Brussels, 17/03/2010 (Agence Europe) - On Wednesday 17 March, the European Commission examined the stability programmes of 10 Member States of the Euro zone and the convergence programmes of four other countries of the EU. Taking account of the measures taken by the countries of the EU to face up to the crisis and the effects of the automatic stabilisers, most of the Member States are now affected by excessive deficit proceedings. Of the countries to be put under scrutiny on this occasion, only Bulgaria and Estonia are likely to keep their public deficit below the threshold of 3% of GDP for the entire period covered by their respective programmes. Others are hoping to achieve the same by various deadlines and in line with the recommendations made to them under the Stability and Growth Pact. Another series of stability or convergence programmes will be examined at the meeting of the College of Commissioners next week.
"The programmes assessed today are marked by two milestones: the stimulus measures put in place to avert the economic downward spiral, and the fiscal exit strategy as agreed at the end of last year", Olli Rehn stated in a press release. In 2010, the support measures will therefore continue to affect the public finances of the majority of Member States, with the budgetary consolidation strategies due to start in 2011 (at the latest). However, the Commissioner for Economic and Monetary Affairs stresses that "the main risks to consolidation stem from somewhat optimistic macroeconomic assumptions and the lack of specification of consolidation measures". The Commission fears that the deficit reductions could be less than those provided for in the programmes and notes that the planned measures to carry out the budgetary consolidation from 2011 contain insufficient detail.
Germany. From -3.3% of GDP in 2009 further to the global economic crisis, the German budgetary deficit is set to reach 5.5% of GDP in 2010. According to the stability programme put forward by Berlin, the consolidation process is set to begin in 2011 and the excessive deficit should be corrected by 2013 (at -3%), in line with the recommendation put by the Council of 2 December 2009. There are, however, risks to the anticipated budgetary results. Amongst other things, the Commission regrets the absence of specific consolidation measures post-2010 and takes the view that the budgetary strategy is insufficient to bring the indebtedness ratio down (from 72.5% of GDP in 2009, the debt is expected to continue to climb, reaching 82% in 2013).
Austria. The Austrian public deficit and public debt reached 3.5% and 66.5% of GDP respectively in 2009, under the effects of permanent measures to fight the recession. Whereas the Austrian programme anticipates a deficit of 4.7% in 2010 and a gradual return to 2.7% in 2013, these budgetary results could, however, turn out to be overly optimistic, in the view of the Commission, which notes the absence of measures to support the consolidation announced to begin in 2011 (although the country has already undertaken major reforms in the field of public expenditure).
Belgium. The Belgian programme plans a restrictive budgetary policy from 2010, to bring its deficit down from 5.9% of GDP in 2009 to 3% by 2012 (with intermediate levels of 4.8% in 2010 and 4.1% in 2011). The measures on which the target for 2011 is based are only partly detailed, and no measures have been announced for 2012, the Commission notes, adding that the macroeconomic assumptions are slightly optimistic. The Belgian government has nonetheless committed, in its programme, to take additional measures to come back below 3% by the stated deadline. The public debt ratio will continue to rise until 2011, before dropping again in 2012.
Spain. With a deficit as high as 11.4% of GDP in 2009, the adjustment effort to come back below 3% by 2013 will be supported as of 2010 (with an objective of -9.8%, then -7.5% in 2011 and -5.3% in 2012). Due to the optimistic nature of the macroeconomic assumptions post-2010, the contribution of economic growth to budgetary consolidation may, however, turn out to be lower than anticipated, and the adjustment path after 2010 would still need to be backed up with measures, the Commission states. Public debt, which was below 40% of GDP in 2008, is set to rise to 55% of GDP in 2009 and will continue to climb, reaching 74% of GDP by 2013.
Finland. Due to its major budgetary relaunch plan in 2009 and its continued expansionist budgetary policy in 2010, Finland will record a deficit of 3.6% this year (compared to 2.2% last year). Under the Finnish programme, which incidentally contains no consolidation measures, it will drop back to 3% in 2011 and 2.3% in 2012. Due to the highly optimistic medium-term growth assumptions, the Commission believes that the budgetary result could turn out to be less favourable than anticipated.
