COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN CENTRAL BANK 2025 European Semester: bringing the new economic governance framework to life
Date: 2024-11-26
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU Member State, budget deficit, coordination of EMU policies, economic governance (EU), economic planning, economic reform, fiscal policy, macroeconomics, public debt, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 26.11.2024  COM(2024) 705 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN CENTRAL BANK 2025 European Semester: bringing the new economic governance framework to life  
 
 
Today’s package launches the first implementation cycle of the new economic governance 
framework, which entered into force on 30 April 20241 and represents the most ambitious and 
comprehensive  reform  of  the  EU's  economic  governance  rules  since  the  aftermath  of  the 
economic and financial  crisis.  The main objectives  of the new framework are to  strengthen 
Member States' debt sustainability and promote sustainable and inclusive growth in all Member 
States through growth-enhancing reforms and priority investments. The framework helps to 
make the EU more competitive and better prepared for future challenges by supporting progress 
towards a green, digital, inclusive and resilient economy. The documents that are published 
today  are  an  important  milestone  in  the  implementation  of  this  new  framework.  Upon 
endorsement  by  the  Council,  they  will  offer  a  coherent  policy  anchor  for  Member  States’ 
conduct of economic and fiscal policy for the years to come.  

The new economic governance framework will help to ensure an effective coordination 
of economic policies and multilateral budgetary surveillance. It ensures a high degree of 
policy coherence, with both fiscal sustainability and sustainable economic growth at its core. 
It  ensures  a  much  closer  integration  between  the  fiscal  strategy  of  Member  States  and  the 
reforms  and  investments  needed  to  support  sustainable  and  inclusive  growth  in  line  with 
European priorities.  

Reforms and investments are key to face new and existing challenges and to help secure 
credible debt reduction. The EU’s priorities include securing the green and digital transitions, 
strengthening economic and social resilience, including the European Pillar of Social Rights, 
productivity and competitiveness, as well as bolstering Europe's security capacity. The new 
framework  facilitates  and  encourages  Member  States  to  implement  necessary  reforms  and 
investment  in  these  areas.  To  that  end,  Member  States  have  set  out  how  they  will  deliver 
reforms  and  investment  responding  to  the  main  challenges  identified  in  the  context  of  the 
European Semester and to the common priorities of the Union.2 In particular, Member States 
can benefit from a more gradual fiscal adjustment path when their plans are underpinned by a 
set of investment and reform commitments that contribute to sustainable and inclusive growth 
and resilience, support fiscal sustainability and address common priorities of the Union.  

Fiscal  objectives  should  be  differentiated  and  consistent  with  Member  States’  fiscal 
sustainability considerations. The new common EU framework allows to differentiate among 
Member States  based on their individual fiscal  situations, in  view of  country-specific  fiscal 
sustainability considerations. Such a risk-based surveillance framework will allow for credible 
and gradual  public  debt  reduction where needed  and ensures that  budget  deficits fall or are 
maintained below the 3% of GDP Treaty reference value in a transparent way, ensuring equal 
treatment across Member States. 

1 Regulation  2024/1263  of  the  European  Parliament  and  of the  Council  (EU)  on  the  effective  coordination  of 
economic policies and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 
1467/97  on  the  implementation  of  the  excessive  deficit  procedure,  and  the  amended  Council  Directive 
2011/85/EU on the budgetary frameworks of Member States are the core elements of the reformed EU economic 
governance framework.  
2 The common priorities, identified in the Regulation, are as follows: i) a fair green and digital transition, including 
the  climate  objectives;  ii)  social  and  economic  resilience,  including  the  European  Pillar  of  Social  Rights;  iii) 
energy security; and iv) where necessary, the build-up of defence capabilities.  

1 

 
 
 
 
 
 
 
The  framework  will  foster  compliance  through  its  medium-term  orientation,  greater 
leeway for Member States to design their policy objectives, and enhanced enforcement. 
The  medium-term  fiscal-structural  plans  (henceforth,  “Medium-Term  Plans”)  that  the 
Commission has assessed today, are at the centre of the new framework. These plans set out 
Member States’ fiscal  objectives as well as  reforms and investments  to  tackle  common EU 
priorities as well as the country specific recommendations. Thus, the framework draws insights 
from  the  Recovery  and  Resilience  Facility’s  (RRF)  commitment-based  approach  to  policy 
coordination, with strong national ownership of policy design and outcomes, based on the new 
framework’s requirements and the Commission’s upfront guidance to Member States.  Like 
for  the  RRF,  the  new  framework  fosters  the  positive  interaction  between  reforms  and 
investments.  The  new  framework  combines  stronger  ownership  with  a  more  effective  and 
coherent enforcement of the EU fiscal rules.  

The on-going economic pickup and absorption of RRF grants and other EU funds provide 
a  supportive  environment  to  improve  the  EU’s  potential  for  sustainable  and  inclusive 
growth,  to  support  investment  and  to  address  fiscal  sustainability  challenges.  The 
European economy has shown resilience and is regaining momentum, while public debt and 
deficit developments require a stronger focus on fiscal sustainability. Following a prolonged 
and  broad-based  stagnation,  the  EU  economy  resumed  growth  in  2024,  with  robust  labour 
market  outcomes,  as  inflationary  pressures  further  abated.  The  conditions  for  a  mild 
acceleration of domestic demand appear in place, despite heightened uncertainty. Economic 
growth in the EU is expected to pick up to 1.5% in 2025, as consumption shifts up a gear and 
investment is set to rebound from its contraction in 2024, with a further expansion of 1.8% in 
2026.  The  absorption  of  EU  funds  (in  particular  NextGenerationEU  (RRF)  and  cohesion 
policy) is set to accelerate in 2025 and 2026, further supporting Member States’ investment. 
Moreover, Member States have set out in their Medium-Term Plans that they will maintain or 
increase  investment  over  the  plan  horizon.  This  more  positive  backdrop  will  facilitate  the 
necessary  measures  to  address  fiscal  sustainability  challenges  in  Member  States  with  high 
deficits and/or debts, as set out in the new framework. The slightly contractionary euro area 
fiscal stance projected for 2025 is combined with an expansion in investment, indicating that 
the new fiscal framework is effective in ensuring that the adjustment is gradual and does not 
come at the cost of investment.  

This Communication is structured into four sections. Section I presents the objective of an 
integrated fiscal package for fiscal sustainability and economic growth. Section II provides an 
overview of the assessment of Member States’ medium-term fiscal-structural plans. Section III 
explains the steps under the excessive deficit procedure this autumn. It covers the proposed 
recommendations under Article 126(7) TFEU for Member States under an excessive deficit 
procedure and the conclusion of the latest Article 126(3) report for two Member States. Section 
IV gives an overview and assessment of this year’s Draft Budgetary Plans and assesses the 
euro area fiscal stance and policy mix. The annexes provide further detail on each of the above 
sections. 

2 

 
 
 
 
 
 
 
 
I.  AN INTEGRATED FISCAL PACKAGE FOR FISCAL SUSTAINABILITY AND ECONOMIC 

GROWTH 

The  Package  incorporates  the  assessments  of  the  Medium-Term  Plans  and  the  Draft 
Budgetary  Plans  for  2025,  as  well  as  the  implementation  of  the  excessive  deficit 
procedures.  The  documents  published 
these  processes,  comprise 
(i) Commission  recommendations  for  Council  recommendations  on  21  Member  States’ 
Medium-Term Plans, (ii) Commission recommendations for Council recommendations under 
Article 126(7) for eight Member States with a view to bringing an end to the situation of an 
excessive deficit and (iii) a Commission report under Article 126(3) TFEU for two Member 
States  assessing  the  respect  of  the  3%  of  GDP  deficit  criterion,  and  (iv)  the  Commission 
Opinions on the Draft Budgetary Plans of 17 euro area Member States (see Annex I).  

today,  reflecting 

While these processes are legally distinct, they are inextricably linked on substance. The 
Medium-Term Plans set the Member State’s fiscal path (defined in terms of net expenditure 
growth rates) as well as priority reforms and investments for the next four years as a rule3. For 
euro-area Member States, the Draft Budgetary Plans outline the draft annual budget proposed 
by the national government, that is the specific expenditure and revenue measures to implement 
the fiscal path set in the Medium-Term plan for the next year. Finally, the excessive deficit 
procedure is to set the path to correct the Member State’s excessive deficit, where it exists. 

