MNI POLICY: EU States To Choose Easier, 7-Year Fiscal Plans

MNI (BRUSSELS) - It is becoming obvious to eurozone finance ministers that many member states are likely to request seven-year debt-cutting plans instead of the standard, default four-year plans, meaning they will undertake annual fiscal adjustments of around 0.3% of GDP on average rather than about 0.7%, MNI understands.

This means fiscal policy from next year - the starting year of the new rules - will be only “slightly contractionary,” according to Brussels’ terminology, despite the statement by eurozone finance ministers following Monday’s Eurogroup meeting that "the implementation of the revised governance framework is expected to lead to a contractionary fiscal stance for the euro area as a whole in 2025". 

The Eurogroup statement raised a few eyebrows as Economy Commissioner Paolo Gentiloni had told reporters just before heading into the talks that the stance of policy was likely to be only "slightly contractionary".

States are due to submit medium-term fiscal-structural plans to the European Commission from Sept 21 to early October. At that point it will become clear which states are leaning towards for seven-year plans. 

Among those are very likely to be the higher-debt states France, Italy, Spain and Belgium. Higher-debt states will still have to make slightly larger deficit reductions under the bloc’s  new fiscal rules.

MNI understands that there is concern in Eurogroup circles that the Commission trajectories even for those countries with seven-year plans may prove politically difficult to implement. (See MNI: EU Already Looking At Flexibility For France- Officials)