REPORT FROM THE COMMISSION Bulgaria, Germany, Estonia, Latvia, Slovenia Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union
Date: 2026-06-03
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, 3.6.2026  COM(2026) 302 final  REPORT FROM THE COMMISSION Bulgaria, Germany, Estonia, Latvia, Slovenia  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 (TFEU) 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, the purpose of this report by the Commission is to 
identify  the  Member  States  for  which  compliance  with  the  deficit  criterion  and/or  the  debt 
criterion has to be examined and to provide this assessment.2 

The deficit criterion is fulfilled if the actual general government deficit for the previous year 
(2025) and planned deficit for the current year (2026) do not exceed the 3% of GDP reference 
value.  If  either  does,  the  Commission  examines  whether  the  deficit  ratio  has  declined 
substantially and continuously, and comes close to the reference value. The Commission also 
examines whether the deficit in excess over the reference value is exceptional and temporary, 
and  remains  close  to  the  reference  value.  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 based on the deficit criterion, if either i) the government debt does not exceed 
60% of GDP, or ii) if the debt exceeds 60% of GDP, the deficit is close to 3% of GDP and the 
excess over it is temporary.  

The debt criterion is fulfilled if the general government gross debt at the end of the previous 
year  (2025)  does  not  exceed  the  60%  of  GDP  reference  value.  If  it  does,  the  Commission 
examines whether the debt ratio is sufficiently diminishing and approaching the reference value 
at  a  satisfactory  pace.  In  Regulation  (EC)  No  1467/97,  the  latter  is  operationalised,  for  a 
Member State with a debt ratio exceeding 60% of GDP, through the respect of the maximum 
net  expenditure3  growth  rates  recommended  by  the  Council,4  with  upward  and  downward 
deviations tracked in a control account.5 If general government debt exceeds 60% of GDP, the 

1   OJ L 209, 2.8.1997 (ELI: http://data.europa.eu/eli/reg/1997/1467/2024-04-30) as last amended by Council 
Regulation  (EU)  2024/1264  of  29  April  2024  (OJ  L,  2024/1264,  30.4.2024).  The  report  also  takes  into 
account the “Specifications on the implementation of the Stability and Growth Pact and guidelines on the 
format  and  content  of  stability  and  convergence  programmes”,  adopted  by  the  Economic  and  Financial 
Committee on 1 December 2025, available at: https://economy-finance.ec.europa.eu/economic-governance-
framework/stability-and-growth-pact/legal-basis-stability-and-growth-pact_en. 

2   Member States subject to a Council Decision establishing an excessive deficit under Article 126(6) TFEU 
are not concerned by this report. The following Member States are in excessive deficit procedure: since April 
2020: Romania; since July 2024: Belgium, France, Hungary, Italy, Malta, Poland, Slovakia; since June 2025: 
Austria and since January 2026: Finland.  

4  

3    Article  2(2)  of  Regulation  (EU)  2024/1263  defines  'net  expenditure'  as  government  expenditure  net  of 
interest  expenditure,  discretionary  revenue  measures,  expenditure  on  programmes  of  the  Union  fully 
matched by revenue from Union funds, national expenditure on co-financing of programmes funded by the 
Union, cyclical elements of unemployment benefit expenditure, and one-off and other temporary measures. 
In accordance with Articles 17, 19 or 20 of 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). 
The  control  account  set  up  by  the  Commission  in  accordance  with  Article  22(2)  of  Regulation  (EU) 
2024/1263 records deviations of the observed net expenditure in a Member State from the recommended 
maximum net expenditure growth rates set by the Council. Upward deviations from the recommended net 
expenditure  path  are  registered  as  debits,  after  taking  into  account  escape  clauses  that  may  have  been 
activated. 

5  

1 

 
 
fiscal  position  is  not  ‘close  to  balance  or  in  surplus’6  and  the  debits  in  the  Member  State’s 
control account exceed 0.3% of GDP annually or 0.6% of GDP cumulatively, the Commission 
should prepare a report. In that report, 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 
based on the debt criterion for all concerned Member States. 

The  report  is  structured  as  follows.  Section  2  identifies  the  Member  States  for  which 
compliance with the deficit criterion must be examined (Bulgaria, Germany, Estonia, Latvia 
and Slovenia) and provides this assessment before the consideration of relevant factors. Section 
3 establishes that there are no Member States for which compliance with the debt criterion must 
be  examined.  Section  4  reviews  relevant  factors.  The  final  section  formulates  the  overall 
conclusions  on  compliance  with  the  deficit  and  debt  criteria.  The  format  of  this  report  − 
covering  all  concerned  Member  States  together,  as  in  previous  vintages  −  helps  in  the 
comparability of the different cases, while the case of each Member State is considered on its 
own merits. 

2. 

DEFICIT CRITERION 

For  the  assessment  of  the  deficit  criterion,  this  report  concerns  those  Member  States  (not 
currently in excessive deficit) for which the actual 2025 deficit ratio provided by Eurostat7 or 
the planned deficit ratio for 2026 reported to Eurostat in the spring 2026 fiscal notification8 
exceeds the reference value of 3% of GDP, or both. In the absence of data reported to Eurostat 
on  the  planned  deficit  for  2026,  the  source  is  the  Member  State’s  2026  Annual  Progress 
Report9. This is the case for Slovenia. Bulgaria did not report a planned deficit for 2026, neither 
to Eurostat, nor in its 2026 Annual Progress Report. In view of the Commission Spring 2026 
Forecast10 showing a 2026 deficit for Bulgaria well above the reference value, this report also 
provides an assessment of this projected deficit for 2026. 

The general government deficit in Bulgaria exceeded the 3% of GDP reference value in 2025, 
while Germany, Estonia, Latvia and Slovenia had government deficits below the 3% of GDP 
reference  value  in  2025,  but  plan  deficits  for  2026  exceeding  3%  of  GDP  (see  Table  1). 
Therefore, this report assesses compliance with the deficit criterion in  Bulgaria, Germany, 
Estonia,  Latvia  and  Slovenia.  For  each  of  these  Member  States,  the  following  paragraphs 
analyse the deficits in excess of the reference value in terms of closeness, temporariness and 
exceptionality. For this, the assessment considers the Commission Spring 2026 Forecast, with 
a cut-off date of 4 May 2026 (Table 1).  

In Bulgaria, the government deficit in 2025 stood at 3.5% of GDP. The Commission Spring 
2026 Forecast projects the 2026 deficit at 4.1% of GDP. The deficits in 2025 and 2026 are 
assessed as above and not close to the reference value. Based on the Commission Spring 2026 
Forecast,  the  government  deficit  in  Bulgaria  is  also  projected  to  continue  exceeding  the 

6   A fiscal position ‘close to balance or in surplus’ is defined as a general government deficit not exceeding 

7  

8  

9  

indicators  of  22  April  2026  https://ec.europa.eu/eurostat/web/products-euro-

0.5% of GDP, according to recital 14 in Council Regulation (EU) 2024/1264. 
See  Eurostat  Euro 
indicators/w/2-22042026-AP, in accordance with Article 14 of Council Regulation (EC) No 479/2009. 
The  complete  set  of  tables  reported  to  Eurostat  by  Member  States  is  available  at:  http://ec.europa.eu 
/eurostat/web/government-finance-statistics/excessive-deficit-procedure/edp-notification-tables. 
Planned 
figures  are  reported  by  Member  States  to  Eurostat,  based  on  their  most  recent  official  forecasts,  taking 
account of budgetary decisions and economic developments and prospects.  
The 2026 Annual Progress Reports are available on: https://economy-finance.ec.europa.eu/economic-and-
fiscal-governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en   

10   European Commission Spring 2026 Forecast (European Economy Institutional Paper 341, May 2026). 

2 

 
 
reference value in 2027. Therefore, the deficits in excess of the reference value are assessed to 
be not temporary. On 8 July 2025, the Council adopted a Recommendation11 under Article 26 
of Regulation 2024/1263 (national escape clause) for Bulgaria12. This Recommendation allows 
Bulgaria to temporarily deviate from the maximum growth rates of net expenditure as set by 
the Council to accommodate the increase in defence spending13, by up to 1.5% of GDP over 
the  period  2025  to  2028  compared  to  the  reference  year  2024.  The  Recommendation 
documented the exceptional circumstances outside the control of the government with a major 
impact on public finances underpinning the increase in defence spending. The deficit in excess 
of the reference value in 2025 is fully explained by an increase in defence spending since the 
reference year14, while this is not the case for the projected deficit in excess of the reference 
value for 2026. Overall, while the deficit in excess of the reference value in 2025 is assessed 
as exceptional, the deficit in excess of the reference value in 2026 is assessed as not exceptional. 

For Germany, the planned deficit for 2026 is 4.2% of GDP. The Commission Spring 2026 
Forecast projects the deficit at 3.7%. The planned deficit in 2026 is therefore assessed as above 
and  not  close  to  the  reference  value.  Based  on  the  Commission  Spring  2026  Forecast,  the 
government deficit in Germany is projected to continue exceeding the reference value in 2027. 
Therefore, the planned deficit in excess of the reference value is assessed to be not temporary. 
On 10 October 2025, the Council adopted a Recommendation15 under Article 26 of Regulation 
2024/1263 (national escape clause) for Germany. This Recommendation allows Germany to 
temporarily deviate from the maximum growth rates of net expenditure as set by the Council 
to accommodate the increase in defence spending, by up to 1.5% of GDP over the period 2025 
to  2028  compared  to  the  reference  year  2021.  The  Recommendation  documented  the 
exceptional circumstances outside the control of the government with a major impact on public 
finances underpinning the increase in defence spending. The deficit in excess of the reference 
value in 2026 is fully explained by an increase in defence spending since the reference year16. 
In  view  of  this,  the  planned  deficit  in  excess  of  the  reference  value  in  2026  is  assessed  as 
exceptional. 

