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EU sees Germany keeping budget surplus, France above deficit ceiling

Published: Updated:

The European Commission forecast on Thursday that Germany would keep a budget surplus at least until 2021, while France’s deficit would be above the EU ceiling this year and Italy’s debt would keep growing to nearly 140 percent of output.

In its quarterly economic forecasts, Brussels said the 19-country eurozone would maintain a broadly neutral fiscal stance this year and next, despite repeated calls on Germany and other wealthier states to spend more to counter a protracted economic slowdown.

Despite a worsening growth outlook, Germany is set to maintain a large budget surplus this year at 1.2 percent of its gross domestic product (GDP). The surplus is to narrow to 0.6 percent of GDP next year, and 0.2 percent in 2021, the Commission forecast.

The Netherlands, which is also among the eurozone states which could spend more, is set to have a surplus of 1.5 percent of output this year, 0.5 percent next and 0.4 percent in 2021.

Italy, which has already the largest debt in absolute terms in the EU, is to increase its debt burden to 136.2 percent of GDP this year, and it would continue rising next year to 136.8 percent and 137.4 percent in 2021, according to the Commission.

The EU executive’s forecasts diverge from the Italian government’s estimates. Rome sees the debt going down next year to 135.2 percent of output and expects it to keep falling in 2021.

Countries with a debt above 60 percent of GDP are required to gradually reduce it, under EU fiscal rules.

The Commission also forecast Italy’s structural deficit, which excludes one-off expenditures and revenues and is key in the Commission’s assessment of compliance with EU fiscal rules, to worsen to 2.2 percent of GDP this year and 2.5 percent in 2020, contrary to rules dictating it should improve.

France, which has a debt close to 100 percent of output, is also spending more this year and is expected to raise its budget deficit to 3.1 percent of GDP, the Commission estimates, above the EU’s 3 percent ceiling.

Its deficit is forecast to fall to 2.2 percent next year, according to the Commission’s forecasts.