Today, we adopted our Opinions on the draft budgetary plans for the euro area countries.
We have also taken decisions under the significant deviation procedure for Hungary and Romania.
And we adopted the fourth Enhanced Surveillance report for Greece.
Let me start with the good news:
For the first time since 2002, no euro-area Member State is in the Excessive Deficit Procedure;
aggregate debt for the euro area is falling;
nine countries show nominal surpluses, and
nine are expected to be at or above their medium-term budgetary objectives.
This overall positive picture is the result of the good efforts Member States have made, but it's also thanks to the tailwinds they have enjoyed from the economic expansion in the euro area.
Now, not-so-good news:
First, this past year has seen a weakening of the European and world economies. Europe has experienced a sharp slowdown in exports and a contraction in manufacturing.
Second, the overall positive fiscal assessment masks important differences across Member States, both in terms of the budgetary situation they face, and in terms of their budgetary plans:
We have found that nine countries - Germany, Ireland, Greece, Cyprus, Lithuania, Luxembourg, Malta, the Netherlands and Austria - are compliant with the requirements of the Stability and Growth Pact;
Two countries - Estonia and Latvia - are broadly complaint;
And eight countries - Belgium, Spain, France, Italy, Portugal, Slovenia, Slovakia and Finland - are at risk of non-compliance.
We invite all Members States that are at risk of non-compliance with the Stability and Growth Pact "to take the necessary measures within the national budgetary process to ensure that the 2020 budget will be compliant with the Stability and Growth Pact".
Among the budgetary plans found at risk of non-compliance, the ones that concern us most are those with high debt levels and where we do not see them being reduced fast enough:
Belgium, Spain and France have very high debt-to-GDP ratios, of almost 100%. Italy's exceeds 136% of GDP. And these countries are not expected to meet the debt rule.
These four countries have not sufficiently used favourable economic times to put their public finances in order. In 2020, they plan either no meaningful fiscal adjustment or even a fiscal expansion.
This is worrying because very high debt levels limit the capacity to respond to economic shocks and market pressures.
Belgium and Spain, which submitted budgetary plans based on a no-policy-change scenario, have been invited to submit updated plans in compliance with the SGP.
Of the other four countries at risk of non-compliance, Slovakia and Finland have debt-to-GDP ratios below 60% and Portugal and Slovenia are expected to meet the debt rule. All four countries have budgetary balances that provide a sizeable margin to the 3% of GDP threshold. However, these four countries are also found to be not progressing fast enough towards their medium-term objective.
Slovakia has taken additional measures after the submission of its draft budgetary plan, which allowed it to avoid the risk of significant deviation in 2020. So, the risk of significant deviation is manifest when the years 2019 and 2020 are taken together, due to fiscal slippages this year.
Slovenia has a nominal surplus [0.5% of GDP] and given the high uncertainty surrounding its output gap estimates, it may well be that it is closer to its medium-term budgetary objective in 2020. We will confirm this in the Spring.
The overall policy message is that Member States must use their fiscal toolkit to get ready for the challenging times ahead.
How exactly they do that depends on the country's situation: For those countries with high levels of debt, the best preparation is to reduce this debt. But for those Member States who have the fiscal space, they should continue to use it.
Furthermore, today we decided to propose to the Council to “renew” the Significant Deviation Procedure for Hungary and Romania. The two countries have not corrected their budgetary course as had been recommended.
Romania is expected to breach the 3% of GDP reference value of the Treaty already this year, with rapidly growing deficits over the following years. The country has run an expansionary policy at a time of high growth. This situation must be addressed urgently.
Finally, a word on Greece: many of us still remember the depth of the 2015 Greek crisis.
I am therefore glad that today we have published an encouraging and overall positive enhanced surveillance report for Greece.
The Eurogroup will discuss the report in December with a view to deciding on the release of the next debt relief measures.
Greece is on course to overachieve the agreed fiscal target of 3.5% of GDP this year. This would be the fifth year in a row of targets being exceeded. And according to our estimations, Greece would meet its fiscal target in 2020.
Capital controls have been lifted in September and the new administration is taking important steps to tackle the large stock of non-performing loans in the banking sector: this is key for strengthening the banks' capacity to provide finance to Greek businesses and households. This work must continue.
The government is also progressing with initiatives to strengthen the business environment and boost investment.
Overall, Greece has taken the necessary actions to achieve its specific reform commitments for mid-2019. This is good news. And we hope the Greek authorities sustain the reform momentum and deliver on their ambitious agenda of future actions.
Thank you very much and Pierre will provide more details.