The board’s annual assessment lands just days after the commission announced plans to loosen budget rules for energy investments.
Wester van Gaal
Europe’s independent budget watchdog has pushed back against the EU Commission’s plans to loosen fiscal rules for energy-related spending.
“The energy shock is real, but it calls for transformation, not stimulus,” said Pieter Hasekamp, chair of the European Fiscal Board (EFB), in a statement published Wednesday (10 June)
He also warned that looser budget rules risk repeating the policy mistakes of the 2022–2023 energy crisis, when subsidies stayed on long after the worst of the crisis was over.
“Support for households and businesses must be temporary, targeted, and offset, not a backdoor to broader loosening,” he added.
The board’s annual assessment of the appropriate fiscal stance for the euro area in 2027 lands just days after the commission announced plans to extend the so-called ‘escape clause’ for energy investments.
Originally meant to allow for 1.5 percent of gross domestic product in extra defence spending, under those plans member states would be allowed to spend up to 0.3 percent of GDP per year on energy without breaching EU fiscal rules.
But the EFB stresses that euro area public finances are already under strain.
The average budget deficit across the bloc is forecast to hit 3.5 percent of GDP in 2027, with aggregate debt set to exceed 90 percent of GDP.
Most member states have still not unwound the fiscal expansions of the pandemic years, the EFB also noted, and rising interest costs are putting even more pressure on high-debt countries such as Italy and France.
Against that backdrop, the board says member states should stick to the spending paths set out in their medium-term fiscal plans, and not borrow more.
According to the EFB, flexibility, once granted, is hard to turn back and could easily lead to untargeted spending.
During the 2022–2023 energy crisis, broad-based support schemes stayed in place long after energy prices had come back down.
Should the Middle East crisis persist, the EFB advises countries to protect public investment, rather than resort to aggregate demand support.
Any energy support that is introduced, the board says, should come with clear end-dates, and be aimed squarely at vulnerable households and businesses, and be paid for through cuts elsewhere or new revenues.
Fiscal conservatives
