Euro Area 2016 Draft Budget Plans: Spain at risk of non-compliance; Italy to use all the flexibility

October 15th is the final deadline for submitting the 2016 Draft Budgetary Plans (DBP) to the European Commission. Spain sent its DBP in early September, requesting an earlier assessment in order for the parliament to approve it before the end of its term (20th October, elections on 20th December). The official EU opinion is due soon, but Commissioner Moscovici was already critical of the Spanish budget at the 5th October Eurogroup meeting. 

While other countries (Latvia and Finland) have also already submitted their DBP, the EC will not give its official opinion on the budget plans until the 23rd November special Eurogroup meeting. If the Commission finds that a DBP poses a particularly serious risk of noncompliance, it can ask for a revised draft. If a country's DBP is found to be broadly compliant or at risk of non-compliance, the Commission could request the national authorities to take additional measures. If the country is under the Excessive Deficit Procedure (EDP), risk of noncompliance has further implications as failure to take additional measures could lead to the stepping up of the EDP (i.e. ultimately leading to imposition of sanctions). 

Already under heavy surveillance last year, France and Italy will most likely again be under the spotlight. Neither the French nor the Italian budget appears at risk of non-compliance, however. That said, the Italian government is using all the flexibility offered by the Stability and Growth Pact (Reform clause and Investment clause) to reduce the fiscal efforts, in fact presenting an expansionary 2016 budget.