In view of the current 2027 budget procedure, the Fiscal Council draws attention to recommendations concerning the State Budget Act, the medium-term budgetary forecast, and the budgets of the National Health Insurance Fund and the State Social Security Fund, referring to the proposals and opinions issued on the respective budgets for 2025 and 2026.
With regard to the State Budget Act, the Medium-Term Budgetary Framework and the macroeconomic forecast, the Fiscal Council makes the following recommendations:
-
The Fiscal Council recommends fiscal consolidation and a move towards a balanced budget, to be achieved through structural reforms.
-
With regard to the assessment of the cyclical position, the analysis indicates the completion of several medium-term cycles and a narrowing of the output gap after 2028, i.e. the approach of a period with the potential for a recession. In this regard, the Fiscal Council recommends a fiscal effort of at least 2% of GDP in 2027 and at least 1% of GDP in 2028. This recommendation is particularly urgent in view of the excessive deficit procedure that has been initiated.
-
The Fiscal Council supports the idea of increasing the ratio of personal to state-funded social security contributions to 40:60 in 2027 (from 20:80 in 2026), bringing it into line with the private sector, with military personnel and police officers also included in this reform.
• The Fiscal Council warns of the risk of a debt spiral and of pressure from rising interest rates. The accumulation of budget deficits is creating a worrying trend in debt and interest payments (the latter reaching €1.88 billion in 2028, or around 1.3% of GDP), which is reducing fiscal space in key sectors such as education and healthcare.
• The temporarily suspended numerical rules governing wages and pensions, which lead to pro-cyclical and inflationary expenditure, should be permanently revised in order to achieve a lasting positive fiscal effect. -
In 2020, expenditure incurred from accounts holding European Union funds was excluded from the scope of the rule on the share of expenditure in the Consolidated Fiscal Programme, on the grounds that the absorption of funds should not be restricted. According to the Fiscal Council, the exemption for EU accounts should be abolished and the Public Finance Act amended, as the exemption contradicts the economic rationale of the rule, which is to limit fiscal expansion and the impact of budgetary expenditure on macroeconomic aggregates.
-
The Fiscal Council recommends optimising current staff costs and restructuring the administration in order to reduce the administrative burden arising from the large number of employees in this sector and the declining population. The Fiscal Council recommends consolidation efforts that reduce staff costs by more than the currently envisaged 10 per cent cut, with a view to achieving long-term savings.
-
The Fiscal Council recommends a thorough analysis of the shortfall in capital expenditure and the implementation of measures to improve its planning and execution, as well as the introduction of a programme-based budgeting approach that would allow for the transparent and traceable implementation of specific budget programmes with a view to enhancing their effectiveness.
Regarding the State Social Security budget:
-
The Fiscal Council draws attention to the levelling of pension amounts, noting that this is linked to a breakdown in the link between contributions to the social security system and the amount of pension received. The Fiscal Council recommends a reform of the pension model aimed at incentivising the second and third pillars and strengthening the funded component of pension income.
-
The Fiscal Council supports the intention to align the distribution of social security contributions between civil servants, magistrates and the state budget with that in the private sector, thereby easing the fiscal burden on the budget.
Regarding the National Health Insurance Fund (NHIF) budget:
-
The trend of rising expenditure across the main budget headings does not demonstrate greater efficiency in healthcare services, but merely reinforces dependence on increasing transfers from the state budget to balance the NHIF’s budget. The Fiscal Council recommends that expenditure be presented in a programme-based format to ensure greater transparency.
-
The relationship between the Ministry of Health’s health policy and the NHIF as the payer for health services needs to be clarified.
The key priorities for the Fiscal Council during the 2027 budgetary process are to improve the budget balance and introduce sustainable expenditure measures, underpinned by realistic revenue projections, with the primary aim of emphasising the efficiency and quality of public finances.