Also this year, the Commission has prepared statements on the Budgetary Plans of euro area Member States and assessed to which extent these comply with the budgetary discipline demanded by the Stability and Growth Pact (SGP). However, the Commission today signalled its readiness to allow exceptions: hence, due to higher security spending, the budgetary discipline will probably be relaxed for France. With regard to Austria, the Commission also announced its willingness not to include the additional costs for caring for refugees in the calculation.

Overview over the statements

Mid-October, 16 euro area Member States submitted overviews over their Budgetary Plans for 2016 based on the “Two Pack” legislation. The states under economic adjustment programmes (Cyprus and Greece) were exempt from the obligation to submit. Overall, for the first time since the start of the crisis, the level of debt has declined on average, said Commissioner Valdis Dombrovskis during the statement presentation (from about 91.6 % of GDP in 2015 to about 90.5 % in 2016). In 2014, the average budget deficit in the euro area still stood at 2.4 % of GDP; it is at about 2 % in 2015 and would fall to 1.7 % in 2016. Thereby the stability criteria in respect of new debt were on average fulfilled: these provide for a maximum deficit of 3 % and a maximum government debt of 60 %.

Flexibility of cost of caring for refugees and France's security budget

Some states had cited the budgetary effects of the migration flow in 2015 as a reason for higher deficits. According to the Commission, a flexibility regulation, which enables to take additional costs for exceptional events, which are beyond the control of a country, into account, may be applied to these states.

The same regulation will probably also be applied to France, who announced following the terror attacks last week to drastically increase her police and security spending. Over the past years, France had already exceeded budget deficit regulations; however, more frequently than other states she had been granted an extension of deadlines. Most recently, the Commission increased pressure on the country to undertake massive cuts with regard to wage costs and pensions.

Austria: Probable non-compliance with the Stability and Growth Pact

As to Austria, the Commission predicts a significant deviation from the mid-term budget target for 2016 and anticipates the risk of non-compliance with the regulations of the Stability and Growth Pact. For 2015, it forecasts a deficit of 1.9 % of GDP and of 1.7b% for 2016. Austria had provided lower figures and the Commission explains the deviation by saying that on the one hand the estimated costs for bank liquidations and caring for refugees had been higher and that on the other hand the estimate of costs for counter financing the tax reform by tackling tax fraud had been more conservative. The burden from bank liquidations, which Austria has to deal with in 2015, amount to a total of EUR 7,5 billion (for the Kommunalkredit Bank and the HETA Bank, Bad Bank of Hypo), thereby increasing the level of debt to a historic maximum level of 86.5 % of GDP.

However, the Commission is willing to exclude the increased spending, which Austria provides for caring for refugees (according to Austria 0.8 % of GDP in 2015 and 0.16 % in 2016), from the calculation, which would mean that the deviation from the budget targets would be slightly smaller. The Commission announced that it would review the feasibility of this exception. In spite of this, Austria will be asked to take measures to comply with the requirements.

National Parliaments now have until 31st December at the latest to adopt their budgets. The next step in the so-called “European Semester” is the presentation of the Annual Growth Report next week, in which the Commission will propose economic priorities for the EU as a whole.

Further information:

Press release of the Commission

Commission Opinion on Austria's Draft Budgetary Plan

Commission Opinion on all Budgetary Plans