Four euro-one na­tions risk break­ing EU rules

Govts urged to keep bud­get short­fall be­low 3% of GDP

Kuwait Times - - BUSINESS -

BRUSSELS: Italy, Lithua­nia, Aus­tria and Spain risk break­ing Euro­pean Union rules with their 2016 bud­get plans, the Euro­pean Com­mis­sion said yes­ter­day, while France might also not meet some of the fis­cal tar­gets set out by EU fi­nance min­is­ters. It said, how­ever, that the costs of Europe’s mi­grant and refugee cri­sis would be treated as a spe­cial case. The Com­mis­sion, the EU ex­ec­u­tive arm, checks draft bud­get plans of euro-zone coun­tries ev­ery year to see if they are in line with the Sta­bil­ity and Growth Pact, which sets rules for EU bud­gets.

The rules say a gov­ern­ment has to keep the head­line bud­get short­fall be­low 3 per­cent of GDP and strive to bal­ance its books in struc­tural terms - ex­clud­ing one-off rev­enues and spend­ing and the ef­fects of the busi­ness cy­cle. To be in line with the rules, each year gov­ern­ments must re­duce their struc­tural deficit by at least 0.5 per­cent of GDP un­til they are close to bal­ance or in sur­plus. The Com­mis­sion pointed the fin­ger this year at Italy, Lithua­nia, Aus­tria and Spain. “The draft bud­getary plans of th­ese coun­tries might re­sult in a sig­nif­i­cant de­vi­a­tion from the ad­just­ment paths to­wards the medium-term ob­jec­tive,” its said.

France’s 2016 draft bud­get was broadly com­pli­ant, the Com­mis­sion said, be­cause the head­line deficit was as re­quired. But France is un­der a dis­ci­plinary EU process, called the ex­ces­sive deficit pro­ce­dure, for hav­ing a bud­get gap higher than 3 per­cent of GDP. EU fi­nance min­is­ters set an­nual fis­cal con­sol­i­da­tion tar­gets for coun­tries un­der this pro­ce­dure. The Com­mis­sion said Paris was at risk of miss­ing th­ese tar­gets. “In the case of France, while the rec­om­mended head­line deficit tar­get is pro­jected to be met in 2016, the (draft bud­get) con­tains risks as re­gards com­pli­ance ... as the fis­cal ef­fort is pro­jected to fall sig­nif­i­cantly short of the rec­om­mended level, ac­cord­ing to all met­rics,” the Com­mis­sion said.

It said that it asked the French au­thor­i­ties to take the “nec­es­sary mea­sures within the na­tional bud­getary process” so that the 2016 bud­get is in line with EU rules. With­out changes in cur­rent poli­cies, France is also ex­pected to have a deficit above the 3 per­cent limit in 2017, in breach of agreed tar­gets, the Com­mis­sion es­ti­mated. Brussels’ anal­y­sis of France’s bud­get was car­ried out be­fore the Paris at­tacks of last week­end. Spain, which faces elec­tions in De­cem­ber, was in big­ger trou­ble. “The draft bud­get plan... was found to pose a risk of non-com­pli­ance with the re­quire­ments for 2016. In par­tic­u­lar, nei­ther the rec­om­mended fis­cal ef­fort nor the head­line deficit tar­get for 2016 is forecast to be achieved,” the Com­mis­sion said con­firm­ing an opin­ion is­sued in Oc­to­ber.

It said it had asked Madrid to make sure the bud­get would com­ply with EU rules and asked for a up­dated draft as soon as pos­si­ble. Italy’s draft bud­get plan is also at risk of non-com­pli­ance with EU fis­cal rules, the Com­mis­sion said in a state­ment, urg­ing Italy to take “the nec­es­sary mea­sures within the na­tional bud­getary process to en­sure that the 2016 bud­get will be com­pli­ant”. The Com­mis­sion will de­cide in May whether Italy can be granted some bud­get lee­way for in­vest­ments and struc­tural re­forms.

Mi­grant im­pact

It also said that the bud­get costs of the mi­grant cri­sis would be treated as an ex­cep­tional cir­cum­stance and not counted into the deficit cal­cu­la­tions, but con­ces­sions will be made only af­ter ac­tual ex­penses are prop­erly as­sessed. Italy, Greece, Aus­tria and Ger­many are all deal­ing with hun­dreds of thou­sands of asy­lum seek­ers from the Mid­dle East and Africa who are flee­ing con­flicts and poverty in their coun­tries. The Com­mis­sion said it would mon­i­tor the sit­u­a­tion closely to de­ter­mine what was el­i­gi­ble and en­sure that it did not im­pact 2015 and 2106 bud­get en­force­ment. Over­all, the ag­gre­gate euro zone bud­get deficit is to shrink to 1,7 per­cent in 2016 from 1.9 per­cent in 2015. Debt is also to fall slightly to just be­low 90 per­cent of GDP. The Com­mis­sion said this rep­re­sented a neu­tral fis­cal stance. — Reuters

PORTO: A woman waits for cos­tumers to buy her wares at the Silo car boot flea mar­ket in Porto. Por­tu­gal has ex­pe­ri­enced zero growth in the third quar­ter af­ter a 0.5% rise in GDP in the first two quar­ters, due to a de­crease in in­vest­ment, the Na­tional Sta­tis­tics In­sti­tute (Ine) said. — AFP

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