Blog Post

Chart of the week: fiscal deficits in the euro area under the new forecast

The 2012 Autumn Economic Forecast of the European Commission confirms the Spring Forecast expectation that several euro area countries, including France, will breach their commitment to return below a 3 percent deficit in 2013, unless they change their budget plans or the EU gives them more time to meet their commitment. However, most of these countries, including France, appear to be taking EU rules seriously as their structural balance figures have improved since the Spring Forecast.

By: and Date: November 8, 2012 European Macroeconomics & Governance Tags & Topics

The 2012 Autumn Economic Forecast of the European Commission confirms the Spring Forecast expectation that several euro area countries, including France, will breach their commitment to return below a 3 percent deficit in 2013, unless they change their budget plans or the EU gives them more time to meet their commitment. However, most of these countries, including France, appear to be taking EU rules seriously as their structural balance figures have improved since the Spring Forecast.

In the Policy Brief “Fiscal rules – timing is everything” we used fiscal deficit figures from the 2012 Spring Economic Forecast of the European Commission  to assess how far each euro area member was likely to be from its own deficit target. At the time, the following countries were found to be at risk of being sanctioned for an excessive deficit in 2013: Cyprus, Slovenia, Slovakia, France, Spain and the Netherlands[1]. During the summer, Spain’s deadline for correction was extended from 2013 to 2014 in light of the country’s poor growth conditions.

Here we compare nominal deficits of all euro countries under Excessive Deficit Procedure with the exception of assisted countries (Greece, Portugal and Ireland) as they appeared in the Commission’s Spring Forecast (Figure 1 a) with those in the Autumn Forecast published this week (Figure 1 b). The countries that are still likely to face sanctions for excessive deficits in 2013 are: Cyprus, Slovenia, Slovakia and France. Hence, besides Spain, the Netherlands have been removed from the list due to its budgetary adjustment.

Figure 1: Expected evolution of deficit levels, 2012 and 2013

(a)    Spring 2012                                                 (b) Autumn 2012

Source: author’s own elaboration based on 2012 Spring Economic Forecast and on 2012 Autumn Economic Forecast

Excessive deficits may stem either from the lack of discretionary government measures or from lack of growth. Discretionary government measures are best captured by structural balance figures[2]. A majority of euro area governments is found in the Autumn Forecast to be going through a more ambitious structural adjustment path than projected by the Spring Forecast (for details see Table 1). This is especially true for the Netherlands and Slovakia, although the latter is still expected to breach the 3 percent limit in 2013, but not by much. Structural adjustment is also substantial in France. The only exception among countries potentially facing sanctions in 2013 is Cyprus, which is however likely to enter into the list of programme countries, and therefore to exit the list of countries having to return below the 3 percent mark by 2013, fairly soon. On this basis it appears that France and Slovakia should probably be given, like Spain, an extra year to meet their budgetary requirement and therefore escape sanctions for excessive nominal deficits in 2013.

Table 1: Changes in the structural balance 2012 – 2013 across the two forecasts

Source: author’s own elaboration based on 2012 Spring Economic Forecast and on 2012 Autumn Economic Forecast

Table 2: The 2013 structural balance across the two forecasts (% of GDP)

Source: author’s own elaboration based on 2012 Spring Economic Forecast and on 2012 Autumn Economic Forecast


[1] For Cyprus the deadline for deficit correction is 2012 (and so is for Belgium). For all others it is 2013.

[2] The structural balance is defined as the cyclically adjusted balance net of one-off and temporary measures.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read about event More on this topic

Upcoming Event

Sep
14
10:00

From crisis management to launching economic growth

What have been the most effective strategies in limiting the impact of the economic crisis in Europe? What challenges lie ahead? Bruegel's 10th anniversary event in Budapest will foster discussion of these important topics.

Topic: European Macroeconomics & Governance Location: Budapest, Hungary
Read about event

Upcoming Event

Sep
6-7
09:15

Bruegel Annual Meetings 2016

The Annual Meetings are a high point in Bruegel's calendar.

