The Commission Assesses 2014 Budgets
BNP Paribas | Dec 01, 2013 04:52AM ET
- According to draft national budgets, the eurozone’s fiscal deficit could come down from 2.9% of GDP this year to 2.5% in 2014.
- On the whole, Brussels has approved the proposals submitted, albeit with certain reservations (for France, the Netherlands).
- It recommends adjustments to policies proposed in Italy and in Spain.
The European Commission (EC) has examined proposed national budgets for 2014 and issued its conclusions on 15 November1. These were discussed by the eurozone’s finance ministers at the most recent Eurogroup meeting. If the Commission had identified a particularly serious failure to meet European rules or the undertakings given by member states in any of the 13 proposed budgets it examined, it could have demanded that the country concerned submit revised proposals. This was not the case and Brussels, on the whole, approved the proposals submitted. The Commission estimates that the average deficit of the thirteen eurozone countries taking part in this exercise will be 2.7% of GDP in 2013, below 3% for the first time since 2008, and then 2.3% in 2014. Taking into account the weight of the missing countries (Greece, Ireland, Portugal and Cyprus) we estimate that the final figures for the eurozone deficit will be 2.9% this year and, if budget proposals are respected, 2.5% in 2014.
The growth assumptions used by member states were in most cases close to the estimates adopted by the European Commission in its autumn forecasts, which has not always been the case in the past. The fact that draft budgets must now all be based on macroeconomic forecasts that are independent, or approved by independent bodies where they have been drawn up by the executive, can clearly take some of the credit for this. It is true that if they so wish, eurozone governments have other ways of accentuating the impact of a possible recovery on budget balances, for example by tinkering with the value of the elasticity of fiscal receipts to economic activity. This said, it should also be noted that the stakes attached to these assumptions are lowered now that more attention is paid to the structural element of deficits, and this is a good thing.
BY Frédérique CERISIER
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