EU urges more belt-tightening from France

22nd February 2006, Comments 0 comments

BRUSSELS, Feb 22, 2006 (AFP) - Britain, France, Greece and Portugal must make further efforts to cut their public deficits, the European Commission said Wednesday, in an update on the finances of some the worst offenders of the EU's fiscal rulebook.

BRUSSELS, Feb 22, 2006 (AFP) - Britain, France, Greece and Portugal must make further efforts to cut their public deficits, the European Commission said Wednesday, in an update on the finances of some the worst offenders of the EU's fiscal rulebook.

Italy was judged to be on its way to bring its deficit in line with EU norms while Spain, Ireland and The Netherlands were held up as examples to others of fiscal discipline.

"These examples should encourage other countries, such as Greece, France and Portugal, to pursue the efforts to bring their public finances in order," said economic affairs commissioner Joaquin Almunia.

EU rules require member states to keep their public deficits to less than three percent of output, but 12 of the European Union's 25 members are currently breaking the limit, testing the commission's authority to police public finances.

The fiscal policies of France, Greece and Portugal -- which have been serial violators of deficit rules -- would "enable them to put their finances on a sound footing in the medium term," the commission said in a statement.

However, Paris and Lisbon could be doing more to improve their public accounts while Athens was "struggling with statistical revisions".

Britain's deficit-cutting programme was at risk of missing its targets as its revenue projections "rely on continuing buoyancy in the financial sector".

The EU executive also disputed a forecast by Britain that its deficit would fall below 3.0 percent by March 31, 2007, saying that the figure "is likely to remain slightly above" the threshold.

Italy, which is expected to have a deficit of 4.3 percent in 2005, was judged to be "on track" to cutting its deficit down to the three-percent limit by 2007 as its EU partners had asked Rome to do in July 2005.

While pleased that Italy's 2006 budget contained belt-tightening measures, Brussels said it would keep a close eye on how well the government managed its finances, especially in light of upcoming elections in the country.

Among the new EU member states included in Wednesday's review, the commission found "encouraging" signs that Cyprus, Lithuania and Malta were nearing their targets for public finances.

After struggling for years to meet the 3.0-percent deficit limit, member states substantially watered down their budget rulebook amid much controversy over how the EU should enforce fiscal discipline.

Many private economists warned that the reform gave too much leeway for countries to get around the rules, which are inscribed in the 1997 Stability and Growth Pact.

However, Almunia told journalists that he was pleased with the results of the reform after the first year.

"In this first year of implementing the provisions and rules of the revised pact, I can say to you that according to our judgement there are encouraging signals," he said.

Thanks to the reform, member states were being more realistic about what targets they set and were showing more responsibility in sticking to them, he said.

The commission is set to round up its review of member states' public finances next week with a review of the German and Polish accounts, which was delayed slightly because of elections last year.

Copyright AFP

Subject: French news

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