Brussels, 07/02/2007 (Agence Europe) - The future budget predictions of Finland, Luxembourg and Ireland are pretty sound and do not raise any concerns at European Commission level. The Commission unveiled a second assessment of Stability and Convergence Programmes on Wednesday (see EUROPE 8350 on the first). Finland and Ireland are both good examples of healthy medium-term budget policies, and while Luxembourg has not yet reached its mid-term target (MTT), it is expected to do so later this year. Malta's Convergence Programme is based on rather pessimistic growth forecasts. Hungary is taking stronger measures, necessary to deal with its current budget deficit levels. Poland's economy is performing better than expected and the European Commission expects the country to correct its excess budget deficit at the end of this year.
Finland. Between 2006 and 2010, Finland will match its MTT and continue to be in budget surplus, ranging from 2.8% of GDP in 2007 to 2.4% in 2010, at the end of the period covered by the current Stability and Convergence Programme. Debt will fall from 37.7% of GDP in 2007 to 33.7% in 2010 and there is little danger of problems due to population ageing, so the European Commission has no recommendations to make.
Ireland. Despite a pro-cyclical policy danger in 2007, Ireland's budget surplus forecasts for its 2006-2009 programme match its target of a close to equilibrium budget. The surplus is expected to range from 1.2% of GDP in 2007 to 0.8% in 2009, and debt is expected to fall from 23% to 21.9%, a very low level even for a country like Ireland that has to tackle average risks of demographic ageing.
Luxembourg. Luxembourg is expected to strike equilibrium by the end of the period covered by its Stability and Convergence Programme, meeting its MTT with 0.1% of GDP in 2009 compared with -0.9% in 2007. Given the prudent nature of Luxembourg's forecasts, the budget may actually perform better than expected, particularly in 2006 and 2007. The Commission comments that Luxembourg's debt ratio is very low (expected to rise from 7.5% in 2006 to 8.5% in 2009), but the country is towards the top of the league in the EU when it comes to the impact of an ageing population on the budget. The Commission wants reforms to the pension system to be implemented.
Malta. Malta's deficit is expected to remain below the 3% GDP cut-off point in 2006 and its debt is expected to reach 60% of GDP by 2009, but the MTT is not expected to be achieved until some time beyond 2009 despite Malta's adjustment programme generally sticking to Stability and Growth Pact rules. The Commission says Malta's programme is likely to correct the deficit in 2006 and urges the country to pursue its MTT, setting out a sustained strategy to tackle expenditure and improve the long-term sustainability of public finances, particularly for healthcare.
Hungary. Hungary's strategy was endorsed in September 2006 (see EUROPE 9273) when the authorities submitted a more detailed version of the previous programme. The most recent version of the 2006-2010 document foresees exactly the same targets, expecting the deficit to be reduced from 10.1% GDP in 2006 to 2.7% in 2010. The MTT of a 0.5% GDP structural deficit will not be reached by 2010, but the debt ratio is expected to reach its 2006 level (67.5% of GDP) in 2010. The Commission comments that measures taken since the summer of last year (increasing income, cutting expenditure, and continuing to reform the civil service, healthcare, pensions and education) mean that Hungary's programme is expected to meet the 2009 deadline recommended by the Council for bringing the budget deficit back below 3% (see EUROPE 9283). The Commission urges Hungary to tighten the budget purse strings in 2007.
Poland. With the introduction of new statistical rules whereby, from April 2007 onwards, it will no longer be possible to count second pillar pensions contributions as civil service income, Poland's deficit will reach 3.4% in 2007 and 2.9% in 2009. The deficit might be even bigger this year, in fact, comments the Commission, arguing that the country's growth forecasts for 2008 and 2009 are rather optimistic. It calls on Poland to take advantage of the current economic boom to correct its excess budget deficit by the end of the year. This recommendation does not alter the previous deadline which the Council said would not be reached, given Poland's failure to take corrective measures (see EUROPE 9316). The economy is performing better than expected in the European Commission's autumn forecasts, and it now looks possible that Poland will be able to bring its excess budget deficit back below the Stability Pact cut-off point in 2007 if it takes additional corrective measures. The Commission also recommends regular progress in moving towards the MTT of a deficit of around 1% GDP. (ab)