Brussels, 24/06/2009 (Agence Europe) - On Wednesday 24 June, the European Commission formally opened the excessive deficit proceedings for 2008 (more than 3% GDP) against four member states. It has recommended that the Ecofin Council's July meeting note the existence of an excessive deficit (article 104, paragraphs 5 and 6 of the Treaty) and propose a timescale for this to be corrected (article 104, paragraph 7) for Lithuania, Malta, Poland and Romania. In reports adopted on the basis of article 104 § 3, the Commission took the view that these excesses were still not close to the reference value of the Stability and Growth Pact (SGP) and were neither temporary nor exceptional (EUROPE 9901). The four countries must now define and start to implement (in the next six months) measures to correct these excessive deficits by: 2010 (Malta), 2011 (Lithuania, Hungary and Romania) and 2012 (Poland). The Commission has also made a recommendation to the Council to set a new timescale for the correction of the Hungarian deficit. Hungary, which is already the subject of proceedings (and has been since July 2004), will not be able to bring its deficit below 3% in 2009 as previously stated. This timescale will therefore be put back to 2011 at the latest.
Hungary. The Hungarian deficit was brought from 9.2% of GDP in 2006 down to 3.4% in 2008, but the crisis has made its mark. With the economy shrinking by 6.3% in 2009, the deadline initially set to bring the deficit below 3% by the end of the year is no longer realistic, notes the Commission, which calls upon the Council to extend the initial time for the deficit to be corrected. Hungary is called on to limit the worsening of its budgetary position in 2009 and attempt to reduce its deficit once again from 2010, more on the basis of structural measures. Additional measures will be needed to correct the excessive deficit no later than 2011.
Lithuania. The Lithuanian deficit, which is close to the reference value, was 3.2% of GDP in 2008. The worsening of the budgetary balance is set to continue in 2009 and 2010 (to reach 5.4% and 8% respectively), so that the Commission is recommending an annual reduction effort of its least 1.5% of GDP, to come back below 3% by the end of 2011.
Malta. Having registered a deficit of 4.7% of GDP in 2008, Malta should be able to get it back under 3% by 2010 at the latest. It will need to implement the budgetary measures scheduled for 2009 and plan further cleansing measures for 2010, with the objective of continuing to bring its deficit towards the medium-term objective of a budget which is balanced in structural terms.
Poland. Having ended up with a deficit of 3.9% of GDP in 2008, Poland has done less well than anticipated. It is likely to continue to deteriorate this year (to 6.6%, according to the Commission) due to the effects of the crisis, which has led to a collapse in exports, a tightening of the conditions for mortgage loans and company loans to be granted, according to the Commission's analysis. This has led it to recommend the correction of the excessive deficit in the medium term (by the end of 2012 at the latest), rather than the year following the one in which the excessive deficit procedure was opened. In order to do this, it recommends an average annual budgetary effort of between 1.25 and 1.5 percentage points of GDP from next year.
Romania. With an excessive deficit of 5.4% in 2008, Romanian budgetary policy aims to reduce this figure considerably in 2009 (to around 5.1% of GDP) and 2010 (4.1%), in line with the economic programme adopted as part of the international financial aid granted to Romania. From 2010, the country will have to make an average annual budgetary effort of at least 1.5% of GDP, in order to fall below 3% by 2010 at the latest, the Commission stresses.
Series underway. It is also worth noting that a procedure is very soon to be opened against Latvia, which has already been the subject of a report under article 104 § 3 (EUROPE 9843). The Commission is currently looking at the rectifying budgetary measures adopted by the government and Parliament of Latvia with a view to releasing the payment of the next tranche of the support plan for the balance of payments in the country. The procedure is already under way against six member states (Spain, France, Greece, Hungary, Ireland and the United Kingdom), plus of course Lithuania, Malta, Poland, Romania and, shortly, Latvia, meaning that 20 countries of the EU will soon be officially involved in excessive deficit procedures. After the last Council, Commissioner for Economic and Monetary Affairs Joaquín Almunia confirmed his intentions of taking action, in the autumn, against the member states whose public deficits are threatening to exceed 3% of GDP in 2009. Eight countries of the eurozone (Germany, Austria, Belgium, Italy, the Netherlands, Portugal Slovakia and Slovenia) and the Czech Republic are targeted by this. Only the member states which are observing the Stability and Growth Pact (SGP) this year (albeit presenting budgetary deficits), Cyprus, Luxembourg, Finland, Bulgaria, Denmark, Sweden and Estonia (which will be at -3% of GDP), will escape this. (A.B./transl.fl)