


A third of European Union countries with roughly half of the bloc’s population between them are now in violation of its fiscal rules, with Austria newly joining the pack.
The list of nine nations reprimanded by the European Commission was released by Brussels officials on Wednesday, representing the largest tally since the euro debt crisis. Each is guilty of running a budget deficit in excess of 3% of gross domestic product.
Those identified will endure tighter scrutiny by Brussels on their public finances under the so-called excessive deficit procedure, and could eventually face fines if they don’t meet the fiscal targets agreed with the EU executive.
The expansion of the list underscores the overall fiscal challenges looming over the region at a time when countries are shouldering pricey rearmament costs to confront the Russian threat, on top of existing budget strains compounded by lackluster economic growth and aging populations.
The inclusion of Austria — which had a deficit of 4.7% last year — is all the more notable given how it used to be among very few borrowers to boast top ratings. It is still ranked one level below that at the main three credit assessors. The government now faces a regime of close supervision as it acts to repair public finances while trying to avoid extending what is already set to be a third year of recession.
“Opening of a deficit-based excessive deficit procedure is warranted for Austria,” Brussels officials said in their report. “The Commission intends to propose to the council to open deficit-based excessive deficit procedures for Austria and propose to the council recommendations to put an end to the excessive deficit situation.”
Once a staunch advocate of strict budget policies, the country’s fiscal discipline has lapsed due to generous handouts to counter the impact of inflation, and spiraling social spending. Austria is also the only EU economy projected by the commission to contract this year.
Finance Minister Markus Marterbauer, delegated by the Social Democrats to a three-way coalition government in March, plans to reach the EU’s 3%-of-output deficit target only in 2028, despite announcing €6.3 billion ($7.2 billion) of savings measures already this year. The centrist cabinet is trying to spread out the impact of budget cuts.
Belgium, France, Hungary, Italy, Malta, Poland, Slovakia, and Romania are the other eight countries facing a reprimand from Brussels for their own fiscal breaches.
Meanwhile Ireland, Cyprus, Luxembourg and the Netherlands were identified by the commission as member state experiencing the biggest deterioration in relation to fiscal targets, though without consequence because of healthy deficit and debt levels.
The need for European rearmament is one budgetary pressure that has been recognized by the EU. Brussels has granted some flexibility on that, and 16 member states requested fiscal space of up to 1.5% of gross domestic product for military spending that will be excluded from oversight.
Among countries breaching the rules, France continues to stand out after its fiscal woes caused investor jitters. Prime Minister Francois Bayrou last week pledged a multi-year budget plan in July to rein in the deficit. That shortfall is targeted at 5.4% for this year, and the government has previously pledged to narrow it to 3% by 2029.
While Italy remains on the commission’s list, efforts to repair its own bloated public finances should ensure that the deficit there falls below the EU ceiling as soon as next year.
Romania faces the most serious reprimand. Brussels officials called on the government there to adopt measures urgently to rein in the deficit after a tumultuous political period, while falling short of sanctioning the country by suspending some of its EU funds.
Economies that fail to keep their deficit and debt levels below 3% and 60% of gross domestic product respectively can face sanctions if their national governments fail to cut spending or raise taxes in time, though that outcome has never materialized.