and  rising  budgetary  costs  related  to  demographic  ageing.  In  sum,  the  growth  of 
nationally  financed  primary  current  expenditure  in  2023  was  not  in  line  with  the  Council 
recommendation. Expenditure financed by Recovery and Resilience Facility grants and other 
EU funds amounted to 0.3% of GDP in  2023. Nationally financed investment amounted to 
2.8% of GDP in 2023, representing an increase of 0.1 percentage points as compared to 2022. 
Belgium  financed  additional  investment  through  the  Recovery  and  Resilience  Facility  and 
other EU funds, including public investment for the green and digital transitions, and for energy 
security, such as investment in rail and cycling infrastructures, renovation of public buildings, 
and hydrogen infrastructure, which are partly funded by the Recovery and Resilience Facility 
and other EU funds.  

Based on the Commission’s estimates, the fiscal stance is projected to be contractionary by 
0.1%  of  GDP  in  2024.  According  to  the  Commission  Spring  2024  Forecast,  Belgium’s  net 
nationally financed primary expenditure is projected to increase by 4% in 2024, which is above 
the  recommended  maximum  growth  rate.  This  risks  being  not  in  line  with  what  was 
recommended  by  the  Council.  According  to  the  Commission  Spring  2024  Forecast,  the  net 
budgetary cost40 of emergency energy support measures is estimated at 0.4% of GDP in 2023 
and projected at 0% of GDP in 2024 and 2025. If the related savings were used to reduce the 
government deficit, as recommended by the Council, these projections would imply a fiscal 
adjustment  of  0.4%  of  GDP  in  2024,  whereas  net  nationally  financed  primary  expenditure 

40   The  figure  represents  the  level  of  the  annual  budgetary  cost  of  those  measures,  including  revenue  and 
expenditure and, where applicable, net of the revenue from taxes on windfall profits of energy suppliers. 

31 

 
 
 
provides a contractionary contribution to the fiscal stance of 0.1% of GDP in that year. The 
emergency energy support measures are projected to be wound down as soon as possible in 
2023  and  2024.  This  is  in  line  with  what  was  recommended  by  the  Council.  However,  the 
related savings are not projected to be fully used to reduce the government deficit. This risks 
being not in line with the Council recommendation. According to the Commission Spring 2024 
Forecast, nationally financed public investment is projected to increase to 2.9% of GDP in 2024 
from 2.8% of GDP in 2023. This is in line with what was recommended by the Council. In 
turn,  public  expenditure  financed  from  revenues  from  EU  funds,  including  Recovery  and 
Resilience Facility grants, is expected to remain stable at 0.3% of GDP in 2024.   

Debt challenges and medium-term debt position. Government debt decreased from 111.9% 
of GDP at the end of 2020 to 107.9% at the end of 2021 and even further to 104.3% in 2022 
before increasing to 105.2% at the end of 2023. It is projected at 105.0% and 106.6% at the 
end of 2024 and 2025, 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 to around 119% 
of GDP in 2034. 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, there is a high likelihood that the debt ratio in 2028 will be higher 
than in 2023.  

Other factors  need to be taken into account 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 
more gradual transmission of rising interest rates to the debt burden, relatively stable financing 
sources,  with  a  diversified  and  large  investor  base,  and  government  debt  being  fully 
denominated in euro.   

structural 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a  positive 
impact  on  GDP  growth  in  the  coming  years.  However,  the  implementation  of  reforms  and 
investments included in the Recovery and Resilience Plan of Belgium is significantly delayed.   

investments  under 

reforms  and 

National  budgetary  framework.  The  effectiveness  of  medium-term  planning  in  Belgium 
remains weak and the coordination across government levels is limited. The High Council of 
Finance  (HCF)  is  not  yet  fully  operational.  The  effective  implementation  of  the  2013 
cooperation agreement between all government levels on the definition of multiannual fiscal 
paths  and  assigning  the  HCF  the  compliance  monitoring  task  remains  incomplete.  This 
hampers the monitoring of compliance and increases the risk of deviating from the medium-
term  fiscal  trajectory.  Fiscal  rules  in  Belgium include healthcare spending targets  at  federal 
level  and  strict  rules  set  for  local  authorities.  Despite  the  federal  level  and  the  regions 
accounting  for  a  high  share  of  general  government  spending,  there  are  few  formal  rules 
governing these levels, with the main exception being Flanders’ recent spendings target. At the 
same time, Belgium has committed in its Recovery and Resilience Plan to conduct spending 
reviews.  

32 

 
Increase  in  government  investment  in  defence.  Based  on  COFOG41  data  published  by 
Eurostat,  total  government  spending  in  defence  amounted  to  1%  of  GDP  in  2022.  Of  this, 
government investment in defence represented 0.1% of GDP in 2022, remaining unchanged 
compared to 2019. 

