Brussels is urging EU member states to keep being disciplined in their public spending (Photo: European Community)

EUOBSERVER / BRUSSELS - While budgetary discipline in most of the European Union's member states significantly improved over the past year, the UK and France - the bloc's economic heavy-weights - are expected to breach the public deficit rules by next year.

Joaquin Almunia, the EU's economy commissioner, told reporters on Monday (28 April) that he will in June propose the launch of a disciplinary procedure against Britain for accumulating a higher
budgetary deficit than the three percent of GDP threshold.

According to the European Commission's spring economic forecast, the UK's deficit will be 3.3 percent in both 2008 and 2009, with Hungary the only other EU member state set to register higher than the allowed spending this year.

France is also being marked down on the EU's budgetary blacklist. "According to our predictions for growth and impact of the French budgetary and fiscal policies, we imagine that this deficit will go up to 2.9 percent in 2008," said Mr Almunia.

"And on the basis of no change in current policies, the deficit in France will likely get up to three percent, meaning that France is getting closer in a dangerous way to the reference value," he added, about the country's prospects in 2009.

The finger-wagging from Brussels over Britain's finances comes as an embarrassment to London, as the UK has for a long time been referred to as a model economy. However, the EU cannot impose sanctions, as Britain is not part of the eurozone.

As in the rest of Europe, Britain's problems are connected to the ongoing global financial turmoil and the US sub-prime crisis.

Primarily due to these external factors, the EU executive has shaved 0.5 percent off its economic forecast for the bloc compared with the autumn projections and warned of a "major problem" with inflation.

Brussels predicts that economic growth in the 27-member EU will slow from 2.0 percent this year to 1.8 percent in 2009. Growth in the 15-nation eurozone is predicted to fall from 1.7 percent in 2008 to 1.5 percent next year.

"The biggest changes in our forecast, when we compare these figures with the previous ones, regards inflation for 2008 for well-know reasons: oil price increases, commodities price increases, food price increases," said Mr Almunia.

"Inflation is rising to 3.6 percent in the EU, and 3.2 percent in the euro area this year. The price increases we hope will start to decelerate in the second quarter of this year, and in 2009, the average inflation will come down to 2.4 percent in the EU, with 2.2 percent in the euro area," he added.

The Spanish commissioner admitted that the euro is overvalued and that the financial turmoil had proved to be "deeper, wider and longer lasting" than expected.

Top of Page

Post an instant comment or a suggestion to the above article or news

Note: You can use the above link to form a new discussion forum, place your opinion and discuss events, politics, articles, environment, fashion, health, internet, search engines, marketing, movies, music, religion and any other topic.