The European Commission said there may be disciplinary budget measures for France, Belgium, Italy, Hungary, Malta, Poland, and Slovakia due to excessive deficits in the country. The move to enforce budgetary measures for these countries could impact France’s upcoming elections on 30 June and create constraints on the incoming party.
President Emmanuel Macon’s move to host a snap election in France after poor results from his party in the EU’s parliamentary elections has had unintended consequences for the French economy, throwing the country into political turmoil. Due to the uncertainty prior to these upcoming snap elections, the cost of borrowing in France’s bond markets has increased, and voters are facing a time of political uncertainty.
In addition, France has been running a budget gap of 5.5% of its GDP in 2023, which is only expected to narrow to 5.3% this year. This leaves the country much higher than the EU’s deficit limit of 3% of GDP.
The other countries running budget deficits were primarily caused by aftershocks from the COVID-19 pandemic and the energy price crisis that followed Russia’s invasion of Ukraine in 2022. Italy has faced a national debt of roughly 138% of its GDP with a growth rate in the country of less than 1%. Politicians and leaders in Rome have addressed this concern and have attempted to reassure markets that the country would do the right thing regarding its economic policy actions.
The statement from the Commission marks the first time since the pandemic that the government has enforced budgetary rules for countries with excessive spending and budget deficits. In 2020, the EU Commission suspended its fiscal rules and allowed countries to borrow money needed to gain economic stability.
The Commission plans to implement the Excessive Budget Procedures (EDP) within these countries in the coming months. This procedure follows a detailed outline under Article 126 of the Treaty on the Functioning of the European Union. This process is outlined to allow the Commission time and resources for managing budget deficits as well as determining solutions for the proposed countries’ budget gaps.
Following the announcement of member states with budget deficits, the Commission will be responsible for coming up with solutions and measures to ensure the budget deficit in these countries declines or changes over the next year. This includes the deadlines to take effective action within the countries and resources to correct the excessive deficit within a designated timeline.
Within the outline to help countries manage their budget deficits, the Commission intends to propose recommendations alongside its Opinions on the Draft Budgetary Plans.