In view of these interlinkages, the Commission has aligned the timing of these processes 
and conducted an integrated assessment to ensure consistency in its fiscal surveillance. 
When the Commission made its proposals for Council decisions on the existence of excessive 
deficits under Article 126(6) TFEU for 7 Member States in spring, it exceptionally postponed 
its recommendations for Council recommendations under Article 126(7) TFEU until after the 
submission  and assessment  of the  Medium-Term Plans.4  In this way, it made possible that, 
subject  to  a  positive  assessment  of  the  Medium-Term  Plan,  the  corrective  path  under  the 
excessive  deficit  procedure  would  reflect  the  Medium-Term  Plan’s  net  expenditure  path. 
Furthermore, the timing of the assessment of the first Medium-Term Plans was aligned with 
the Draft Budgetary Plan process so that the latter could be assessed against the fiscal path for 
2025 included in the Medium-Term Plans.5 The Draft Budgetary Plans can thus present the 
first steps towards implementing the Medium-Term Plan, with concrete policy measures for 
the  first  year  (2025).  Going  forward,  compliance  under  all  three  processes  will  be  assessed 
solely on the basis of net expenditure growth, the single operational indicator under the new 
framework, which will ensure consistency and transparency. 

3 The exact length of the plan depends on the length of national legislature. In any case, the fiscal adjustment 
period should be a maximum of four years (unless the adjustment period is extended).  
4 The same approach was followed for Romania, for which the Council Decision in July, establishing no effective 
action meant that a revised Recommendation under Article 126(7) TFEU was necessary. 
5  Member  States  were  required  to  submit  their  MTP  by  20  September,  although  the  Commission  agreed  that 
submissions until 15 October would be acceptable, to align with the submission of Draft Budgetary Plans.  

3 

 
 
 
 
 
 
 
 
 
II.  OVERVIEW OF THE MEDIUM-TERM PLANS  

The  Commission  assessed  21  out  of  22  submitted  Medium-Term  Plans  and  proposes 
Council  recommendations  for  them.  Following  constructive  technical  dialogues  with  the 
Member States, the Commission considers that the Medium-Term Plans for Croatia, Cyprus, 
Czechia,  Denmark,  Estonia,  Finland,  France,  Greece,  Ireland,  Italy,  Latvia,  Luxembourg, 
Malta,  Poland,  Portugal,  Romania,  Slovakia,  Slovenia,  Spain  and  Sweden  meet  the 
requirements of Regulation 2024/1263 on the effective coordination of economic policies and 
on multilateral budgetary surveillance  (hereafter “the Regulation”) and set out a credible fiscal 
path to ensure fiscal sustainability over the medium term. In the case of the Netherlands, the 
Commission  proposes  to  endorse  the  net  expenditure  path  consistent  with  the  technical 
information it transmitted in June, while for all other Member States, the Commission proposes 
to endorse the fiscal path set out in the respective Medium-Term Plans. Hungary’s plan was 
submitted on 4 November 2024 and is still being assessed within the 6-week deadline in line 
with the Regulation. The submission of the plans for Austria, Belgium, Bulgaria, Germany and 
Lithuania has been delayed, due to general elections and the formation of new governments.  

For 5 out of the 21 Medium-Term Plans that have been assessed by the Commission, the 
recommended fiscal adjustment period is extended from 4 to 7 years (Finland, France, 
Italy, Romania and Spain). The extension of the adjustment period for these five Member 
States  is  underpinned  by  a  set  of  investment  and  reform  commitments  which  contribute  to 
sustainable and inclusive growth and resilience, support fiscal sustainability and address the 
main  challenges  identified  in  the  European  Semester,  in  particular  in  the  country-specific 
recommendations,  and  the  common  priorities  of  the  Union.  In  line  with  the  Regulation, 
Member States underpinned the extension of their adjustment period with relevant measures 
included in their Recovery and Resilience Plans (RRPs), combined with RRP measures with 
further specifications and additional measures. For example, Romania included in its plan the 
pension reform and the reform of special pension regimes included in its RRP. France’s plan 
includes  an  investment  programme  to  support  transformation  in  strategic  sectors,  which 
complements and adds to commitments made under the French RRP. Member States also took 
a  number  of  new  measures  under  their  Medium-Term  Plans.  This  includes  for  example  a 
comprehensive reform  of social  security in  Finland, measures to  simplify the tax system  in 
Italy and a reform of the work and job search visa system in Spain.  

Member  States  have  set  out  in  their  Medium-Term  Plans  that  they  will  maintain  or 
increase investment over the plan horizon. Reflecting the focus of the new framework on 
investments and reforms to deliver sustainable and inclusive growth over the medium and long 
term, most Member States plan to increase the level of nationally-financed investment by 2028. 
This includes the Member States that requested an extension of their fiscal adjustment period, 
who have committed to at least maintaining their pre-plan medium-term level of nationally-
financed public investment, as required by the Regulation.6 

All  Member  States  have  reported  their  policy  intentions  on  reforms  and  investments 
addressing  challenges  identified  as  part  of  the  European  Semester  and  the  common 

6 As part of the transitional provisions set out in Article 36 of Regulation (EU) 2024/1263, these Member States 
are  also  required  to  maintain  their  nationally  financed  investment  levels  realised  on  average  over  the  period 
covered by the recovery and resilience plan (paragraph d). 

4 

 
 
 
 
 
 
priorities of the EU in their plans. Member States explain in their plans how they will ensure 
the delivery of reforms and investments responding to the main challenges identified as part of 
the European Semester, and in particular the country specific recommendations. Member States 
are also required to report how they will address the common priorities of the EU, comprising 
a fair green and digital transition, social and economic resilience, including the European Pillar 
of Social Rights, energy security and, where necessary, the build-up of defence capabilities. 
Member States have included in their plans a broad reform and investments agenda covering 
the  policy  areas  related  to  common  priorities  of  the  EU  and  where  relevant,  the  challenges 
identified in country-specific recommendations addressed to them by the Council. Measures to 
address  the  fair  green  and  digital  transition,  for  example  by  supporting  energy-efficient 
building renovation and investment in energy infrastructure, are also to be seen in the context 
of the National Energy and Climate Plans. Examples of measures taken in the plans to support 
social and economic resilience include reforms of social protection or of the pension system, 
measures to improve the effectiveness and efficiency of healthcare or to support skills and life-
long  learning,  as  well  as  measures  to  improve  the  availability  of  childcare.  A  number  of 
Member States have also included in their plans measures to strengthen the independence and 
efficiency of their justice system and their governance frameworks. The plans include reforms 
commitments as well as investments that will contribute to bridge the investment needs related 
to the EU common priorities, including as regards the build-up of defence capabilities. The 
Commission  has  analysed  Member  States’  intentions  on  reforms  and  investments.  The 
assessment of the implementation of the reform and investments will be carried out in spring – 
starting  already  in  2025  –  as  part  of  the  European  Semester  Spring  Package,  following  the 
submission of the first Annual Progress Reports by Member States.  

Member States’ implementation of the Medium-Term Plans  will be assessed in spring 
2025  and  then  in  the  subsequent  economic  and  fiscal  surveillance  and  coordination 
rounds in spring and autumn. The first assessment, as part of the Semester Spring Package, 
will rely on the Annual Progress Reports to be submitted by Member States in spring 2025. 
Those  reports  will  allow  the  Commission  to  assess  the  implementation  of  the  fiscal  path, 
progress in the implementation of the reforms and investment that Member States committed 
to  deliver  in  their  Medium-Term  Plans,  as  well  as  the  implementation  of  country-specific 
recommendations in spring. Member States under an excessive deficit procedure will also have 
to report on action taken in response to the recommendation under Article 126(7) TFEU. 

