European Fiscal Monitor: February 2025

2024 marks a turning point in European fiscal policy with the first steps being taken in the implementation of the new EU Economic Governance Framework. This represents a significant evolution in fiscal oversight, shifting towards a streamlined system that places greater emphasis on national ownership, flexibility and debt sustainability. As Member States navigate this transition, the role of Independent Fiscal Institutions (IFIs) is more crucial than ever in ensuring robust fiscal oversight and providing technical assessments that enhance transparency and accountability.

Amid these institutional developments, the broader economic and fiscal landscape remains complex. Economic forecasts indicate a moderate recovery across the EU, with real GDP projected to grow by 1.4% in 2025, peaking at 1.5% in 2026 before stabilizing. However, growth prospects remain uneven. Inflation, although on a downward trajectory, is expected to remain above the 2% target in many Member States through 2024, with a weighted EU average of 2.1%. Public finances remain fragile despite projected improvements. While the number of countries exceeding the 3% deficit-to-GDP threshold is expected to decline from nine in 2024 to just four by 2028, high deficits persist in France, Slovakia, and Belgium, triggering excessive deficit procedures. Additionally, public debt ratios, although stabilizing, remain a key concern. 

In this evolving context, the Network of EU IFIs has undertaken an extensive survey to assess the macroeconomic outlook and the role of IFIs in the first round of Medium-Term Plans (MTPs). The survey results highlight both progress and challenges – while many IFIs have actively contributed to fiscal planning, the extent of their involvement varies significantly across Member States. In half of cases, IFIs were not formally involved in the drafting or assessment of MTPs prior to their submission, despite their mandate to provide independent analysis. Nevertheless, the IFIs’ strong commitment to fiscal scrutiny is evident, as many undertook assessments on their own initiative – and generally expressed a positive judgement.

The first steps of the new governance framework have been taken but much work lies ahead. Ensuring that IFIs have the resources and institutional backing necessary to fulfil their role will be essential to strengthening fiscal oversight across Europe. The Network of EU IFIs remains committed to fostering peer-to-peer learning, enhancing technical expertise and contributing to a transparent and effective fiscal governance system.