France. The French deficit, which stood at 7.9% in 2009 and 8.2% in 2010, is set to drop to 6% next year and to 4.6% in 2012, finally reaching 3% in 2013. In the view of the Commission, the assumptions underlying the scenario put forward in the programme are highly optimistic (the stability programme assumes growth of 2.5% in 2011) and a number of the measures announced regarding expenditure have not been specified. It appears that the strategy defined allows no security margin in the event that the economic situation should develop less favourably than anticipated by the programme (the Commission anticipates that GDP will rise by 1.5% in 2011). Debt will continue to rise, reaching 87.1% of GDP in 2012, dropping to 86.6% the following year.
Ireland. Under the Irish programme, deficit is set to stabilise in 2010 at 11.6% of GDP, returning to 2.9% in 2014. Debt will reach 83.9% of GDP in 2012, before starting to drop off. The absence of specific consolidation measures after 2010 and the optimistic nature of the macroeconomic prospects, together with the risk that the earmarked expenditure could be exceeded, are, however, of concern to the Commission. It stresses the need for the country to up its competitiveness (productivity gains and appropriate salary policies) and halt the rise of long-term unemployment.
Italy. Italy's stability programme anticipates a reduction of deficit this year (to 5%, compared to 5.3% in 2009) and a return to 2.7% in 2012. This adjustment is based on expenditure austerity measures adopted in 2008 and the consolidation measures, even though these are not detailed, which makes the achievement of the objective uncertain in the view of the Commission, which feels that the Italian macroeconomic assumptions are optimistic. The indebtedness ratio, which is already high, is set to peak at 117% of GDP in 2010, then fall back below the level of 115% of GDP in 2012.
Netherlands. The Dutch programme plans to reduce the deficit from 2011, to reach 4.5% the following year. However, there are no indications for 2013, which is the deadline laid down by the Council for the excessive deficit to be corrected, states the Commission, which feels that the macroeconomic scenario is also optimistic. The indebtedness ratio of the country, which reached the reference value of 60% of GDP in 2009, is also set to continue to climb steeply over this period (72.5% in 2012).
Slovakia. The Slovakian authorities are planning a sizeable budgetary consolidation, focusing on the beginning of the period, in order to bring the country's deficit from 6.3% of GDP in 2010 to 3% of GDP in 2012 at the latest (a year before the deadline set by the Council). On the base of optimistic macroeconomic assumptions for 2011 and 2012, these budgetary results could turn out somewhat less favourable than anticipated and a number of measures under the expenditure plank could fail to generate the savings hoped for.
Bulgaria. The healthy budgetary situation is expected to continue, according to the Bulgarian convergence programme, which targets balanced budgets (after a deficit of 1.9% in 2009, small surpluses are anticipated for 2011 and 2012, of +0.1%). Generally speaking, the budgetary policy appears restrictive in 2010 and neutral overall in 2011, then relaxes somewhat in 2012, according to the Commission. It adds that the consolidation measures implemented and the strong political commitment which has been made in favour of budgetary discipline should do much to compensate for the risks stemming from the slightly optimistic nature of the assumptions concerning growth and fiscal revenue.
Estonia. Although the Estonian economy is starting to bounce back from the crisis, there is a major challenge ahead of the country if it is not to experience a level of growth similar to previously. According to the Commission, the Estonian authorities made a considerable consolidation effort in 2009, which helped to adjust the public finances. The programme now plans to return to budgetary surplus by 2013 (0.2% of GDP, compared to an estimated deficit of 2.6% of GDP in 2009). The ratio of debt to GDP is likely to remain low and is not expected to exceed 15% of GDP by the end of the period.
Sweden. Having made surpluses when the economic situation allowed it, Sweden is planning moderate deficits for the years to come. From 2.2% in 2009, this deficit is set to reach 3.4% this year, falling back down to 2.1% next year and 1.1% in 2012. However, the growth assumptions are highly optimistic and no consolidation measures have been specified for the entire period covered by the programme, the Commission notes. Amongst other things, the country should carefully plan the withdrawal of stimulus measures so as not to nip recovery in the bud and stand ready to adopt discretionary consolidation measures, should budgetary outcomes fall short of expectations.
United Kingdom. The worsening of British public finances has been considerable, with deficit reaching 12.7% for the financial year 2009-2010. Under its convergence programme, the United Kingdom does not anticipate correcting its excessive deficit by the financial year 2014-2015 (the authorities anticipate -4.9%) as recommended to it by the Council, the Commission notes with concern, adding that the macroeconomic situation could also prove considerably less favourable than anticipated by the programme. The indebtedness ratio will peak at 91.6% of GDP in 2013-2014, then tail off very gradually afterwards. (A.B./trans.fl)