Other  factors  put  forward  by  the  Member  State.  On  17  May  2024,  Belgium  provided 
additional  relevant  factors  not  already  mentioned  above,  namely  recent  efforts  to  increase 
public  investment  to  accelerate  the  green  and  digital  transition  (including  through  the 
implementation of the RRP) and to step up spending on defence; the impact of exceptionally 
high inflation on public finances, in particular given automatic indexation mechanisms; and 
steps aiming  to improve the sustainability of the pension system  and to  reform  the taxation 
system. 

41  

The  Classification of the Functions of Government (COFOG) classifies government expenditure data 
from ESA by the purpose for which the funds are used. 

33 

 
 
 
SPAIN 

Medium-term macroeconomic position.  Real GDP decreased by  11.2% in  2020.  After an 
expansion of 6.4% in 2021, real GDP grew by 5.8% in 2022 and by 2.5% in 2023. It is expected 
to  grow  by  2.1%  in  2024  and  1.9%  in  2025.  Growth  in  2024  is  mainly  driven  by  private 
consumption and, to a lesser extent, investment.  

Medium-term budgetary position, including investment. The government deficit has been 
above 3% of GDP since 2020; it decreased from 6.7% in 2021 to 4.7% of GDP in 2022 and 
3.6% in 2023. It is projected to further reduce to 3.0% and 2.8% of GDP in 2024 and 2025, 
respectively. Government investment slightly increased from 2.7% of GDP in 2021 to 2.8% 
and 3.0% in 2022 and 2023 respectively. It is projected to stand at 3.1% in both 2024 and 2025, 
being larger than the government deficit in the same years.  

In 2023, according to the Commission estimates, the fiscal stance was broadly neutral, at -0.2% 
of GDP. The growth in nationally financed primary current expenditure (net of discretionary 
revenue measures) in 2023 provided a contractionary contribution to the fiscal stance of 0.3% 
of GDP and was in line with the Council recommendation. The contractionary contribution of 
nationally financed primary current expenditure was due to the reduced costs of the emergency 
support measures (targeted and untargeted) to households and firms in response to energy price 
hikes (by 0.6 percentage points of GDP). The main drivers of growth in nationally financed 
primary current expenditure (net of revenue measures) were social benefits other than in kind, 
driven by the revaluation of pensions, and intermediate consumption, driven by spending in 
defence. Expenditure financed by Recovery and Resilience Facility grants and other EU funds 
amounted to 1.3% of GDP in 2023. Nationally financed investment amounted to 2.3% of GDP 
in 2023, with an annual increase of 0.1 percentage points. Spain financed additional investment 
through the Recovery and Resilience Facility and other EU funds, including public investment 
for the green  and digital transitions,  and  for  energy security, such  as the  digital toolkit, the 
PERTE for electric and connected vehicles, new vocation education and training places and 
investments in the area of green hydrogen, which are funded by the Recovery and Resilience 
Facility and other EU funds. 

Based on the Commission’s estimates, the fiscal stance is projected to be neutral at 0.0% of 
GDP  in  2024.  According  to  the  Commission  Spring  2024  Forecast,  Spain’s  net  nationally 
financed primary expenditure is projected to increase by 3.8% in 2024 , which is above the 
recommended maximum growth rate. This risks being not in line with what was recommended 
by the Council. According to the Commission Spring 2024 Forecast, the net budgetary cost  of 
emergency  energy  support  measures  is  estimated  at  0.9%  of  GDP  in  2023  and  projected  at 
0.2% in 2024, and -0.1% in 2025. If the related savings were used to reduce the government 
deficit, as recommended by the Council, these projections would imply a fiscal adjustment of 
0.7%  of  GDP  in  2024,  whereas  net  nationally  financed  primary  expenditure    provides  a 
contractionary contribution to the fiscal stance of 0.3% of GDP in that year. The emergency 
energy support measures are projected to be wound down as soon as possible in 2023 and 2024. 
This is in line with what was recommended by the Council. However, the related savings are 
not projected to be fully used to reduce the government deficit. This risks being not in line with 
the Council recommendation. According to the Commission Spring 2024 Forecast, nationally 
financed public investment is projected to increase to 2.4% of GDP in 2024 from 2.3% of GDP 
in 2023. This is in line with what was recommended by the Council. In turn, public expenditure 
financed from revenues from EU funds, including Recovery and Resilience Facility grants, is 
expected to increase to 1.6% of GDP in 2024 (from 1.3% of GDP in 2023). 

