MNI POLICY: European Fiscal Board To Call For Spending Restraint In Report

The euro area’s fiscal watchdog, the European Fiscal Board, will warn in a report this week that the level of fiscal support by member state governments can no longer be justified by the economic outlook, MNI understands.

The watchdog will also question the European Commission’s decision to depart from usual practice by not issuing detailed policy recommendations alongside its recent announcement that seven EU states recorded excessive budget deficits in 2023. The EFB will say that this has added to uncertainty around the 2025 fiscal outlook at a time of transition to new EU fiscal rules.  (See MNI: Multi-Year Fiscal Plans For EU States Delayed Until Autumn- Officials)

The EFB will say that much tighter fiscal policies would help avoid possible alarm in government bond markets.

The eurozone economy is forecast by the Commission to continue its recovery through the rest of this year and into next, driven by strong consumer demand and tight labour markets.

The warnings come at a time of unease about the fiscal outlook, with Sunday’s first-round elections in France showing a strong showing for the potentially high-spending far-right and far-left political blocs.