The piece frames the EFB’s critique as part of a broader debate over how EU fiscal rules are applied amid energy-price pressures and market volatility, with implications for France and Italy’s funding conditions and policy choices.

Repeated exemptions granted by the Commission and Council to delay or adjust targets undermine the comply-or-explain mechanism, where countries should justify deviations.

Despite stronger-than-expected 2025 growth, EU fiscal positions improved less than planned, with debt rising to about 82% of GDP in 2025 and projected to exceed 84% in 2026.

The Board warned that focusing on the headline deficit’s decline conflicts with the Stability and Growth Pact’s emphasis on fiscal effort and noted inaccuracies in how Italy’s fiscal effort was described in 2023.

National Escape Clauses began in March 2025 to allow higher spending in response to shocks, with one NEC used for defence and another anticipated in 2026 for energy-resilience measures.

For France, ambiguity in the Commission’s assessment arises from a discrepancy between relying on annual expenditure growth versus cumulative expenditure growth, raising questions about predictability and transparency.

Near-term stakes include potential changes in monitoring: Italy could exit extra monitoring by publishing lower deficit figures, while France faces a Commission decision on required savings for next year.

No statements under the comply-or-explain rule were issued; only Bulgaria faced an excessive deficit procedure, highlighting a gap between intended outcomes and actual compliance.

The EFB warns that politically motivated exemptions risk setting a dangerous precedent if the framework bends for every new shock, potentially eroding the rule’s long-term purpose.

The broader market focus on debt sustainability and expectations of a rate-tightening cycle link fiscal credibility to market discipline.

EU rules, active since April 2024, require each member state to agree on a national debt-reduction path with the European Commission, aiming for a deficit near 3% of GDP and debt around 60% of GDP within four to seven years.

The EU’s independent European Fiscal Board criticizes institutions for applying the updated rules with excessive discretion and flexibility, risking credibility.