Debt challenges and medium-term debt position. Government debt decreased from 120.3% 
of GDP at the end of 2020 to 116.8% at the end of 2021 and to 111.6% in 2022. It further 

34 

 
decreased at the end of 2023 to 107.7% and it is projected to decline even more at the end of 
2024 and 2025 (amounting to 105.5% and 104.8% of GDP 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  113%  of  GDP  in  2034.  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 likelihood that the 
debt ratio in 2028 will be higher than in 2023.  

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the  one  hand,  risk-increasing  factors  relate  to  the  context  of  higher  interest  rates  given  the 
elevated level of public debt. On the other hand, risk-mitigating factors include the lengthening 
of debt maturity in recent years, relatively stable financing sources featuring a well-diversified 
and large investor base and the very large share of debt denominated in euro. In addition, the 
‘closure clause’ introduced by the 2023 pension reform, if fully implemented, would contribute 
to addressing emerging fiscal sustainability gaps related to public pension expenditure.  

structural 

reforms  and 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included in the Recovery and Resilience Plan of Spain is underway, however timely completion 
requires increased efforts.  

investments  under 

Assessment  under  the  macroeconomic  imbalances  procedure.  Spain  is  no  longer 
experiencing macroeconomic imbalances.  

National budgetary framework. The Spanish Fiscal Council (AIReF) has a broad mandate 
and has quickly established itself as a trusted independent institution. National fiscal rules in 
Spain include the budget balance rule, the debt rule and the national expenditure rule. With the 
deactivation of the General Escape Clause at the end of 2023 and the recent adoption of new 
rules at EU level, Spain is currently in a transition phase with its national fiscal rules again 
being applied.  In its national Recovery and Resilience Plan, Spain has committed to carry out 
spending reviews prepared by AIReF and to integrate them into the annual budgetary process. 

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 1.1% of GDP in 2022. 
Of this, government investment in defence represented 0.4% of GDP in 2022, which was 0.2 
percentage points higher than in 2019. 

Other factors put forward by the Member State.  The analysis presented in the previous 
sections already covers the relevant factors put forward by Spain on 20 May 2024.  

FRANCE 

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  7.5%  in  2020.    After  an 
expansion of 6.4% in 2021, real GDP grew by 2.5% in 2022 and by 0.7% in 2023. It is expected 
to grow by 0.7% in 2024 and 1.3% in 2025. Growth in 2024 is set to be mainly driven by both 
private and public consumption.  

Medium-term budgetary position, including investment. The government deficit has been 
above 3% of GDP since 2020; it  decreased from 6.6% of GDP in 2021 to 4.8% of GDP in 
2022, before increasing to 5.5% in 2023. It is projected to decline to 5.3% in 2024 and 5.0% of 
GDP  in  2025.  Government  investment  remained  quite  stable  (slightly  above  4%  of  GDP) 

35 

 
 
between 2020 to 2023. It is projected to amount to 4.3% of GDP in 2024 and to decline to 4.2% 
in 2025.  

In 2023, according to the Commission estimates, the fiscal stance  was contractionary, by 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  provided  a  contractionary 
contribution  to  the  fiscal  stance  of  0.3%  of  GDP  and  was  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. Nationally financed investment amounted to 
4.1% of GDP in 2023, representing an increase of 0.1 percentage points as compared to 2022. 
France financed additional investment through the Recovery and Resilience Facility and other 
EU  funds,  including  public  investment  for  the  green  and  digital  transitions,  and  for  energy 
security, such as for the development and industrial deployment of renewable and low-carbon 
hydrogen solutions, innovation projects in sustainable agricultural systems, recycled materials, 
innovative buildings, digitalisation and decarbonisation of mobility as well as investments for 
the thermal renovation of buildings, which are partly funded by the Recovery and Resilience 
Facility and other EU funds. 

Based on the Commission’s estimates, the fiscal stance is projected to be contractionary  by 
1.1%  of  GDP  in  2024.  According  to  the  Commission  Spring  2024  Forecast,  France’s  net 
nationally  financed  primary  expenditure  is  projected  to  increase  by  1.8%  in  2024,  which  is 
below the recommended maximum growth rate. This is in line with what was recommended 
by the Council. According to the Commission Spring 2024 Forecast, the net budgetary cost of 
emergency  energy  support  measures  is  estimated  at  0.9%  of  GDP  in  2023  and  projected  at 
0.2% in 2024, and 0.0% in 2025. If the related savings were used to reduce the government 
deficit, as recommended by the Council, these projections would imply a fiscal adjustment of 
0.6%  of  GDP  in  2024,  whereas  net  nationally  financed  primary  expenditure  provides  a 
contractionary contribution to the fiscal stance of 1.0% of GDP in that year. The emergency 
energy support measures are projected to be wound down as soon as possible in 2023 and 2024. 
This is in line with what was recommended by the Council. Moreover, the related savings are 
projected to be fully used to reduce the government deficit. This is also in line with the Council 
recommendation.  According  to  the  Commission  Spring  2024  Forecast,  nationally  financed 
public investment is projected to remain stable at 4.1% of GDP in 2024. This is in line with 
what was recommended by the Council. In turn, public expenditure financed from revenues 
from EU funds, including Recovery and Resilience Facility grants, is expected to remain stable 
at 0.4% of GDP in 2024.  

