Thursday 25 December 2014

Italy, Spain criticised among countries at risk of breaking EU budget rules

Published 16/11/2013 | 01:00

Spain's Economy Minister Luis de Guindos and his Italian counterpart Fabrizio Saccomanni
Spain's Economy Minister Luis de Guindos and his Italian counterpart Fabrizio Saccomanni

THE European Commission has warned that the budgets of a number of countries, including Italy and Spain, may not be compliant with new European-wide debt and deficit rules.

The Brussels-based body yesterday announced its verdicts on the draft budgets of 13 eurozone states, and three countries which don't use the single currency, as new figures showed inflation in the 17-member bloc fell to 0.7pc in October, far below the European Central Bank's target.

The enhanced scrutiny forms part of new eurozone rules known as the 'Two Pack', but bailout states including Ireland were not included. Under the rules, each country must unveil its draft budget by October 15 and submit it to the European Commission to check.

The Commission has the right to ask for a revised budget plan from a eurozone country if its draft clearly breaks EU rules, which oblige governments to cut deficits until they reach a balanced budget, or surplus, and cut debt.

SUBSTANTIAL

No countries will have to resubmit budgets, but the commission said that in several cases it found reasons for substantial criticism.

"It is reassuring that no draft budgetary plan has been found in serious non-compliance with the obligations of the 'Stability and Growth Pact' and that it is not necessary to request revised budgetary plans,'' the statement said.

"However, in several cases, the Commission has found reasons for substantial criticism and has called on the Member States concerned to take its opinions into account in the finalisation of the 2014 budgets.''

This was the first time that the Commission reviewed the main assumptions of draft budgets of eurozone countries before they were submitted to national parliaments, so as to assess if they are in line with EU laws.

Three of the eurozone's biggest economies came in for criticism with the Commission saying France's budget just about passed muster. Germany, the eurozone's biggest economy, was accused of not heeding Commission recommendations to correct its structural imbalances.

Italy, Finland, Spain, Luxembourg and Malta were among other countries at risk of breaking the rules.

The findings come just a day after it emerged that the eurozone barely grew at all in the third quarter, at just 0.1pc. This was slower than expected and below the 0.3pc rate of growth eked out earlier in the year. France contracted by 0.1pc.

And to compound concern, falling fuel and telecoms prices pulled inflation in the bloc to its lowest level in four years.

Inflation hit 0.7pc last month, far below the European Central Bank (ECB) target of 2pc.

Heating oil fell by the most in October compared to a year earlier, followed by fuels and then telecoms, Europe's statistical agency, Eurostat said. After Eurostat released its flash reading last month, the ECB cut its main refinancing rate last week by 25 basis points to 0.25pc, warning of "a prolonged period of low inflation" as the eurozone struggles to recover from recession.

European Economics Commissioner Olli Rehn said a "turning point'' had been reached on the road to recovery and urged countries to take heed of criticisms.

"Today's Commission opinions on national budgetary plans support the euro area Member States in their pursuit of stronger growth and fiscal sustainability,'' he said.

"Member States have given the Commission the responsibility to issue these opinions and I trust that they will thus be taken on board by national decision-makers."

Irish Independent

Promoted articles

Read More

Promoted articles

Editors Choice

Also in Business