MNI: At Least 4 EU States For 7-Year Debt Plans-Officials

France, Italy, Spain, Belgium look likely to be among European Union countries granted extended seven-year adjustment periods under the bloc’s new fiscal rules, with others also seeking the longer programmes rather than tighter four-year plans, officials told MNI, citing criteria included in a confidential European Commission paper.

The shorter plans would be too challenging for countries with debt-to-GDP ratios above 100%, officials judge, in line with the new rules’ debt sustainability approach.

Slovakia and maybe even Finland which have public debt below 90% of GDP, may also qualify for seven years, given their challenges in meeting the new tough requirement for debt to be on a steady 10-year declining path after the initial phase of adjustment plans. (See MNI: EU Vote Pushes Back Fiscal Rule Implementation-Officials)

NET FISCAL TIGHTENING

“Some of these countries have made it clear that they will find it extremely difficult to do it after four years,” an official said.

On present trajectories French and Italian debt will rise through the 2025-2028 adjustment period if there are no changes to spending plans and will not fall unless new steps are taken.

“Those steps will be easier the longer you have,” the source added.

Commission officials calculate that the EU’s fiscal stance will see an additional tightening of somewhere between 0.25 and 0.5% of GDP in 2025 via adjustments in states' primary surplus, in line with the "slightly" contractionary effort recommended by the Eurogroup on March 11.