Debt challenges and medium-term debt position. Government debt decreased from 113.0% 
of GDP at the end of 2021 to 111.9% at the end of 2022 and further to 110.6% at the end of 
2023.  It  is  projected  to  increase  to  112.4%  and  to  113.8%  at  the  end  of  2024  and  2025, 
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  139%  of  GDP  in  2034.  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 likelihood that the debt ratio in 2028 will 
be higher than in 2023.  

Other factors need to be taken into account 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 government debt, the expected increase in gross financing needs over the medium 
term  and  the  contingent  liability  risks  stemming  from  the  private  sector,  including  via  the 

36 

 
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 and relatively stable financing sources (with a diversified and large 
investor base). 

structural 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included in the Recovery and Resilience Plan of France is well underway. It It includes ansive  

investments  under 

reforms  and 

Assessment  under  the  macroeconomic  imbalances  procedure.  France  is  no  longer 
experiencing macroeconomic imbalances. In particular, policy action has helped in reducing 
vulnerabilities, which had cross-border relevance, related to competitiveness in a context of 
low  productivity  growth,  but  efforts  need  to  continue,  while  vulnerabilities  related  to  high 
public debt remain. 

National  budgetary  framework.  The  High  Council  for  Public  Finance  (HCPF)  has  a 
relatively narrow mandate, limited to issuing opinions on the plausibility of the macroeconomic 
and budget  forecasts underlying the annual  and  multiannual  budgetary documents and their 
consistency with the structural balance objectives. The French Constitution and accompanying 
laws introduced a balanced budget-rule in structural terms covering the general government 
and  the  balanced-budget  rule  for  local  governments.  A  medium-term  budgetary  strategy 
outlining the government’s fiscal objectives and medium-term priorities over three to five years 
is also in place. In the past, the national budgetary objectives set over the medium-term have 
been revised or not met and the fiscal adjustment backloaded, weakening the link with annual 
budgets.  At  the  same  time,  in  its  Recovery  and  Resilience  Plan,  France  has  committed  to 
conduct spending reviews in connection to the annual budget.  

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 1.8% of GDP in 2022. 
Of  this,  government  investment  in  defence  represented  0.3%  of  GDP  in  2022,  remaining 
unchanged compared to 2019. 

Other  factors  put  forward  by  the  Member  State.  On  22  May  2024,  France  provided 
additional relevant factors not already mentioned above, namely the low GDP elasticity of tax 
revenue and, to a lesser extent, the impact of the revision of the statistical base made by the 
French statistical institute. 

ITALY 

Medium-term macroeconomic position. After a contraction of 9.0% in 2020, real GDP grew 
by 8.3% in 2021, 4.0% in 2022 and 0.9% in 2023. Growth is expected to stand at 0.9% also in 
2024 and to slightly increase to 1.1% in 2025. Growth in 2024 is set to be mainly driven by net 
exports and investment.  

Medium-term budgetary position, including investment. The government deficit has been 
above 3% of GDP since 2020; it decreased from 8.7% in 2021 to 8.6% of GDP in 2022 and 
7.4% in 2023. The 2020-2023 deficit figures include the deficit-increasing impact of housing 
renovation tax credits.42 The government deficit is projected to decline to 4.4% of GDP in 2024 
before slightly increasing to 4.7% of GDP in 2025. After increasing to 2.9% of GDP in 2021, 

See 
IT+Advice+on+recording+of+2023+Superbonus.pdf (europa.eu). 

Eurostat 

(2023), 

Advice 

recording 

on 

of 

2023 

Superbonus 

42  

37 

 
 
 
government investment marginally decreased to 2.7% of GDP in 2022, before increasing to 
3.2% in 2023, where it is projected to stay also in 2024. In 2025, it is expected to amount to 
3.5% of GDP. 

