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

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.

Topics

Comments

Read article More on this topic

Blog Post

Pia Hüttl
jaume

Northern Ireland and EU funds

EU funding for the UK has risen considerably since 2000, but funding predominantly goes to rural and less developed areas, meaning that Northern Ireland, Scotland and Wales receive more funding relative to their GDP than England.

By: Pia Hüttl and Jaume Martí Romero Topic: European Macroeconomics & Governance Date: May 3, 2016
Read about event More on this topic

Past Event

Past Event

Fighting corruption: from headlines to real impact

Despite recent efforts to tackle corruption there is not much evidence that these strategies are producing results. Why is this the case and what can we do to improve the situation?

Speakers: Carl Dolan, Mihaly Fazekas, Alina Mungiu-Pippidi and Alessio Terzi Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 28, 2016
Read about event More on this topic

Past Event

Past Event

Active labour market policies, what works?

How are Europe's labour markets performing, and what policies can best help them function?

Speakers: Alfonso Arpaia, Clyde Caruana, Grégory Claeys, Dan Finn, Regina Konle-Seidl, Alfred Mifsud, Godwin Mifsud, Edward Scicluna and Paul Swaim Topic: European Macroeconomics & Governance Location: Mediterranean Conference Centre Triq l-Isptar, Valletta, Malta Date: April 27, 2016
Read article More on this topic More by this author

Blog Post

Jérémie Cohen-Setton

Understanding HM Treasury’s Brexit analysis

What’s at stake: The UK will hold a referendum on its membership of the EU on June 23rd 2016. Her Majesty’s Treasury released an assessment of the impact of Brexit finding that the economy would be between 3 and 7% smaller in 2030 if the UK left the EU than it would be if it stayed in.

By: Jérémie Cohen-Setton Topic: European Macroeconomics & Governance Date: April 25, 2016
Read about event More on this topic

Upcoming Event

25 
May
2016
12:30

Lessons for the euro from early US monetary and financial history

The United States has a monetary union that many look to when considering the future of the EU. But how easy was it really to create such a union and what can Europe learn from the US process?

Speakers: Jeffry Frieden 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

jaume

Are regional governments causing deficit overshooting in Spain?

Spain once again missed its deficit target in 2015 and it seems unlikely that 2016 will be any better. The central government has pointed to regional deficits as being the cause of the fiscal slippage. However, regional governments claim that their deficit is due to under-financing and overly strict deficit targets.

By: Jaume Martí Romero Topic: European Macroeconomics & Governance Date: April 19, 2016
Read about event More on this topic

Past Event

Past Event

CANCELLED: The Search for Europe

This event has been cancelled because of an unforeseen change in the calendar of the main speaker.

Speakers: Francisco González, Sylvie Goulard, Veronica Nilsson, John Peet, Javier Solana and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 19, 2016
Read article More on this topic

Blog Post

IMG_20151009_103117 (3)
Karen E. Wilson
Guntram B. Wolff

Youth unemployment in the Mediterranean region and its long-term implications

Youth unemployment in the Mediterranean region has consequences for the whole of Europe. Tackling youth unemployment in the region must continue to be a high policy priority.

By: Nuria Boot, Karen E. Wilson and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: April 13, 2016
Read article More on this topic

Opinion

Grégory Claeys
Zsolt Darvas

How to reform EU fiscal rules

The current inefficient European fiscal framework should be replaced with a system based on rules that are more conducive to the two objectives of public debt sustainability and fiscal stabilisation.

By: Grégory Claeys and Zsolt Darvas Topic: European Macroeconomics & Governance Date: April 12, 2016
Read article More on this topic More by this author

Opinion

Guntram B. Wolff

Making the EU-Turkey refugee deal work

The EU deal with Turkey reached on 18 March is problematic, but without a deal the EU’s external borders would have collapsed completely. Now the EU needs to support Greece and increase the number of refugees taken directly from Turkey.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: April 11, 2016
Read article More on this topic

Opinion

fratzscher-03
Reint_Gropp_m
p2-Kotz
jan-pieter-krahnen
odendahl-june14-1409577172
Beatrice Weder di Mauro
Guntram B. Wolff

Mere criticism of the ECB is no solution

What would happen if the ECB failed to respond to the excessively low inflation and the weak economy? And what economic policy would be suitable under the current circumstances, if not monetary policy?

By: Marcel Fratzscher, Reint Gropp, Hans-Helmut Kotz, Jan Krahnen, Christian Odendahl, Beatrice Weder di Mauro and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: April 10, 2016
Read article More on this topic More by this author

Blog Post

Zsolt Darvas

The structural budget balance limbo

A key indicator in the EU’s fiscal framework is the structural budget balance, but estimates of the indicator by the European Commission, IMF and OECD are revised a lot from one year to the next, sparking concerns among some EU finance ministers.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: April 7, 2016
Load more posts