III.  EXCESSIVE DEFICIT PROCEDURES 

The Autumn Package includes eight recommendations for the Council to set the fiscal 
path  correcting  the  excessive  deficit  for  Member  States  under  an  excessive  deficit 
procedure. This includes the seven Member States for whom an excessive deficit procedure 
was opened in July 2024 (Belgium, France, Italy, Hungary, Malta, Poland and Slovakia) as 
well  as  Romania,  which  has  been  in  excessive  deficit  procedure  since  2020.  When  the 
Commission recommends to the Council to endorse the fiscal path contained in the Medium-
Term Plan, the corrective path in the excessive deficit procedure recommendation is consistent 
with  the  net  expenditure  path  in  the  Medium-Term  Plan.  In  the  absence  of  such  a 
recommendation,  as  for  Belgium  and  Hungary,  the  corrective  path  in  the  excessive  deficit 
procedure recommendation is based on the Commission’s 4-year reference trajectory, updated 
based  on  most  recent  data.  The  Commission  stands  ready  to  recommend  a  revised 

5 

 
 
 
recommendation after a positive assessment and Council endorsement of the Medium-Term 
Plan of these Member States.   

For two Member States (Austria and Finland), the Commission has assessed compliance 
with  the  deficit  criterion  to  decide  whether  there  is  a  case  to  initiate  excessive  deficit 
procedures. Based on the Article 126(3) report, the Commission will consider proposing the 
opening  of  a  deficit-based  excessive  deficit  procedure  for  Austria.  Austria  has  reported  a 
planned deficit above the 3% of GDP reference value in 2024 and the Commission forecast 
does not project a reduction below the 3% of GDP reference value in 2025 or 2026 under a no 
policy change assumption.7 The Commission will therefore consider to propose to the Council 
to establish that an excessive deficit exists in Austria. The Austrian authorities have expressed 
their  intention  to  take  the  necessary  action  to  bring  the  deficit  below  3%  in  2025.  The 
Commission  stands  ready  to  assess  new  measures  as  soon  as  formally  agreed  by  the 
government  and sufficiently detailed. In the case of Finland, which also  reported a planned 
deficit  over  3%  of  GDP  for  2024,  the  Commission  does  not  intend  to  propose  opening  an 
excessive  deficit  procedure,  since  the  deficit  is  no  longer  projected  to  exceed  the  reference 
value already as from 2025 without additional policy measures. The Commission also reviewed 
the budgetary situation of those Member States which were concerned by the Article 126(3) 
report  in  spring  2024  but  for  whom  the  Commission  did  not  recommend  the  opening  of 
excessive deficit procedures (Czechia, Estonia, Spain and Slovenia), and concluded that the 
spring assessment was still valid.   

IV.  OVERVIEW OF THE DRAFT BUDGETARY PLANS AND THE EURO AREA FISCAL STANCE 

in  2024-25, 

The  Commission  has  assessed  the  budgetary  policies  for  2025  for  euro  area  Member 
States and examined whether they represent appropriate first steps to implement their 
medium-term  plans.  The  Commission  has  published  separate  Opinions  assessing  17  Draft 
Budgetary Plans. The assessment of the Draft Budgetary Plans is focused on net expenditure 
growth 
the  Commission  autumn  2024  forecast. 
Operationalising the qualitative 2024 fiscal country-specific recommendations, the Opinions 
assess whether net expenditure is within the ceilings set out in the Member States’ Medium-
Term  Plans,  provided  such  a  plan  is  available  and  recommended  for  endorsement  by  the 
Council. Otherwise, the assessment refers to the reference trajectory (for Germany) or technical 
information (for the Netherlands) provided to the Member States on 21 June 2024, or directly 
to the country-specific recommendation (for Lithuania).   

into  account 

taking 

Overall,  eight  euro  area  Member  States  are  considered  to  be  in  line  with  the  fiscal 
recommendations.  The  Draft  Budgetary  Plans  for  Croatia,  Cyprus,  France,  Greece,  Italy, 
Latvia, Slovakia, and Slovenia are assessed to be in line with the recommendations. The Draft 
Budgetary Plans for Estonia, Germany, Finland, Luxembourg, Malta and Portugal are assessed 
to be not fully in line with the recommendation. For Estonia, Germany, Finland and Ireland8, 
their annual and/or cumulative net expenditure growth is projected to be above the respective 

7 For Austria, the forecast does not consider a budget for 2025 since the latter has been delayed by the Austrian 
electoral cycle. 
8 While Ireland’s net expenditure growth is also expected to be above the ceiling, it did not receive a fiscal CSR 
and the Commission Opinion does not contain a concluding overall assessment of its Draft Budgetary Plan. 

6 

 
 
 
 
 
ceiling; for Luxembourg, Malta and Portugal, the energy emergency support measures are not 
set to be phased out by winter 2024-2025, while their net expenditure growth is expected to be 
within the ceiling. For the Netherlands, the plan is assessed as not in line, while for Lithuania, 
the plan is assessed to risk not being in line. For those Member States, there will be a need for 
vigilance and possible action to ensure that their budgetary implementation is in line with their 
country-specific recommendations and the new framework. For the euro area Member States 
that  have  not  submitted  a  Draft  Budgetary  Plan  for  2025  (Austria,  Belgium,  Spain),  the 
Commission cannot at this stage assess whether those Member States’ fiscal policies in 2025 
are in line with the recommendations.  

The  Commission’s  assessment  of  the  Draft  Budgetary  Plans  points  to  a  slightly 
contractionary fiscal stance in 2025, which is appropriate, coupled with continued growth 
in  public  investment.  Therefore,  the  new  framework  delivers  on  the  premise  that  fiscal 
consolidation cannot come at the expense of investment. The contraction in the fiscal stance in 
2025  is  driven  by  a  reduction  in  net  current  expenditure,  partially  offset  by  increasing 
investment. This follows a contractionary stance in 2024 after a long period of expansion, also 
characterised by high or increasing level of public debt. The projected stance in 2025 would 
also support the effort of monetary policy to ensure that inflation returns to target.  

At the same time, the fiscal stance is projected to be heterogeneous across Member States 
in 2025, reflecting the risk-based approach of the revised framework. Consistent with the 
approach of the new framework, a larger fiscal effort is planned by Member States with greater 
fiscal challenges.  

Public  investment  is  expected  to  increase  again  in  2025  in  almost  all  Member  States. 
Overall, euro area public investment is projected to reach 3.5% of potential GDP, compared to 
3% of potential GDP in 2019. This reflects the ongoing efforts of Member States to protect and 
enhance investment in the face of multiple crises since 2019, building on the lessons learned 
from the financial crisis, when investment suffered cuts. Contributions from national budgets 
vary  across  Member  States,  while  there  is  a  significant  impact  of  the  RRF  and  EU  funds 
(including cohesion policy funds) in several Member States.  

7 

 
 
 
 
ANNEX I: OVERVIEW TABLE OF THE FISCAL AUTUMN PACKAGE 

Medium-term plan 

Excessive deficit 
procedure 

Country 

Draft 
Budgetary 
Plan 
Submission 
and Opinion 

Submission 

Extension of 
adjustment 
period 

Recommendati
on for Council 
Recommendati
on endorsing 
plan  

Recommendati
on for Council 
Recommendati
on under Art 
126(7) 
X 

Report under 
Art. 126(3) 

X 
X 

X 
X 
X 
X 
X 
X 
X 
X 
X 

X 
X 
X 
X 

X 
X 
X 
X 
X 
X 
X 

X 
X 

X 
X 
X 
X 
X 
X 
X 
X 
X 

X 

X 
X 

X 
X 
X 
X 
X 
X 
X 

X 
X 

X 

X 

X 

X 

X 

X 
X 

X 

X 

X 

X 

X 

BE 
BG 
CZ 
DK 
DE 
EE 
IE 
EL 
ES 
FR 
HR 
IT 
CY 
LV 
LT 
LU 
HU 
MT 
NL 
AT 
PL 
PT 
RO 
SI 
SK 
FI 
SE 

n.a. 
n.a. 
n.a. 
X 
X 
X 
X 

X 
X 
X 
X 
X 
X 
X 
n.a. 
X 
X 

n.a. 
X 
n.a. 
X 
X 
X 
n.a. 

