Eurogroup statement on the draft budgetary plans for 2026 17:35 Eurogroup statement on the draft budgetary plans for 2026. Eurogroup

The euro area economy has shown significant resilience despite a challenging external environment. Economic growth in 2025 has outperformed expectations, supported by increasing investment and consumption, the Recovery and Resilience Facility (RRF) and other EU funds. Growth is set to continue at a moderate pace in 2026, with key conditions for an expansion of the economic activity remaining in place, notably robust labour markets and favourable financing conditions. Inflation has decelerated and is set to stabilize around the 2% target. The euro area economy is still facing high uncertainty, with geopolitical and global trade risks remaining key external factors that could weigh on growth prospects.

According to the Commission Autumn Forecast, public deficit and debt ratios are expected to increase slightly in the euro area, although significant differences across countries remain. The aggregate deficit ratio in the euro area is expected to increase to 3.2% of GDP in 2025 and 3.3% of GDP in 2026, inter alia as rising defence spending pushes up government expenditure. Public debt is forecast to rise to 88.8% of GDP in 2025 and 89.8% of GDP in 2026.

We welcome the submission of the draft budgetary plans for 2026, as well as the Commission's Opinions and its Communication, published on 25 November. With the revised economic governance framework now firmly in place, draft budgetary plans remain a cornerstone of fiscal policy coordination in the euro area, enhancing transparency, strengthening accountability and supporting the credibility of fiscal policies and of the governance framework. Within the flexibilities provided by the new framework, the Council has activated national escape clauses for 2025 to 2028 for 12 euro area member states which have applied so far, to help facilitate their transition to higher defence spending at national level, while safeguarding fiscal sustainability.

The euro area fiscal stance in 2025 is expected to be broadly neutral, consistent with our July statement. We concur with the Commission's assessment that the broadly neutral fiscal stance expected in 2026 is appropriate in view of the economic situation and largely consistent with the implementation of the fiscal framework. We welcome and stress the importance of the stance being underpinned by restraint in current expenditure, in particular in some high-debt countries, expected increased absorption of the RRF and growing investment expenditure that supports potential growth.

On the basis of the Commission's Opinions on the draft budgetary plans, we discussed the different degrees of risk regarding compliance with the maximum growth of net expenditure recommended by the Council, based on the Commission's forecast for 2026.

The Eurogroup welcomes the draft budgetary plans which are considered compliant in 2026. This concerns Austria, Italy, Slovakia and France, which are subject to the excessive deficit procedure, as well as Cyprus, Estonia, Finland, Germany, Greece, Ireland, Latvia, Luxembourg and Portugal. The Eurogroup invites these member states to implement their fiscal policies in 2026 in line with the requirements of the Stability and Growth Pact (SGP).

Based on the Commission assessment, three draft budgetary plans (Croatia, Lithuania and Slovenia) are at risk of non-compliance and two at risk of material non-compliance with the net expenditure growth rates recommended by the Council (the Netherlands, which is under the preventive arm, and Malta, which is subject to the excessive deficit procedure, though in both cases debt is well below the 60% reference value). While noting differences in terms of deficit and debt levels, the Eurogroup invites these member states to ensure, within their budgetary process, compliance with the requirements of the SGP.

Two member states, Spain and Belgium, have not yet submitted a draft budgetary plan and are invited to do so as soon as possible. The Eurogroup stands ready to assess these plans on the basis of Commission Opinions once they are available.

We are committed to the effective implementation of the fiscal framework and to sound public finances, which support sustainable growth. We underline the importance of reviewing the quality of both government revenue and expenditure, in light of the multiple demands on public finances. The Eurogroup will continue to closely monitor economic and fiscal developments, also in light of the temporary nature of the national escape clause, and continue its strong policy coordination. We will also continue tackling the long-term structural challenges in view of ensuring competitiveness of the euro area economy.