For  Estonia,  the  planned  deficit  for  2026  reported  to  Eurostat  is  4.5%  of  GDP,  which  was 
revised to 4.3% of GDP in its 2026 Annual Progress Report. The Commission Spring 2026 
Forecast  projects  the deficit  ratio at  4.5% of GDP. The planned deficit in  2026 is  therefore 
assessed as above and not close to the reference value. Based on the Commission Spring 2026 
Forecast, the government deficit in  Estonia is projected to continue exceeding the reference 

11   Council Recommendation of 8 July 2025 allowing Bulgaria to deviate from the maximum growth rates of 
net expenditure as set by the Council under Regulation (EU) 2024/1263 (Activation of the national escape 
clause), (OJ C, C/2025/3961, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3961/oj). 

12   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 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. 

13   The  defence  spending  relevant  to  the  assessment  of  compliance  is  the  nationally  financed  defence 

expenditure as defined in the Classification of the functions of government (COFOG 02). 

14   According to the Commission Spring 2026 Forecast, defence spending in Bulgaria was at 1.9% in 2025 and 
projected to remain at that level in 2026. This is an increase by 0.6 pps. of GDP compared to 2024.  
15   Council Recommendation of 10 October 2025 endorsing the national medium-term fiscal-structural plan of 
Germany and allowing Germany to deviate from the maximum growth rates of net expenditure as set by the 
Council under Regulation (EU) 2024/1263 (Activation of the national escape clause), (OJ C, C/2025/5635, 
ELI: http://data.europa.eu/eli/C/2025/5635/oj). 

16  According to the Commission Spring 2026 Forecast, defence spending in Germany is projected at 1.9% in 

2026. This is an increase by 0.8 pps. of GDP compared to 2021.  

3 

 
 
value in 2027. Therefore, the planned deficit in excess of the reference value is assessed to be 
not temporary. On 8 July 2025, the Council adopted a Recommendation17 under Article 26 of 
Regulation  2024/1263  (national  escape  clause)  for  Estonia.  This  Recommendation  allows 
Estonia to temporarily deviate from the maximum growth rates of net expenditure as set by the 
Council to accommodate the increase in defence spending, by up to 1.5% of GDP over the 
period 2025 to 2028 compared to the reference year 2021. The Recommendation documented 
the exceptional circumstances outside the control of the government with a major impact on 
public  finances  underpinning  the  increase  in  defence  spending.  The  deficit  in  excess  of  the 
reference value in 2026 is fully explained by an increase in defence spending (capped at 1.5% 
of  GDP  in  line  with  the  maximum  flexibility  under  the  national  escape  clause)  since  the 
reference year18. In view of this, the planned excess over the reference value in 2026 is assessed 
as  exceptional. Note  that the projected large increase in  the deficit in  Estonia from  2025 to 
2026 is only partially related to the increase in defence spending in 2026. Most of the increase 
in defence spending in Estonia took place in previous years. 

For  Latvia,  the  planned  deficit  for  2026  reported  to  Eurostat  is  3.3%  of  GDP,  which  was 
revised to 3.0% of GDP in its 2026 Annual Progress Report. The Commission Spring 2026 
Forecast projects the deficit at 3.3% of GDP. The planned deficit in 2026 is therefore assessed 
as above but close to the reference value. Based on the Commission Spring 2026 Forecast, the 
government deficit in Latvia is projected to continue exceeding the reference value in 2027. 
Therefore, the planned deficit in excess of the reference value is assessed to be not temporary. 
On  8  July  2025,  the  Council  adopted  a  Recommendation19  under  Article  26  of  Regulation 
2024/1263  (national  escape  clause)  for  Latvia.  This  Recommendation  allows  Latvia  to 
temporarily deviate from the maximum growth rates of net expenditure as set by the Council 
to accommodate the increase in defence spending, by up to 1.5% of GDP over the period 2025 
to  2028  compared  to  the  reference  year  2021.  The  Recommendation  documented  the 
exceptional circumstances outside the control of the government with a major impact on public 
finances underpinning the increase in defence spending. The deficit in excess of the reference 
value in 2026 is fully explained by an increase in defence spending (capped at 1.5% of GDP in 
line with the maximum flexibility under the national escape clause) since the reference year20. 
In view of this, the planned excess over the reference value in 2026 is assessed as exceptional. 

For  Slovenia,  the  planned  deficit  for  2026  is  3.4%  of  GDP.  The  Commission  Spring  2026 
Forecast projects the deficit at 3.3%. The planned deficit in 2026 is therefore assessed as above 
but  close  to  the  reference  value.  Based  on  the  Commission  Spring  2026  Forecast,  the 
government deficit in Slovenia is projected to continue exceeding the reference value in 2027. 
Therefore, the planned deficit in excess of the reference value is assessed to be not temporary. 
On  8  July  2025,  the  Council  adopted  a  Recommendation21  under  Article  26  of  Regulation 
2024/1263 (national escape clause) for Slovenia. This Recommendation allowed Slovenia to 

17   Council Recommendation of 8 July 2025 allowing Estonia to deviate from the maximum growth rates of net 
expenditure  as  set  by  the  Council  under  Regulation  (EU)  2024/1263  (Activation  of  the  national  escape 
clause), (OJ C, C/2025/3964, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3964/oj). 

18   According to the Commission Spring 2026 Forecast, defence spending in Estonia is projected at 4.6% in 

2026. This is an increase by 2.5 pps. of GDP compared to 2021.  

19   Council Recommendation of 8 July 2025 allowing Latvia to deviate from the maximum growth rates of net 
expenditure  as  set  by  the  Council  under  Regulation  (EU)  2024/1263  (Activation  of  the  national  escape 
clause), (OJ C, C/2025/3970, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3970/oj). 

20   According to the Commission Spring 2026 Forecast, defence spending in Latvia is projected at 4.1% in 2026. 

This is an increase by 1.7 pps. of GDP compared to 2021.  

21   Council Recommendation of 8 July 2025 allowing Slovenia to deviate from the maximum growth rates of 
net expenditure as set by the Council under Regulation (EU) 2024/1263 (Activation of the national escape 
clause), (OJ C, C/2025/3973, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3973/oj). 

4 

 
 
temporarily deviate from the maximum growth rates of net expenditure as set by the Council 
to accommodate the increase in defence spending, by up to 1.5% of GDP over the period 2025 
to  2028  compared  to  the  reference  year  2021.  The  Recommendation  documented  the 
exceptional circumstances outside the control of the government with a major impact on public 
finances underpinning the increase in defence spending. The deficit in excess of the reference 
value in 2026 is fully explained by an increase in defence spending since to the reference year22. 
In view of this, the planned excess over the reference value in 2026 is assessed as exceptional. 

In sum, this analysis − of whether the deficit remains close to the reference value as well as 
whether the deficit in excess is exceptional and temporary − suggests that the deficit criterion 
is  not  fulfilled,  before  the  consideration  of  the  relevant  factors,  by  Bulgaria,  Germany, 
Estonia, Latvia and Slovenia.  

22   According to the Commission Spring 2026 Forecast, defence spending in Slovenia is projected at 1.6% in 

2026. This is an increase by 0.5 pps. of GDP compared to 2021.  

5 

 
 
Table 1 - General government balance 

Percentage of 
GDP 

Data 
provided by 
Eurostat 
2025  

April 2026 EDP 
notification 

Commission Spring 2026 Forecast 

2026 

2026 

2027 

Member States for which compliance with the deficit criterion has to be further discussed  
Bulgaria 
Germany 
Estonia 
Latvia 
Slovenia 

− a 
-4.2 
-4.5 
-3.3 
-3.4a 

-3.5 
-2.7 
-2.0 
-2.5 
-2.5 

-4.1 
-3.7 
-4.5 
-3.3 
-3.3 

-4.3 
-4.1 
-4.8 
-4.3 
-3.5  

Member States for which compliance with the deficit criterion is not discussed in this report 
Czechia 
Denmark 
Ireland 
Greece 
Spain 
Croatia 
Cyprus 
Lithuania 
Luxembourg 
Netherlands 
Portugal 
Sweden 
Source: Eurostat (data for 2025), April 2026 EDP notification and Commission Spring 2026 Forecast (data for 2026 and 

-2.6 
0.7 
1.0 
-0.2 
-2.1 
-2.9 
1.8 
-2.7 
-1.2 
-2.5 
0.1 
-2.6 

-2.1 
2.9 
1.8 
1.7 
-2.4 
-3.0 
3.4 
-1.8 
-2.0 
-1.6 
0.7 
-1.3 

-2.8 
0.9 
1.4 
0.8 
-2.4 
-2.9 
2.1 
-2.2 
-1.2 
-2.5 
-0.1 
-2.8 

-2.9 
0.5 
1.2 
0.6 
-2.0 
-2.7 
2.5 
-2.7 
-1.5 
-1.9 
-0.4 
-2.5 

2027). 

Note:  Bold indicates that a deficit figure exceeds the reference value of 3% of GDP. The following Member States are in 
excessive  deficit  procedure  and  therefore  not  covered  in  the  table:  since  April  2020:  Romania;  since  July  2024: 
Belgium, France, Hungary, Italy, Malta, Poland, Slovakia; since June 2025: Austria and since January 2026: Finland. 
(a) In the absence of data reported to Eurostat on the planned deficit for 2026 (in the context of the April 2026 EDP 
notification), the source is the Member State’s 2026 Annual Progress Report. This is the case for Slovenia. Bulgaria 
reported a planned deficit for 2026 neither to Eurostat nor in its 2026 Annual Progress Report.  

6 

 
 
 
 
 
3. 

