EU acts as budget deficits bulge

The European Commission has taken disciplinary steps to tackle swelling budget deficits in six EU countries.

• It said that France, Greece, Spain, Ireland, Latvia and Malta had breached EU rules by allowing their budget deficits to exceed 3% of GDP in 2008.
• The global downturn has taken its toll on public finances as countries try to spend their way out of recession.
• The Commission said it would issue a deadline in March for the countries to reduce their deficits.
• The countries will now be subject to the EU’s excessive deficit procedure and countries will be invited to take steps to reduce their deficits.
• The Commission, the executive arm of the EU, said it would be flexible when considering the six cases given the “exceptional circumstances” of the economic downturn.
• Joaquin Almunia, EU economic and monetary affairs commissioner, said that public finances were under stress because of the sharp global financial and economic crisis.
• “Public finances deteriorated further as many many member states adopted fiscal measures to support demand and job creation this year,” he added.
• The rules are part of the EU’s Stability and Growth Pact.