Note:  Only euro area Member States are required to submit a Draft Budgetary Plan.  

8 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX II: THE MEDIUM-TERM FISCAL-STRUCTURAL PLANS 

(i) 

The new framework and process 

The implementation of the new economic governance framework, with Member States’ 
medium-term fiscal-structural plans as its cornerstone, began in spring 2024. The process 
for the medium-term plans was established in Regulation 2024/1263).9 The plans should also 
ensure  consistency  with  the  corrective  arm  (Regulation  1467/97)  for  Member  States  in  an 
excessive  deficit  procedure.  The  first  step  in  preparing  the  plans  consisted  of  technical 
exchanges between Member States and the Commission upon request, which were followed 
by technical dialogues with all Member States to ensure their plans would be compliant with 
the Regulation.  

Reference trajectories were sent to Member States with a projected government deficit 
above 3% of GDP or a debt-to-GDP ratio above 60% in 2024. These were part of the prior 
guidance that the Commission  transmitted to  Member States on 21 June  2024  ahead of the 
technical dialogues, which also  included  information  requirements  for the plans and annual 
progress reports. The reference trajectory sets out a country-specific maximum growth rate of 
net expenditure consistent with the requirements of the new framework. It should ensure that, 
by the end of the adjustment period, the general government debt is on a plausibly downward 
trajectory or stays at  prudent  levels,  and that  the  general  government  deficit is  brought  and 
maintained below 3% of GDP, in line with Articles 6, 7 and 8 of the Regulation. Nine Member 
States received a reference trajectory (see Table 2) while the other Member States were sent 
technical information if they requested it. The technical information indicates the minimum 
level of the structural primary balance that would be required by the end of the Member State’s 
plan to ensure their debt and deficit levels continue to respect the fiscal rules over the medium 
term.10  

Within  seven  months  of  the  new  framework  coming  into  force,  the  Commission  has 
adopted 21 recommendations for a Council recommendation on the Medium-Term Plans. 
The Commission  recommendations for a Council recommendation also  contain the detailed 
assessment of the Medium-Term Plan. Based on this assessment, the Commission recommends 
that the Council adopts a recommendation endorsing the fiscal requirement of 20 of those plans 
as they comply with the requirements of the new fiscal framework. Overall, this illustrates the 
usefulness of the technical dialogue process. This swift implementation ensures high-quality 
fiscal surveillance can be conducted for 2025.  

Member States are submitting their Medium-Term Plans by the agreed deadlines. There 
has been a staggered submission of the Medium-Term Plans, with two plans (Denmark and 
Malta) submitted by the deadline of 20 September 2024. Most Member States agreed with the 
Commission to delay the submission to around 15 October 2024, to be submitted alongside the 
Draft Budgetary Plans for euro-area Member States. This delay ensured Member States had 

9 Under the Regulation’s transitional provisions, the timeline for the first set of plans is different to that of the 
steady state, when Member States should submit plans by 30 April of the year before the current plan ends. 
10 Of the Member States eligible for technical information, six would still need to adjust their fiscal position to 
ensure that their deficit and debt remain below the Treaty reference values over the medium term. 

9 

 
 
 
 
 
 
sufficient time to respect domestic procedures, which needed to adjust to a new process, and 
that there was consistency with the Draft Budgetary Plans.  

Member States reported on the consultations carried out in their Medium-Term Plans. 
Member States were strongly encouraged to consult social partners, regional authorities, civil 
society organisations and other relevant national stakeholders on their Medium-Term Plans. 
Moreover,  the  involvement  of  national  parliaments  during  the  preparation  of  the  plans  is 
important  to  contribute to the credibility  of the policy commitments in  the plans.  However, 
given  the  time  constraints  of  this  year’s  process  and  the  need  to  avoid  a  gap  in  fiscal 
surveillance, this was not a requirement for the first round of plans, but it will be for all future 
plans.  The consultation of national stakeholders was varied and uneven across Member States. 
Many Member States consulted national parliaments and social partners. National independent 
fiscal institutions played a role in the preparation process of the plans in two thirds of Member 
States, although to varying degrees. A continued dialogue with national stakeholders and the 
involvement of national parliaments would be important during the implementation of the plans 
to increase their effectiveness.  

Five  Medium-Term  Plans  will  be  submitted  later  and  thus  their  assessment  is  not 
included  in  this  Autumn  Package.  The  submission  of  the  plans  for  Austria,  Belgium, 
Bulgaria, Germany and Lithuania has been delayed, due to general elections and the formation 
of new governments. The new governments should submit their plans as soon as feasible after 
taking office, and the Commission will publish its assessment thereafter.  

The Commission assessed whether the net expenditure growth paths set out by Member 
States,  which  will  also  be  the  sole  indicator  against  which  future  compliance  will  be 
assessed, ensure fiscal sustainability over the medium term. The Commission examined for 
each plan whether the net expenditure path envisaged therein complies with the requirements 
of  the  Regulation,  i.e.,  whether  it  effectively  puts  general  government  debt  on  a  plausibly 
downward path by the end of the adjustment period or keeps it at prudent levels below 60% of 
GDP, and whether it brings and maintains the government deficit below 3% of GDP over the 
medium term. The Commission also assessed whether the net expenditure paths complied with 
the debt sustainability safeguard and deficit resilience safeguard set out in the Regulation where 
relevant, and for Member States in  excessive deficit  procedure,  compliance with  the deficit 
benchmark,  as  well  as  the  need  to  avoid  backloading  the  adjustment.  Compliance  will  be 
assessed over the horizon of the Medium-Term Plans solely on the basis of the net expenditure 
growth path, which will ensure transparency and also facilitate macroeconomic stabilisation.11 
For Member States that requested an extension of the adjustment period by committing to a set 
of reforms and investment, the Commission assessed whether the criteria for such an extension 
were  met.  For  all  Member  States,  the  Commission  analysed  Member  States’  intentions  on 
reforms and investments responding to the main challenges identified as part of the European 
Semester and the common priorities of the EU.   

11 The net expenditure indicator is not affected by the operation of automatic stabilisers and other expenditure 
fluctuations outside the direct control of the government, thus providing leeway for counter-cyclical macro-
economic stabilisation. 

10 

 
 
 
 
 
 
 
 
(ii)  Medium-Term Plan commitments and Commission assessment 

Out of the 21 Medium-Term Plans the Commission has assessed, it concludes that 20 set 
out  a  credible  fiscal  path.  All  Member  States  were  found  to  be  compliant  with  the 
Regulation’s  requirements  regarding  the  net  expenditure  path,  with  the  exception  of  the 
Netherlands, whose proposed net expenditure growth is projected to lead to a breach of the 
Treaty reference values in the medium term. In light of the Netherlands’ statement in its plan 
that it was waiving its right to submit a revised plan, the Commission is thus proposing that the 
Council instead recommend a net expenditure path consistent with the technical information 
the Commission transmitted to the Netherlands. For the other Member States, the Commission 
is proposing that the Council recommend the net expenditure paths included by Member States 
in their plans. Table 2 shows the net expenditure growth planned by Member States across the 
Medium-Term Plan horizons. 

The  Commission  assessed  the  net  expenditure  growth  path  in  the  plans  against  the 
requirements set by the Regulation. Concerning the underlying assumptions, the assessment 
relies on two main elements. First, where Member States have used macroeconomic and fiscal 
assumptions  in  their  plan  that  differ  from  the  prior  guidance,  the  Commission  has  assessed 
whether the difference is explained and duly justified in a transparent manner and based on 
data-driven  and sound  economic arguments.  Second, the Commission  has assessed whether 
these differences in assumptions, considered both in isolation and jointly, affect the average 
net  expenditure  growth  to  which  the  Member  State  commits  during  the  adjustment  period. 
Overall, the Commission has found that, when the net expenditure path in the plan is higher 
than the prior guidance, this is backed by duly justified differences in assumptions.    

