MNI: Multi-Year Fiscal Plans For EU States Delayed Until Autumn- Officials

Excessive Deficit Procedures to be announced against around a dozen European Union member states by as soon as Wednesday will only be followed by detailed requirements for fiscal adjustments in the late autumn, delaying the worst political impact by several months, EU official told MNI.

The delay, which is a departure from previous practice for simultaneous announcements, comes as it remains unclear how the EDPs will work in combination with the long-term fiscal adjustments which are being introduced under the EU’s recently-agreed revision of its fiscal rules.  It will provide welcome relief to French President Emmanuel Macron, whose centrist Renaissance party is campaigning for National Assembly elections on June 30 and July 7, and which is trailing both the far right and a united left bloc in opinion polls.

"What that means is that, although the EDPs applied to 2023 budgets, states can only begin to adjust in 2025 - the first year of the new fiscal plans," one official said.

While states were originally required to submit their four- or seven-year fiscal structural plans by Sept 20, only some have committed to doing so, with several countries asking for a delay until Oct 15, when details of 2025 budgets are also due to be presented to the Commission.

"The Commission has implicitly accepted that anything that comes in before it has had time to comment on 2025 budget plans is okay. So we are in for some delay here," the source said.

While the EDP announcement, part of the Commission's Spring Package, was due to be made this Wednesday, officials on Tuesday were unable to confirm whether it would go ahead on time, amid speculation over a possible delay.

PRECEDENCE UNCLEAR

While EDPs have been retained in the revised fiscal framework, at the insistence of Germany and so-called frugal states during prolonged talks which concluded in December, officials acknowledged that it was still hard to tell how the Commission will combine their requirements with those of the new four- and seven-year plans when it provides its judgement on 2025 budgets, for approval by member states, in November. (See MNI: EDPs Give EU Early Test Of New Fiscal Rules-Officials)

The EDP would normally impose a 0.5% of GDP minimum adjustment on states with a deficit over 3% of GDP.

"The EDP remains the main operational mechanism in the minds of many countries, while others believe that the new rules should override the old," the official said.

The Commission will send out reference trajectories for the new consolidation plans on Friday. Although the trajectories will be confidential, they will be shared not just with the state concerned but with other national finance ministry officials, making a leak of these politically sensitive documents during the French election campaign a real risk.