Brussels, 07/03/2007 (Agence Europe) - On Wednesday, for its penultimate series of assessments, the Commission looked at the stability programmes of Belgium and Spain, whose budgetary strategy it praises, as well as the convergence programmes of Bulgaria, Latvia and Romania, that are invited to achieve a higher surplus for budgetary adjustment in favourable economic times. Although two countries, Austria and the Czech Republic, have still to be carefully examined, Joaquin Almunia has already presented a summary of quite satisfactory ambitions set out by member states in their programmes.
Spain. “Together with Denmark and Finland, already examined, Spain provides a good example of fiscal policies run in compliance with the Stability and Growth Pact”, the Commissioner was pleased to state, giving details of elements of the updated programme, which aims to achieve budgetary surpluses until 2009. Growth will be between 3.8% in 2006 and 3.3% in 2009 and the debt ratio will continue to fall to reach 32.2% compared with a little over 60% in 1999. This healthy budgetary position compensates for the considerable costs of an ageing population, the Commission says.
Belgium. According to Joaquin Almunia, Belgium “should not relax the effort in the medium-term, starting with this year” if it wants to pursue its exemplary strategy of debt reduction (from 87.7% in 2006 it should fall to 72.6% in 2010) and in order to face up to the budgetary impact of ageing although in respect to the latter reforms are also required. The country should reach its medium term objective (MTO) in 2008 (surplus of 0.5% of GDP) but there is a risk of debt being carried over so that the Commission recommends the Council invite Belgium to ensure that the budgetary target for 2007 is met and the pace of adjustment towards the MTO thereafter, including through a reduction of the recourse to one-off measures be strengthened, in order to improve the long term viability of its public finance.
Latvia. With the biggest growth rate of the EU in 2006 (11.5% of GDP), Latvia is counting on a 9% rise of GDP in 2007 and a 7.5% rise for the two last years of its programme. These projections, which are plausible, are surrounded by risks linked to high inflation and considerable external imbalance. The national economy is “overheating” and there is a risk of public finance deterioration in 2007 (-1.3% compared to -0.4% in 2006), Mr Almunia commented, saying that the MTO of a structural deficit of 1% of GDP may not be reached in 2008. Latvia should therefore have a more ambitious budgetary objective and establish a clearer and binding medium term framework for controlling public finance.
Bulgaria. Today, the country is enjoying comfortable budgetary surplus (3.2% in 2006) but it is expected to suffer a strong fall in 2007 (+0.8%) and the following years (1.5% in 2008 and 2009), despite the spectacular growth rate (about 6% over the period). Although the tendency is pro-cyclical this year, the medium term situation is sound and the debt - slightly below 30% of GDP in 2005 - should fall to 21% in 2009. The Commission invites Bulgaria to achieve a higher budgetary surplus in 2007 than currently planned and to further strengthen the efficiency of public spending, in particular through a reform of the healthcare system.
Romania. From 2.3% in 2006, the Romanian deficit will vary between -2.7% in 2007 and -2% in 2009 so that the country should not reach its MTO (deficit of 0.9% of GDP) until 2011. This scenario nonetheless presents considerable risk, as, according to the Commission, “the budgetary strategy does not provide a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal macro-economic fluctuations”. This adjustment effort is too limited given the prospects of sustained growth for the country (between 6.5% in 2007 and 5.9% in 2009). Bucharest must set itself objectives that are more ambitious in 2007 and beyond, and also better master the strong rise in medium term public spending.
Growth figures predicted in the context of the programmes (2.2% on average in the eurozone and 2.5% in the EU27) are coming closer and are sometimes even more cautious than those of the Commission (2.4% and 2.7% respectively - see EUROPE 9268), approved Mr Almunia. The average EU deficit should fall from 2% in 2006 to 1.4% in 2007 and to 0.7% in 2009, so that, in 2008, only three member states will present a deficit of more than 3% of GDP (Portugal, Hungary and Poland). Thus, Germany will come out of excessive deficit procedure during the first half of 2007, Italy the following year and Malta “probably” at the same time as Germany and Greece, said Mr Almunia. At the level of the debt, the picture is more contrasted. The debt ratio compared to GDP should fall below 60% as of 2008 in the EU27 but still remain around 65% in the eurozone. Among the most affected, Greece and Belgium record a downward trend, whereas in Italy development is not very marked. This prompts compliance with the objectives of the Stability and Growth Pact (SGP) to use favourable economic growth periods to advantage in order to stabilise public finance, exploit budgetary margins and avoid pro-cyclical policies, the Commissioner stressed, noting that, at this stage, only four countries of the eurozone have reached their medium term objective (Ireland, Spain, the Netherlands and Finland). More generally, Germany, Greece, France, Hungary, Poland, Portugal and Romania run a great risk of not reaching their MTO within the time set, deplored Mr Almunia. (ab)