For five Member States, the recommended fiscal adjustment period is extended to seven 
years based on their commitment to a relevant set of investment and reforms. In all five 
cases  (Finland,  France,  Italy,  Romania  and  Spain),  the  set  of  reforms  and  investments  was 
assessed as  meeting the  Regulation’s conditions for an extension.  Reforms  and investments 
commitments were found to improve growth and resilience potential in a sustainable manner 
and  support  fiscal  sustainability.  They  address  the  common  priorities  of  the  Union  and  the 
relevant  CSRs  and  ensure  that  the  level  of  nationally  financed  public  investment  is  at  least 
maintained throughout  the plan’s horizon. They are also  consistent and, whenever possible, 
complementary with the commitments included in the RRPs and the Partnership Agreement 
agreed under the MFF. Each of the reform and investment commitments is sufficiently detailed, 
front-loaded, time-bound and verifiable. All five Member States have included RRP measures 
underpinning the extension that are aimed at improving fiscal sustainability and enhancing the 
growth  potential  of  their  economies.  In  many  cases,  the  Member  States  have  committed  to 
continuing or increasing the reform effort for these measures throughout the plan’s horizon. 
Examples  of  measures  that  are  part  of  the  RRPs  or  that  build  upon  existing  RRP  measures 
include reforms  of the public expenditure system,  pension system,  tax system,  civil  justice, 
business climate and the labour market as well as investments related to vocational training, 
healthcare, R&D and the digital and green transitions. Reform and investment commitments 
made  in  addition  to  those  included  in  the  RRPs  include,  for  example,  social  welfare  and 
healthcare reforms, pension and tax reform and measures on access to finance for businesses.  

11 

 
 
 
 
 
 
Table 2: Overview of the average net expenditure growth in Medium-Term Plans 

Medium-Term Plan 

Average net expenditure 
growth over the plan 
horizon  

CZ 

DK 

EE 

IE 

EL 

ES 

FR 

IT 
HR 
CY 

LV 

LU 

MT 

NL 
PL 

PT 

RO 

SI 

SK 

FI 

SE 

3.1 

4.4 

4.7 

5.3 

3.3 

3.0 

1.1 

1.5 
4.8 
5.2 

4.1 

4.9 

5.9 

4.2 
4.5 

3.6 

4.4 

4.5 

2.0 

2.4 

4.4 

Final year of 
the 
adjustment 
period 
2028 

2028 

2028 

2028 

2028 

2031 

2031 

2031 
2028 
2028 

2028 

2028 

2028 

2028 
2028 

2028 

2031 

2028 

2028 

2031 

2028 

Commission prior 
guidance 

Average over the plan 
horizon 

3.5 

5.8 

3.1 

n.a. 

3.1 

2.8 

1.6 

1.5 
4.0 
4.9 

3.7 

n.a. 

5.9 

3.2 
4.5 

3.6 

5.2 

4.4 

2.0 

1.5 

4.5 

Note: For countries that did not receive a reference trajectory due to having a general government deficit 
below 3% of GDP and general government debt below 60% of GDP, the implied net expenditure growth 
based on their technical information is shown. The average uses 2025 as the starting point.  
Source: Member States’ medium-term plans, Commission reference trajectory / technical information 
transmitted on 21 June 2024 

12 

 
 
 
  
 
 
 
 
Graph 1: Nationally-financed investment in 2023 vs average 2025-28 (% of GDP) 

Note:  NL did not report this information. The Regulation requires Member States extending their adjustment period to at least maintain their level of 
nationally-financed investment compared to the medium-term level before the start of the plan. 
Sources:  European Commission 2024 autumn forecasts 

13 

 
 
 
 
 
 
 
 
 
 
ANNEX III: EXCESSIVE DEFICIT PROCEDURES 

The  Autumn  Package  includes  recommendations  setting  the  fiscal  path  correcting  the 
excessive deficit for eight Member States that are under an excessive deficit procedure.12 
The corrective path included in the excessive deficit procedure recommendation is consistent 
with the net expenditure path recommended by the Commission as part of the Medium-Term 
Plan process if the plan is positively assessed, one element being consistency with the minimum 
annual  adjustment  of  0.5%  of  GDP  in  structural  terms.13  For  Belgium  and  Hungary,  the 
Commission proposes recommending the reference trajectory as the corrective path, updated 
based  on  more  recent  data,  as  Belgium  has  not  yet  submitted  its  medium-term  plan,  while 
Hungary’s  plan  is  still  under  assessment.  These  paths  could  be  revised  after  these  Member 
States’ plans have received a positive assessment from the Commission and been endorsed by 
the Council. Romania has been in excessive deficit procedure since 2020 and, following the 
July  Council  decision on the  lack of effective  action  under Article 126(8), the Commission 
proposes a revised recommendation under Article 126(7) with a corrective path that is likewise 
based on Romania’s medium-term plan. The deadline for the correction of the excessive deficit 
is  set  taking into  account  the  correction  date  indicated  in  the  plan  (where  available),  cross-
checked with the European Commission 2024 Autumn forecast and the Commission medium-
term government debt projection framework.  

The Commission has assessed whether an excessive deficit exists in Austria and Finland. 
In  the  context  of  the  autumn  excessive  deficit  procedure  notification,  Austria  and  Finland 
reported a planned deficit for 2024 above the 3% of GDP reference value. For both Austria and 
Finland, the deficit in excess in 2024 has been assessed as not close to the reference value. 
Based on Commission Autumn 2024 Forecast, the government deficit in Austria is projected 
to  exceed  3%  of  GDP  over  the  forecast  horizon,  until  2026,  under  a  no  policy  change 
assumption as the Commission forecast does not consider a budget for 2025 since it has been 
delayed by the Austrian electoral cycle. This is not the case for Finland (where the government 
deficit is not likely to exceed the reference value in 2025 and 2026). As a result, the excessive 
deficit has been assessed as not temporary for Austria and as temporary for Finland. In addition, 
the planned deficits in excess over the reference value for both Austria and Finland have been 
impacted by unfavourable macroeconomic conditions, and therefore they have been assessed 
as exceptional. For both Member States, the analysis carried out in the Article 126(3) report 
suggests that the deficit criterion is not fulfilled, before the consideration of the relevant factors. 
However, since the double condition necessary for relevant factors to be taken into account by 
the Council and the Commission in the steps leading to the decision on the existence of an 
excessive  deficit  is  not  met  in  both  Member  States,  relevant  factors  cannot  be  taken  into 
account. In light of its assessment in the Article 126(3) report, and after considering the opinion 
of  the  Economic  and  Financial  Committee  as  established  under  Article  126(4)  TFEU,  the 
Commission will consider to propose to the Council to establish that an excessive deficit exists 

12 In light of the medium-term plans under the new framework, which include Member States’ reform priorities, 
the  recommendations  to  euro  area  Member  States  under  an  excessive  deficit  procedure  do  not  recommend 
submitting an economic partnership programme in accordance with Article 9 of Regulation 473/2013. 
13 In line with the transitional provisions set out in Regulation (EU) 2024/1264 and against the backdrop of the 
significantly changed interest rate environment, the Commission may, during a transition period in 2025, 2026 
and 2027, adjust this benchmark to take into account the increase in interest payments when setting the proposed 
corrective path relating to the first medium-term fiscal-structural plans. 

14 

 
 
 
 
in  Austria.  In  the  exchange  leading  to  this  report,  the  Austrian  authorities  recalled  that 
negotiations  are  currently  ongoing  to  form  a  government.  The  authorities  expressed  their 
intention to take the necessary action to bring the deficit below 3% in 2025 without having to 
open an excessive deficit procedure. This would require a package of corrective measures, in 
time for the ECOFIN meeting of January 2025. The Commission stands ready to assess such a 
package as soon as related measures are formally agreed by the government and sufficiently 
detailed.  In contrast, according to the Commission Autumn 2024 Forecast, Finland’s deficit is 
projected  to  no  longer  exceed  the  reference  value  from  2025,  and  that  without  additional 
measures. The Commission is thus of the view that initiating an excessive deficit procedure for 
Finland would not serve a useful purpose at this stage. 

