MNI: Most EU States To Miss Debt Plan Deadline - Sources

MNI (BRUSSELS) -  As few as two to three of the European Union member states required to submit long-term debt sustainability plans will be ready by the Sept 20 deadline as required under new fiscal rules, with France and Belgium among those countries facing a potentially “chaotic” start to 2025, sources told MNI.

"It's a very low number, most of the countries are already committing to Oct 15, the secondary deadline by which the budget (plans) for the next year have to be submitted. That makes some sense," one source said. "Some may well say we can't even do it by that time. Some don't really have governments - Belgium and France for example." 

The latter group are a particular worry, the source said.

"The [2025 ]budget is supposed to be coordinated with the fiscal-structural plan. If you have a final discussion on your plan and your budget in January that is going to be a bit of a chaotic start to the fiscal year." 

One country likely to submit a 2025 budget by the Oct 15 deadline is Italy, sources said.

“The fiscal position there looks much improved at least for the first year of the plan, with the removal of the housing subsidy,” one source said, referring to expensive “superbonus” payments for house renovations. 

“They will have little problem with the first year and they are looking better than France, where the deficit for 2024 is looking to be a lot higher than anticipated. France had targeted 3% [of GDP] for 2027, by which time Macron will be out of office. Whether that still stands is highly questionable.” (See MNI: EU Already Looking At Flexibility For France- Officials)

EXCESSIVE DEFICIT PROCEDURES

High-debt states like France, Italy and Belgium must make fiscal adjustments of at least 0.5% of GDP under their Excessive Deficit Procedures whether they submit plans in time or no, sources pointed out. (See MNI POLICY: EU States To Choose Easier, 7-Year Fiscal Plans)

The Commission is said to be set on presenting its comments on states’ fiscal plans, its adjustment recommendations for the EDPs and draft 2025 budget plans in one big package during the autumn. The Commission has been in intensive talks with states over the summer and is well aware of the challenges faced, sources said. (See MNI INTERVIEW: EC To Go Easy On Fiscal Rules Due Sell-Off Fear)

That said, the scope for divergence from the fiscal “reference trajectory” proposed by the Commission for each member state will be constrained, source say: 

"It will be harmful if there is a wide divergence between the Commission's reference trajectory which will have to be published at the same time as the plan and the reference trajectory implied by that plan, so I am sure that there will be an effort to minimise that divergence." 

There will be no scope for a political-level discussion by finance ministers when they meet in Budapest this weekend. Indeed, many finance ministers have already said that they will not be attending as have the two EU commissioners who would normally be in attendance, due to their objections to Hungary’s poor record on rule of law issues and its lack of support for Ukraine.