In 2023, according to the Commission estimates, the fiscal stance was slightly expansionary, 
by 0.3%  of  GDP,  in  a  context  of  high  inflation. The  growth  in  nationally  financed  primary 
current expenditure (net of discretionary revenue measures) in 2023 provided a contractionary 
contribution  to  the  fiscal  stance  of  1.0%  of  GDP  and  was  in  line  with  the  Council 
recommendation.  The  contractionary  contribution  of  nationally  financed  primary  current 
expenditure was  due to  the reduced  costs of the  emergency support measures (targeted  and 
untargeted) to households and firms in response to energy price hikes (by 1.4 percentage points 
of  GDP).  Pensions  and  cuts  to  the  labour  tax  wedge  were  the  main  drivers  of  growth  in 
nationally  financed  primary  current  expenditure  (net  of  discretionary  revenue  measures). 
Expenditure financed by Recovery and Resilience Facility grants and other EU funds amounted 
to 0.8% of GDP in 2023. Nationally financed investment amounted to 2.9% of GDP in 2023, 
representing an increase of 0.3 percentage points as compared to 2022. Italy financed additional 
investment through the Recovery and Resilience Facility and other EU funds, including public 
investment  for  the  green  and  digital  transitions,  and  for  energy  security,  such  as  the 
strengthening  of  smart  grids,  the  construction  of  the  “Tyrrhenian  link”,  the  development  of 
rapid  mass  transport  systems,  the  production  of  hydrogen  in  brownfield  sites,  fast  internet 
connections and the digitisation of the public administration, which are partly funded by the 
Recovery and Resilience Facility and other EU funds  

Based  on  the  Commission’s  estimates,  the  fiscal  stance  is  projected  to  be  contractionary  at 
3.1%  of  GDP  in  2024.  According  to  the  Commission  Spring  2024  Forecast,  Italy’s  net 
nationally financed primary expenditure is projected to decrease by 2.8% in 2024, which is 
below the recommended maximum growth rate. However, net expenditure in 2023 was higher 
than  expected  at  the  time  of  the  recommendation  (by  2.9%  of  GDP).  Therefore,  as  the 
recommendation for 2024 was formulated as a growth rate, the assessment of compliance also 
needs to take into account the base effect from 2023. Had net expenditure in 2023 been the 
same  as  expected  at  the  time  of  the  recommendation,  the  resulting  growth  rate  of  net 
expenditure in 2024 would have been above the recommended growth rate by 0.9% of GDP. 
Therefore, net nationally financed primary expenditure is assessed as at risk of being not fully 
in line with the recommendation. According to the Commission Spring 2024 Forecast, the net 
budgetary cost of energy support measures is estimated at 1.0% of GDP in 2023 and projected 
at  0.0%  in  2024.    If  the  related  savings  were  used  to  reduce  the  government  deficit,  as 
recommended by the Council, these projections would imply a fiscal adjustment of 1.0% of 
GDP in 2024, whereas net nationally financed primary expenditure provides a contractionary 
contribution to the fiscal stance of 2.7% of GDP in that year. However, the latter is driven by 
the contractionary contribution of other capital expenditure of 3.2% of GDP, which is mainly 
related to the above-mentioned sharp reduction of subsidies related to tax credits for housing 
renovation  in  2024.  At  the  same  time,  the  contribution  of  net  nationally  financed  current 
primary expenditure to the fiscal stance, which is affected by the phase-out of current energy 
support measures, is projected to be expansionary by 0.4% of GDP, pointing to the full use of 
the 0.8% of GDP savings from those current energy support measures for expansionary policies 
increasing  net  current  spending  in  2024,  including  labour  tax  wedge  cuts.  The  emergency 
energy support measures are projected to be wound down as soon as possible in 2023 and 2024. 
This is in line with what was recommended by the Council. However, the related savings are 
not projected to be fully used to reduce the government deficit. This risks being not in line with 
what was recommended by the Council. According to the Commission Spring 2024 Forecast, 
nationally financed public investment is projected at 2.8% of GDP in 2024 from 2.9% of GDP 

38 

 
in  202343  .  This  is  in  line  with  the  Council  recommendation.  In  turn,  public  expenditure 
financed from revenues from EU funds, including Recovery and Resilience Facility grants, is 
expected to decrease to 0.8% of GDP in 2024 (from 1.2% of GDP in 2023), mainly in relation 
to ReactEU. 

Debt challenges and medium-term debt position. Government debt decreased from 155.0% 
of GDP at the end of 2020 to 147.1% at the end of 2021, 140.5% in 2022 and 137.3% in 2023. 
It is then projected to increase to 138.6% and 141.7% of GDP at the end of 2024 and 2025 
respectively. 

Overall, the debt sustainability analysis indicates high risks over the medium term. According 
to the baseline 10-year projections, the general government debt ratio increases continuously 
to  about  168%  of  GDP  in  2034.  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  likelihood  that  the  debt  ratio  would  be 
higher in 2028 than in 2023.   

