EU Fiscal Rules Face Strain as Debt Rises and Exemptions Grow
European Fiscal Board warns that new budget rules are weakening. Exemptions for defense and energy are diluting strict enforcement.
Key points
- The European Fiscal Board warns that informal guidance is replacing formal sanctions in the new fiscal framework.
- Bulgaria entered the excessive-deficit procedure in July with a projected 4.1 per cent deficit for 2026.
- Italy reallocated its defense spending flexibility to energy measures, illustrating the ease of shifting priorities.
The European Fiscal Board warns that new EU budget rules are losing force. This happened in the first full year after April 2024. Member states are already bending the agreed spending paths.
Brussels is using informal guidance more often than formal sanctions. The Board calls this a tendency toward forbearance. This weakens the credibility of the entire fiscal framework.
Debt rises as enforcement weakens
Nine countries are currently under excessive-deficit procedures. These include Austria, Belgium, Finland, France, and Italy. Bulgaria joined this list in July 2025.
Bulgaria's deficit is projected to reach 4.1 per cent of GDP in 2026. This is well above the three per cent limit. The entry tests the new regime's strictness.
Defense exemptions reshape the rules
Member states activated national escape clauses for military spending. This allowed extra costs without full impact on limits. The Board sees this as a major exception.
This flexibility did not stay confined to defense. Brussels allowed some of it to cover energy resilience. The Board criticized this repurposing of budget room.
Italy reallocates its fiscal flexibility
Italy used its available flexibility fully for energy measures. It used only part of its defense allowance. This shows how governments shift priorities easily.
EU Today reported that this interaction weakens the framework. Successive exceptions turn binding paths into flexible targets. The original intent of strict control is fading.
