The 2025 draft budget plans submitted by Eurozone countries to the European Commission reflect a pivotal shift toward fiscal consolidation after years of pandemic- and crisis-driven expansion. The return of EU fiscal rules, which were suspended during the pandemic, requires countries to adhere to stricter fiscal discipline. The aggregated Eurozone deficit is projected to fall from 3.2% of GDP in 2024 to 2.7% in 2025, marking the first time deficits dip below the Maastricht 3% threshold since the pandemic. However, structural challenges, high borrowing needs, and political uncertainties cloud the fiscal outlook.
Country-Specific Fiscal Dynamics
France: Ambitious Consolidation Amid Political Risks
- Deficit Trends: France is expected to record one of the highest deficits in the Eurozone, at 5% of GDP in 2025, following a 2024 deficit revised upwards to 6.1%. The country requires an annual fiscal adjustment of 0.8% over seven years, far exceeding most other nations’ requirements.
- Fiscal Measures: A comprehensive €60.6 billion consolidation package aims to reduce deficits:
- Spending Cuts (€41.3 billion): Key measures include a six-month delay in pension indexation (€3.6 billion) and reductions in corporate social contributions (€4.7 billion).
- Tax Increases (€19.3 billion): Highlights include an exceptional corporate tax contribution (€8 billion), higher electricity taxes (€3 billion), and increased income taxes on high earners (€2 billion).
- Challenges: Resistance to measures such as delayed pension adjustments and tax hikes, combined with opposition fragmentation in Parliament, poses significant risks. The potential use of Article 49.3 to bypass parliamentary votes may intensify political tensions.
Germany: Limited Adjustments, Legal Challenges, and Investment Focus
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