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the one hand, risk-increasing factors are related to the share of short-term government debt. On 
the other hand, risk-mitigating factors include the structure of the debt. In particular, the major 
share of government debt is still held by domestic lenders. Moreover, the fact that public debt 
is completely denominated in euro excludes currency risks. Italy’s positive net international 
investment position further mitigates fiscal risks.   

structural 

reforms  and 

the  NextGenerationEU 
In  addition, 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included in the Recovery and Resilience Plan of Italy is underway, however timely completion 
requires increased efforts.  

investments  under 

Assessment  under  the  macroeconomic  imbalances  procedure.  Italy  is  experiencing 
macroeconomic  imbalances,  after  being  identified  with  excessive  imbalances  in  2023.  In 
particular, Italy faces vulnerabilities related to high government debt and weak productivity 
growth in a context of labour market fragilities and some residual weaknesses in the financial 
sector, which have cross-border relevance. 

National budgetary framework. The Italian Parliamentary Budget Office (PBO) has a broad 
mandate  and  represents  an  example  of  good  practice  among  European  independent  fiscal 
institutions.  The  PBO  stands  in  a  continuous  dialogue  with  the  government.  The  Italian 
Constitution and accompanying laws introduced a balanced budget-rule in structural terms and 
a  debt  rule  for  the  general  government,  an  expenditure  rule  that  applies  to  the  general 
government and a regional balanced-budget rule. A medium-term budgetary strategy outlining 
the government’s fiscal objectives and medium-term priorities over three years is also in place. 
At  the  same  time,  the  annual  budget  is  weakly  anchored  on  the  medium-term  plan.  In  its 
national Recovery and Resilience Plan, Italy has committed to conduct yearly spending reviews 
over 2023-2025.  

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 1.3% of GDP in 2022. 

43  

When rounding at the first decimal, the difference of nationally financed public investment between 2024 
and 2023 is 0.0. 

39 

 
 
Of  this,  government  investment  in  defence  represented  0.3%  of  GDP  in  2022,  remaining 
unchanged compared to 2019. 

Other  factors  put  forward  by  the  Member  State.  The  analysis  presented  in  the  previous 
sections already covers the relevant factors put forward by Italy on 17 May 2024. 

HUNGARY 

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  4.5%  in  2020.  After  an 
expansion of 7.1% in 2021, real GDP grew by 4.6% in 2022 and then contracted by 0.9% in 
2023. It is expected to grow by 2.4% in 2024 and 3.5% in 2025. Growth in 2024 is set to be 
mainly driven by private consumption and investment. 

Medium-term budgetary position, including investment. The government deficit has been 
above 3% of GDP since 2020; it decreased from 7.2% in 2021 to 6.2% of GDP in 2022, before 
rising again, to 6.7% of GDP, in 2023. It is projected to amount to 5.4% and 4.5% of GDP in 
2024 and 2025, respectively. After increasing to 6.3% of GDP in 2021, government investment 
decreased to 5.4% of GDP in 2022 and 5.1% in 2023. It is projected to be at 4.6% of GDP in 
2024 and 4.7% in 2025, thus being larger than the general government deficit in the latter year.  

 In 2023, according to the Commission estimates, the fiscal stance was contractionary, at 4.7% 
of  GDP,  in  a  context  of  high  inflation.  The  growth  in  nationally  financed  primary  current 
expenditure  (net  of  discretionary  revenue  measures)  in  2023  provided  a  contractionary 
contribution to the fiscal stance of 1.7% of GDP. The growth of nationally financed primary 
current  expenditure  in  2023  was  in  line  with  the  Council  recommendation.  However,  it  is 
important to note that this was largely driven by the very high level of net expenditure in 2022 
compared  to  2023,  including  untargeted  expenditure  in  several  areas,  which  contributed  to 
macroeconomic imbalances, financed by windfall profit and sectoral taxes levied on companies 
mainly in the energy, financial and retail sectors. Nationally financed investment amounted to 
4.6% of GDP in 2023, representing an increase of 0.2 percentage points as compared to 2022. 
Hungary  financed  public  investment  for  the  green  and  digital  transitions,  and  for  energy 
security,  such  as  energy  efficiency  enhancements  and  digitalisation  in  healthcare  and 
education. Hungary has not yet submitted a payment request under the Recovery and Resilience 
Facility. 

Based on the Commission’s estimates, the fiscal stance is projected to be contractionary by 
1.0%  of  GDP  in  2024.  According  to  the  Commission  Spring  2024  Forecast,  Hungary’s  net 
nationally  financed  primary  expenditure  is  projected  to  increase  by  3.6%  in  2024,  which  is 
below the recommended maximum growth rate. However, net expenditure in 2023 was higher 
than  expected  at  the  time  of  the  recommendation  (by  1.8%  of  GDP).  Therefore,  as  the 
recommendation for 2024 was formulated as a growth rate, the assessment of compliance also 
needs to take into account the base effect from 2023. Had net expenditure in 2023 been the 
same  as  expected  at  the  time  of  the  recommendation,  the  resulting  growth  rate  of  net 
expenditure in 2024 would have been above the recommended growth rate by 1.5% of GDP. 
Therefore, net nationally financed primary expenditure is assessed as at risk of being not fully 
in line with the recommendation. According to the Commission Spring 2024 Forecast, the net 
budgetary cost of energy support measures is estimated at 1.6% of GDP in 2023 and projected 
at 0.9% in 2024 and 0.4% in 2025. If the related savings were used to reduce the government 
deficit, as recommended by the Council, these projections would imply a fiscal adjustment of 
0.6%  of  GDP  in  2024,  whereas  net  nationally  financed  primary  expenditure  provides  a 
contractionary contribution to the fiscal stance of 1.9% of GDP in that year. The emergency 
energy support measures are not projected to be wound down as soon as possible in 2023 and 

