Deficit: EU Infringement Proceedings for Italy, France, 5 Other Countries

The European Commission has launched an excessive debt breach procedure for Italy, France, and 5 other EU countries. 12 of the 27 member countries were under close scrutiny for exceeding the 3% deficit-to-GDP ratio, and proceedings were initiated against Italy, France, Belgium, Hungary, Poland, Malta, and Slovakia.

The target is clearly aimed at Europe’s second and third largest economies. In France, the budget deficit was 5.5% of GDP in 2023 and is expected to be around 5.3% this year, while public debt amounted to 110.6% of GDP in 2023, and the Commission forecasts an increase to 112.4% in 2024 and 113.8% in 2025.

Italy had a deficit of 7.4% in 2023 and is projected to fall to 4.3% in 2024; the government debt-to-GDP ratio in 2023 was 137.3%, and ten-year projections have it increase steadily to 168% of GDP by 2034.

Community rules, although less stringent now with the new stability pact, in any case require a public debt-to-GDP ratio of less than 60% of GDP and a deficit of 3%.

The European Union has returned to applying budget rules using the “fiscal” method for the first time since 2020, when the economy was tested by the covid pandemic. Only in autumn, the new Commission, to be selected by July after the European elections on June 6-9, 2024, will signal the annual adjustment needed to get back “in order,” while countries, under the new stability pact, will have until September 20, 2024 to submit a multi-year plan to restore public finances.