National fiscal plans under the new EU fiscal rules: An initial assessment

This paper provides an assessment of the national medium-term fiscal structural plans submitted by EU countries and compares them to the prior guidance issued by the Commission. The national plans are instrumental in ensuring sustainable fiscal policy in the euro area, while providing fiscal paths tailored to country-specific macroeconomic conditions and needs. To gauge the national plans and their effects at the euro area level, we focus on three related issues: to what extent were fiscal paths revised following the initial guidance by the Commission, how much fiscal consolidation do national plans imply for the euro area on aggregate, and how well is public investment spending protected under national plans. We find that the national fiscal plans for some countries imply less fiscal consolidation than the prior guidance and that the amount of fiscal consolidation at the euro area level embedded in the national plans between 2025 and 2028 is less than envisioned by the Commission in its prior guidance. Finally, even before recent activation of escape clauses permitting higher defence spending in several countries, public investment seemed protected in most EU countries, despite planned fiscal tightening in the agreed national plans.