40 

 
 
2024. This risks being not in line with what was recommended by the Council. However, the 
related savings are projected to be fully used to reduce the government deficit. This is in line 
with  the  Council  recommendation.  According  to  the  Commission  Spring  2024  Forecast, 
nationally financed public investment is projected to decrease to 4.0% of GDP in 2024 (from 
4.6% of GDP in 2023). This is largely due to the cuts and postponements in nationally financed 
investment projects announced by the authorities in light of the high projected deficits. This 
risks being not in line with what was recommended by the Council. In turn, public expenditure 
financed from revenues from EU funds, including Recovery and Resilience Facility grants, is 
expected to increase to 1.7% of GDP in 2024 from 0.8% of GDP in 2023. This increase is due 
to a projected pickup in the absorption of the EU cohesion policy funding from the 2020-2027 
programming period and higher expenditure on investments supported by the Recovery and 
Resilience Facility. 

Debt challenges and medium-term debt position. Government debt decreased from 79.3% 
of GDP at the end of 2020 to 76.7% at the end of 2021 and 74.1% at the end of 2022, further 
reducing to 73.5% in 2023. It is then projected to rise to 74.3% in 2024, before decreasing to 
73.8% at the end of 2025. 

Overall,  the  debt  sustainability  analysis  indicates  medium  risks  over  the  medium  term. 
According  to  the  baseline  10-year  projections,  the  general  government  debt  ratio  would 
increase  to  around  78%  of  GDP  in  2034.  The  debt  trajectory  is  relatively  sensitive  to 
macroeconomic shocks. According to the stochastic projections, which simulate a large range 
of possible temporary shocks to macroeconomic variables, there is a moderate probability that 
the debt ratio would be higher in 2028 than in 2023.   

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the one hand, risk-increasing factors are related to the structure of public debt, particularly the 
major  shares  of  both  short-term  government  debt  and  government  debt  held  in  foreign 
currency. Contingent liability risks stemming from the banking sector, as well as Hungary’s 
negative net international investment position, pose additional fiscal risks. On the other hand, 
risk-mitigating factors include the high share of domestically held government debt. 

structural 

reforms  and 

In  addition, 
the  NextGenerationEU 
(NGEU)/Recovery and Resilience Facility (RRF), if fully implemented, could have a positive 
impact on GDP growth in the coming years. The implementation of reforms and investments 
included  in  the  Recovery  and  Resilience  Plan  of  Hungary  is  significantly  delayed,  due  to 
substantial challenges. 

investments  under 

Assessment  under  the  macroeconomic  imbalances  procedure.  Hungary  is  experiencing 
macroeconomic  imbalances.  In  particular,  Hungary  faces  vulnerabilities  related  to  price 
pressures  and  external  and  government  financing  needs,  although  an  improving  external 
environment has mitigated some short-term risks.  

National budgetary framework. Hungary’s independent fiscal institution (the Fiscal Council) 
is a relatively small organisation with a rather narrow mandate. It is currently not involved in 
the  production  of  budgetary  forecasts,  costings  of  planned  policy  measures  or  ex-post 
evaluations of the macroeconomic forecasts. Hungary has several national fiscal rules, one rule 
limiting public debt and two balanced budget rules. The debt reduction rule puts an effective 
constraint on annual budgets but has certain procyclical features, as it restricts spending and 
allows for tax increases when growth and inflation are lower and vice versa. The multiannual 
balanced budget rule restricts the annual national budgets to a lesser extent, as the targets for 
the medium-term plans can be changed twice a year for all years covered under the plans. In 
its national Recovery and Resilience Plan, Hungary has committed itself to conduct spending 

41 

 
reviews  as  a  way  to  increase  the  efficiency  of  public  expenditure  and  find  additional  fiscal 
space to meet new spending pressures.  

Increase  in  government  investment  in  defence.  Based  on  COFOG  data  published  by 
Eurostat, total general government expenditure in defence amounted to 1.4% of GDP in 2022. 
Of this, government investment in defence represented 0.3% of GDP in 2022, which was 0.1 
percentage  points  higher  than  in  2019.  According  to  preliminary  estimates  provided  by 
Hungary, expenditure on defence is expected to have approached 2% of GDP in 2023. 