DEBT CRITERION 

For the assessment of the debt criterion, this report should discuss those Member States (not 
currently in excessive deficit) where:  

• 

the  actual  general  government  gross  debt  ratio-to-GDP,  as  provided  by  Eurostat,23 
exceeded the reference value of 60% of GDP at the end of 2025, 

•  and the actual deficit in 2025, as also provided by Eurostat, exceeded 0.5% of GDP, 
which corresponds to a budgetary position that cannot be considered as ‘close to balance 
or in surplus’ 

•  and, based on the Commission’s calculations24, the control account for 2025 shows a 
debit exceeding the threshold of 0.3% of GDP annually and/or the threshold of 0.6% of 
GDP cumulatively.  

The corresponding data are shown in Table 2. At end of 2025, the general government gross 
debt ratio exceeded the reference value in Germany, Greece, Spain, Portugal and Slovenia.  

Greece and Portugal have budgetary surpluses. Therefore, this report does not further consider 
the debt criterion for these two Member States, as it is considered to be fulfilled. 

Based on the Commission’s calculations, for Germany, the control account for 2025 recorded 
credits, in annual and cumulative terms. Therefore, this report does not further consider the 
debt criterion for Germany, as it is considered to be fulfilled. 

For  Spain  and  Slovenia,  the  control  accounts  in  2025  recorded  deviations  that  exceed  the 
annual  threshold,  based  on  the  Commission’s  calculations  (their  debits  remained  below  the 
threshold in cumulative terms). However, Slovenia benefits from the national escape clause to 
accommodate higher defence expenditure during the period 2025-202825. Meanwhile, on 22 
May 2026, the Commission recommended the Council to activate the national escape clause 
for Spain, following a positive assessment of Spain's request of 13 April 2026, to accommodate 
the  increase  in  defence  expenditure  during  the  period  2025-202826.  Taking  into  account  the 
national escape clause for Slovenia and assuming that the Council will activate the national 
escape clause for Spain, the augmented control accounts27 recorded either a credit (Spain) or a 
debit  within  the  0.6%  of  GDP  threshold  (Slovenia).  Therefore,  this  report  does  not  further 
consider the debt criterion for these two Member States, as it is considered to be fulfilled. 

In sum, there are no Member States for which compliance with  the debt  criterion has to  be 
further examined in this report. 

23   See Eurostat Euro indicators of 22 April 2026 https://ec.europa.eu/eurostat/web/products-euro-

indicators/w/2-22042026-ap  

24   Fiscal Statistical Tables providing background data relevant for the assessment of the budgetary policies of 

the Member States, SWD(2026)200 final, Brussels  3.6.2026. 

25   Council Recommendation of 8 July 2025 allowing Slovenia to deviate from the maximum growth rates of 
net expenditure as set by the Council under Regulation (EU) 2024/1263 (Activation of the national escape 
clause), (OJ C, C/2025/3973, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3973/oj). 

26   Commission Recommendation for a Council Recommendation allowing Spain to deviate from the maximum 
growth rates of net expenditure as set by the Council under Regulation (EU) 2024/1263 (activation of the 
national escape clause), 22.5.2026, COM(2026)262 final. 

27   For Member States benefitting from the national escape clause to accommodate higher defence spending, 
actual deviations from the maximum growth rates of net expenditure set by the Council that are allowed 
under the national escape clause are not to be recorded as debits in their control account. The augmented 
control account excludes the deviations due to increases in defence  spending that benefit from flexibility 
under the national escape clause, and the remaining deviation is assessed against the threshold of 0.6% of 
GDP cumulatively. 

7 

 
 
Table 2 – Identification of Member States for further assessment of the debt criterion  

Recorded deviations1 of net expenditure 
growth in 2025 in the control account2 

General 
government 
balance in 2025 

General 
government debt 
at end-2025 

Percentage 
of GDP 

Annual 
deviation 

Cumulated 
deviation 

Cumulated 
deviation 
(augmented 
control account3) 
Member States with debt ratio exceeding 60% of GDP for which compliance with the debt criterion 
is not to be discussed in this report 
Germany4 
Greece4 
Spain4 
Portugal4 
Slovenia4 

63.5 
146.1 
100.7 
89.7 
65.7 

-0.3 
-1.3 
0.1 
0.4 
0.5 

-2.7 
1.7 
-2.4 
0.7 
-2.5 

-0.3 
-0.3 
0.4 
0.2 
1.4 

-0.7 
-1.5 
-0.1 
0.4 
0.3 

Member States with debt ratio below 60% of GDP 
Bulgaria4 
29.9 
Czechia4 
44.3 
Denmark4 
27.9 
Estonia4 
24.1 
32.9 
Ireland 
Croatia4 
56.3 
55.0 
Cyprus 
Latvia4 
46.9 
Lithuania4 
39.5 
26.5 
Luxembourg 
44.4 
Netherlands 
Sweden 
35.1 
Source: Eurostat and Fiscal Statistical Tables providing background data relevant for the assessment of the budgetary 

1.4 
-1.7 
-1.6 
-2.9 
 n.a.6 
0.9 
 n.a.6 
-2.6 
0.3 
 n.a.6 
 n.a.6 
n.a.6 

2.1 
-1.4 
-0.6 
-1.4 
-0.15 
1.4 
1.0 
-1.9 
1.5 
0.6 
1.05 
-1.1 

-3.5 
-2.1 
2.9 
-2.0 
1.8 
-3.0 
3.4 
-2.5 
-1.8 
-2.0 
-1.6 
-1.3 

2.1 
0.2 
1.0 
-2.0 
0.35 
1.8 
1.3 
-0.4 
1.5 
1.3 
1.55 
-0.9 

policies of the Member States, SWD(2026)200 final, Brussels 3.6.2026. 

Note:  Bold figures denote that the relevant condition for examination of compliance  with the debt criterion in the 
present report as described in Section 3 is met. The following Member States are in excessive deficit procedure 
and  are  therefore  not  covered  in  the  table:  since  April  2020:  Romania;  since  July  2024:  Belgium,  France, 
Hungary,  Italy,  Malta,  Poland,  Slovakia;  since  June  2025:  Austria  and  since  January  2026:  Finland.  (1)  A 
positive deviation indicates net expenditure growth exceeding the Member State’s Council recommendation. (2) 
See the Fiscal Statistical Tables (SWD(2026)200 final) for a detailed explanation of the control account and the 
augmented  control  account.  (3)  The  augmented  control  account  excludes  the  deviations  due  to  increases  in 
defence expenditure that benefit from flexibility under the national escape clause. (4) Member State benefitting 
from  flexibility  provided  by  the  national  escape  clause.  This  is  assumed  to  extend  to  Spain,  for  which  the 
Commission on 22 May 2026 recommended to the Council to activate the national escape clause on defence. 
(5) For Ireland and the Netherlands, deviations based on the maximum annual and cumulative net expenditure 
growth rates established by the Member State’s Council Recommendations of 21 January 2025, which remain 
valid for the year 2025. (6) Not applicable for Member States for which the national escape clause has neither 
been activated nor recommended by the Commission to be activated. 

8 

 
 
 
 
4. 

RELEVANT  FACTORS  WHEN  ASSESSING  COMPLIANCE  WITH  THE  DEFICIT 
AND DEBT CRITERIA 

Article 126(3) TFEU 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 developments in 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  developments  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 progress in 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;” and 

e)  “the increase of government investment in defence, where applicable, considering also 
the time of recording of military equipment expenditure.” 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 also provides that “any other factors which, in the 
opinion  of  the  Member  State  concerned,  are  relevant  in  order  to  comprehensively  assess 
compliance with the deficit and debt criteria and which the Member State has put forward to 
the Council and the Commission” need to be given due consideration in this report. 

Furthermore, in accordance with Article 2(4) of Regulation (EC) No 1467/97, the presence of 
substantial public debt challenges is a key aggravating factor. Favourable cyclical economic, 
budgetary  and  financial  developments  shall  not  be  considered  as  mitigating  factors,  while 
unfavourable developments may be considered as mitigating factors.   

In  line  with  the  spirit  of  the  new  governance  framework,  the  Commission  considers  that 
deviations from the maximum recommended growth rates (point b) above), especially when 
exceeding at least one of the thresholds (of 0.3% and 0.6% of GDP in annual and cumulative 
terms, respectively), constitute a particularly important relevant factor. 

Article 2(4) of Council Regulation (EC) No 1467/97 further 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  based  on  the  deficit  criterion  (i.e.  under 
Articles 126(5) and 126(6) TFEU) only when: 

9 

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

By contrast, relevant factors should always be taken into account in the steps leading to the 
decision on the existence of an excessive deficit based on the debt criterion (i.e. under Articles 
126(5) and 126(6) TFEU) for all concerned Member States.  

Considering the Member States covered by this report’s examination of the deficit criterion, 
the  2025  debt-to-GDP  ratio,  as  shown  in  Table  2,  does  not  exceed  the  reference  value  in 
Bulgaria,  Estonia and  Latvia. Therefore,  for  these Member States, 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 based on the deficit criterion.  

For Germany and Slovenia, the 2025 debt-to-GDP ratio exceeds the 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 based on the deficit criterion.   

In line with established practice, the relevant factors are, however, presented below even for 
the Member States where they 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 on the basis of the 
deficit  criterion.  It  should  be  noted  in  this  regard  that  Article  2(6)  of  Regulation  (EC)  No 
1467/97 states that, if the Council decides that an excessive deficit exists in a Member State 
under Article 126(6) TFEU, the relevant factors referred to in Article 126(3) TFEU shall be 
taken  into  account  in  the  subsequent  steps  under  the  excessive  deficit  procedure28,  for  all 
concerned Member States. 

While  the  country-specific  sections  below  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 details on the macroeconomic and fiscal outlook can be 
found in the Commission Spring 2026 Forecast29. 

28   But not for a decision under Article 126(12) to abrogate decisions under the excessive deficit procedure. 
29   For further information regarding the fiscal outlook, see also the 2026 Country Reports, as well as the Fiscal 

Statistical Tables SWD(2026)200 published by the Commission on 3 June 2026. 

10 

 
 
 
 
4.1. 

