Two EU countries to submit debt reduction plans by Commission’s deadline

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By Jan Strupczewski

BRUSSELS (Reuters) – Only Malta and Denmark will submit their debt reduction plans to the European Commission by the initial September 20 deadline set by the EU’s new fiscal rules, with most other governments planning to do so in October and France even later, EU officials said.

The delay is a setback for the credibility of the new rules, in force since April, because they are meant to show markets how EU governments, many of which are saddled with high public debt after the COVID-19 pandemic and energy crisis, want to put debt on a declining path over four to seven years.

In June, the European Commission sent each EU country with public debt above the EU ceiling of 60% of GDP suggestions on the path of its reduction.

Governments have until September 20 to submit back to the Commission an agreed debt-cutting trajectory along with planned reforms and investments that would make it possible.

But EU officials close to the process said many EU countries either faced elections or did not yet have governments after recent elections that could to sign off such plans, which was an acceptable excuse to get more time.

Only Malta and Denmark would meet the deadline, while 20 other countries – Bulgaria, Croatia, Czechia, Germany, Hungary, Estonia, Ireland, Greece, Spain, Italy, Cyprus, Latvia, Luxembourg, Netherlands, Poland, Portugal, Slovenia, Slovakia, Sweden, Finland – would do so in October, officials said.

Many of those would use the separate October 15th deadline for the submission of draft 2025 budgets to the Commission to attach their debt reduction, reform and investment plans to them, officials said.

The five remaining countries — Lithuania, Romania, Belgium, France and Austria — would need even more time, officials said.

France, which at the end of June saw a jump in the premium investors want to hold its bonds over uncertainty about the outcome of snap parliamentary elections, needs more time because it still does not have a new government and the fragile ruling coalition will have a hard time pushing through debt cuts.

Italy, the country with the second-highest public debt in Europe, will have regional elections in October and November and the right-wing government is now promising tax cuts and help for families and employment in 2025.

Germany is facing elections in 12 months and EU officials said Berlin was undecided what to propose in its long-term plan.

The situation is also unclear in Lithuania, which has elections next month, and in Belgium, which is still without a government after elections in June. Austria will have elections at the end of September and Romania in December.

Once all the plans are submitted to and accepted by the Commission, they will be approved by EU finance ministers in December and January.