EU warns members over budgets

Brussels says some nations are relying on overly optimistic forecasts to cut debts.

The reprimand has embarrassed Gordon Brown, the UK’s prime minister, coming ahead of parliamentary elections expected at the start of May.

Brown’s government has largely pushed back spending curbs in the run-up to the polls.

‘Growth assumptions’

With a deadline of 2014-15 to correct an overspend currently at 12.7 per cent of British output, “the absence of detailed departmental spending limits is a source of uncertainty”, the European Commission said.

“Overall, for the majority of the 14 programmes, the growth assumptions underlying the budgetary projections are assessed as rather optimistic, implying that budgetary outcomes might be worse than targeted,” Olli Rehn, the EU’s economic and monetary affairs commissioner, said in a statement.

The report warned that Germany’s “budgetary strategy is not sufficient to bring the debt ratio back on a downward path”, and that the nation needs to reconcile possible tax cuts with the need to reduce budget spending.

It also warns that Berlin has failed to spell out what cuts it would make after this year.

France’s budget plans also fail to leave “any safety margin if economic developments turn out worse than projected” by the government’s “markedly favourable” growth assumptions, the EU said.

Deficit and debt

It called on France to specify spending cuts and show exactly how it will bring down its deficit and its debt, which will keep increasing until 2012 as France takes out a “grand loan” of $48bn to fund a stimulus programme.

Spain may need to draft extra measures to reduce its huge deficit, estimated at 11.4 per cent this year, by 2013 because it may be too optimistic about growth after this year, the EU report said.

The EU also told Italy that its debt and deficit could be higher than targeted because the government’s growth outlook is likewise too high, it has not described how it plans to make reductions and it could spend more than it assumes.

It said that Italy needs “a swift and durable recovery in productivity growth” to get the country’s economy growing again.

The EU told the Dutch government to lay out more details on how it will reduce its deficit and debt by 2013.

Source: News Agencies


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