Bulgaria 

For Bulgaria, relevant factors can be considered by the Council and the Commission in the 
steps leading to the decision on the existence of an excessive deficit.  

Medium-term macroeconomic position.  Real GDP increased by 3.4% in 2024. Real GDP 
increased  further  by  3.1%  in  2025,  mainly  driven  by  strong  domestic  demand.  Economic 
growth is projected at 2.5% in 2026 and 2.2% in 2027. Growth in 2026 is projected to be mainly 
driven by continued growth in domestic demand components. HICP inflation increased from 
2.6% in 2024 to 3.5% in 2025 and is projected at 4.2% in 2026 and 2.6% in 2027, mainly driven 
by high food (in 2025) and energy prices (in 2026), and persistent services inflation. 

Medium-term  budgetary  position,  including  investment.  Bulgaria’s  general  government 
deficit  increased  from  3.0%  of  GDP  in  2024  to  3.5%  in  2025,  which  mainly  reflects  the 
increases in public sector salaries, notably in the areas of defence and security, increases in 
social  spending,  including  automatic  pensions  indexations,  and  investment  grants  in  the 
Bulgarian Energy Holding. Government investment stood at 3.2% of GDP in 2024 (of which 
2.8% of GDP is nationally financed) and increased to 4.5% in 2025 (of which 3.1% of GDP is 
nationally financed). Based on Commission estimates, the fiscal stance30, which includes both 
nationally and EU financed expenditure, was expansionary, by 2.3% of GDP, in 2025. Growth 
in  nationally financed primary expenditure  (net  of discretionary  revenue  measures) in  2025 
provided an expansionary contribution to the fiscal stance, amounting to 0.7% of GDP. 

The Commission Spring 2026 Forecast projects a general government deficit of 4.1% of GDP 
in  2026 and  4.3% in  2027.  The increases in  2026 and in  2027 mainly  reflect  the  continued 
structural increases in public sector wages and social benefits in the absence of compensatory 
measures. Government investment is projected to decrease to 4.4% of GDP in 2026 (of which 
2.1%  of  GDP  is  nationally  financed)  and  then  4.0%  in  2027  (of  which  2.8%  of  GDP  is 
nationally  financed).  Based  on  Commission  estimates,  the  fiscal  stance  is  projected  to  be 
expansionary, by 1.0% of GDP, in 2026. Growth in nationally financed primary expenditure in 
2026 is projected to provide an expansionary contribution to the fiscal stance, amounting to 
0.3% of GDP.  

Based on the Commission’s calculations31, net expenditure in Bulgaria grew by 12.3% in 2025. 
The  net  expenditure  growth  in  2025  is  above  the  recommended  maximum  growth  rate32, 
corresponding  to  a  deviation  of  2.1%  of  GDP  in  annual  terms.  Taking  into  account  the 
flexibility  for  higher  defence  spending  provided  for  by  the  national  escape  clause33,  the 
cumulative deviation of net expenditure reduces to 1.4% of GDP.  

In 2026, net expenditure in Bulgaria is projected to grow by 5.5%, and 18.5% cumulatively 
over 2025 and 2026. The projected net expenditure growth in 2026 is above the recommended 

30 

The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of the 
general government. It 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 fiscal stance is measured as the 
difference between (i) the medium-term potential growth and (ii) the change in primary expenditure net of 
discretionary revenue measures and including expenditure financed by non-repayable support (grants) from 
the Recovery and Resilience Facility and other Union funds. 

31   Fiscal Statistical Tables providing background data relevant for the assessment of the budgetary policies of 

the Member States, SWD(2026)200 final, Brussels 3.6.2026. 

32   Council Recommendation of 20 June 2025 endorsing the medium-term fiscal-structural plan of Bulgaria, OJ 

C, C/2025/3700, 20.08.2025. ELI:  http://data.europa.eu/eli/C/2025/3700/oj.  

33   Council Recommendation of 8 July 2025 allowing Bulgaria to deviate from the maximum growth rates of 
net expenditure as set by the Council under Regulation (EU) 2024/1263 (Activation of the national escape 
clause), OJ C, C/2025/3961, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3961/oj. 

11 

 
 
maximum growth rate, corresponding to a deviation of 0.2% of GDP in annual terms. When 
considering 2025 and 2026 together, the projected cumulative growth rate of net expenditure 
is also above the recommended maximum growth rate, corresponding to a deviation of 2.2% 
of GDP in cumulative terms. Taking into account the flexibility for higher defence spending 
provided for by the national escape clause, considering 2025 and 2026 together, the projected 
cumulative deviation of net expenditure reduces to 1.6% of GDP. 

As mentioned above, the Commission regards deviations from the  maximum recommended 
net expenditure growth (after considering the national escape clause) above the threshold as a 
particularly important relevant factor. 

Debt challenges and medium-term debt position. Government debt in  Bulgaria increased 
from 23.8% of GDP at the end of 2024 to 29.9% of GDP at the end of 2025. The debt-to-GDP 
ratio is projected to increase further to 32.3% of GDP at the end of 2026 and 35.5% at the end 
of 2027.  
Overall, the debt sustainability analysis indicates medium risks over the medium term.34 The 
debt ratio in the baseline of the sustainability analysis under unchanged policies is projected to 
increase  steadily,  and  the  debt  trajectory  is  sensitive  to  adverse  macroeconomic  shocks. 
According to the stochastic projections, which simulate a large range of possible temporary 
shocks to macroeconomic variables, there is a medium likelihood that the debt ratio in 2030 
will be higher than in 2025. 

Other factors need to be taken into account for an overall assessment of debt sustainability. 
Risk-increasing factors are related to (i) the slightly increasing share of government debt held 
by non-residents and (ii) the share of non-performing loans in the Bulgarian banking sector that 
remains above the euro area average in a context of a high level of capitalization of the banking 
sector. Risk-mitigating factors are related to (i) the low share of short-term government debt 
and (ii) the small amount of general government contingent liabilities.  

Implementation of reforms and investment. Structural reforms and investments under the 
Recovery and Resilience Facility (RRF) are expected to have a positive impact on GDP growth 
in the coming years. The implementation of reforms and investments included in the RRP is 
underway and the final milestones and targets must be completed to ensure a full disbursement 
of the allocated RRF financing. This requires a final focused effort to ensure the deadline of 31 
August 2026 for milestone and target completion is met.  

National  budgetary  framework.  Bulgaria has a complex system  of  national  fiscal  rules in 
place. Several rules target the same budgetary aggregates but the fact that they are expressed 
according to  different  accounting standards (accrual  and cash-based) may create conflicting 
messages.  The  strength  of  its  medium-term  budgetary  framework  is  in  line  with  the  EU 
average. While the Fiscal Council of Bulgaria has so far had a relatively narrow mandate, its 
role  is  about  to  be  broadened  following  euro  accession  and  the  transposition  into  national 
legislation  of  the  Budgetary  Frameworks  Directive  EU/2024/1265.  Finally,  reforms  are 
underway  to  improve  the  planning,  selection  and  budgeting  of  nationally  funded  public 
investments (see Annex 2 of the 2026 Country Report for Bulgaria). 

Increase  in  government  investment  in  defence.  Based  on  data  collected  by  Eurostat, 
nationally  financed  government  expenditure  on  defence35  in  Bulgaria  amounted  to  1.9%  of 

34   Debt Sustainability Monitor 2025 (European Economy Institutional Paper 332, February 2026) based on the 

Commission Autumn 2025 Forecast. 

35   Nationally-financed defence expenditure as defined in the International Classification of the Functions of 
Government (COFOG) in the framework of the European System of National Accounts (ESA2010). 

12 

 
 
GDP in 2025. Of this, government investment in defence represented 0.5% of GDP in 2025, 
which was 0.4 percentage point higher than in 2024.  

The  Commission  Spring  2026  Forecast  projects  government  expenditure  on  defence  in 
Bulgaria to amount to 1.9% of GDP in 2026 and 2.2% of GDP in 2027. Of this, government 
investment  in  defence  is  projected  to  represent  0.4%  of  GDP  in  2026,  which  would  be  0.1 
percentage point lower than in 2025, and projected to then increase in 2027 by 0.3 percentage 
point to 0.7%. 

Other  factors  put  forward  by  the  Member  State.  On  7  May  2026,  Bulgaria  put  forward 
additional factors not mentioned above. Bulgaria notably refers to the delayed adoption of the 
budget for 2025 in view of the political situation and to lower-than-expected revenues in 2025. 
The latter reflected adverse external developments (although domestic developments remained 
supportive of fiscal performance) as well as delays in the implementation of planned measures 
to improve revenue collection and reduce the shadow economy.  

13 

 
 
 
 
4.2. 

Germany 

For Germany, relevant factors cannot be considered by the Council and the Commission in the 
steps leading to the decision on the existence of an excessive deficit.  

Medium-term  macroeconomic  position.  Real  GDP  decreased  by  0.5%  in  2024  and  then 
increased by 0.2% in 2025, mainly driven by a strong positive growth contribution of private 
consumption  which  was  offset  by  a  strong  negative  growth  contribution  by  net  exports. 
Economic growth is projected at 0.6% in 2026 and 0.9% in 2027. Growth in 2026 is projected 
to  be  mainly  driven by  domestic demand, as  public spending  (including public investment) 
ramps up and private consumption grows despite current geopolitical tensions and the inflation 
shock, as confidence is expected to improve again over time. HICP inflation decreased from 
2.5% in 2024 to 2.3% in 2025 and is projected at 2.9% in 2026 and 2.7% in 2027, mainly driven 
by strong energy inflation in 2026 resulting from the conflict in the Middle East and subsequent 
normalisation in 2027. 

