Home News Brussels gives warning to Portugal over significant risk of deviation from 2020 debt goals

Brussels gives warning to Portugal over significant risk of deviation from 2020 debt goals

Published on November 21, 2019

debt goalsEarlier today the European Commission repeated that Portugal’s draft budgetary plan for next year poses a risk of non-compliance with the EU Stability and Growth Pact, highlighting that the government must put forward an updated document “as soon as possible”.

In a statement published today providing opinions on the budgetary plans of the euro area Member States for 2020, the EU executive pointed out that Portugal’s draft budgetary plan for next year presents a “risk of significant deviation from the adjustment path towards the medium-term budgetary objective” and “compliance with the reference value for debt reduction”.

Together with Portugal, the European Commission said that “the draft budgetary plans pose a risk of non-compliance with the Stability and Growth Pact in 2020” in the case of Belgium, Spain, France, Italy, Slovenia, Slovakia and Finland.

The EU Commission pointed out the “importance of these euro area member states including in the updated draft budgetary plans additional measures necessary” to comply with European rules.

“For Portugal, Slovenia, Slovakia and Finland, the public debt has either fallen below the reference value of 60% of Gross Domestic Product or is following an appropriate path in this direction,” the statement claimed, adding that these four member states “have also achieved a budgetary balance that provides a considerable margin towards the reference value of 3% of GDP”.

“Among the budgetary plans found at risk of non-compliance, the ones that concern us most are those with debt levels that are high and not reduced fast enough,” Commission Vice President Valdis Dombrovskis revealed, explicitly referring to Italy, France, Belgium and Spain.

“We invite all member states that are at risk of non-compliance with to take the necessary measures within the national budgetary process to ensure that the 2020 budget will be compliant,” he said.

The opinions are part of a regular annual assessment of national budgets. None of the 19 countries of the euro area was found at “serious” risk of breaching EU fiscal rules, the Commission expressed. That could have led to immediate requests to change draft budgetary plans as in the case of Italy back in 2018.

Countries have been often found at risk of breaching EU fiscal rules, but no punitive action has ever been taken by the Commission which favoured a lenient interpretation of the rules.

Earlier in November the Commission forecast Italy, which has the largest debt in absolute terms in the EU, would increase its debt burden to 136.2% of Gross Domestic Product (GDP) this year. The debt would continue rising to 136.8% next year and to 137.4% in 2021, the Commission says.

Under EU rules, countries with a debt above 60% of GDP must gradually reduce it.