In Euro Zone, Who Will Renege Budget Targets Next?

Italy delayed the date when the country will finally have a balanced budget by a year earlier this week, shortly after Spain also rejected budget targets agreed with European partners.

European Union Flag
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European Union Flag

They are unlikely to be the last European countries to change their budget targets this year, as the euro zone debt crisis continues to bite.

France is likely to be the next country to move its budget goalposts, particularly if Socialist Francois Hollande gets into the Elysee in May, according to analysts and economists.

“It’s always sensible to say: ‘Look how bad a state we’ve been left with’ when you get elected,” Jeremy Stretch, head of currency strategy at CIBC, told

The Netherlands is also believed to be in line for changes to its budget targets after an analyst at credit rating agency Fitch warned of possible negative risks to its rating from the country’s heavy debt pile and potential property market devaluation.

“The Netherlands has a rather Anglo-Saxon tendency in terms of the property market, and now it’s risking a property bubble,” Stretch said. “This all shows that problems are getting closer to the core and lapping at the toes of Germany.”

Spain and Italy’s actions highlight that the European authorities may not be able to enforce the stringent budget targets set for those peripheral countries which have been most troubled in recent years.

Portugal, Ireland, and Greece — whose austerity packages took months of painstaking negotiations to complete — may also be able to justify shifting their budget targets after the lack of repercussions for the larger economies.

While the FTSE MIB, the Italian stock market index, fell by around 2 percent on Thursday and bond yields moved slightly higher, the moves were far from the punishing swings of last year.

Ireland is likely to be the next peripheral country to alter its targets, as the country struggles with austerity, according to Megan Greene, senior economist for Western Europe at Roubini Global Economics.

Greene believes that the troika of the International Monetary Fund, European Union and European Central Bank which has bailed out Ireland will demand further austerity measures to make it meet its budget forecasts — and thinks Ireland will eventually need a second bailout.

“Of all these countries who change their forecasts, Ireland is the one who will be really hauled up about it,” she told