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 Topic: European Macroeconomics & Governance

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.


Warning: Invalid argument supplied for foreach() in /home/bruegelo/public_html/wp-content/themes/bruegel/content.php on line 449
View comments
Read article Download PDF More on this topic

External Publication

Analysis of developments in EU capital flows in the global context

The monitoring and analysis of capital movements is essential for policymakers, given that capital flows can have welfare implications. This report, commissioned by the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union, aims to analyse capital movements in the European Union in a global context.

By: Grégory Claeys, Maria Demertzis, Konstantinos Efstathiou, Inês Goncalves Raposo, Alexander Lehmann and David Pichler Topic: European Macroeconomics & Governance Date: January 17, 2019
Read article More on this topic More by this author

Podcast

Podcast

Director's Cut: The economics of no-deal Brexit

Bruegel director Guntram Wolff is joined by senior fellow Zsolt Darvas to rake through the possibilities and probabilities inherent in a no-deal Brexit scenario, covering trade, the Irish border, citizens' rights and the EU budget.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: January 16, 2019
Read about event More on this topic

Upcoming Event

Jan
24
12:30

Towards a new social contract

This event will look at a a proposal for a new social contract put forward by the World Bank.

Speakers: Maurizio Bussolo, Zsolt Darvas, Ruby Gropas and Bernadette Ségol Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More by this author

Blog Post

What 2019 could bring: A look inside the crystal ball

Economic performance prospects in Europe, the US and Asia in 2019. We start off by reviewing commentaries and predictions about the euro zone, which many commentators expect to perform below potential as uncertainties continue to dampen a still robust recovery.

By: Michael Baltensperger Topic: European Macroeconomics & Governance, Global Economics & Governance Date: January 14, 2019
Read article More on this topic More by this author

Blog Post

EU budget implications of a no-deal Brexit

A no-deal Brexit would mean the UK’s contributions to the EU budget fall to zero as of March 30th 2019. The author here calculates an estimate of the budget shortfall that would have to be covered in this case, and how the burden would fall across different member states.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: January 14, 2019
Read article Download PDF More on this topic More by this author

Policy Contribution

The implications of no-deal Brexit: is the European Union prepared?

The author, based on a note written for the Bundestag EU Committee, is exploring the possible consequences of a no-deal Brexit for the EU, assessing preparations on the EU side and providing guidance on the optimal strategy for the EU, depending on the choices made by the United Kingdom.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: January 14, 2019
Read article Download PDF More by this author

Parliamentary Testimony

German Bundestag

The implications of no-deal Brexit: is the EU prepared?

Hearing on Brexit in the EU Committee of Bundestag on 14 January 2019, exploring the possible consequences of a no-deal Brexit for the EU and assessing preparations on the EU side.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance, German Bundestag, Testimonies Date: January 14, 2019
Read article More on this topic More by this author

Opinion

Fifty shades of yellow

Who are the Yellow Vests? What are the true roots of their uprising? And what do they want? Six weeks after they started rocking French politics and a month after violence erupted on the Champs Élysées, these questions are still hotly debated in France.

By: Jean Pisani-Ferry Topic: European Macroeconomics & Governance Date: January 10, 2019
Read article More by this author

Podcast

Podcast

Director’s cut: Wrapping up 2018

With 2018 drawing to a close, and the dawn of 2019 imminent, Bruegel's scholars reflect on the economic policy developments we can expect in the new year – one that brings with it the additional uncertainty of European elections.

By: The Sound of Economics Topic: Energy & Climate, European Macroeconomics & Governance, Finance & Financial Regulation, Global Economics & Governance, Innovation & Competition Policy Date: December 20, 2018
Read article Download PDF More on this topic

Policy Contribution

The euro as an international currency

Is a more important international role for the euro worth pursuing? What measures would achieve this result, if it is worth pursuing?

By: Konstantinos Efstathiou and Francesco Papadia Topic: European Macroeconomics & Governance Date: December 18, 2018
Read article More on this topic More by this author

Blog Post

Brexit: Now for something completely different?

The life of Brexit. After a week of ECJ rulings, delayed votes, Theresa May’s errands across Europe and the vote of no confidence, we review the latest economists’ opinions to try to make sense of what has changed and what hasn’t.

By: Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: December 17, 2018
Read article More on this topic

Opinion

Can virtual currencies challenge the dominant position of sovereign currencies?

Marek Dabrowski and Lukasz Janikowski analyse why private money has historically failed in competition against sovereign currencies and what it means for modern virtual currencies, such as Bitcoin.

By: Marek Dabrowski and Łukasz Janikowski Topic: European Macroeconomics & Governance Date: December 15, 2018
Load more posts