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bne July 2024 Companies & Markets I 5
According to the report – which did not cover Romania – Hungary, Poland and Slovakia breached the 3% budget deficit threshold in 2023 and are expected to continue to do so in 2024 and 2025.
The Polish budget deficit hit 5.1% of GDP in 2023 and the Commission expects it to widen still further to 5.4% in 2024 before going down slightly to 4.6% in 2025.
Poland tried to claim exceptional reasons for this because of the ramp-up in its defence spending – a new factor that can be taken into account in the Stability and Growth Pact – though the Commission decided it should nevertheless still enter the EDP.
Polish defence spending is set to become the highest in terms of GDP in the EU. It was 2.1% of GDP in 2023 and the government expects it to reach 2.8% in 2024, 3.2% in 2025, 3.7% in 2026, 4.3% in 2027 and 4.1% of GDP in 2028.
Hungary has long had one of the worst deficit and debt records among the CEE member states. Hungary was previously under the EDP from 2004 to 2013 for continuously overshooting the deficit. It is now set to re-enter the EDP after Hungarian strong- man Viktor Orban splurged to win the April 2022 election and his government failed to subsequently rein in spending sufficiently.
Hungary’s 2023 budget gap of 6.7% exceeded the government’s original target by some 3pp and in the absence of further measures, the Commission projects it to remain elevated
at 5.4% of GDP in 2024 and decelerate to 4.5% in 2025, both figures above the government's latest forecasts. Public debt fell 0.5pp in 2023 to 73.5% of GDP.
Slovakia was singled out as an “aggravated” case because the new left-right populist government has failed to take adequate steps to correct the deficit since it took power last October.
The government deficit spiked to 4.9% of GDP in 2023 as energy-support measures were implemented amid the energy crisis. The EC projected the public deficit to increase to 5.9% of GDP this year and to decrease a bit next year to 5.4% as the energy aid is expected to wind down.
The European Commission also recommended that Belgium, France, Italy, and Malta enter the EDP.
The EDP had been suspended during the COVID-19 pandemic, but this suspension was lifted at the end of last year.
The Commission recommendation is due to be endorsed by the European Council in mid-July, and then the countries under the procedure will have to set out how they plan to reduce the deficits by September 20.
If countries do not comply with the agreed path of correction, they could be liable for half-yearly fines amounting to 0.05% of GDP until they are compliant – although, as ING Bank points out, this famously has not happened so far.
Czech minister says two investors are interested in taking over Liberty Steel’s insolvent local unit
Albin Sybera
Two investors are reportedly interested in taking over Liberty Ostrava, the largest Czech steel mill, which entered insolvency proceedings last week.
Czech Minister of Labour and Social Affairs Marian Jurecka said he knows of two "very seriously interested” investors, adding that “it cannot be ruled out that next week or the week after another will appear”.
Online news outlet Seznam Zpravy (SZ), reported earlier that defence and heavy industry conglomerate Czechoslovak Group (CSG), financial group Creditas and local regional metals company Trinecke zelezarny are among the potential investors into Liberty Ostrava.
The steelworks, owned by struggling British-based Liberty Steel, part of industrialist Sanjeev Gupta’s GFG Alliance, has shuttered most of its production since the end of last year
when its key energy provider Tameh Czech stopped supplies to the plant over missing payments.
Employees have been on paid leave since then and the company management pursued a reorganisation plan which was backed by the majority of creditors under a court moratorium protecting Liberty Ostrava against creditors.
However, without any warning, last Friday Liberty Ostrava appeared in the insolvency registry, with stated liabilities exceeding CZK5bn.
Liberty Steel later said that, "given the ongoing material risks and uncertainties facing Ostrava, Liberty has decided the right course of action is to initiate a sale of Ostrava’s operations and withdraw the preventative restructuring plan in order to enter into a judicial reorganisation under the Insolvency Act".
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