The European Commission decided today to launch an excessive deficit procedure against seven EU member states, including five from the Eurozone, as part of the so-called European Semester procedure.

In the group of seven countries with an excessive deficit are France and Italy, i.e. the second and third largest economies in the Eurozone. In the case of France, this is a development that comes at a difficult political period, since on June 30 the first round of parliamentary elections will take place and the economy is at the center of the discussions.

Today’s decision essentially marks the activation in practice of the new revised Stability Pact. The previous one had been shut down with the onset of the COVID-19 pandemic to allow member states to increase public spending and deal with the impact of the crisis. With the start of the process, five Eurozone countries, France, Italy, Belgium, Slovakia and Malta, will have to adjust their budgets to gradually reduce the public deficit below 3% of GDP, which is the maximum limit accepted by the Treaty. Outside the Eurozone, Poland and Hungary show an excessive deficit. At the end of 2023, which is also the reference year, the public deficit in France amounted to 5.5% of GDP and in Italy to 7.4%.

Greece, which in the past was the most financially troubled country in the EU, has been in the group of countries with the best performance in reducing deficits and public debt in the last two years. In fact, as mentioned in the text, during 2023 Greece improved its position, with the result that the excessive structural imbalances that existed in some sectors turned into simple imbalances.