EU Fiscal Watchdog Warns Repeated Exceptions Weaken New Budget Rules
The European Fiscal Board warns that repeated exceptions to the EU's new fiscal rules risk undermining their credibility, as government debt rises to 82% of GDP.
The European Union's independent fiscal watchdog has warned that the bloc's new budget framework is being weakened by the frequent use of discretion and flexibility, raising doubts about its credibility less than two years after it came into force.
In a report, the European Fiscal Board said the Commission and the Council of EU governments have repeatedly granted exceptions to member states, even though the rules are meant to steadily reduce debt. The framework, which took effect in April 2024, requires each country to agree an individual annual debt-reduction path with the Commission, with four to seven years to bring deficits and debt towards the EU's limits of 3% and 60% of gross domestic product.
Countries that fail to meet their agreed path must explain why or face a disciplinary procedure. The board noted that no explanations were issued under the comply-or-explain rule, and only one country — Bulgaria — faced procedural consequences in the form of a new excessive deficit procedure. That outcome, it said, contrasts with shortfalls in fiscal results and projections relative to recommended spending paths.
The watchdog pointed to National Escape Clauses, first offered in March 2025, which allow temporary departures from fiscal targets to accommodate higher spending. One was used for defence, and another in 2026 to cover some energy-resilience measures. It said that whenever governments came under pressure to spend more — on defence or to counter high energy prices — EU institutions agreed to create an exception.
"Every such exception may seem reasonable from a political perspective, but rules are judged in the accumulation of precedent, and a framework that bends with each new shock risks losing its ultimate purpose," said EFB Chair Pieter Hasekamp.
The criticism comes as EU countries face mounting pressure to increase spending on defence, energy security and the green transition while coping with rising debt-servicing costs after years of elevated borrowing. Despite stronger-than-expected economic growth in 2025, fiscal positions improved far less than envisaged in national plans. EU government debt rose to 82% of GDP in 2025 from 81% a year earlier, according to Eurostat, and the Commission forecasts it will exceed 84% in 2026.