EU prepares budget warnings as multiple nations breach 3% deficit rule
The European Commission is set to issue warnings to multiple member states violating the EU's 3% budget deficit ceiling. France and Italy have already received formal reprimands alongside eight other countries, with the EU executive publishing its assessment Wednesday.
Bulgaria faces rebuke just months after joining the eurozone, with its deficit expected to reach 4.1% this year after 3.5% in 2025. Germany will avoid public criticism despite breaching the limit at 3.7% this year (rising to 4.1% next year) due to a defense spending exemption following Russia's Ukraine invasion.
France's budget challenges continue as Paris aims to keep deficit at 5% this year but faces warnings it could reach 5.7% in 2027—a crucial election year—potentially triggering austerity measures. Prime Minister Sebastien Lecornu vows to reduce deficit below 3% by 2029.
Italy appears more stable with deficit expected to fall to 2.9% in 2026-2027, though Prime Minister Giorgia Meloni demands exemptions for energy price measures similar to defense spending exceptions.
The EBRD downgraded growth forecasts to 3.1% this year (from 3.4%), citing energy price shocks from the Middle East conflict that have made European gas prices five times higher than US levels. Higher energy costs are squeezing competitiveness and tightening fiscal space when economies can least afford it.
How will these fiscal pressures reshape Europe's economic landscape in the coming years?