European Fiscal Monitor, Summer 2025

After several years marked by overlapping crises—from the COVID-19 pandemic to the energy shock triggered by Russia’s invasion of Ukraine—the European economy is showing signs of stabilisation. Most EU Member States are projected to return to growth in 2025, with national Independent Fiscal Institutions (IFIs) broadly judging official forecasts of GDP and inflation as plausible. Nonetheless, the recovery remains uneven and vulnerable to significant downside risks. Rising defence spending, persistent geopolitical uncertainty, and the looming impact of global trade fragmentation cast long shadows over the medium-term outlook.

The implementation of the EU’s new Economic Governance Framework, in force since April 2024, marks a critical juncture for European fiscal policy. In this context, IFIs play a central role in assessing the credibility of national fiscal projections and monitoring compliance with the new net expenditure growth paths. However, fewer than 40% of IFIs currently view their countries’ expenditure paths as plausible, raising early concerns about the feasibility of delivering on the framework’s debt reduction ambitions. Further, the transposition of key Directive 2024/1265, inter alia meant to boost IFIs’ capacities, is occurring heterogeneously, with almost half of IFIs believing it has yet to begin, raising questions ahead of the deadline for transposition at the end of this calendar year.

This edition of the European Fiscal Monitor provides a timely and comprehensive overview of IFI assessments across Europe, drawing on survey responses from 32 IFIs covering 26 Member States and the United Kingdom.