The European Union has initiated an excessive deficit procedure (EDP) against seven member states following a Council of the European Union meeting on Friday.
The procedure targets France, Italy, Belgium, Hungary, Malta, Poland, and Slovakia.
This decision followed a vote that commenced on Wednesday and concluded on Friday, mandating these countries to implement corrective actions within a four to seven-year timeframe to address their budget deficits.
On 19 June, the European Commission decided to include these seven countries in the procedure, citing their failure to take necessary corrective measures. The EDP is triggered when a member state’s deficit exceeds 3% of its gross domestic product (GDP) and its debt surpasses 60% of GDP. Member states must adhere to these treaty-established benchmarks.
The EDP aims to ensure disciplined budgeting among member states, preventing excessive deficits and promoting debt reduction to acceptable levels.
By the end of the year, the Council of the European Union is expected to adopt recommendations based on proposals from the Commission, urging member states to take effective measures within the specified timeframes.
The European Commission is anticipated to present its recommendations to the Council around November. These recommendations will outline the necessary steps for each country to correct their deficits.
King Philippe of Belgium Calls for Urgent Action on Budget Deficit
King Philippe of Belgium has called on the country’s political leadership to address the alarming budget deficit situation. According to The Brussels Times, the monarch raised this issue in his speech during the national holiday celebrations.
King Philippe urged political leaders to tackle the “extraordinary budget situation,” emphasising the need for a “unifying project” to address the deficit. He advocated for an economic model that would strengthen Belgium’s position by “protecting our production base, enhancing competitiveness, and developing our centres of excellence.”
Belgium’s budget deficit this year could become one of the largest among European countries and may continue to grow without government countermeasures. Eurostat statistics released on Monday showed that Belgium’s budget deficit in the first quarter of 2024 was 4.5% of GDP, with overall public debt at 108.2%, significantly higher than the European average. Growing debt increases interest payments, consuming more funds in addition to the principal debt.
Similar figures are seen in France and Spain, with public debts at 110.8% and 108.9%, respectively, while Italy and Greece have even higher debts at 137.7% and 159.8%.
In June, the European Commission took the first steps towards launching the EDP for Belgium and the other six member states with similar problems. This procedure requires countries to reduce their deficit by at least 0.5% of GDP per year, either through spending cuts or increased tax revenues.
The head of Belgium’s Central Economic Council stated that reducing spending would be a significant challenge for the country, as various sectors, from climate initiatives to defence, require increased funding.
Germany is also grappling with budgetary challenges, with the deficit issue contributing to the complex negotiations within the “traffic light coalition” regarding the national budget. Defence Minister Boris Pistorius remains dissatisfied with the agreement and seeks to secure more funding for defence during parliamentary budget discussions.
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