Fiscal policy implications of euro area countries’ 2023 draft budgetary plans

On 22 November 2022 the European Commission released its opinions on the draft budgetary plans (DBPs) of euro area countries for 2023.

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ECBECB
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https://www.ecb.europa.eu//pub/economic-bulletin/focus/2023/html/ecb.ebbox202208_08~8caa7063ac.en.htmlhttps://www.ecb.europa.eu//pub/economic-bulletin/focus/2023/html/ecb.ebbox202208_08~8caa7063ac.en.html
Retrieved on: 
Monday, January 16, 2023
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Tags: 
Government, Commission, Pact, Depreciation, Compliance, Coronavirus, European, Stability, Council, Public finance, European Central Bank, COVID-19, Royal commission, DBP, RRF, GDP, Public sector banks in India, Section 2, Aggression, Recovery, Growth, Policy, Orientation, ECB, European System of Central Banks, International Economics Bulletin, European Commission, ESCB, European Parliament, Central bank, State, Section 6 of the Canadian Charter of Rights and Freedoms, Environment, Working Group, SGP, Renewable energy, Bookkeeping, Security (finance), Health insurance, Risk management, EU, Eurosystem, Eurogroup
Geotags: 
BELGIUM, ESTONIA, LITHUANIA, UKRAINE, AUSTRIA, SLOVAKIA, SLOVENIA, ITALY, NETHERLANDS, LUXEMBOURG, GERMANY, PORTUGAL, LATVIA
Summary
Key Points: 
  • On 22 November 2022 the European Commission released its opinions on the draft budgetary plans (DBPs) of euro area countries for 2023.
  • At that time, the Council also advised euro area countries to adopt differentiated fiscal policies in 2023, in particular recommending countries with high levels of government debt to ensure a prudent fiscal policy.
  • Euro area countries with low or medium levels of government debt were recommended to ensure that the growth in nationally financed current expenditure is in line with an overall neutral policy stance.
  • Euro area countries were also advised to expand public investment for the green and digital transitions and for energy security.
  • These financing sources provide a fiscal impulse to the economy but are not reflected in the budget balances of euro area countries, given that they are recorded equally as both revenue and expenditure.
  • According to the Commission assessment, the DBPs of euro area countries for 2023 are broadly in line with the fiscal policy recommendations of the Council, with a few exceptions.
  • According to the Commission, fiscal policies may become expansionary in 2023 in an environment of still elevated inflation.
  • The aggregate euro area energy support, as embedded in the macroeconomic outlook of the December 2022 Broad Macroeconomic Projections Exercise (BMPE), is estimated at around 2% of GDP.
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