Tomorrow, the European commission will warn five countries that their budget submissions risk breaching new fiscal rules set out by the European Union (EU).
Last week, all member states had to send their latest budget plans to Brussels for review. Officials there have since informed the FT that they are requesting more details from Italy, France, Austria, Slovenia and Malta.
A spokesman for Jyrki Katainen, the EU’s economic commissioner who is overseeing the review, told the FT that the requests will not be a definite rejection by Brussels. Rather, they will mark the first step in the full process of sending budgets back to national capitals for revision.
“Technical consultations with member states on the draft budget plans do not prejudge the outcome of our assessment,” he said.
Under the new rules, which were introduced at the height of the Eurozone crisis, the commission has to send a budget back to its government for review within two weeks of submission. Therefore, it must reach a definite conclusion on rejection for each country by the end of the month.
The initial warning, meanwhile, has to be made within a week of submission under the rules. This means tomorrow is the deadline.
Why more details are being requested
In the case of France, its budget downfall is a failure to outline how it intends to bring its deficit back down to under the EU limit of three per cent of economic output within the next year. At present, its budget projects a deficit of 4.3 per cent of GDP – over one per cent higher than the cap.
Additionally, where it was supposed to improve its structural deficit by 0.8 per cent, it has proposed an improvement of just 0.2 per cent.
For Italy, the problem does not lie in lowering the deficit, since theirs already sits under the three per cent threshold. Instead, it is about bringing down public debt, which is currently at 135 per cent of GDP. This is over twice the EU limit of 60 per cent, and is second highest in the Eurozone.