Despite higher debt servicing costs and lower nominal GDP growth, the EU’s debt-to-GDP ratio is set to stabilise at 82.9 % in 2024, edging up slightly by 0.4 percentage points in 2025.
The aggregate EU general government deficit, having increased marginally from 3.4 % to 3.5 % of GDP in 2023, is projected to decline to 3.0 % in 2024 and 2.9 % in 2025. This reduction is being driven by the phase-out of energy-related measures, lower subsidies on private investment, and a gradual improvement in economic activity. The EU’s fiscal stance, which expanded significantly in 2020-2022 before becoming neutral in 2023, is expected to be contractionary in 2024 and broadly neutral in 2025. As new fiscal rules entered into force on 30 April 2024, in line with the excessive deficit procedure (EDP), the Commission assessed Member States’ deficits. In July, the Commission intends to propose opening EDPs in seven countries, requiring them to adjust their deficits by at least 0.5 percentage points of GDP each year.
Whether a Member State is compliant with the EU fiscal rules is one of the criteria the ECB considers in decisions on purchases of that country’s securities on the secondary market under the Transmission Protection Instrument, whose activation is at the discretion of the ECB.
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