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.

View comments
Read article More on this topic More by this author

Blog Post

Opening speech by Bruno Le Maire

Bruno Le Maire, minister of the economy and finance, delivered the opening speech at Bruegel's event “The Eurozone agreement – a mini revolution?”, 8 July 2019.

By: Bruno Le Maire Topic: European Macroeconomics & Governance Date: July 9, 2019
Read article More on this topic

Blog Post

‘Lo spread’: The collateral damage of Italy’s confrontation with the EU

The authors assess whether the European Commission's actions towards Italy since September 2018 have had a visible impact on the spread between Italian sovereign-bond yields and those of Germany, and particularly whether the Commission’s warnings have acted as a ‘signalling device’ for bond-market participants that it might be difficult for Italy to obtain the support of the ESM or the ECB’s OMT programme if needed.

By: Grégory Claeys and Jan Mazza Topic: European Macroeconomics & Governance Date: July 8, 2019
Read article More by this author

Blog Post

It’s hard to live in the city: Berlin’s rent freeze and the economics of rent control

A proposal in Berlin to ban increases in rent for the next five years sparked intense debate in Germany. Similar policies to the Mietendeckel are currently being discussed in London and NYC. All three proposals reflect and raise similar concerns – the increase in per-capita incomes is not keeping pace with increases in rents, but will a cap do more harm than good? We review recent views on the matter.

By: Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: July 8, 2019
Read about event More on this topic

Past Event

Past Event

Eurozone agreement: a mini revolution?

What does the new Eurozone budget do, and what does it not do? What are its strengths and weaknesses?

Speakers: Bruno Le Maire and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: July 8, 2019
Read article More on this topic More by this author

Podcast

Podcast

Director's Cut: Priorities for the new ECB president

In this Director's Cut of 'The Sound of Economics', Guntram Wolff talks to two of the authors of Bruegel's memo to the new ECB president, Maria Demertzis and Grégory Claeys, to specify the most important issues at the beginning of this eight-year cycle and to clarify the parameters within which the new incumbent will have to work.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: July 4, 2019
Read article Download PDF

Policy Brief

The threats to the European Union’s economic sovereignty

Memo to the High Representative of the Union for Foreign Affairs and Security Policy. The authors describe the current context and the increasing interlinkages between economics and power politics and the role to play in reinforcing and defending Europe’s economic sovereignty.

By: Jean Pisani-Ferry and Guntram B. Wolff Topic: European Macroeconomics & Governance, Global Economics & Governance Date: July 4, 2019
Read article Download PDF More on this topic

Policy Brief

Preparing for uncertainty

Memo to the president of the European Central Bank. Grégory Claeys, Maria Demertzis and Francesco Papadia present the challenges that the next ECB president will face during the upcoming mandate, reinventing monetary policy in a system riddled with uncertainties.

By: Grégory Claeys, Maria Demertzis and Francesco Papadia Topic: European Macroeconomics & Governance Date: July 3, 2019
Read about event

Upcoming Event

Sep
4-5
08:30

Bruegel Annual Meetings 2019

Bruegel's 2019 Annual Meetings will be held on 4-5 September and feature the launch of Bruegel's Memos to the New European Commission.

Speakers: Lorenzo Bini Smaghi, Laurence Boone, Claire Bury, Vítor Constâncio, Zsolt Darvas, Maria Demertzis, Ottmar Edenhofer, Baroness Kishwer Falkner of Margravine, Alicia García-Herrero, Danuta Hübner, Mikaela Gavas, José Manuel González-Páramo, Mathew Heim, Yi Huang, Korbinian Ibel, Pascal Lamy, Päivi Leino-Sandberg, Ann Mettler, Ashoka Mody, Mateusz Morawiecki, Mark Leonard, Stefano Manservisi, Erik F. Nielsen, Florence Parly, Jean Pisani-Ferry, Lapo Pistelli, Lucrezia Reichlin, Joakim Reiter, André Sapir, Olaf Scholz, Sena Siaw-Boateng, Philipp Steinberg, Alexander Stubb, Ezequiel Szafir, Laura Tyson, Nicolas Véron, Reinhilde Veugelers, Sabine Weyand, Thomas Wieser, Guntram B. Wolff and Georg Zachmann Topic: Energy & Climate, European Macroeconomics & Governance, Finance & Financial Regulation, Global Economics & Governance, Innovation & Competition Policy Location: Palais des Academies, Rue Ducale 1, 1000 Brussels
Read article More on this topic More by this author

Podcast

Podcast

Director's Cut: ECB monetary policy decisions deconstructed

In this Director’s Cut, Bruegel’s Grégory Claeys and Maria Demertzis take a deeper look at whether the monetary policy decisions made by the ECB over the past three presidential eras arrived by consensus, by unanimity or by majority votes of the governing council.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: June 27, 2019
Read article More on this topic

Blog Post

The evolution of the ECB governing council's decision-making

Before it is decided who will chair the governing council for the next eight years, the authors look back and examine precisely how decisions have been taken since the ECB was created – by unanimity, by majority, or by consensus.

By: Grégory Claeys and Tanja Linta Topic: European Macroeconomics & Governance Date: June 27, 2019
Read about event

Upcoming Event

Sep
16
08:30

Climate change and the role of central banks

What connections exist between central banks and climate change, and what are the resulting implications?

Speakers: Emanuele Campiglio, Paul Hiebert, Pierre Monnin, Kjell G. Nyborg, Luiz Awazu Pereira da Silva, Mario Quagliariello, Mattia Romani, Paweł Samecki and Dirk Schoenmaker Topic: Energy & Climate, European Macroeconomics & Governance Location: Narodowy Bank Polski, Świętokrzyska 11/21, 00-919 Warsaw
Read article More on this topic More by this author

Blog Post

Where Brexit goes, the law shall follow

How the financial industry and the law firms that support it are preparing for what comes next

By: Rebecca Christie Topic: European Macroeconomics & Governance Date: June 25, 2019
Load more posts