The European Fiscal Board assesses the appropriate fiscal stance for the euro area in 2027

EFB: energy measures do not justify fiscal loosening, euro area countries should follow agreed expenditure paths

The European Fiscal Board (EFB) today issued its assessment of the appropriate fiscal stance for the euro area in 2027. The euro area faces renewed headwinds from a conflict in the Middle East that erupted in February 2026, causing a significant energy price shock and heightened uncertainty. Against this backdrop, the EFB recommends that Member States follow the net expenditure paths established in their medium-term fiscal-structural plans. 

In its new report, the EFB stresses that the current level of fiscal support remains elevated and debt-to-GDP ratios are rising. The headline deficit in the euro area is forecast to increase to 3.5% of GDP in 2027, with aggregate debt expected to exceed 90% of GDP. Most Member States have not yet fully reversed the fiscal expansions of the pandemic years, and rising interest expenditure is adding further pressure on public finances, espeically in high-debt countries.

The EFB is critical of the Commission’s proposal - set out in the recent 2026 spring surveillance package - to extend the scope of national escape clauses to energy support measures. Extending the clauses sends the wrong signal. The EFB is concerned that the new flexibility, once granted, will be applied well beyond what is strictly necessary - repeating the mistakes of the 2022–2023 energy crisis, when broad-based and untargeted support persisted long after energy prices had normalised. More generally, offering exemptions whenever there are political pressures to increase certain expenditure categories fortifies the unfortunate notion that, after all, there are no trade-offs in fiscal policy

“The energy shock is real, but it calls for transformation, not stimulus,” said Pieter Hasekamp, Chair of the European Fiscal Board. “Fiscal credibility, built through adherence to agreed expenditure paths, is our best protection against rising borrowing costs. Support for households and businesses must be temporary, targeted, and offset - not a backdoor to broader loosening.”

Where energy support measures are introduced, they should  be temporary with clear end-dates; be non-distortionary so as not to impede relative price adjustments; and be targeted at vulnerable households and businesses. Any such measures should be financed by compensating expenditure reductions or revenue increases to keep countries on course with their agreed consolidation path.

Should the Middle East crisis persist and growth deteriorate beyond the baseline, the EFB advises Member States to protect public investment — in particular investments outlined in their medium-term fiscal-structural plans — rather than resort to aggregate demand support. This would safeguard the credibility of the EU’s reformed fiscal framework and support the structural transformation needed to enhance energy security and long-term resilience.

Contact:
Secretariat of the European Fiscal Board
EFB-SECRETARIATec [dot] europa [dot] eu (EFB-SECRETARIAT[at]ec[dot]europa[dot]eu)
https://commission.europa.eu/european-fiscal-board-efb_en