Brussels, 12/05/2004 (Agence Europe) - As expected the European Commission adopted on Wednesday the reports on six new Member States (Cyprus, Czech Republic, Hungary, Malta, Poland and Slovakia), which had budget deficits higher than the 3% reference value stipulated in the treaty. Two of these countries (Cyprus and Malta) had levels of public debt that were higher than 60% of the GDP reference value. Budgetary surveillance procedures have therefore been launched for these countries. This will involve developments for 2004, the different national authorities, as well as spring 2004 forecasts from the Commission indicating that the deficit was expected to remain higher than the 3% of GDP reference value in six countries. In two of the countries, Cyprus and Malta, where debt has gone above the 2003 reference threshold, the debt ratio is on an upward trend and is expected to remain above 60% of GDP in 2004.
Addressing the press, the European Commissioner for economic and monetary policy, Joaquin Almunia welcomed the fact that the new Member States decided to integrate voluntarily into the budgetary surveillance framework and would submit the convergence programmes from the end of the week. On the basis of the programmes and data compiled by the Commission, the Economic and Financial Committee will be called on to give an opinion in the next two weeks for each country. Mr Almunia explained that on 23 June the Commission would adopt, in the perspective of the Ecofin Council of 5 July, recommendations for the excessive debt procedure. In the preparation of these recommendations, the Commission will take into count the flexible position adopted in the update for 2004 of the Broad Economic Policy Guidelines (BEPG), according to which it will be appropriate to take into consideration, on a case-by-case basis, the interaction between budgetary policy and structural developments in the economy, in the expectation of an adjustment period of several years in order to correct the excessive deficit. On this point Amunia explained that in terms of the Stability Pact, excessive debt had to be corrected the following year, except in the case of "special circumstances". The Commissioner said that deficit at the moment of accession was a "pertinent factor" relating to special circumstances and the deficits would be examined on a case-by-case basis depending on the situation in each country. Measures would therefore be tailored to the situation in each country and formulated by the commission. Almunia confirmed that "it could be appropriate to allow for a multi-annual adjustment period when correcting a deficit of more than 3%"… This means that they cannot be submitted to the last two steps of the excessive deficit procedure, namely 'enhanced budgetary surveillance' by the Council and ultimately sanctions". The Commissioner noted that all six countries recorded a deficit above 3% of GDP in 2003, ranging from 3.6% of GDP in Slovakia to almost 13% in the Czech Republic and compared to 2002, the deficit widened in all countries except Hungary and Slovakia. The Commissioner also indicated that "unusual events outside the control of the authorities cannot be held responsible for exceeding the 3% threshold" and that in each country the deficit is expected to remain above 3% of GDP in 2004. Mr Almunia concluded that "the Commission expects all countries to include in their convergence programmes, which we are receiving this week, a time-frame for correcting the excessive deficit situations. And we expect these time-frames to be realistic and in line with their ambitions to join the euro area over the medium term".
In the follow up to Mr Almunia's comments, Siim Kallas from Estonia, who is close to the former, explained that the new Member States respected the spirit and rules of EMU. He declared that, "According to my experience, it is clear for all new Member States governments that euro membership is not an option; it is an obligation. For which we have to prepare, each one in its own pace and in line with the needs of its economy. Kallas also explained that Wednesday marked the real entry of the new Member States into EMU. He underlined that "We all know that there are rules in the Union and it has become clear to all of us during negotiations that these rules are there to protect us and to ensure us equal treatment. That is why I believe that these rules have to be respected and adhered to. The discussion in the College today confirmed and strengthened this view". The Estonian Commissioner aid that all new Member States were convinced that continuing excessive deficit would harm their economies for two reasons: "first, they create a burden for future generations and restrict the ability of the economy to react to the continuous globalisation pressures, second, they create an obstacle to our path to euro membership". Mr Kallas concluded that the new Member States had to structure their economies invest and above all "need to keep their macroeconomic stability and ensure sound public finances if we were to succeed in our euro membership aspirations". The full text of the Commission reports can be consulted on: (http: //europa.eu.int/comm/economy_finance/about/activities/sgp/procedures_en.htm).