Medium-term  budgetary  position,  including  investment.  Germany’s  general  government 
deficit stood at 2.7% of GDP in 2024 and 2025. Government investment stood at 3.1% of GDP 
in 2024 (of which 2.9% of GDP is nationally financed) and increased slightly to 3.3% in 2025 
(of which  3.1% of GDP  is  nationally financed).  Based on Commission  estimates, the fiscal 
stance, which includes both nationally and EU financed expenditure, was  broadly neutral in 
2025.  Growth  in  nationally  financed  primary  expenditure  (net  of  discretionary  revenue 
measures) in 2025 provided a broadly neutral contribution to the fiscal stance. 

The Commission Spring 2026 Forecast projects a general government deficit of 3.7% of GDP 
in  2026  and  4.1%  in  2027.  The  increase  in  2026  and  2027  mainly  reflects  an  increase  in 
infrastructure  and  defence-related  spending  and  revenue-decreasing  tax  relief  measures. 
Government investment is projected to increase to 3.5% and 3.7% of GDP in 2026 and 2027, 
respectively,  of  which  3.3%  of  GDP  and  3.6%  of  GDP  is  nationally  financed.  Based  on 
Commission estimates, the fiscal stance is projected to be expansionary, by 1.3% of GDP, in 
2026. Growth in nationally financed primary expenditure in 2026 is projected to provide an 
expansionary contribution to the fiscal stance, amounting to 1.3% of GDP. 

Based on the Commission’s calculations36, net expenditure in Germany grew by 3.8% in 2025. 
Net expenditure growth in 2025 is below the recommended maximum growth rate.37  

In 2026, net expenditure in Germany is projected to grow by  5.6%, and 9.7% cumulatively 
over 2025 and 2026. The projected net expenditure growth in 2026 is above the recommended 
maximum growth rate, corresponding to a deviation of 0.5% of GDP in annual terms. When 
considering 2025 and 2026 together, the projected cumulative growth rate of net expenditure 
is also above the recommended maximum growth rate corresponding to a deviation of 0.3% of 
GDP  in  cumulative  terms.  However,  the  projected  deviation  is  within  the  flexibility  of  the 
national escape clause based on current projections for defence spending. 

Debt challenges and medium-term debt position. Government debt in Germany increased 
from 62.2% of GDP at the end of 2024 to 63.5% of GDP at the end of 2025. The debt-to-GDP 

36   Fiscal Statistical Tables providing background data relevant for the assessment of the budgetary policies of 

the Member States, SWD(2026)200 final, Brussels 3.6.2026. 

37   Council Recommendation of 10 October 2025 endorsing the medium-term fiscal-structural plan of Germany 
and allowing Germany to deviate from the maximum growth rates of net expenditure as set by the Council 
under  Regulation  (EU)  2024/1263  (Activation  of  the  national  escape  clause),  OJ  C,  C/2025/5635, 
22.10.2025, ELI: http://data.europa.eu/eli/C/2025/5635/oj.  

14 

 
 
ratio is projected to increase further to 65.8% of GDP at the end of 2026 and 68.0% at the end 
of 2027.  
Overall, the debt sustainability analysis indicates high risks over the medium term.38 The debt 
ratio  in  the  baseline  of  the  sustainability  analysis  under  unchanged  policies  is  projected  to 
increase  steadily,  and  the  debt  trajectory  is  sensitive  to  adverse  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 2030 will 
be higher than in 2025. 

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the one hand, risk-increasing factors include a potential additional debt uptake (beyond the one 
included in the DSA baseline) allowed by (i) the reform of the debt brake and (ii) the creation 
of the special fund for infrastructure and climate neutrality. 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, a low share of public debt held in foreign 
currency, and Germany’s positive net international investment position.  

As mentioned above, the presence of substantial public debt challenges is a key aggravating 
relevant factor.  

Implementation of reforms and investment. The Council recommendation  on 10 October 
2025 endorsing the medium-term plan of Germany specifies the set of reforms and investments 
underpinning  the  extension  of  the  adjustment  period,  along  with  a  timeline  for  their 
implementation. Taking into account the information provided by Germany in its April 2026 
Annual  Progress  Report,  the  Commission  finds that  the  implementation  of  the  key  steps  of 
these reforms and investments that were due by 30 April 2026 seems to be broadly on track. 
The  Commission  considers  that,  overall,  Germany  has  complied  with  its commitments  in  a 
satisfactory manner.  

In  addition,  structural  reforms  and  investments  under  the  Recovery  and  Resilience  Facility 
(RRF)  are  expected  to  have  a  positive  impact  on  GDP  growth  in  the  coming  years.  The 
implementation  of  reforms  and  investments  included  in  the  RRP  is  underway  and  the  final 
milestones and targets must be completed to ensure a full disbursement of the allocated RRF 
financing. This requires a final focused effort to ensure the deadline of 31 August 2026 for 
milestone and target completion is met. 

National budgetary framework.  The German fiscal framework is based on a number of fiscal 
rules at  different  levels  of government. In 2024, the strength  of Germany’s fiscal  rules was 
close to the EU average level, as measured by data collected in the Fiscal Governance Database 
of the European Commission. In 2025, some exceptions were introduced affecting the so-called 
debt brake. Spending reviews are an established practice in Germany, but the country could 
benefit from further institutionalisation of the review processes. Germany lags behind the EU 
average when it comes to accrual accounting, which can improve transparency over a public 
body’s  financial  position  and  performance,  and  can  also  support  sustainability  and 
intergenerational equity. The German independent fiscal institution (the Advisory Board to the 
Stability Council) is very small and has a narrow mandate.  

Increase  in  government  investment  in  defence.  Based  on  data  collected  by  Eurostat, 
nationally financed government expenditure on defence in Germany amounted to 1.5% of GDP 

38   Debt Sustainability Monitor 2025 (European Economy Institutional Paper 332, February 2026) based on the 

Commission Autumn 2025 Forecast. 

15 

 
 
in 2025. Of this, government investment in defence represented 0.3% of GDP in 2025, which 
was 0.1 percentage point higher than in 2024.  

The  Commission  Spring  2026  Forecast  projects  government  expenditure  on  defence  in 
Germany to amount to 1.9% of GDP in 2026 and 2.2% of GDP in 2027. Of this, government 
investment in defence is projected to represent 0.4% of GDP in 2026, which is 0.1 percentage 
point higher than in 2025, and projected to then increase to 0.5% in 2027. 

Other factors put forward by the Member State. On 11 May 2026, Germany put forward 
additional  factors  not  entirely  covered  above.  Germany  drew  attention  to  the  adoption  of 
growth-enhancing reforms and explicitly mentioned improved investment depreciation rules, 
as well as bureaucracy reduction, faster planning and permitting procedures, and labour supply 
reforms. Those measures are also included in the Commission Spring 2026 Forecast. Germany 
also mentioned upcoming reforms on cutting red tape and reducing labour taxes and stated that 
a  major  public  health  insurance  reform  had  been  approved.  In  terms  of  fiscal  impact,  this 
package  of  measures  can  be  considered  ambiguous.  The  measures  could  have  a  growth-
enhancing impact, which would be fiscally beneficial. However, the tax-related measures will 
also reduce revenues.  

16 

 
 
 
4.3. 

Estonia 

For Estonia, relevant factors can be considered by the Council and the Commission in the steps 
leading to the decision on the existence of an excessive deficit.  

Medium-term macroeconomic position. Real GDP fell by 0.1% in 2024 to then increase by 
0.6% in 2025, driven by domestic demand, notably investment, government consumption and 
accumulation of inventories. Economic growth is projected at 1.6% in 2026 and 1.7% in 2027. 
Growth in 2026 is projected to be mainly driven by private and public consumption and public 
investment, while net exports are set to weigh on growth, particularly as defence equipment is 
largely imported. HICP inflation increased from 3.7% of GDP in 2024 to 4.8% in 2025 and is 
projected at 4.4% in 2026 and 2.9% in 2027, mainly driven by higher prices of energy, food 
and services in 2026 and prices of services and food in 2027. 

Medium-term  budgetary  position,  including  investment.  Estonia’s  general  government 
deficit increased from 1.1% of GDP in 2024 to 2.0% in 2025, which mainly reflects stronger 
expenditure dynamics, in particular public investment on large infrastructure projects, such as 
Rail  Baltica.  Government  investment  stood  at  6.2%  of  GDP  (of  which  5.4%  of  GDP  is 
nationally financed) in 2024 and increased to 6.7% in 2025 (of which 5.7% of GDP is nationally 
financed). Based on Commission estimates, the fiscal stance, which includes both nationally 
and  EU  financed  expenditure,  was  contractionary,  by  0.5%  of  GDP,  in  2025.  Growth  in 
nationally  financed  primary  expenditure  (net  of  discretionary  revenue  measures)  in  2025 
provided a contractionary contribution to the fiscal stance, amounting to 1.2% of GDP. 

The Commission Spring 2026 Forecast projects a general government deficit of 4.5% of GDP 
in  2026  and  4.8%  in  2027.  The  increase  in  2026  mainly  reflects  a  decrease  in  revenue  in 
particular  due  to  the  personal  income  tax  reform  (transition  to  a  universal  tax-exemption 
system) and an increase in expenditure mainly on the back of defence spending reaching 5% 
of GDP, and of investment projects such as Rail Baltica. Government investment is projected 
to increase to 7.9% of GDP in 2026 (of which 7.0% of GDP is nationally financed) and then 
decrease  to  7.2%  in  2027  (of  which  6.9%  of  GDP  is  nationally  financed).  Based  on 
Commission estimates, the fiscal stance is projected to be expansionary, by 2.8% of GDP, in 
2026. Growth in nationally financed primary expenditure in 2026 is projected to provide an 
expansionary contribution to the fiscal stance, amounting to 3.0% of GDP. 

Based on the Commission’s calculations39, net expenditure in Estonia grew by 2.0% over 2025 
and 5.7% cumulatively over 2024 and 2025. The net expenditure growth in 2025 is below the 
recommended  maximum  growth  rate40.  When  considering  2024  and  2025  together,  the 
cumulative growth rate of net expenditure is also below the recommended maximum growth 
rate.  