Other factors put forward by the Member State. On 17 May 2024, Hungary provided an 
additional  relevant  factor  not  already  mentioned  above,  namely  that  the  primary  balance 
improved significantly in 2023, including in structural terms. 

5. 

CONCLUSIONS 

The government deficit exceeded the reference value of 3% of GDP in 2023 in ten EU Member 
States:  Belgium,  Czechia,  Estonia,  Spain,  France,  Italy,  Hungary,  Malta,  Poland  and 
Slovakia. In all those Member States with the exception of Estonia, the government deficits 
were above and not close to the reference value in 2023.  

For Estonia, the deficit was above but close to the reference value in 2023. 

Finland had a government deficit not exceeding the reference value in 2023, but reported a 
planned deficit above but close to 3% of GDP in 2024; the Commission’s forecast likewise 
projects a deficit above but close to 3% of GDP for 2024. 

Slovenia  had  a  government  deficit  not  exceeding  the  Treaty  reference  value  in  2023,  but 
reported  a  planned  deficit  above  and  not  close  to  3%  of  GDP  in  2024;  as  the  Commission 
Spring 2024 Forecast projects the 2024 deficit below 3% of GDP, the planned breach of the 
reference value in 2024 in the sense of Article 126(3) TFEU is not confirmed for Slovenia.   

According to the Commission’s forecast, the government deficits in Belgium, Estonia, France, 
Italy,  Hungary,  Malta,  Poland,  and  Slovakia  are  projected  to  exceed  3%  of  GDP  in  2025. 
Therefore, the deficits in excess of the reference value are assessed to be not temporary for 
Belgium, Estonia, France, Italy, Hungary, Malta, Poland, and Slovakia. Differently, the 
government deficits in Czechia, Spain, Slovenia and Finland are presently projected not to 
exceed the reference value in 2025, and therefore the excess deficits are assessed as temporary. 

The excess over the reference value is assessed as exceptional for Estonia and not exceptional 
Czechia, Malta, Poland, Slovakia, Belgium, France, Italy, Hungary, Spain, Slovenia and 
Finland. 

In sum, this analysis suggests that the deficit criterion is not fulfilled by twelve Member States 
before the consideration of the relevant factors: Belgium, Czechia, Estonia, Spain, France, 
Italy, Hungary, Malta, Poland, Slovenia, Slovakia and Finland. 

Relevant factors can be taken into account in the steps leading to the decision on the existence 
of an excessive deficit for Member States with government debt below 60% of GDP (Czechia, 
Estonia, Malta, Poland and Slovakia) and for Member States with government debt above 
60% of GDP if the deficit remains close to the reference value and the excess over the reference 
value is temporary (Slovenia and Finland). They can affect the assessment of compliance with 
the deficit criterion as aggravating or mitigating factors, whereby substantial debt challenges 
are regarded as a key aggravating factor. 

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Overall, the relevant factors examined in this report are assessed as presenting a mixed picture 
for  Malta,  Poland  and  Finland.  They  are  assessed  as,  on  balance,  mitigating  for  Czechia, 
Estonia and Slovenia, and aggravating for Slovakia.  

For Slovenia and Finland, given the uncertainty attached to planned data as well as the fact 
that, according to the Commission’s Spring 2024 Forecast, the planned breach of the reference 
value in 2024 is not confirmed for Slovenia, and the deficit is projected to remain close to the 
reference value in 2024 and fall below it in 2025 for Finland, the Commission will monitor 
budgetary developments carefully and re-assess the situation in autumn. 

For  Czechia  and  Estonia,  taking  into  account  the  relevant  factors  brought  forward  by  the 
Member State, the deficit criterion is assessed as being fulfilled. 

For Spain, the budgetary deficit in excess of the reference value is temporary. Based on the 
Commission 2024 Spring Forecast, the deficit is projected to be below the reference value of 
in  2024  and  2025,  without  additional  measures.  As  no  additional  fiscal  adjustment  will  be 
required for Spain to bring its deficit below the reference value, initiating an excessive deficit 
procedure would not, at this stage, serve a useful purpose. The Commission will, in any case, 
continue monitoring budgetary developments in Spain and re-assess the situation in autumn. 

In the light of this assessment, and after considering the opinion of the Economic and Financial 
Committee as established under article 126(4) TFEU, the Commission intends to propose in 
July  to  open  excessive  deficit  procedures,  by  proposing  to  the  Council  to  adopt  a  Decision 
under Article 126(6) establishing the existence of an excessive deficit, for Belgium, France, 
Italy, Hungary, Malta, Poland and Slovakia. 

_________________ 

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