Brussels, 11/01/2012 (Agence Europe) - On Wednesday 11 January, the European Commission commented on measures taken by five member states that had promised to bring their budget deficits back to below 3% of GDP in 2011 or 2012. Four of the five - Belgium, Cyprus, Malta and Poland - have made sufficient progress towards timely and affordable achievement of this goal, but the Commission says that Hungary's measures are insufficient and it suggests moving to the next stage of the infringement proceedings. Under the Stability and Growth Pact, Hungary now risks suspension of EU Cohesion Fund cash unless it changes tack. The ECOFIN Council on Tuesday 24 January will examine the Commission's recommendations.
At the end of November 2011, all five member states looked like they might not be able to meet the deadline, but since then, they have all taken measures to correct their budget deficits in 2012, commented EU Commissioner for the Euro Olli Rehn (see EUROPE 10493). He said that Belgium, Cyprus, Malta and Poland had taken effective action, but unfortunately Hungary had not. The Commission is not recommending moving to the next stage in the infringement proceedings against the first four countries, although it may change its mind once it gets updated growth figures.
Belgium announced at the weekend that it was freezing €1.3bn of planned borrowing (see EUROPE 10527), which the commissioner sees as a good move ahead of a budget control by the federal government next month against a backdrop of weak growth and high debt. Although the Commission forecast a 3.6% public deficit for Belgium in 2011 and 4.6% in 2012, it has since amended the figures and is now expecting the deficit to reach 4.1% in 2011, but be reduced to 2.9% by 2013. Under a special Stability and Growth Pact clause, Poland was able to take account of the impact of recent pension reforms when calculating its public deficit. In the Commission's January analysis, Poland's deficit is expected to reach 5.6% in 2011 and 3.3% in 2012 (November forecasts: 5.6% in 2011 and 4% in 2012). The Commission has changed its deficit forecasts for Malta and Cyprus. In 2011 and 2012, it expects Malta's deficit to stand at 3% and 2.6%. Cyprus' deficit will be reduced to 2.6% in 2012 (no figures have been published for 2011).
Hungary. Although the Hungarian budget was in surplus in 2011 (3.5%), the country has not taken sustainable measures because they are one-off, explains Rehn. Hungary diverted cash from its pension system into the state budget, for example, and without measures of this type, the country would in reality be facing a deficit of 6%, added the commissioner. The Commission therefore recommends that the ECOFIN Council decide that Viktor Orban's government has taken no effective action to bring the deficit to below 3% of GDP in a sustainable manner (Art. 126). Hungary therefore risks losing some of the Cohesion Fund cash it has been granted.
When it publishes its Spring Economic Forecasts (at the end of February), the Commission will focus on countries that have pledged to reduce their public deficit to below 3% of GDP in 2013, namely Spain, France and Italy. On Wednesday 25 January, the Commission will publish an initial macroeconomic analysis of each member state's performance in the ten tests set out in the Stability and Growth Pact roadmap. (MB/transl.fl)