The Commission has also reviewed the budgetary situation of Member States which were 
concerned  by  the  Article  126(3)  TFEU  report  in  spring  2024  but  for  whom  the 
Commission  did  not  recommend  the  opening  of  excessive  deficit  procedures.  These 
comprise  Czechia,  Estonia,  Spain  and  Slovenia.  Taking  into  account  the  autumn  excessive 
deficit  procedure  notification  and  the  Commission  Autumn  2024  Forecast,  no  substantive 
changes in the budgetary situation of Czechia and Spain are observed compared to spring, while 
for Estonia and  Slovenia  the situation has  in  fact  improved. Overall,  the conclusions of the 
Article 126(3) report in spring – that the excessive deficit procedure should not be opened for 
these countries – are still deemed as pertinent for all four Member States this autumn. A more 
detailed assessment is provided in Annex V. 

15 

 
 
 
 
 
 
ANNEX IV: OVERVIEW OF THE DRAFT BUDGETARY PLANS AND THE EURO AREA FISCAL 
STANCE 

Euro  area  Member  States’  Draft  Budgetary  Plans  for  2025  set  out  the  budgetary 
implementation of the first year of their medium-term plans. The Draft Budgetary Plans 
were submitted to the Commission and Eurogroup in October 2024 before their submission to 
national  parliaments  by  all  euro  area  Member  States  except  Austria,  Belgium,  and  Spain14. 
Against  the  background  of  the  Commission’s  2024  autumn  forecast,  the  Commission  has 
adopted Opinions on whether the plans are compliant with the Council recommendations of 21 
October 2024, which in practice means if they are compliant with the new EU fiscal framework. 
The Commission’s approach to this assessment and its opinions are explained and summarised 
in the first part of this Annex. The Draft Budgetary Plans allow the Commission to assess the 
euro  area  fiscal  stance  and  overall  budgetary  situation  and  prospects,  which  is  done  in  the 
second part of this Annex.  

(i) 

Summary assessment of Member States’ Draft Budgetary Plans 

The following is a summary of the Commission’s assessment of the 2025 Draft Budgetary 
Plans and on national budgetary policies.15 The Opinions are based on the Commission 2024 
autumn forecast including the information in the Draft Budgetary Plans.  

The assessment of the Draft Budgetary Plans is focused on net expenditure growth. The 
2024 fiscal CSRs are qualitative. Their central element  is a recommendation to all Member 
States  to:  ‘limit  the  growth  in  net  expenditure  in  2025  to  a  rate  consistent  with  putting  (or 
keeping) the general government debt on a plausibly downward trajectory over the medium 
term and reducing (or maintaining) the general government deficit below 3% of GDP’. Making 
this more operational means assessing whether net expenditure is within the ceilings set out in 
the Member States’ medium-term plans, provided such a plan is available and the ceilings are 
consistent with the requirements of the new framework. Otherwise, the Commission based its 
assessment on the prior guidance provided to the Member States on 21 June 2024. From next 
year, the Draft Budgetary Plan assessments will be guided by the multi-annual net expenditure 
path for each Member State set in the Council recommendation endorsing the medium-term 
plan. 

The  assessment  of  net  expenditure  growth  examines  2025  annual  and  2024-2025 
cumulative growth rates. As a first step, the Commission looked at the 2025 annual growth 
rate (with a 0.3% of GDP threshold marking the difference between “not fully in line” and “not 
in line”). As a second step, the cumulative growth rate over 2024-2025 (with a 0.6% of GDP 

14 The  Commission  did not require Member States to submit a  Draft Budgetary Plan under the assumption of 
unchanged policies. Such “no policy change”  Draft Budgetary Plans were submitted in past rounds where, for 
example, a government was not tabling a draft budget in the national parliament. This autumn, the Member States 
in such situations – Belgium, Austria and Spain - have been asked to postpone the submission until a fully-fledged 
Draft Budgetary Plan can be prepared. In any case, the Commission continuously monitors the budgetary situation 
in  all  Member  States,  based  on  all  available  information,  including  technical  exchanges  between  national 
authorities and Commission services.  
15 The Opinions are accompanied by a Statistical Annex including the necessary information to assess Member 
States’ plans.  

16 

 
 
 
 
 
threshold between “not fully in line” and “not in line”16). The conclusion in the Draft Budgetary 
Plan opinion depends on the less favourable of the two (annual or cumulative growth rate).  

Graph 2: Net expenditure growth in 2024 and 2025: Draft Budgetary Plan vs 2024 Autumn Commission 

forecast   

Source: European Commission 2024 autumn forecast 
Note: Austria, Belgium, and Spain have not submitted Draft Budgetary Plans. The net expenditure growth from France’s Medium-Term Plan is shown as it did 
not report net expenditure growth in its Draft Budgetary Plan.  

The assessment of the Draft Budgetary Plans of Malta, Portugal and Luxembourg also 
took  into  account  the  Council  recommendation  to  phase  out  the  remaining  energy 
emergency  support  measures.  Luxembourg,  Malta  and  Portugal  are  the  only  euro-area 
Member States that received a country-specific recommendation to phase out the emergency 
energy support measures by winter 2024/25. For all three, the Commission concludes that they 
do not phase out these measures. As a result, the overall conclusion in the Draft Budgetary Plan 
opinion is adjusted from “in line” (i.e., the assessment based on net expenditure growth) to “not 
fully in line”. 

Overall, eight euro-area Member States’s Draft Budgetary Plans are considered to be in 
line with the fiscal recommendations, while seven are not fully in line, one is not in line, 
and one risks not to be in line: 

•  Croatia, Cyprus, France, Greece, Italy, Latvia, Slovakia and Slovenia are assessed to 
be in line with the recommendations, as their net expenditure is projected to be within 
the ceilings.  

•  Estonia,  Germany  and  Finland  are  assessed  to  be  not  fully  in  line  as  their  annual 
(Finland)  and/or  cumulative  (Estonia,  Germany)  net  expenditure  is  projected  to  be 
above the respective net expenditure growth ceilings, but still within the thresholds for 
the control account foreseen in the Regulation. Ireland’s cumulative net expenditure is 
also projected to be above the respective ceiling.   

16 These 0.3%/0.6% thresholds are consistent with the thresholds from the control account. 

17 

-5.00.05.010.015.020.0FRITEEFIDEELSKLVSIPTIEMTCYLUNLHRLTDBP 2024DBP 2025AF24 2024AF24 2025 
 
 
 
 
 
 
 
•  Luxembourg,  Malta,  Portugal  are  assessed  to  be  not  fully  in  line  with  the 
recommendation: as they do not phase out the energy emergency support measures by 
winter 2024-2025, while their net expenditure is projected within the net expenditure 
growth ceilings. 

•  The  Netherlands  is  assessed  to  be  not  in  line  with  the  recommendation,  as  the  net 
expenditure (both in annual and in cumulative terms) is projected above the ceiling. 
•  Lithuania is  assessed to  risk being not in line with  the recommendation,  as  the net 
expenditure (both in annual and in cumulative terms) is projected to exceed the rates 
that the Commission would consider as an appropriate first step in the implementation 
of  the  new  economic  governance.  However,  Lithuania  has  not  yet  submitted  its 
Medium-Term Plan. 

For  the  euro  area  Member  States  that  have  not  submitted  a  Draft  Budgetary  Plan  for  2025 
(Austria, Belgium, Spain), the Commission cannot at this stage assess whether those Member 
States’ fiscal policies in 2025 are in line with the recommendations.  

(ii) 

Overall fiscal developments in the euro area, including the aggregate fiscal stance 

Member States’ fiscal policies would help bring the euro area deficit below 3% of GDP 
in  2025.  The  pace  of  reduction  of  public  deficits  halted  in  2023,  despite  the  phase-out  of 
COVID-19  temporary  emergency  measures,  due  to  weak  economic  growth  and  sizeable 
revenue shortfalls. However, the euro area aggregate deficit is expected to have decreased again 
in 2024, reaching 3.0% of GDP in the Commission Autumn 2024 Forecast, driven by fading 
subsidies to private investment (notably for housing renovations in Italy) and strong revenue 
developments.17 The deficit is then set to decline marginally to 2.9% of GDP in 2025, thanks 
to the consolidation efforts from Member States to ensure fiscal sustainability in the medium 
term, as set out in the new fiscal framework. This forecast is largely in line with the projections 
in Member States’ Draft Budgetary Plans.   

