Euro Zone Fiscal Policy Recommendations

BRUSSELS (Reuters) – Euro zone countries should aim for slight fiscal tightening in 2025 and 2026 to improve debt sustainability, according to a recommendation from the European Commission. This proposal will be endorsed by finance ministers in January.

Following significant public spending during the COVID pandemic and energy crisis, the recommendation, initially focused on 2025, now includes 2026 as well.

The Commission, responsible for enforcing the EU’s new debt and deficit rules, stated that adherence to agreed net spending plans should lead to slight fiscal tightening in both years.

> "(The Council recommends that euro zone countries take action) to ensure compliance with the new fiscal framework and improve debt sustainability, keeping the national growth rates in net expenditure in each Member State as recommended by the Council," the declaration stated.

The recommendation aims to achieve appropriately differentiated fiscal adjustments and a slightly contractionary euro area fiscal stance in the upcoming years.

Additionally, the Commission monitors the economies of all 27 EU countries to identify potential imbalances that could trigger economic crises affecting the bloc.

On Wednesday, the EU executive announced it would conduct in-depth reviews of the economies of Greece, Cyprus, Italy, Hungary, Slovakia, Romania, the Netherlands, Sweden, Estonia, and Germany due to identified imbalances this year.