In 2026, net expenditure in Estonia is projected to grow by 12.0%, and 18.4% cumulatively 
over  2024,  2025  and  2026.  The  projected  net  expenditure  growth  in  2026  is  above  the 
recommended maximum growth rate, corresponding to a deviation of 2.8% of GDP in annual 
terms. When considering 2024, 2025 and 2026 together, the projected cumulative growth rate 
of net expenditure is also above the recommended maximum growth rate, corresponding to a 

39   Fiscal Statistical Tables providing background data relevant for the assessment of the budgetary policies of 

the Member States, SWD(2026)200 final, Brussels  3.6.2026. 

40   Council Recommendation of 21 January 2025 endorsing the medium-term fiscal-structural plan of Estonia, 

OJ C, C/2025/655, 10.02.2025. ELI:  http://data.europa.eu/eli/C/2025/655/oj.  

17 

 
 
deviation of 1.5% of GDP in cumulative terms. However, the projected deviation is within the 
flexibility of the national escape clause based on current projections for defence spending. 

Debt challenges and medium-term debt position. Government debt increased from 23.5% 
of GDP at  the  end of  2024 to  24.1% of GDP at  the end of  2025. The debt-to-GDP ratio is 
projected to increase further to 26.9% of GDP at the end of 2026 and 30.5% at the end of 2027. 
Overall, the debt sustainability analysis indicates medium risks over the medium term.41 The 
debt ratio in the baseline of the sustainability analysis under unchanged policies is projected to 
increase  steadily  and  the  debt  trajectory  is  sensitive  to  adverse  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 2030 will 
be higher than in 2025. 

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the one hand, the large share of government debt held by non-residents can constitute a risk-
increasing factor. On the other hand, risk-mitigating factors include (i) the modest contingent 
liabilities and (ii) the fact that the overall still low government debt is fully denominated in 
euro.  

Implementation of reforms and investment. Structural reforms and investments under the 
Recovery and Resilience Facility (RRF) are expected to have a positive impact on GDP growth 
in the coming years. The implementation of reforms and investments included in the RRP is 
underway and the final milestones and targets must be completed to ensure a full disbursement 
of the allocated RRF financing. This requires a final focused effort to ensure the deadline of 31 
August 2026 for milestone and target completion is met. 

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 allowing higher structural deficits up to 1% of GDP, as long as the debt 
level  does  not  exceed  30%  of  GDP  and  long-term  fiscal  sustainability  risks  are  low.  The 
Estonian Fiscal Council endorses the macroeconomic and fiscal forecasts and assesses both ex 
ante and ex post compliance with the general government structural balance rule. 

Increase  in  government  investment  in  defence.  Based  on  data  collected  by  Eurostat, 
nationally financed government expenditure on defence in Estonia amounted to 3.9% of GDP 
in  2025.  Of  this,  government  investment  in  defence  represented  1.6%  of  GDP  in  2025, 
remaining unchanged compared to 2024.  

The Commission Spring 2026 Forecast projects government expenditure on defence in Estonia 
to amount to 4.6% of GDP in 2026 and 4.9% of GDP in 2027. Of this, government investment 
in defence is projected to represent 1.9% of GDP in 2026, which is 0.3 percentage point higher 
than in 2025, and projected to then decrease in 2027 by 0.5 percentage point to 1.4%. 

Other  factors  put  forward  by  the  Member  State.  The  analysis  presented  in  the  previous 
sections already covers the key factors put forward by Estonia on 11 May 2026. 

41   Debt Sustainability Monitor 2025 (European Economy Institutional Paper 332, February 2026) based on the 

Commission Autumn 2025 Forecast. 

18 

 
 
 
4.4. 

Latvia 

For Latvia, relevant factors can be considered by the Council and the Commission in the steps 
leading to the decision on the existence of an excessive deficit.  

Medium-term macroeconomic position. Real GDP remained flat in 2024 and increased by 
2.1% in 2025, mainly driven by a surge in private and public investments, a recovery in private 
consumption  and  supportive  public  consumption.  Economic  growth  is  projected  at  1.4%  in 
2026  and  1.6%  in  2027.  Growth  in  2026  is  projected  to  be  mainly  driven  by  private 
consumption and investments. HICP inflation increased from 1.3% in 2024 to 3.8% in 2025 
and is projected at 3.6% in 2026 and 2.2% in 2027, mainly driven by high energy inflation in 
2026 and prices of food and services in 2027. 

Medium-term  budgetary  position,  including  investment.  Latvia’s  general  government 
deficit increased from 1.8% of GDP in 2024 to 2.5% in 2025, which mainly reflects the adverse 
fiscal impact of the personal income tax reform and a reduction in property income, affected 
by  lower  dividend  payments  from  state-owned  enterprises  and  lower  interest  revenue. 
Government investment stood at 6.3% of GDP in 2024 and in 2025 (of which 5.5% of GDP 
and 4.4% of GDP is nationally financed, respectively). Based on Commission estimates, the 
fiscal stance, which includes both nationally and EU financed expenditure, was expansionary, 
by  1.1%  of  GDP,  in  2025.  Growth  in  nationally  financed  primary  expenditure  (net  of 
discretionary revenue measures) in 2025 provided a broadly neutral contribution to the fiscal 
stance. 

The Commission Spring 2026 Forecast projects a general government deficit of 3.3% of GDP 
in 2026 and 4.3% in 2027. The increase in 2026 mainly reflects higher investment (including 
in defence), increasing interest costs, and continued growth in social transfers, largely due to 
pension and benefit indexation outpacing  economic growth,  and a rising  number of pension 
recipients. Government investment is projected to increase to 7.2% of GDP in 2026 (of which 
5.1% of GDP is nationally financed) and then to decrease to 6.7% in 2027 (of which 5.3% of 
GDP is nationally financed). Based on Commission estimates, the fiscal stance is projected to 
be expansionary, by 1.5% of GDP, in 2026. Growth in nationally financed primary expenditure 
in 2026 is projected to provide an expansionary contribution to the fiscal stance, amounting to 
1.1% of GDP. 

Based on the Commission’s calculations42, net expenditure in Latvia grew by 5.0% in 2025 and 
10.2% cumulatively  over 2024 and  2025.  The net  expenditure growth in  2025 is  below the 
recommended  maximum  growth  rate43.  When  considering  2024  and  2025  together,  the 
cumulative growth rate of net expenditure is also below the recommended maximum growth 
rate.  

In 2026, net expenditure in Latvia is projected to grow by 6.7%, and 17.5% cumulatively over 
2024, 2025 and 2026. The projected net expenditure growth in 2026 is above the recommended 
maximum growth rate, corresponding to a deviation of 1.2% of GDP in annual terms. When 
considering  2024,  2025  and  2026  together,  the  projected  cumulative  growth  rate  of  net 
expenditure is below the recommended maximum growth rate44.  

42   Fiscal Statistical Tables providing background data relevant for the assessment of the budgetary policies of 

the Member States, SWD(2026)200 final, Brussels 3.6.2026. 

43   Council Recommendation of 21 January 2025 endorsing the medium-term fiscal-structural plan of Latvia, 

OJ C, C/2025/652, 10.02.2025. ELI:  http://data.europa.eu/eli/C/2025/652/oj.  

44   As Latvia benefits from flexibility under the National Escape Clause, the assessment of compliance focusses 

on the latter comparison. 

19 

 
 
Debt challenges and medium-term debt position. Government debt in Latvia increased from 
46.2% of GDP at the end of 2024 to 46.9% of GDP at the end of 2025. The debt-to-GDP ratio 
is projected to increase further to 48.8% of GDP at the end of 2026 and 53.8% at the end of 
2027. 
Overall, the debt sustainability analysis indicates medium risks over the medium term.45 The 
debt ratio in the baseline of the sustainability analysis under unchanged policies is projected to 
rise  continuously  and  the  debt  trajectory  is  sensitive  to  adverse  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 2030 will 
be higher than in 2025. 

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the one hand, risk-increasing factors include (i) the relatively large share of public debt held by 
non-residents and (ii) the negative net international investment position, while being on a clear 
improving path for several years. On the other hand, risk-mitigating factors include (i) the low 
share of short-term debt in total debt and (ii) the fact that debt is largely denominated in euro.  

Implementation of reforms and investment. Structural reforms and investments under the 
Recovery and Resilience Facility (RRF) are expected to have a positive impact on GDP growth 
in the coming years. The implementation of reforms and investments included in the RRP is 
underway and the final milestones and targets must be completed to ensure a full disbursement 
of the allocated RRF financing. This requires a final focused effort to ensure the deadline of 31 
August 2026 for milestone and target completion is met.  

National  budgetary  framework.  The  national  fiscal  framework  of  Latvia  underwent  a 
comprehensive reform in 2013, when the Fiscal Discipline Law was adopted, with the Latvian 
Fiscal Discipline Council (FDC) starting its operations in 2014. The FDC monitors compliance 
with  Latvia’s  fiscal  rules,  including  the  structural  balance  rule  and  the  expenditure  rule.  In 
2024, the structural balance rule was amended, allowing higher structural deficits of up to 1% 
of GDP as of 2025, with further amendments to accommodate defence expenditure foreseen 
after  the  expiration  of  the  national  escape  clause.  The  FDC  endorses  the  macroeconomic 
forecasts underpinning the budgetary process and communicates proactively on various aspects 
of  fiscal  policy  and  sustainability  of  public  finances.  The  FDC  is  a  well-established 
independent collegial institution actively participating in the domestic debate. 

Increase  in  government  investment  in  defence.  Based  on  data  collected  by  Eurostat, 
nationally financed government expenditure on defence in Latvia amounted to 3.2% of GDP 
in 2025. Of this, government investment in defence represented 1.1% of GDP in 2025, which 
was 0.2 percentage point higher than in 2024.  

