European Fiscal Monitor: Winter 2026 - Heightened Fiscal Risks and Europe’s new Economic Governance Framework

Independent Fiscal Institutions (IFIs) are national fiscal watchdogs. They assess government forecasts, monitor compliance with European and national fiscal rules, and promote transparency in public finances. This Winter 2026 edition of the European Fiscal Monitor (EFM), prepared by the EU IFI Network Secretariat, presents the views of IFIs based on a survey carried out between 16 December 2025 and 23 January 2026.

Key findings include:

• IFIs are doubtful the net expenditure growth path will be respected (pp.11-12). Just over a quarter of IFIs believe their country is likely to fully respect the 2026 net primary expenditure target. Although this rule is central to the new EU framework, only around half of IFIs consider current expenditure paths plausible. In many cases, compliance is expected to depend on using the margins of tolerance of control accounts.
• Concerns about broader public finance forecasts have increased (pp.8-11). While most IFIs consider macroeconomic forecasts plausible, a sizeable minority expressed doubts about projections for deficits and debt, especially in countries affected by political instability.
• Defence spending is the central fiscal risk currently (pp.13-15). Ninety percent of IFIs see it as an important risk in both the short and medium term, particularly as national escape clauses are phased out. More IFIs are also concerned about compliance with national fiscal rules.
• Progress on transposing Directive (EU) 2024/1265 is uneven (pp.17-18). Eleven IFIs are satisfied with progress, while 12 report some but insufficient progress. Two report no progress.
• IFI involvement in transposition varies widely (p.19). Most IFIs report strong involvement but four report no involvement.
• IFIs are more cautious than governments about new safeguards (pp.20-21). While views are broadly aligned on technical aspects, IFIs continue to raise concerns about independence, access to information, adequate resources and their ability to meet expanded responsibilities.

The report comes at a time of growing fiscal pressure and a more complex role for IFIs. The reformed EU economic governance framework has expanded the mandate of IFIs. At the same time, governments face greater spending pressures; higher defence spending, ageing populations, climate-related costs and ongoing geopolitical uncertainty. 

Overall, the macroeconomic outlook is seen as broadly credible but pressure on public finances is increasing. IFIs are sober about the likely risks of non-compliance with national and EU fiscal rules, especially under the new net expenditure benchmark. Effective implementation of the reformed framework will depend not only on fiscal outcomes but also on ensuring that IFIs are independent, properly resourced, and fully integrated into national fiscal processes. In a period of uncertainty and competing spending demands, strong independent fiscal oversight remains essential for sustainable public finances in Europe.