The euro area public debt-to-GDP ratio is projected to increase marginally in 2025, but 
it  remains  significantly  below  its  2020  peak.  Both  the  Draft  Budgetary  Plans  and  the 
Commission forecast project a slight increase in the debt-to-GDP ratio to 90% in 2025, down 
from almost 99% of GDP in 2020. The public debt ratio is rising due to continued high primary 
deficits and rising interest expenditure, while lower inflation means that nominal GDP growth 
is weaker, moderating the increase in the denominator. 

The  euro  area  fiscal  stance  is  set  to  be  contractionary  in  2024  after  a  long  period  of 
expansion.18 The contraction of ½% of GDP, projected in the Commission’s autumn forecast, 
follows four years of large crisis-related expansion, totalling around 3½% of GDP.19 The euro 

17 Further detail on the EU fiscal outlook is presented in the Commission’s Autumn 2024 forecast: 
https://economy-finance.ec.europa.eu/publications/european-economic-forecast-autumn-2024_en 
18 The contribution to the fiscal stance of total nationally financed net expenditure is projected to be contractionary 
(close to ½% of GDP) in both 2024 and 2025. 
19 The fiscal stance measures the short-term impulse to the economy from discretionary fiscal policy. It is based 
on  the  increase  in  net  expenditure  relative  to  10-year  nominal  potential  output  growth.  The  net  expenditure 
aggregate used to assess the fiscal stance includes expenditure financed by RRF grants and other EU funds. 

18 

 
 
 
 
 
 
 
area fiscal stance in 2024 has primarily been driven a reduction in other capital expenditure, 
which  relates  to  the  phase-out  of  large  subsidies  for  private  investment  (especially  housing 
renovations in Italy) (Graph 3). The phase-out of remaining energy measures was largely offset 
by new net current expenditure, which could weigh on fiscal consolidation efforts in the coming 
years.   

Graph 3: The euro area fiscal stance and components, 2020-2025 (% of GDP)  

Note: the fiscal stance for 2020-2023 is cumulative.  
Source: European Commission 2024 autumn forecast 

The euro area  fiscal  stance is  projected to be slightly contractionary in 2025, with the 
reduction in net current expenditure partially offset by increasing investment. According 
to the autumn forecast, the fiscal stance is expected to be slightly contractionary at just above 
¼%  of  GDP,  driven  by  a  reduction  in  net  current  expenditure,  as  well  as  a  small  further 
contraction in government subsidies for private investment. This contractionary effect is partly 
offset by a slight expansion in investment, both that financed by national budgets and by RRF 
grants and other EU funds (Graph 4). This suggests that the new fiscal framework has been 
effective, at  its  outset, in ensuring  that consolidation does not  come at  the cost  of  reducing 
necessary investments in the green and digital transitions, productivity and competitiveness.  

19 

 
 
 
 
 
 
Graph 4: Euro area public investment 2019-2025 (% of potential GDP) 

(1) Nationally-financed investment includes the national co-financing of EU funds. 

Sources:  European Commission 2024 autumn forecasts 

This slightly contractionary fiscal stance is appropriate in 2025.  First, the contraction in 
current expenditure is consistent with the need to gradually improve the sustainability of the 
public finances in some Member States, after the period 2020-2023 when the normal operation 
of the EU fiscal rules was suspended by the activation of the general escape clause to address 
the impact of the COVID-19 crisis and the Russia’s war of aggression against Ukraine and the 
related energy crisis. Second, debt pressures will continue to increase due to inter alia ageing 
costs, the green and digital transition and defence, as well as the less favourable interest-growth 
differential,  which  all  create  a  need  for  future  additional  fiscal  space.  Third,  the  slight 
expansion in investment in 2025, continuing the trend since the pandemic, is consistent with 
the need to ensure sustainable and inclusive growth in the medium and long-term and with the 
focus  of  the  new  framework  on  incentivising  reforms  and  investment.  An  overall  slightly 
contractionary fiscal stance coupled with continued investment growth would also avoid any 
significant negative effect on aggregate economic activity in the euro area in the short term and 
also the longer term. 

The  slightly  contractionary  fiscal  stance  projected  in  the  euro  area  for  2025  would 
support the effort of monetary policy to ensure that inflation returns to target. In June 
2024, thanks to  falling  inflation, the ECB began lowering its deposit  facility rate – the rate 
through which the Governing Council steers the monetary policy stance – to 3.75%, after nine 
months of holding it steady at 4%. Since then, the ECB has further cut the deposit facility rate 
twice by 25 basis points, to the current 3.25%. The ECB stated that policy rates will remain 
sufficiently  restrictive  for  as  long  as  necessary  to  ensure  that  inflation  returns  to  the  2% 
medium-term target in  a timely manner. A slightly contractionary euro area fiscal stance in 
2025  would  thus  contribute  to  a  policy  mix  lowering  inflationary  pressures,  potentially 
providing room to the monetary authorities to further reduce interest rates in the future. This 
would have a positive effect on fiscal sustainability. 

(iii)  Member States’ fiscal situation 

20 

 
 
 
 
 
 
 
 
Deficit  and  debt  remain  very  diverse  in  the  euro  area,  in  particular  regarding  their 
compliance with the Treaty-based reference values. Four euro area Member States plan a 
budgetary deficit above 3% of GDP in 2025 (France, Italy, Malta, Slovakia), with Belgium and 
Austria also  projected to  be above 3% in  the Commission  forecast.  Turning to  public debt, 
eleven euro-area Member States are projected to have a debt ratio above 60% of GDP in 2025. 
Developments vary across countries, with the debt ratio increasing in more than half of euro 
area Member States, including in three of the five Member States with debt above 100% of 
GDP (Belgium, France and Italy). 

The fiscal stance is still projected to be very heterogeneous across Member States in 2025. 
This geographical heterogeneity has also been evident in 2024, when half of euro area Member 
States are projected to have an expansionary stance, despite an overall contractionary euro area 
stance. In 2025, one third of euro area Member States are expected to have an expansionary 
stance, compared with a contractionary stance in six, while it would be broadly neutral in the 
remainder of Member States. As expected, in the Member States with the largest adjustment 
needs under the new framework, the stance is projected to be contractionary. Thus, the fiscal 
stance will range from a contraction of 1½% to an expansion of 1¼% of GDP (Graph 5).  In 
terms of composition, nationally-financed current expenditure is projected to contract in the 
majority  of  Member  States.  The  contraction  is  driven  by  a  reduction  in  non-energy-related 
expenditure  in  most  countries  (and  the  phasing-out  of  remaining  energy  measures  in  some 
Member States).   

Graph 5:  Fiscal stance and components of euro area Member States, 2025 and 2024-25 (% of GDP) 

a)  2025 

21 

 
 
 
 
 
 
 
 
 
b) 2024-2025 cumulative 

(1) Nationally-financed investment includes the national co-financing of EU funds. 

Sources: European Commission 2024 autumn forecasts (AF2024)  

Public  investment  is  projected  to  increase  in  2025  in  almost  all  Member  States,  with 
varying contributions from national budgets and a significant impact of the RRF grants 
and EU funds in several Member States. According to the Commission’s forecast, overall 
investment  will  increase  in  all  but  three  euro  area  Member  States.  Nationally-financed 
investment is expected to make an expansionary contribution in half of the Member States in 
2025. In the countries where nationally-financed investment is contractionary, the absorption 
of  RRF  grants  and  other  EU  funds  is  expanding.  The  absorption  of  RRF  grants  is  set  to 
accelerate further in 2025, to 0.4% of GDP, making an expansionary contribution in almost all 
Member States, and the absorption of other EU funds is also accelerating. This will allow the 
EU  to  continue  to  finance  investment  projects  and  productivity-enhancing  reforms  while 
ensuring Member States can improve national fiscal sustainability.  

