Estonia's budgetary plan for 2018 is essentially in accordance with EU budget rules, the European Commission said. The Commission is forecasting, however, that Estonia's structural budget position is to worsen to -1.4 percent of the GDP, which is why the risk may arise that Estonia will deviate from its set medium-term objective.

At the same time, Estonia's level of state debt is still below ten percent of its GDP, the lowest among EU member states.

The 2018 European Semester cycle of economic, fiscal and social policy coordination begins against a backdrop of robust economic activity in the euro area and the EU, record high employment levels and unemployment rates declining towards pre-crisis levels.

"For all the reforms of the past years, Europe's Economic and Monetary Union (EMU) remains uncompleted," EU Vice-President for the Euro and Social Dialogue Valdis Dombrovskis said. "This is why we need to use good times now to further strengthen our EMU and make our economies more resilient and inclusive. Next month, we will come forward with proposals to further reinforce the EMU."

He noted, however, that strengthening the architecture of the EMU would not replace the need for sound budgetary, economic and social policies at the national level. "This is the main aim of the European Semester," Dombrovskis explained. "Today we provide opinions on draft budgetary plans and call on member states that are at risk of non-compliance with the Stability and Growth Pact to take the necessary measures to adjust their budgetary path."

Economic growth is accelerating quickly, with the euro area economy on track to grow at its fastest pace in a decade this year. This strong performance is propelled by resilient private consumption, robust growth around the world and falling unemployment rates. The economies of all EU member states are expanding and their labor markets improving, but wages are slow to increase. Investment are also picking up on the back of favorable financing conditions and considerably brightened economic sentiment as uncertainty has faded.

The public finances of euro area countries have improved considerably. With member states in different stages of the economic cycle, today's guidance stresses the need to strike the right balance between supporting the economic expansion and ensuring the sustainability of public finances, particularly through reducing high debt levels.

Commission opinions on draft budgetary plans

The European Commission has completed its assessment of whether the 2018 draft budgetary plans of euro area member states comply with the provisions of the Stability and Growth Pact. In all, the Commission adopted 18 opinions for all euro area member states except Greece.

For six countries — Germany, Lithuania, Latvia, Luxembourg, Finland and the Netherlands — the draft budgetary plans are found to be compliant with the requirements for 2018 under the Stability and Growth Pact.

For five countries — Estonia, Ireland, Cyprus, Malta, and Slovakia — the plans are found to be broadly compliant with the requirements for 2018 under the pact. For these countries, however, their plans may result in some deviation from each country's medium-term objective or the adjustment path towards it.

For five countries — Belgium, Italy, Austria, Portugal, and Slovenia — the plans pose a risk of non-compliance with the requirements for 2018 under the pact. The plans of these member states may result in a significant deviation from the adjustment paths towards the respective medium-term objective. For Belgium and Italy, non-compliance with the debt reduction benchmark is also projected.

For France and Spain, the corrective arm of the Stability and Growth Pact will continue to be implemented.

Building on previous guidance, and taking account of the member states' different situations in the economic cycle, the Annual Growth Survey (AGS) calls on member states to boost investment as a way to support expansion and to increase productivity and long-term growth. The European Commission also recommends further structural reforms that are needed to make Europe's economy more stable, inclusive, productive and resilient.

Fiscal policies should strike the appropriate balance between ensuring the sustainability of public finances and supporting the economic expansion, the Commission said. Reducing high levels of debt and rebuilding fiscal buffers must continue to be a priority. Closing tax loopholes, improving the quality of the composition of public finances and better targeted spending can help in this effort. Social fairness remains a cross-cutting priority and the principles and rights of the European Pillar of Social Rights will be mainstreamed in the European Semester from now on.