Getting out of the red

Published: 13 November 2009 y., Friday

Pinigai
A year ago, budget shortfalls of two or three times the EU limit would have been unthinkable in most countries. Now they are the norm – a legacy of the economic crisis that threatens to pull Europe back into recession.

EU countries must get their public finances back in shape - on this everyone agrees. The question is how quickly? Many are reluctant to cut spending anytime soon for fear of stalling the incipient recovery. The commission timetable gives 13 countries between two and five years to reinstate fiscal discipline.

Under EU rules, current and potential eurozone members must keep their budget deficits below 3% of gross domestic product, although they are allowed some flexibility when the economy sours. The rules - part of the EU’s stability and growth pact – are aimed at preventing imbalances that could undermine the eurozone.

On average, EU countries posted deficits of 0.8% of GDP in 2007 and 2.3% in 2008. That is expected to triple to 6.9% this year and climb to 7.5% in 2010.

The gaps between government spending and revenue ballooned during the crisis as governments boosted spending to shore up their banking systems and revive their economies. With tax revenues falling sharply, many had to borrow the money.

Paying off this debt is already expensive, even though interest rates are low. Any rise in rates could put a brake on the recovery, economic affairs commissioner Joaquin Almunia warns.

The commission proposes a deadline of 2013 for nine countries: Germany, France, Spain, Austria, the Netherlands, the Czech Republic, Slovakia, Slovenia and Portugal.

Italy and Belgium would have until 2012, Ireland until 2014 and Britain until fiscal year 2014-15. The recommendations are subject to council approval.

For France, Spain, Ireland and the UK, the proposals represent a reprieve as those countries had faced earlier deadlines because they already posted deficits above the 3% limit last year.

The commission urged Greece to take immediate action, saying the country has not done enough to close its gap. Greece expects to post a deficit of nearly 13% this year, far more than previously estimated.

 

Šaltinis: ec.europa.eu
Copying, publishing, announcing any information from the News.lt portal without written permission of News.lt editorial office is prohibited.

Facebook Comments

New comment


Captcha

Associated articles

The most popular articles

China bought Volvo

In Gothenburg Sweden a deal is done for Volvo. A delegation from China’s Zhejiang Geely Holding Group, China’s largest private-run car maker, was given the red carpet treatment when it agreed to buy Ford Motor’s Volvo car unit for 1.8 billion dollars. more »

Zapatero hopes to reach employment figures of 70 percent for women in the EU by the year 2020

The President of the Spanish Government and current rotational President of the European Union, José Luis Rodríguez Zapatero, affirmed this Sunday that during his presidency of the EU, Spain will continue to support the inclusion of the "complete affirmation of equality between men and women" within the new economic strategy. more »

UniCredit Bank Lithuanian Branch resisted the economic recession

Despite the unfavorable macroeconomic situation, AS UniCredit Bank Lithuanian Branch achieved positive activity indicators in 2009: the bank branch operated profitably, the total loan portfolio and assets increased and the number of customers grew. more »

2011 budget: Parliaments spells out its priorities

Young people, economic recovery and research should be the EU's top budgetary priorities, said the European Parliament on Thursday, when it became the first EU institution to adopt an opinion on next year's budget. more »

Eurogroup countries give their support to the aid mechanism for Greece

The sixteen leaders of the euro area countries (the Eurogroup) have given their support to the financial aid mechanism for Greece; this involves the participation of the International Monetary Fund (IMF) and of the euro area countries through bilateral loans. more »

European social partners meet EU to debate exit from the crisis and Europe 2020 strategy

Today, President of the European Commission José Manuel Barroso, President of the European Council Herman Van Rompuy and Spanish Prime Minister José Luis Rodriguez Zapatero representing the Presidency of the Council met the European social partners to look at how Europe can exit the current economic and financial crisis. more »

Parliament backs aid to unemployed in Lithuania

Around 1,100 former furniture and textile workers in Lithuania will receive EU aid worth €1.2 million following a vote by Parliament on Thursday. more »

Developing countries facing the “abyss” says report

An estimated 100 million people in developing countries will fall into extreme poverty because of the economic and financial crisis, according to a report being presented Wednesday evening in the House. more »

EU to make its first formal decisions on the common economic strategy for the next ten years

The Heads of State or Government of the EU-27 will make their first formal decisions in the process to develop the “Europe 2020” strategy that aims to achieve sustainable economic growth, job creation as well as recognition for the European social model. more »

Telecoms: Lithuania withdraws proposed regulatory measures on network access market

On 16 March 2010 the Lithuanian Authority, Ryšių reguliavimo tarnyba (RRT), informed the European Commission that it was withdrawing its proposed measure on network infrastructure access markets. more »