Commission takes further steps under the excessive deficit procedure for France, Greece, Ireland, Spain and the UK and assesses the Stability Programme of Cyprus
A proposal towards correcting budget deficits and an examination of the updated stability programme of Cyprus.
24 March 2009.
Following earlier assessments of their stability and convergence programmes, the European Commission today proposed deadlines for the correction of the budget deficits of Greece, Spain, France and Ireland that were above 3% already in 2008. The Commission also proposed a new deadline for the correction of the excessive deficit in the UK and examined the updated stability programme of Cyprus.
What is the legal background?
According to Council Regulation (EC) No 1466/97 on the strengthening of budgetary surveillance and the surveillance and coordination of economic policies, Member States must submit updated macroeconomic and budgetary projections every year, called stability programmes in the case of countries that have adopted the euro, and convergence programmes otherwise. This regulation is also referred to as the 'preventive arm' of the Stability and Growth Pact. The EU budgetary surveillance framework implies, inter alia, that excessive deficits should be avoided. The excessive deficit procedure (EDP), as the "corrective arm" of the Pact, is regulated by Article 104 of the Treaty and further specified in Council Regulation (EC) No 1467/97.
Which steps were taken under the excessive deficit procedure today?
Following earlier assessments of stability and convergence programmes, the Commission today concludes that Greece, Spain, France and Ireland are running excessive deficits. It recommends the Council to decide in line with this opinion and make recommendations for bringing these situations to an end based on the economic outlook of the January 2009 interim forecast. As for the UK, which was already in EDP since 8 July 2008, the Commission has established that no effective action has been taken to correct the deficit, and therefore proposes new recommendations on the basis of the new outlook. Deadlines are proposed depending on the fiscal starting point and the scope for manoeuvre in line with the European Economic Recovery Plan (EERP), the economic outlook, macroeconomic imbalances and financing conditions. As a result, the proposed deadline for Spain and France (2012) is longer than for Greece (2010), but shorter than for Ireland (2013) and UK (financial year 2013/14) .
What is the assessment of the budgetary situation in Cyprus?
The fiscal stance in Cyprus will be expansionary in 2009 due to the adoption of significant stimulus measures in line with the EERP agreed by EU leaders in December. In the subsequent years, the structural balance is projected to continue worsening, which does not appear justified in view of the relatively good economic prospects and the existence of large external imbalances. Based on its assessment, the Commission has adopted a recommendation for a Council opinion on the Cypriot programme.
The Ecofin Council is expected to discuss the recommendations at the 3-4 April informal gathering and to formalise its position at an upcoming Council formation. At that point, the Member States concerned will have six months to take effective action regarding budgetary outcomes in 2009 and to specify the measures that will be necessary to progress towards the correction of the excessive deficit.