EU fiscal board warns exceptions to bloc budget rules risk credibility

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EU fiscal rules risk credibility

Highlights

The European Fiscal Board warns repeated exceptions under the EU’s new April 2024 fiscal rules risk undermining the framework's credibility and enforcement.
Only Bulgaria faced procedural consequences despite weaker fiscal results than planned, while National Escape Clauses have already enabled exemptions for defence and energy in 2025 and 2026.
Eurostat data show EU government debt rose to 82% of GDP in 2025 from 81% in 2024, with the Commission projecting it to exceed 84% in 2026.

Concerns over enforcement of new rules

As reported by Reuters, citing the European Fiscal Board, repeated exceptions granted under the European Union's new fiscal rules risk weakening the framework's credibility soon after its April 2024 launch. The watchdog says the European Commission and the Council have shown too much discretion in applying rules meant to steer member states toward deficit and debt limits of 3% and 60% of gross domestic product.

Under the system, each EU country agrees a tailored annual debt reduction path with the Commission and gets between four and seven years to improve its fiscal position. If a government does not stay on the agreed path, it must explain the deviation or face disciplinary action.

The board says enforcement so far remains limited. It says no statements were issued under the comply-or-explain rule, while only Bulgaria faced procedural consequences through a new excessive deficit procedure.

The report says this outcome contrasts with weaker fiscal results and projections than the recommended expenditure paths envisaged. EFB Chair Pieter Hasekamp says each exception may appear politically reasonable, but a framework that bends with every new shock risks losing its purpose.

Debt pressures and spending demands intensify

The exemptions take the form of National Escape Clauses, which allow temporary departures from fiscal targets to accommodate higher spending. First offered in March 2025, they have been used for defence spending and, in 2026, for some energy-resilience measures.

The criticism comes as EU governments face mounting calls to raise spending on defence, energy security and the green transition. At the same time, they are coping with higher debt servicing costs after years of elevated borrowing and as global markets keep debt sustainability in focus amid expectations of a rate-tightening cycle.

Despite stronger-than-expected economic growth in 2025, the board says fiscal positions across the EU improve far less than countries laid out in their fiscal plans. Eurostat data show EU government debt rose to 82% of GDP in 2025 from 81% a year earlier, and the Commission forecasts it will exceed 84% in 2026.

Our earlier coverage of expanding energy subsidy programmes highlighted how governments’ efforts to shield households and businesses from surging fuel and power costs can quickly become fiscally unsustainable. The article noted that “temporary” support is often hard to unwind during prolonged crises, raising deficit risks and underscoring the need to balance affordability with long-term budget stability.

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