EU states face budget deadlines

EU states face budget deadlines

Commission will press countries to bring deficits back to normal levels.



The European Commission will on Wednesday (11 November) recommend deadlines by when member states should have reduced their budget deficits to pre-crisis levels.

The Commission is expected to propose deadlines for Germany, Italy, the Netherlands, Austria, Belgium, the Czech Republic, Portugal, Slovakia and Slovenia. All of these countries will in 2009 have a budget deficit larger than 3% of gross domestic product (GDP), the maximum level allowed under the EU’s Stability and Growth Pact.

The Commission notified these member states last month that their deficits were larger than 3%, a standard step before deadlines are set. The Commission’s recommendations will be sent for approval to the Council of Ministers.

Joaquín Almunia, the European commissioner for economic and monetary affairs, said that the Commission would differentiate between member states when recommending deadlines, as countries’ economic situations vary.

“At the same time this differentiation will need to provide a global picture that demonstrates fair treatment, equal treatment, to everybody,” he said.

Officials expect the Commission to grant the UK, France, Ireland and Spain an extra year to bring their deficits back into line. This would give Ireland until the end of 2014 to correct its deficit, Spain and France until the end of 2013 and the UK until April 2015. The current deadlines for all four countries were set in April.

Almunia did not confirm that countries would be receiving new deadlines. He did say, however, that member states “would be able to be accorded a one-year extension” if they had “adopted effective action” to bring down deficits.

The Commission estimates that, across the EU, the average budget deficit in 2009 will be 6.9% in 2009. In 2008, the figure was 2.3%. It expects this figure to rise to 7.5% in 2010.

Almunia, who was speaking after participating in a meeting of eurozone finance ministers, said he had received assurances from German Finance Minister Wolfgang Schäuble that Germany is serious about cutting its budget deficit.

The German cabinet today approved €6 billion of tax cuts as part of its 2010 budget, raising speculation that the country is not committed to the Stability and Growth Pact. The cuts are part of a larger reduction in the tax burden agreed by Germany’s ruling coalition.

Almunia said that Schäuble was “fully committed to the implementation” of the pact and was a “very credible politician”.

This was echoed by Spanish Finance Minister Elena Salgado, who chaired the meeting. “I don’t think there has been any doubt on our part on his absolute commitment to comply with the provisions of the pact,” she said.

Almunia and Salgado said that the ministers had discussed the fiscal situation in Greece, which last month increased its estimate for its budget deficit in 2009 to 12.5% of GDP. It had previously predicted 6-8%. The change in figures has been strongly criticised by the European Central Bank, which sees the alteration as a threat to the eurozone’s credibility.

Salgado said that the ministers would hold further discussions on the Greek situation “in the coming months”. Almunia said he had held bilateral discussions with Greek Finance Minister Giorgos Papaconstantinou. The commissioner said he would give his opinion on the country’s finances when the Greek government presents its budget for 2010 on 27 November.

Jim Brunsden 

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