The Commission Spring 2026 Forecast projects government expenditure on defence in Latvia 
to amount to 4.1% of GDP in 2026 and 5.5% of GDP in 2027. Of this, government investment 
in defence is projected to represent 1.8% of GDP in 2026, which is 0.7 percentage point higher 
than in 2025, and projected to then increase in 2027 by 0.4 percentage point to 2.2%. 

Other factors put forward by the Member State. The analysis presented in the previous 
sections already covers the key factors put forward by Latvia on 11 May 2026.  

45   Debt Sustainability Monitor 2025 (European Economy Institutional Paper 332, February 2026) based on the 

Commission Autumn 2025 Forecast. 

20 

 
 
 
4.5. 

Slovenia 

For Slovenia, relevant factors cannot be considered by the Council and the Commission in the 
steps leading to the decision on the existence of an excessive deficit.  

Medium-term macroeconomic position.  Real GDP increased by 1.7% in 2024. Real GDP 
increased further by 1.1% in 2025, mainly driven by domestic demand. Economic growth is 
projected at 1.9% in 2026 and 2.3% in 2027. Growth in 2026 is projected to be mainly driven 
by private and public consumption. HICP inflation increased from 2.0% in 2024 to 2.5% in 
2025 and is projected at 3.5% in 2026 and 2.5% in 2027, mainly driven by rising global energy 
and food prices. 

Medium-term  budgetary  position,  including  investment.  Slovenia’s  general  government 
deficit increased from 0.9% of GDP in 2024 to 2.5% in 2025, which mainly reflects weaker-
than-expected  revenue  growth  and  a  rise  in  current  expenditures  and  record-high  public 
investments. Government investment stood at 5.1% of GDP in 2024 (of which 4.7% of GDP 
is nationally financed) and increased to 5.6% in  2025 (of which 5.0% of GDP is nationally 
financed). Based on Commission estimates, the fiscal stance, which includes both nationally 
and  EU  financed  expenditure,  was  expansionary,  by  1.6%  of  GDP,  in  2025.  Growth  in 
nationally  financed  primary  expenditure  (net  of  discretionary  revenue  measures)  in  2025 
provided an expansionary contribution to the fiscal stance, amounting to 1.3% of GDP. 

The Commission Spring 2026 Forecast projects a general government deficit of 3.3%46 of GDP 
in 2026 and 3.5% in 2027. The increase in 2026 mainly reflects increase in current expenditures 
driven  by  government  intermediate  consumption,  social  benefits  and  public  wages.  The 
increase  of  the  deficit  in  2027  mainly  reflects  the  expiry  of  EU  transfers  from  RRF  grants 
against  a  sustained  high  level  of  public  investments.  Government  investment  is  projected 
decrease slightly to 5.5% of GDP in 2026 (of which 4.4% of GDP is nationally financed) and 
then to decrease to 5.1% in 2027 (of which 4.6% of GDP is nationally financed). Based on 
Commission estimates, the fiscal stance is projected to be expansionary, by 1.3% of GDP, in 
2026. Growth in nationally financed primary expenditure in 2026 is projected to provide an 
expansionary contribution to the fiscal stance, amounting to 0.7% of GDP. 

On 11 May 2026, after the cut-off date of the Commission Spring 2026 Forecast, additional 
deficit-increasing measures were adopted by the National Assembly, in the area of personal 
income  tax,  social  contributions,  taxes  on  products  and  social  transfers,  which,  based  on 
currently available information,  are  estimated by the Commission  to  have a  total  budgetary 
cost between 0.5% and 1.0% of GDP in 2026. Most of these measures are expected to be not 
temporary  and  they  would  increase  the  deficit  in  2026  and  beyond.  The  impact  of  these 
additional measures is only considered in this report when explicitly mentioned, and only in 
qualitative terms.  

Based on the Commission’s calculations47, net expenditure in Slovenia grew by 8.8% in 2025 
and 13.2% cumulatively over 2024 and 2025. The net expenditure growth in 2025 is above the 
recommended maximum growth rate48, corresponding to a deviation of 1.4% of GDP in annual 
terms.  When  considering  2024  and  2025  together,  the  cumulative  growth  rate  of  net 
expenditure  is  also  above  the  recommended  maximum  growth  rate,  corresponding  to  a 

46   Based on policy measures known at the cut-off date of 4 May 2026 in the Commission Spring 2026 Forecast. 
47   Fiscal Statistical Tables providing background data relevant for the assessment of the budgetary policies of 

the Member States, SWD(2026)200 final, Brussels 3.6.2026. 

48   Council Recommendation of 8 July 2025 2025 endorsing the medium-term fiscal-structural plan of Slovenia, 

OJ C, C/2025/3973, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3973/oj.  

21 

 
 
deviation of 0.5% of GDP in cumulative terms. Taking into account the flexibility for higher 
defence  spending  provided  for  by  the  national  escape  clause49,  considering  2024  and  2025 
together, the cumulative deviation of net expenditure  amounts to marginally above 0.3% of 
GDP. 

In 2026, net expenditure in Slovenia is projected to grow by 7.2%, and 21.3% cumulatively 
over  2024,  2025  and  2026.  The  projected  net  expenditure  growth  in  2026  is  above  the 
recommended maximum growth rate, corresponding to a deviation of 1.2% of GDP in annual 
terms. When considering 2024, 2025 and 2026 together, the projected cumulative growth rate 
of net expenditure is also above the recommended maximum growth rate, corresponding to a 
deviation of 1.7% of GDP in cumulative terms. Taking into account the flexibility for higher 
defence spending provided for by the national escape clause, considering 2024, 2025 and 2026 
together, the projected cumulative deviation of net expenditure reduces to 1.2% of GDP. 

As mentioned above, the Commission regards deviations from the maximum recommended 
net expenditure growth (after considering the national escape clause) above the threshold as a 
particularly important relevant factor. 

Debt challenges and medium-term debt position. Government debt in Slovenia decreased 
from 66.4% of GDP at the end of 2024 to 65.7% of GDP at the end of 2025. The debt-to-GDP 
ratio is projected to decrease further to 64.9% of GDP at the end of 2026 to then increase to 
65.1% at the end of 2027. 
Overall, the debt sustainability analysis indicates medium risks over the medium term.50 The 
debt ratio in the baseline of the sustainability analysis under unchanged policies is projected to 
decrease slightly until 2027 before increasing again over the medium term, reaching around 
75%  of  GDP  in  2036.  The  debt  trajectory  is  sensitive  to  adverse  macroeconomic  shocks. 
According to the stochastic projections, which simulate a large range of possible temporary 
shocks to macroeconomic variables, there is a medium likelihood that the debt ratio in 2030 
will be higher than in 2025. 

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 large share of government debt held by non-
residents. On the other hand, risk-mitigating factors include (i) the stabilisation of debt maturity 
at high levels in recent years and (ii) the high cash buffer. 

Implementation of reforms and investment. Structural reforms and investments under the 
Recovery and Resilience Facility (RRF) are expected to have a positive impact on GDP growth 
in the coming years. The implementation of reforms and investments included in the RRP is 
underway and the final milestones and targets must be completed to ensure a full disbursement 
of the allocated RRF financing. This requires a final focused effort to ensure the deadline of 31 
August 2026 for milestone and target completion is met. 

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 (see Annex 2 of the 2026 Country Report 
on Slovenia). Slovenia adopted a comprehensive new national framework in 2025, including 
the Fiscal Rules Act and amendments to the Public Finance Act. National fiscal rules require 

49   Council Recommendation of 8 July 2025 allowing Slovenia to deviate from the maximum growth rates of 
net expenditure as set by the Council under Regulation (EU) 2024/1263 (Activation of the national escape 
clause), OJ C, C/2025/3973, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3973/oj. 

50   Debt Sustainability Monitor 2025 (European Economy Institutional Paper 332, February 2025) based on the 

Commission Autumn 2025 Forecast. 

22 

 
 
the net expenditure path to follow the national medium-term fiscal-structural plan, to achieve 
respect of the reference values of 3% and 60% for the deficit and debt ratio respectively, and 
to remain below these values in the medium term. The medium-term fiscal-structural plan plays 
a central role in the revised medium-term budgetary framework.  

Increase  in  government  investment  in  defence.  Based  on  data  collected  by  Eurostat, 
nationally financed government expenditure on defence in Slovenia amounted to 1.3% of GDP 
in 2025. Of this, government investment in defence represented 0.3% of GDP in 2025, which 
was 0.1 percentage point lower than in 2024.  

The  Commission  Spring  2026  Forecast  projects  government  expenditure  on  defence  in 
Slovenia to amount to 1.6% of GDP in 2026 and 1.8% of GDP in 2027. Of this, government 
investment in defence is projected to represent 0.3% of GDP in 2026, remaining unchanged 
compared to 2025, and projected to then increase in 2027 by 0.2 percentage point to 0.5%. 

Other factors put forward by the Member State. On 12 May 2026, Slovenia put forward 
additional factors not mentioned above. Slovenia highlighted cost saving measures that were 
adopted  to  create  additional  fiscal  buffers,  while  the  impact  of  the  structural  reforms 
implemented is associated with higher costs in the short-term but positive effects on the mid- 
to long-term fiscal sustainability. Those measures that were specified in sufficient detail by the 
cut-off date were reflected in the Commission Spring 2026 Forecast and thus taken into account 
in  the  preceding  analysis.  Slovenia  also  mentioned  that  further  deficit  decreasing  measures 
intended to create additional fiscal buffers were being compiled by the outgoing government: 
these were not reflected in the Commission Spring 2026 Forecast as they had not been credibly 
announced with sufficient detail by the cut-off date of the forecast. It should however be noted 
that the Slovenia did not mention the additional deficit-increasing measures adopted on 11 May 
by  the  National  Assembly,  nor  their  likely  impact.  Slovenia  also  mentions  that  several 
statistical  issues  are having an impact  on public  finance statistics51.  These  issues have been 
reflected  in  the  Commission  Spring  2026  Forecast  and  in  the  calculation  of  the  above 
deviations from the recommended net expenditure path. 

