European Economic Perspectives "Eurozone: Fiscal policy in 2026 – takeaw..."

Research evidence excerpt

European Economic Perspectives "Eurozone: Fiscal policy in 2026 – takeaw..."

Global Research

18 May 2026ab

European Economic Perspectives Economics

Europe Ex. UKEurozone: Fiscal policy in 2026 – takeaways from

budget plans Felix Huefner

Economist

felix.huefner@ubs.com

+49-69-1369 8280

2026 annual progress reports provide updated fiscal projections... Reinhard Cluse

Fiscal stimulus in the form of higher defence spending across the EU and higher Economist

infrastructure spending in Germany is a key theme for the European macro outlook in reinhard.cluse@ubs.com

+44-20-7568 6722

the next two years. As usual in April, EU governments have submitted their budget plans

to the European Commission, providing an update to 2026 fiscal projections. These Franziska Fischer

plans used to be called stability programmes but are now called annual progress reports Economist

under the reformed EU fiscal framework. In this note, we review and aggregate the franziska.fischer@ubs.com

+41-44-239 2054

individual country plans, which show budget deficit increases in around half of Eurozone

countries, including much higher deficits in Germany and Greece, and more mixed Anna Titareva

developments elsewhere. Croatia has not (yet) published its report and hence we use Economist

projections from the latest IMF Fiscal Monitor. anna.titareva@ubs.com

+44-20-7568 5083

...showing moderate fiscal easing, heavily dependent on Germany

Overall, we draw three key conclusions: (1) The updated budget plans point to moderate

fiscal easing in the Eurozone in 2026 of 0.2% of GDP (in cyclically adjusted terms),

slightly less than our (and the ECB's) expectation for 0.3% of GDP, but higher than the

0.1% of GDP assumed in the latest IMF Fiscal Monitor. (2) Eurozone fiscal easing is