Brussels, 13/05/2009 (Agence Europe) - On Wednesday 13 May, the European Commission observed that Lithuania, Malta, Poland and Romania had registered public deficits above 3% of GDP in 2008. In reports based on Article 104§3 of the treaty, the Commission considers that these overshoots are neither close to the reference value of the Stability and Growth Pact (SGP), nor temporary, nor exceptional. The adoption of these reports constitutes the first stage in the formal opening of a formal excessive debt procedure against the four countries. Once these reports are analysed by the economic and financial committee, the Commission will recommend the Council to notify the existence of an excessive deficit (Article 104§5 and 6) and propose a deadline for its correction (Article 104§7). Latvia has already been subject to a report as stipulated in article 104§3 (EUROPE 9843) and is also expected to be affected by a procedure that has so far been launched against six member states: Ireland, Spain, France, Greece and previously, the United Kingdom and Hungary.
Lithuania. The general government deficit in Lithuania reached 3.2% of GDP in 2008, above, but close to the 3% of GDP reference value. The deterioration of the fiscal position in 2008 was mainly due to expansionary fiscal policy and, to a lesser extent, the slowdown of the economy in the second half of the year. For this reason, the Commission does not consider the excess over the reference value as exceptional. Given the Commission services' spring forecast deficit projections for 2009 and 2010, the excess over the 3% ceiling cannot be regarded as temporary.
Malta. On the basis of data provided by the Maltese authorities, the deficit for 2008 is expected to be 3.3% of GDP, with gross debt of 63.8% of GDP. The Commission's first report highlighted that the excess of the deficit remained close to the 3% reference value and was likely to be temporary and that at this stage there were no other measures to be taken as part of the excessive debt procedure (EUROPE 9843). However, according to the most recent data, the general government deficit in Malta was revised upward to 4.7% of GDP in 2008, thus largely exceeding the reference value. The 2008 figure is due in great part to specific developments on the expenditure side rather than to the impact of the economic downturn, as GDP growth in 2008 was still positive at 1.6%. It cannot be considered temporary as the deficit is expected to remain above the 3% threshold.
Poland. From 3.9% of GDP in 2008, it will increase to 6.6% this year. It is not close to the SGP criteria and is mainly due the fact that the good times were only to a certain extent used as an opportunity to consolidate public finances and undertake deep reforms on the expenditure side. Even though the Polish authorities have revised their 2009 deficit target to 4.6% of GDP, this target is still above the reference value and shows that the excess is not temporary. The excess over the reference value cannot be qualified as exceptional either.
Romania. The general government deficit reached 5.4% of GDP in Romania, in 2008. This figure mainly reflects significant slippages with respect to current spending, notably with public wages and social benefits. The Commission pointed out that Romania pursued a pro-cyclical fiscal policy during the 2005-2008 demand boom, (with the headline deficit standing at 1.2% of GDP). The Commission believes that this evolution reflects to a large degree a weak budgetary planning and implementation. As part of the economic programme adopted in response to the international financial assistance granted to the country, Romania is committed to limiting the deficit to 5.1% in 2009. According to the Commission the deficit could reach 5.6% of GDP in 2010. (A.B./trans/rh)