The watch list, which is part of the European Commission’s opinion on national budgets for 2024, also points to possible violations by Belgium, Finland and Croatia.
Austria, Latvia, Luxembourg, the Netherlands, Portugal and Slovakia may also receive warnings from Brussels over concerns about meeting EU budget targets. The report highlights that the European Commission is faced with a potential challenge to comply with the budgetary rules within the euro area, especially the deficit and public debt targets.
The assessment follows the suspension of the Stability and Growth Pact (SNP) due to the pandemic, which limited the deficit to 3% of the gross domestic product. This break gave the EU the opportunity to rethink the general fiscal rules for the different economies of the euro area.
While there is agreement that a comprehensive review of the framework of the Stability and Growth Pact is needed, the different strategic visions of the member states have hindered agreement on the specifics of the reform. The upcoming deadline for making a decision on renewal is the end of the year; otherwise, the old rules will automatically apply again.
It is important to note that being on the EU watch list does not automatically entail consequences. The European Commission will later have to decide whether to launch the “excessive deficit procedure” for countries that do not take adequate corrective measures, which could lead to financial sanctions. The upcoming rulings may change before the Commission formally adopts them, as discussions and negotiations with EU member states continue.
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