1、Fiscal consol idation in the EMU4 wil l continue for the next three years.In nGermany,the constitutional Debt Brake is unl ikel y to be rel axed until at l east the German el ection in September 2025.In France,the government l ed by PM Barnier promised a primary bal ance adjustment of a magnitude un

2、seen outside of post-crisis normal isation in 2011 and 2021-22.The Ital ian Ministry of Finance has promised a faster fiscal consol idation than expectations,taking the country out of the Excessive Deficit Procedure in 2026.In Spain,the difficul ties of the rul ing coal ition to bridge an agreement

3、with the regional parties and approve the 2025 budget is l ikel y to del iver a steady consol idation on the basis of the 2024 three-year pl an.Given the broad-based fiscal consol idation,the European fiscal stance wil l nremain negative until 2027,al beit l ess than this year,providing a drag on gr

4、owth at about 0.3pp per annum in our estimate.Fiscal support fuel ed by the European Recovery Fund remained sl ightl y positive in 2024,but fel l once again short of our expectations.Whil e Spain has increased the pace of spending,recovery fund expenditures were underwhel ming in Ital y,the main ben

5、eficiary of the pl an.We expect Ital ian spending to increase in 2025 and 2026 with the growth impact peaking in 2025 at the European l evel.The macroeconomic backdrop wil l continue to proceed toward normal isation.nCool ing inflation,subdued but stabl e real growth and a sl ight increase in the ef

6、fective interest rate paid on debt are pushing up the real sovereign borrowing rates across the EMU4.We expect debt-to-GDP ratios wil l continue to decrease in Spain and,l ess markedl y,in Germany,whil e debt ratios have begun to increase again in France and Ital y.The decoupl ing in debt paths with