The Fiscal Council criticizes the draft budget for 2027

"The Council of Ministers does not take advantage of favorable economic conditions"

On Monday, the Fiscal Council published its opinion on the draft budget for 2027.

"The project presents a permanent and deep imbalance of public finances. It does not present any measures whose implementation would ensure the initiation of the consolidation process, and the Council of Ministers does not take advantage of the favorable economic conditions to reduce the deficit," we read in the opinion of the Fiscal Council.

"The current imbalance is the result of the accumulation of decisions made over a longer period, and not a collapse of public revenues. The ratio of income to gross domestic product (GDP) is still historically high, while the primary source of the deepening deficit remains the increase in expenditure, clearly exceeding the increase in income," it was emphasized.

Not just defense spending

The Council emphasized that defense spending is not the only reason for the deterioration of public finances.

She estimated that these expenses account for about a quarter of the increase in spending from 2021 and that "social transfers, wages and other permanent state liabilities" are also important.

"Very high risk"

"The risk of the state public debt (PDP) exceeding the 55% threshold in 2027 in relation to GDP is very high. The threshold is exceeded in almost all analyzed risk variants, including taking into account the absence of 'natural savings' in the assumed amount. Therefore, the project does not provide an adequate safety margin," we read in the opinion of the Fiscal Council.

It added that the draft budget does not provide a "sufficient response" to the ECOFIN Council's recommendation to use the period of the national exit clause to change spending priorities or increase revenues. Such a change would allow for stable financing of "permanently" higher defense spending.

A multi-year plan is necessary

"The forecast of budget revenues presented in PUB27 (draft budget act for 2027 - ed.) is burdened with high risk, among others due to taking into account changes in the tax system that have not yet been adopted and optimistic assumptions regarding the dynamics of tax revenues," assessed the Fiscal Council.

The Council also stated that "repairing public finances requires a credible multi-annual plan and the broadest possible political agreement." She emphasized that repairing the state of public finances "does not mean limiting the state's ambitions, but is a condition for sustainable financing of security, public services, investments and social policy."