Commissie neemt eerste stap tegen begrotingstekorten in zes landen (en)
EUOBSERVER / BRUSSELS - The European commission took the first step towards starting excessive deficit procedures against six countries on Wednesday (18 February) when it issued its analysis of member state budgetary forecasts submitted last month.
The six states - Ireland, Greece, Spain, France, Latvia and Malta - all reported a 2008 budget deficit exceeding the 3 per cent of national GDP permitted under the Stability and Growth Pact, which underpins public finance stability within the EU.
The other 11 states also up for review were Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Hungry, the Netherlands, Poland, Sweden, Finland and the United Kingdom.
"During the recession the pact is not about sanctions, nobody is thinking of sanctions," said economy commissioner Joaquin Almunia i.
"The pact is an instrument that will help governments fight the recession in the short-term, to preserve the sustainability of public finances in the medium-term ... and not to pass a huge burden onto the next generation."
All 27 EU members are subject to the Stability and Growth Pact. Those on the receiving end of excessive deficit actions are handed a timetable by the commission under which governments must incrementally reduce their deficits, chiefly through cuts in public expenditure and tax raises. Eurozone countries - those who use the euro - can be fined for failing to do so.
Mr Almunia had a particular message for small economies such as Ireland and Greece, whose cost of borrowing has risen markedly in recent months.
"The markets are putting very strong pressure on them and we think that the best way to react to this market pressure is to step up consolidation now in 2009," he said.
Regarding France and Spain, Mr Almunia said 2009 should be a year for stimulating economic growth through public spending packages, but that government action to reduce deficits should start in 2010.
Both Ireland and Spain have suffered from a severe slowdown in the construction sector with new figures released by the European Statistics Office on Wednesday showing eurozone construction output for 2008 down 2.7 percent on 2007.
Malta, whose deficit of 3.3 percent in 2008 resulted in its inclusion on Wednesday's initial list, is unlikely to ultimately receive excessive deficit action. The small Mediterranean island economy has initiated measures to bring its deficit below 3 percent in 2009.
The United Kingdom, already facing excessive deficit procedures along with Hungary, will receive new recommendations from the commission on improving public finances.
Mr Almunia issued cautious praise for Scandinavian countries and Bulgaria that have produced budget surpluses in recent years. "So far we can tell them, please continue doing the things that you are doing," he said.
EU finance ministers must agree on a final commission list before formal excessive deficit procedures are initiated. This is likely to occur at an April meeting in Prague.