EU opens Excessive Deficit Procedure against a member state under reformed fiscal rules by mid-2026

European fiscal policy risk is underpriced. The reformed SGP gives the Commission more discretion but also creates new trigger thresholds for debt sustainability. France and Italy both project deficits above 4% of GDP through 2025, and Belgium's debt-to-GDP exceeds 110%. The new rules require net expenditure paths that several countries are already overshooting. The Commission faces a credibility test: enforce the rules and risk political backlash from major member states, or show flexibility and undermine the reform's entire purpose. Historical precedent suggests the Commission delays action, but the reform's architects explicitly designed it to reduce discretion. Watch for the Commission's country-specific recommendations in spring 2025 and any EDP proposals that follow. This market captures whether EU fiscal enforcement has real teeth or remains a paper tiger.