Speakers: Michel Barnier, Joachim Bitterlich, Arnoud Boot, Albert Bravo-Biosca, Elmar Brok, Nadia Calviño, Tom Carver, Grégory Claeys, Daniel Daianu, Zsolt Darvas, Paulina Dejmek-Hack, Maria Demertzis, Jeroen Dijsselbloem, Alicia García-Herrero, Sylvie Goulard, Charles Grant, Dominique Guellec, Connie Hedegaard, Michel Houdebine, Vazil Hudák, Brigitte Knopf, Pascal Lamy, Lawrence J. Lau, Matthew Lobner, Robert Madelin, Sylvie Matherat, Simone Mori, Erik F. Nielsen, Barbara Novick, Jean Pisani-Ferry, Romano Prodi, Olli Rehn, Carmen M. Reinhart, André Sapir, Dirk Schoenmaker, Ludger Schuknecht, Egon Schulz, Maroš Šefčovič, Jeremy Shapiro, Scott Stern, Jean-Claude Trichet, Laszlo Varro, Nicolas Véron, Reinhilde Veugelers, Helen Wallace, Guntram B. Wolff and Georg Zachmann Topic: Energy & Climate, European Macroeconomics & Governance, Finance & Financial Regulation, Global Economics & Governance, Innovation & Competition Policy Location: Autoworld, Brussels, Belgium
Read about event More on this topic

Upcoming Event

Sep
29
08:30

Inclusive growth in the European Union

Why is inclusive growth important and how do the EU’s social problems differ from social problems in other parts of the world?

Speakers: Zsolt Darvas, Monica Brezzi, Jana Hainsworth, Reinhilde Veugelers and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Blog Post

IMG_1985

How to make the single market more inclusive after Brexit

The creation of the single market generated winners and losers. Yet redistribution remains first and foremost a competence of national governments. It is thus fair to state that a failure in national, more than European, policies and welfare systems can be partly blamed for current discontent with the EU and the single market.

By: Alessio Terzi Topic: European Macroeconomics & Governance Date: August 18, 2016
Read about event More on this topic

Upcoming Event

Oct
4
12:30

Barriers to long-term investment

Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Blog Post

Jérémie Cohen-Setton

The state of macro redux

What’s at stake: In 2008, Olivier Blanchard argued in a paper called “the state of macro” that a largely shared vision of fluctuations and of methodology had emerged. With the financial crisis and our inability to prevent the greatest recession since the 1930s, the discipline entered into a period of soul searching. The discussions on the state of macro received new echoes this week after Blanchard published a short essay on the future of DSGE models.

By: Jérémie Cohen-Setton Topic: European Macroeconomics & Governance Date: August 16, 2016
Read article More on this topic More by this author

Opinion

Dalia Marin

What’s the matter with Austria?

Austrian firms invested heavily in Central and Eastern Europe. They offshored the parts of the value chain that required specialized skills and produced valuable research. This resulted in lowered growth in Austria.

By: Dalia Marin Topic: European Macroeconomics & Governance Date: August 9, 2016
Read article More on this topic More by this author

Blog Post

André Sapir

Should the UK pull out of the EU customs union?

The UK Government appears divided on whether the United Kingdom should seek to remain within the European Union’s customs union after Brexit. The United Kingdom is likely to want to leave the customs union, even it remains in the EU’s single market. But the UK should try and keep to the EU’s commitments at the WTO, at least at the start, in order to minimise the trade disruption that Brexit entails.

By: André Sapir Topic: European Macroeconomics & Governance Date: August 1, 2016
Read article More on this topic

Opinion

Grégory Claeys
Schoenmaker pic

Now is the time to open Strasbourg’s ‘Bronislaw Geremek’ European University

It is the right time to revive the proposal made 10 years ago by Bronislaw Geremek and Jean-Didier Vincent to create a truly European University in the European Parliament buildings in Strasbourg.

By: Grégory Claeys and Dirk Schoenmaker Topic: European Macroeconomics & Governance Date: August 1, 2016
Read about event More on this topic

Upcoming Event

Nov
21-22
13:30

Vision Europe Summit 2016

The 2016 Vision Europe Summit is titled "Redesigning European Migration and Refugee Policy" and will be held in Lisbon on 21-22 November 2016.

Topic: European Macroeconomics & Governance Location: Lisbon
Read article More by this author

Blog Post

Zsolt Darvas

Single market access from outside the EU: three key prerequisites

In relative terms, Norway’s current net financial contribution to the EU is similar to the UK’s. Switzerland and Liechtenstein pay surprisingly little, while Iceland is a net beneficiary. Relative to their population, Switzerland, Norway, Iceland and Liechtenstein received about twice as large an inflow of EU immigrants as the UK. These countries also have to adopt the vast majority of EU regulation to gain access to the single market.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: July 19, 2016
Read article More on this topic More by this author

Opinion

Guntram B. Wolff

The difficulties of defining EU-UK economic relations

Negotiations on the UK's exit from the EU have not yet begun, but the UK leadership needs to find a balance between single market access and free movement. There are also tensions between the demands of voters and what EU partners can plausibly agree. Guntram Wolff doubts the likelihood of a Norway- or Switzerland-style deals, and urges caution on all sides.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: July 19, 2016
Load more posts