An economic tornado over the European Union. 2026 will be the key year

The portal warns that 2026 “may be a decisive year for the European economy.” EU funding that was intended to alleviate the economic effects of the COVID-19 pandemic will end. In addition to the National Recovery Plans, this also includes the Recovery and Resilience Facility (RRF), the main element of which is the NextGenerationEU program. In addition, new budget rules will come into force, which are intended to help EU countries reduce their debt ratios. The point is that the public debt of EU member states cannot exceed 60%. GDP, and the public finance sector deficit is 3%. GDP. Inflation, in turn, cannot be higher than the average in the three countries with the lowest rate plus 1.5 percentage points.

Lost decade of 2010 “The fiscal cliff is approaching”

According to “Politico”, tightened regulations and the suspension of EU funding will cause EU capitals “to look for cash”. The European Commission’s turning off the taps with billions of euros could leave a black hole in the budgets of highly indebted countries, especially France and Italy. And this was a few months before the decisive elections in both countries. – There is a risk that if we do not invest enough, we will return to the lost decade of 2010, said Nils Redeker from the Jacques Delors Institute think tank. It refers to the euro zone crisis, which had the greatest impact on the economies of Southern Europe, plunging them into recession, with growing public debt and unemployment.

In the current situation, experts say that the European Commission will end post-pandemic financing, and at the same time EU governments will have to continue investing in ecological and digital projects without a stream of money from Brussels. The projects are financed through the RRF, whose budget is EUR 700 billion and is scheduled to “exhaust” in 2026. In addition, there will be restrictions on public aid, which will significantly limit governments’ room for maneuver. – The fiscal cliff is approaching – says Lydia Korinek from the Zoe Institute for Future-Fit Economy think tank. Fiscal cliff is a term meaning a sharp reduction in the budget deficit through tax increases and cuts in budget spending.

Domino effect in politics?

According to “Politico”, the biggest shock may be felt by countries with high debt, and analysts warn that this may hit their economies hard, which in turn will translate into a domino effect in the political sphere. The ruling parties in France and Italy, the two largest economies in the euro zone after Germany, have reasons to worry. “The next presidential elections in France will take place in April 2027. Emmanuel Macron will not be able to run again, and the leader of the far right, Marine Le Pen, is gaining support. Elections in Italy are scheduled for no later than the end of the same year,” we read.