Overview
- Treasury projections revealed in early June show the public deficit at 5.2% of GDP in 2026 and rising to as much as 6.2% in 2027 if no corrective measures are taken.
- The European Commission, in a June 3 report, forecasts a 2027 deficit of about 5.7% and public debt near 118.1% of GDP based on current policies.
- Officials attribute the near-term deterioration mainly to a sharp rise in debt service from higher interest rates and the delayed one‑year indexation of social benefits including pensions.
- Brussels flags deeper structural problems that limit growth, citing heavy public spending (57.8% of GDP), weak labor productivity, stalled private R&D despite an €8 billion research tax credit, and social strains such as 19.7% youth unemployment.
- Political constraints from the suspension of the 2023 pension reform and the 2027 election reduce the chance of quick fixes and raise the risk of future austerity, higher taxes, or EU corrective steps that would affect public services and households.