French-based multinational financial services Societe Generale (SocGen) classified Greece, along with Portugal and Ireland, as facing low fiscal pressure, as all three maintain low deficits and have achieved significant de-escalation of debt-to-GDP ratios. However, the French bank suggests that new EU fiscal rules could increase political pressure on these nations.

While the approval of the new EU fiscal rules by the European Parliament is pending, and the timeframe for their implementation remains uncertain, Societe Generale believes that the proposed rules offer insights into how the current fiscal situations of Eurozone countries will be evaluated, along with potential new guidelines. The new rules will focus on the path to fiscal consolidation, aiming for a structural deficit below 3% over 4-7 years of fiscal plans and an average reduction in debt of 0.5% to 1% of GDP during the same period.

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Non-compliance doesn’t necessarily mean a country will enter an Excessive Deficit Procedure (EDP), as the new rules may include a certain degree of flexibility. However, Societe Generale believes that countries with high deficits and slow debt reduction, such as France, Italy, Spain, and Belgium, will face greater pressure to implement austerity measures compared to countries with low deficits and rapid debt reduction, like Greece, Portugal, and Ireland.

The first debt sustainability test is scheduled for February 16, 2024, when Fitch will reassess Belgium’s current rating due to its high deficit and debt, coupled with a potential political impasse in June 2024. France, currently rated AA- by S&P, will undergo its first S&P assessment of the year on May 31, 2024.