BRUSSELS (Reuters) -The aggregated fiscal stance of euro zone countries should stay neutral next year, the European Commission said on Tuesday in a recommendation that is to help coordinate fiscal policies
in the single currency area that already has one monetary policy.
The Commission forecast last week that the aggregated budget deficit of the 20 countries sharing the euro would inch up to 3.2% this year from 3.1% in 2024 and edge higher to 3.3% in 2026 and 3.4% in 2027.
But the aggregate deficit reading hides widely differing trends. While the deficits of Belgium, Latvia, Lithuania, Estonia or Germany are to rise next year, mainly on higher defence spending, most others are expected to shrink.
"To safeguard fiscal sustainability, respect the recommended net expenditure paths, including, where applicable, the temporary flexibility granted via the national escape clause for defence spending. That should deliver an appropriately differentiated fiscal policy and result in an overall neutral fiscal stance in 2026," the Commission said.
It said that next year euro zone economic activity was likely to be constrained by slower external demand from trade restrictions and the lingering global uncertainty. It forecast euro zone economic growth at 1.2% in 2025 and by 1.2% in 2026, with the 2026 outlook subject to high uncertainty, with downside risks prevailing.
(Reporting by Jan Strupczewski)
