In the State Budget Strategy, the government has set a target for the nominal budget deficit not to exceed 4% of GDP in 2027. To this end, the budget position has been improved by approximately 220 million euros compared with the summer forecast, but these are mainly minor adjustments to government investment, EU funds and accounting, rather than a permanent improvement in the structure of government revenue and expenditure.
Contrary to the Fiscal Council’s recommendation, the general government budget deficit will remain at 4% of GDP also in 2028 and 2029. However, achieving these targets depends on the implementation of several revenue and expenditure measures planned by the government, which are still subject to considerable uncertainty. The recent rise in interest rates may also make servicing government debt more costly.
Thus, according to the State Budget Strategy, the reduction in the budget deficit will not continue after 2027, nor will it resume in 2029, as might have been expected with the expiry of the escape clause. Here, the government proceeds from the interpretation that, although the national fiscal rules will reapply from 2029, deliveries arriving later under defence contracts concluded during the 2025–2028 escape clause may be taken into account when complying with the required adjustment.
According to the Fiscal Council, the budgetary targets set in the State Budget Strategy for 2027–2030 comply with the requirements of the fiscal rules, based on a flexible interpretation of those rules. However, the Fiscal Council recommends that the fiscal adjustment should not be postponed for as long as the temporarily relaxed fiscal rules allow but should instead continue immediately after 2027.
Even if the budgetary targets set by the government are achieved, the government debt burden and interest expenditure would increase rapidly in the coming years. By 2030, the debt ratio would already reach 37.4% of GDP, and almost 2 billion euros would need to be allocated for interest expenditure over the next four years. If the fiscal adjustment were to continue only from 2030, government debt would not begin to decline until it had exceeded 40% of GDP.
Overall,
the four-year outlook for public finances prepared this autumn still does not
contain a plan for finding a permanent source of funding in the state budget
for permanently higher defence expenditure that would not rely on borrowing. A
flexible interpretation of the fiscal rules has allowed the necessary fiscal
adjustment to be postponed, but the later it is addressed, the more costly it
will become for both the government and taxpayers.