Spain, Portugal deficit cuts a 'substantial improvement': EU

2nd June 2010, Comments 0 comments

European Union economic supremo Olli Rehn on Wednesday hailed Spanish and Portuguese moves to curb their public deficits, ahead of a formal assessment by their euro peers next week.

"Our first assessments are that the new targets for both countries are indeed appropriate for the current situation," EU Commissioner for Economic Affairs Rehn said, citing a "substantial improvement" on earlier targets.

Finance ministers from the 16 countries that share the single currency will on Monday examine a 15-billion-euro austerity plan approved by Spain's parliament last week as well as a pledge by Portugal to cut its public deficit this year to 7.3 percent of national output, rather than 8.3 percent as initially planned.

Their assessment at talks in Luxembourg will feed into a formal European Commission judgement on June 15, when 12 EU countries who have exceeded the EU's three-percent deficit limit will also go under the microscope.

Britain should have been the 13th EU member state to come up for inspection then, but with a new emergency budget set for June 22, Rehn said that would be put back.

Spain's latest cuts come on top of a 50-billion-euro austerity package announced in January and include an average five-percent pay cut for public sector workers from June and a pay freeze from 2011. Pensions, except for the poorest, will also be frozen in 2011.

Portugal's public debt, which came to 76.6 percent of Gross Domestic Product (GDP) last year, is projected to widen to 86 percent in 2010, well beyond the 60 percent level prescribed by eurozone rules.

© 2010 AFP

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