Published by Global Banking and Finance Review
Posted on December 18, 2024
BRUSSELS (Reuters) - Euro zone countries should aim for slight fiscal tightening not only in 2025 but also in 2026 to improve debt sustainability, the European Commission said on Wednesday in a recommendation that finance ministers are due to endorse in January.
The recommendation to tighten fiscal policy in the 20 countries sharing the euro, after massive public spending in support of the economy during the COVID pandemic and the energy crisis, has so far been only for 2025.
The Commission, which is in charge of enforcing the EU's new debt and deficit rules, said that if euro zone countries stick to the agreed net spending plans, it should produce a slight fiscal tightening next year and in 2026.
"(The Council recommends that euro zone countries take action) to ensure compliance with the new fiscal framework and improve debt sustainability, keep the national growth rates in net expenditure in each Member States as recommended by the Council," the declaration prepared by the Commission for the ministers said.
"This should deliver appropriately differentiated fiscal adjustments and an overall slightly contractionary euro area fiscal stance in 2025 and 2026," it said.
The Commission is also tasked with monitoring the economies of all 27 EU countries to point out imbalances that might be building up which could then cause an economic crisis which would affect others in the bloc.
The EU executive said on Wednesday it would launch in-depth reviews of the economies of Greece, Cyprus, Italy, Hungary, Slovakia, Romania, the Netherlands, Sweden, Estonia and Germany because of imbalances in these countries identified this year.
(Reporting by Jan Strupczewski; editing by Philip Blenkinsop)
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