Brussels, 18/05/2005 (Agence Europe) - On Wednesday, the European Commission decided to recommend that the Council close excessive deficit procedure begun on 2 June 2004 against the Netherlands. The Dutch deficit, which was 3.2% at the time, was finally reduced to 2.3% in 2004, one year before the deadline set by the EU finance ministers. The case of the Netherlands shows that budgetary improvements implemented in a determined manner can rapidly bring lasting results, a press release from the Commissioner for Economic and Monetary Affairs, Joaquin Almunia, states.
The Commission forecasts show a continued fall in deficit for the Netherlands, to 2% in 2005 and 1.6% in 2006. After the Ecofin Council meeting of 7 June, which will take a stance on suspending the procedure against the Netherlands, nine countries should still be the subject of excessive deficit procedure (Germany, France, Greece, Czech Republic, Cyprus, Hungary, Malta, Poland and Slovakia). Portugal, and Italy in particular, may be the next concerned. The College of Commissioners will give its stance early June on the Italian case, Commissioner Almunia repeated during the informal Ecofin meeting last week in Luxembourg (EUROPE 8948). Italy and Portugal are more at risk for 2005 as the figures for 2004 are still uncertain. The Commission predicts -3.6% and -4.9% deficit for Italy and Portugal in 2005 and -4.6% and -4.7% for 2006.
Italian Finance Minister Domenico Siniscalco, cited by Reuters, admitted on Tuesday before the Italian Senate that he will have to review his growth forecasts for 2005 downwards. “This forecast (currently 1.2%), although recent, has not taken into account the 0.5% fall in growth recorded during the first quarter”, he explained, admitting that this would “very likely” need downward revision of the public finance figures for 2005. “If growth were below 0.6% (at the current forecast of 1.2%), this would involve (…) a budgetary deficit of around 3.75% of GDP”, Mr Siniscalco added. On Wednesday, the Organisation for Economic Cooperation and Development (OECD) published its survey on the economic situation in Italy in which it notes that, although Italy is not faced with an immediate crisis and sensitive policy reforms have been launched (for example concerning the labour market and retirement), the economy is still characterised by gradual erosion of its internal dynamic and its external competitiveness, as well as by action that is still insufficient to ensure the sustainability of public finance. He went on to call for reforms to be implemented without delay.