22 

 
 
 
 
 
 
 
 
ANNEX V: Re-assessment of Member States included in the Article 126(3) report of the 
Spring  2024  Package,  for  whom  the  Commission  concluded  not  to  propose  opening 
excessive deficit procedures 

•  Czechia: a deficit of 3.7% of GDP for 2023 and a planned deficit for 2024 equal to 
2.3% of GDP were notified in spring. As a result, Czechia was included in the Article 
126(3) report in spring. However, the deficit criterion was assessed as fulfilled in 2023 
due  to  the  mitigating  nature  of  the  relevant  factors.  The  excessive  deficit  procedure 
notification in autumn points to a deficit of 3.8% of GDP in 2023 and of 2.8% of GDP 
in 2024, denoting a marginal deterioration compared to spring. The relevant factors that 
were  considered  in  spring  appear  to  remain  applicable.  Moreover,  according  to  the 
Commission Autumn 2024 Forecast, the deficit is projected at 2.5% of GDP in 2024, 
at 2.3% of GDP in 2025 and at 1.9% of GDP in 2026. Overall, no substantive changes 
in  the  situation  of  Czechia  are  detected  in  autumn  compared  to  spring  and  the 
conclusion of the 126(3) Report in spring (namely, not to propose the opening of an 
excessive deficit procedure) is deemed as still pertinent for Czechia this autumn. 
•  Estonia: the excessive deficit procedure notification in spring pointed to a deficit of 
3.4% of GDP for 2023 and a planned deficit of 2.9% of GDP for 2024. As a result, 
Estonia was covered by the 126(3) Report in spring. The deficit in 2023 was assessed 
as close to the reference value, and the excess over the 3% reference value was assessed 
as  due  to  exceptional  circumstances.  Overall,  the  deficit  criterion  was  assessed  as 
fulfilled  due  to  the  mitigating  nature  of  the  relevant  factors.  The  excessive  deficit 
procedure  notification  in  autumn  reflects  a  substantive  improvement  compared  to 
spring  for  the  year  2023,  with  a  deficit  now  at  2.8%  of  GDP,  but  a  slightly  higher 
planned  deficit  for  2024,  at  3.0%  of  GDP.  In  its  press  release  of  22  October  2024, 
Eurostat expressed a reservation on the quality of data reported by Estonia for 2023. 
Eurostat is discussing with the Estonian statistical authorities the appropriate time of 
recording of military expenditure, impacting the deficit by around 0.4% of GDP. The 
relevant factors that were considered in spring appear to remain applicable. According 
to the Commission Autumn 2024 Forecast, the deficit is projected to remain at 3.0% of 
GDP in 2024, 2025 and 2026. Overall, the budgetary situation has improved compared 
to  spring,  since  no  breach  of  the  deficit-to-GDP  ratio  is  observed  in  2023  and  2024 
based on the autumn notification.  Therefore, the conclusion of the 126(3) Report in 
spring (namely, not to propose the opening of an excessive deficit procedure) is deemed 
as still pertinent for Estonia this autumn. 

•  Spain: the spring notification reported an actual deficit of 3.6% of GDP for 2023 and 
a planned deficit of 3.0% of GDP for 2024. As the Commission Spring 2024 Forecast 
pointed to a deficit of 3.0% of GDP in 2024 and of 2.8% of GDP in 2025, the 126(3) 
Report adopted in spring concluded that initiating an excessive deficit procedure at that 
stage would not serve a useful purpose. The excessive deficit procedure notification in 
autumn points to a deficit of 3.5% of GDP in 2023, and to a planned deficit of 3.0% of 
GDP in 2024, therefore not revealing any deterioration compared to the figures notified 
in spring. According to Commission Autumn 2024 Forecast, the deficit is projected at 
3.0% of GDP in 2024, 2.6% of GDP in 2025 and 2.7% of GDP in 2026. Overall, no 

23 

 
 
substantive changes in the situation of Spain are detected in autumn compared to spring 
and the conclusion of the 126(3) Report in spring (namely, not to propose the opening 
of an excessive deficit procedure) is deemed as still pertinent for Spain this autumn.  
•  Slovenia: In spring, Slovenia notified an actual deficit of 2.5% of GDP in 2023 and a 
planned deficit of 3.6% of GDP for 2024. However, due to the uncertainty surrounding 
planned data and considering that the Commission Spring 2024 Forecast pointed to a 
deficit  of  2.8%  of  GDP  in  2024,  it  was  decided  not  to  open  an  excessive  deficit 
procedure for Slovenia in spring. The excessive deficit procedure notification in autumn 
points to a 2023 deficit of 2.6% of GDP and an improvement of the planned deficit in 
2024  to  2.9%  of  GDP,  hence  below  the  reference  value.  According  to  Commission 
Autumn 2024 Forecast, the deficit is projected at 2.4% of GDP in 2024 and at 2.1% of 
GDP both in 2025 and 2026. Overall, the budgetary situation has improved compared 
to  spring,  since  no  breach  of  the  deficit-to-GDP  ratio  is  observed  in  2023  and  2024 
based on the autumn notification. As a result, the conclusion of the 126(3) Report in 
spring (namely, not to propose the opening of an excessive deficit procedure) is deemed 
as still pertinent for Slovenia this autumn. 

24 

 
 
 
 
 
ANNEX VI: Debt sustainability analysis and sensitivity analysis 

This  Annex  presents  a  sensitivity  analysis  of  public  debt  developments  to  possible 
macroeconomic shocks, as required by Article 7 of Regulation (EU) No 473/2013. Stochastic 
debt  projections  are  used  to  assess  the  possible  impact  on  public  debt  dynamics  of  risks  to 
nominal  GDP  growth,  financial  market  developments  and  fiscal  shocks  affecting  the 
government budgetary position (20). 

The stochastic projections account for macroeconomic uncertainty around one ‘central’ debt 
projection  scenario  in  2025-2029:  the  Commission  2024  autumn  forecast  scenario.  In  this 
scenario, the usual ‘no-fiscal policy change’ assumption is applied beyond the forecast horizon 
(21).  As  such,  this  scenario  does  not  include  the  fiscal  consolidation  commitments  in  the 
medium-term fiscal structural plans submitted by member States.   

Shocks are applied to the macroeconomic conditions assumed in the central scenario to obtain 
the distribution of possible debt paths (the ‘cone’ in the fan charts shown in Graph 6). The cone 
corresponds  to  a  wide  set  of  possible  macroeconomic  conditions,  with  up  to  10000  shocks 
simulated on growth, short- and long-term interest rates and the primary balance. The size and 
correlation  of  these  shocks  reflect  historical  volatility  and  relationships  between  these 
variables (22).  Therefore,  the  fan  charts  provide  probabilistic  information  on  euro  area  debt 
dynamics, taking into account the possible occurrence of shocks to growth, interest rates and 
the primary balance of a magnitude and correlation mirroring the past developments. 

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

The median debt for 2029 is estimated at 90% of GDP, i.e. there is an equal probability that 
debt will be higher or lower than that level. Moreover, the baseline points to a slight increase 
in  the debt  ratio over the next  five years  and the stochastic projections  suggest  with  a 57% 
probability that debt might actually be higher in 2029 than it was in 2024.  

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

21  The  Commission  2024  autumn  forecast  incorporates  fiscal  policy  measures  that  were  adopted  or  at  least 
credibility announced and information that was available as of 31 October 2024. Beyond 2026 (the last forecast 
year), the structural primary balance is only modified by the projected (net) costs of ageing.  

22 Shocks are assumed to follow a joint normal distribution. 

25 

 
 
 
 
 
 
 
 
Graph 6: Fan charts from stochastic debt projections around the Commission’s baseline scenario; euro 

area  

Note: the dashed line represents the median while the red line represents the baseline 

26 

p10p20p40p60p80p906070809010011020222023202420252026202720282029% of GDPMedianBaseline 
 
 
 
 
 
ANNEX VII: Tables of macro and fiscal indicators  

Note: Austria, Belgium, and Spain have not submitted Draft Budgetary Plans. 
Source: European Commission 2024 autumn forecasts (AF2024) 

27