51   Namely, the reclassification of two units in 2025 (Šoštanj Thermal Power Plant and Velenje Coal Mine) and 
the change in the service model by the Company for the management of public passenger transport (DUJPP) 
in 2026. 

23 

 
 
 
5. 

CONCLUSIONS 

Based on the preceding analysis, the conclusions on compliance with the deficit criterion for 
the different countries covered by the report, after considering relevant factors as appropriate, 
are as follows. 

5.1.  Bulgaria 

The government deficit in Bulgaria exceeded the reference value of 3% of GDP in 2025 and, 
while Bulgaria has not reported a planned deficit for 2026, the Commission projects the deficit 
in 2026 at 4.1%. Both deficits in excess of the reference value are assessed as above and not 
close to the reference value. They are assessed as not temporary − based on the Commission 
forecast − with the deficit in excess in 2025 as exceptional, but not exceptional in 2026. 

For Bulgaria, relevant factors can be taken into account in the assessment of compliance with 
the deficit criterion, as government debt was below 60% of GDP in 2025. The relevant factors 
examined in this report for Bulgaria are assessed as, on balance, aggravating. Overall, taking 
into account all relevant factors as appropriate and, in particular, as the deficit is increasing to 
well above 3% of GDP in 2026, the deficit criterion is assessed as not fulfilled in Bulgaria. 

On 8 July 2025, the Council activated the national escape clause to facilitate an increase in 
defence expenditure during the period 2025-2028 for Bulgaria. Defence expenditure increased 
from 1.3% of GDP in 2024 to 1.9% in 2025, and is projected to be 1.9% of GDP also in 2026, 
based on the Commission Spring 2026 Forecast. Without this increase in defence expenditure 
since the reference year 2024, the deficit in 2025 would be 2.9% of GDP, below the 3% of 
GDP  reference  value.  However,  in  2026,  the  deficit  without  the  increase  in  defence 
expenditure,  as  projected by the Commission  amounts to  3.5%  of GDP, thus  exceeding  the 
reference value.  

After considering the opinion of the Economic and Financial Committee as established 
under Article 126(4) TFEU, the Commission will consider proposing to open an excessive 
deficit procedure for Bulgaria by recommending to the Council to adopt a Decision under 
Article  126(6)  TFEU  establishing  the  existence  of  an  excessive  deficit  as  well  as  a 
Recommendation  under  Article  126(7)  TFEU  with  a  view  to  correcting  the  excessive 
deficit. 

5.2.  Germany 

Germany had a government deficit not exceeding the reference value in 2025 but has reported 
a planned deficit above and not close to 3% of GDP in 2026; the Commission forecast likewise 
projects a deficit assessed as above and not close to 3% of GDP in 2026. Germany’s planned 
deficit in excess of the reference value is assessed as not temporary − based on the Commission 
forecast − but as exceptional. 

For Germany, relevant factors cannot be taken into account in the assessment of compliance 
with the deficit criterion, as government debt was above 60% of GDP in 2025 and the double 
condition (i.e. that the deficit remains close to the reference value and that the excess over the 
reference  value  is  temporary)  is  not  met.  Therefore,  the  deficit  criterion  is  assessed  as  not 
fulfilled in Germany.  

On 10 October 2025, the Council activated the national escape clause to facilitate an increase 
in  defence  expenditure  during  the  period  2025-2028  for  Germany.  Defence  expenditure 
increased from 1.1% of GDP in 2021 to 1.5% in 2025 and is projected to be 1.9% of GDP in 
2026,  based  on  the  Commission  Spring  2026  Forecast.  Without  this  increase  in  defence 

24 

 
 
expenditure since 2021, the deficit in 2026 projected by the Commission would be 2.9% of 
GDP, thus not exceeding the reference value.52 Not to reach a conclusion on the existence of 
an excessive deficit in Germany at this stage is therefore in accordance with Article 2(5) of 
Regulation (EU) No 1467/97. 

In light of this assessment, the Commission is of the view that there is no case to open an 
excessive  deficit  procedure  for  Germany.  Fiscal  developments  in  Germany  will  be 
reassessed in autumn 2026. 

5.3.  Estonia 

Estonia had a government deficit not exceeding the reference value in 2025 but has reported a 
planned deficit above and not close to 3% of GDP in 2026; the Commission forecast likewise 
projects a deficit assessed as above and not close to 3% of GDP in 2026. Estonia’s planned 
deficit in excess of the reference value is assessed as not temporary − based on the Commission 
forecast − but as exceptional. 

For Estonia, relevant factors can be taken into account in the assessment of compliance with 
the deficit criterion, as government debt was below 60% of GDP in 2025. The relevant factors 
examined in this report for Estonia are assessed as, on  balance, presenting a mixed picture. 
Overall, taking into account all relevant factors as appropriate, the deficit criterion is assessed 
as not fulfilled in Estonia.  

On 8 July 2025, the Council activated the national escape clause to facilitate an increase in 
defence expenditure during the period 2025-2028 for Estonia. Defence expenditure increased 
from 2.0% of GDP in 2021 to 3.9% in 2025, and is projected to be 4.6% of GDP in 2026, based 
on the Commission Spring 2026 Forecast. Without this increase in defence expenditure since 
the reference year 2021 − capped at 1.5% of GDP in line with the maximum flexibility under 
the national escape clause − the deficit in 2026 as projected by the Commission would be 3.0% 
of GDP, thus not exceeding the reference value.53 Not to reach a conclusion on the existence of 
an  excessive  deficit  in  Estonia  at  this  stage  is  therefore  in  accordance  with  Article  2(5)  of 
Regulation (EU) No 1467/97. 

In light of this assessment, the Commission is of the view that there is no case to open an 
excessive deficit procedure for Estonia.  Fiscal developments in Estonia will be reassessed 
in autumn 2026. 

5.4.  Latvia 

Latvia had a government deficit not exceeding the reference value in 2025 but has reported a 
planned  deficit  above  but  close  to  3%  of  GDP  in  2026;  the  Commission  forecast  likewise 
projects a deficit assessed as above but close to 3% of GDP in 2026. Latvia’s planned deficit 

52  

In line with the Commission Communication of 19 March 2025, C(2025) 2000 final, if the national escape 
clause for defence spending is activated, the Commission and Council may decide not to reach a conclusion 
regarding the existence of an excessive deficit in case of an excess of the deficit exceeding 3% of GDP, when 
this is due to an increase in defence expenditure. 

53   The  projected  large  increase  in  the  deficit  in  Estonia  from  2025  to  2026  is  only  partially  related  by  the 
increase in defence spending in 2026. Most of the increase  in defence spending in Estonia took place in 
previous years. 

25 

 
 
 
 
in  excess  of  the  reference  value  is  assessed  as  not  temporary  −  based  on  the  Commission 
forecast − but as exceptional. 

For Latvia, relevant factors can be taken into account in the assessment of compliance with the 
deficit  criterion,  as government  debt  was below  60% of  GDP  in  2025. The relevant  factors 
examined in this report for Latvia are assessed as, on balance, mitigating.   

The  relevant  factors  considered  for  Latvia  are  assessed  as  sufficiently  mitigating  to 
conclude that, overall, the deficit criterion is assessed as fulfilled. Fiscal developments in 
Latvia will be reassessed in autumn 2026. 

5.5. 

Slovenia 

Slovenia had a government deficit not exceeding the reference value in 2025 but has reported 
a planned deficit above but close to 3% of GDP in 2026; the Commission forecast likewise 
projects a deficit assessed as above but close to 3% of GDP in 2026. Slovenia’s planned deficit 
in  excess  of  the  reference  value  is  assessed  as  not  temporary  −  based  on  the  Commission 
forecast − but as exceptional. 

For Slovenia, relevant factors cannot be taken into account in the assessment of compliance 
with the deficit criterion, as government debt was above 60% of GDP in 2025 and the double 
condition (i.e. that the deficit remains close to the reference value and that the excess over the 
reference  value  is  temporary)  is  not  met.  Therefore,  the  deficit  criterion  is  assessed  as  not 
fulfilled in Slovenia. 

On 8 July 2025, the Council activated the national escape clause to facilitate an increase in 
defence  expenditure  during  the  period  2025-2028  for  Slovenia.  In  Slovenia,  defence 
expenditure increased from 1.1% of GDP in 2021 to 1.3% in 2025 and is projected to be 1.6% 
of  GDP  in  2026,  based  on  the  Commission  Spring  2026  Forecast.  Without  this  increase  in 
defence  expenditure  since  the  reference  year  2021,  the  deficit  in  2026  projected  by  the 
Commission would be 2.8% of GDP.  

After  the  cut-off  of  the  Commission  Spring  2026  Forecast,  Slovenia  adopted  a  number  of 
measures that, therefore, are not considered in the data discussed above. In particular, deficit-
increasing  measures  in  the  areas  of  personal  income  tax,  consumption  taxes,  social 
contributions and pensions were adopted by the National Assembly on 11 May (amounting to 
between  0.5%  and  1%  of  GDP).  The  Commission  understands  that  a  number  of  savings 
measures are also being prepared. Therefore, there is at this stage uncertainty about the fiscal 
outlook for 2026, including on the projected deficit in excess of 3% of GDP, and on the extent 
to which such an excess is related to the increase in defence expenditure. 

In light of this assessment, the Commission is of the view that there is no case to open an 
excessive deficit procedure for Slovenia at this stage. Fiscal developments in Slovenia will 
be reassessed in autumn 2026. If sufficient corrective measures are not taken in a credible 
and timely manner, this may lead to the opening of the excessive deficit procedure for 
Slovenia in autumn. 

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