TRANSFORMATION OF THE BUDGETARY POLICY OF GERMANY, FRANCE AND ITALY UNDER GEOPOLITICAL UNCERTAINTY AND MIGRATION CHALLENGES

Abstract

This article examines the transformation of the budgetary policy of Germany, France and Italy under conditions of heightened geopolitical uncertainty and intensifying migration pressures. The study focuses on the dynamics of key budgetary indicators between 2017 and 2024, including the budget balance, primary balance, public debt, government expenditure and the cyclically adjusted budget balance. The analysis additionally addresses the emerging significance of defence spending and migration-related expenditure, which may be exerting a growing influence on the public finance structures of the three countries. The paper also reflects on how post-pandemic recovery measures, energy-security shocks and the war-induced reconfiguration of EU priorities have altered the budgetary trajectories of the analysed economies. The analysis shows that Germany combines moderate debt levels with systematic consolidation measures, although rising defence and integration costs create new long-term challenges for future stability. France continues to face chronically high deficits and a persistent increase in public debt, demonstrating limited budgetary space and structural dependence on expansive social spending that is difficult to reduce without socio-political consequences. Italy, despite its extremely high debt burden, has shown an ability to return to a primary surplus and implement budgetary adjustment, yet migration-related obligations, demographic pressures and rigid expenditure commitments continue to slow down its path to sustainability and constrain room for manoeuvre within the reformed EU budgetary framework. Using regression modelling, the article identifies the main determinants of the structural balance for each country and reveals distinct budgetary behaviour patterns. Budget balance and government expenditure show strong explanatory power across the models, while public debt demonstrates divergent effects due to differences in institutional settings, budgetary rules and national policy responses to external shocks. The findings highlight that geopolitical shocks, demographic trends and migration pressures have reshaped budgetary trajectories in Germany, France and Italy, making the issue of budgetary sustainability central to their future economic stability.