Filenews 19 November 2025 - by Theano Thiopoulou
The picture that is currently being formed in the European Union is two-sided and cannot go unnoticed, something that is also recorded in the recently issued autumn forecasts of the Commission.
The EU sees its fiscal deficits inflating year by year, while Cyprus records exemplary fiscal discipline, in an environment where challenges are constantly multiplying. As the European Commission's report characteristically states, "the average general government deficit in EU countries is projected to increase from 3.1% of GDP in 2024 to 3.3% in 2025 and 2026 and to 3.4% in 2027, provided that there is no policy change. Similarly, in euro area countries the deficit is forecast to increase from 3.1% of GDP in 2024 to 3.2% in 2025, to 3.3% in 2026 and to 3.4% in 2027." The question is where this deficit comes from and what response does the Commission give to the forecasts announced on Monday. The rise is due to the increase in defense spending in the EU (from 1.5% of GDP in 2024 to 2% in 2027), combined with the continued increase in interest on debt servicing and some deficits recorded in the revenue category.
Twelve member states are expected to have deficits exceeding 3% of GDP in 2027, the autumn forecast shows. The fiscal stance is projected to remain broadly neutral over the forecast horizon in both the EU and the euro area, albeit with significant variations across Member States.
The debt-to-GDP ratio in EU countries is forecast to increase from 82% in 2024 to 85% in 2027 (from 88% to 91% in the euro area), driven by persistent primary deficits and an average cost of servicing public debt that is higher than nominal GDP growth. By 2027, four Member States are expected to have a government debt ratio of more than 100% of GDP.
Cyprus is a good example
At a time when the Commission's technocrats are recording Europe's fiscal deficits and the fiscal pressure that some states are under, the economy of Cyprus is performing very well. The Government's fiscal surpluses, according to the report, are projected to be maintained and the debt-to-GDP ratio is expected to continue its downward trend and move below 50% of GDP in 2027.
Hopes for good performance in European economies are based on the national Recovery and Resilience Plans. Europe, according to the Commission's forecasts, is making efforts to revise the national Recovery and Resilience Plans (RRPs) to facilitate the availability of the remaining (unallocated) funds by the deadline of 31 August 2026.
Although the RRP is a temporary instrument, its macroeconomic impact is expected to last beyond its completion. Some expenditure financed by the RRP may take place after 2026, in particular in the case of financial instruments providing financing for private sector investments.
In addition, the decreasing direct fiscal stimulus provided by the RRP is expected to be mitigated in 2027 by increasing the use of other EU funds. According to the Commission, the recently completed mid-term evaluation of cohesion policy provides member states with more flexibility and incentives to make available existing resources faster and accelerate the implementation of the programme.
Importantly, structural reforms and investments made by member states under the RRP are expected to improve productivity and raise income levels in the long term, the Commission's forecasts say.
