EU launches excessive debt action against nine nations

EU launches excessive debt action against nine nations

Brussels: The European Union launched action against nine countries on Wednesday over excessive debt levels which have now engulfed 20 of the bloc’s 27 nations.

Austria, Belgium, the Czech Republic, Germany, Italy, Slovakia, Slovenia, the Netherlands and Portugal were each charged with breaching commitments made to hold planned or actual budget deficits to within 3% of Gross Domestic Product.

“In all cases the commission concludes that, although the deficit levels are exceptional in nature... they are neither close to the reference value nor temporary," said a statement by the commission.

The decision was taken by the commission after studying fiscal projections for coming years submitted by the countries themselves.

“Now is also the moment to design coordinated exit strategies so that, when the moment is right, we can begin to roll back the soaring debt levels," warned Economic and Monetary Affairs Commissioner Joaquin Almunia.

He said the stability and growth pact under which the action was called “is sufficiently flexible to combine the fiscal stimulus in the short term with consolidation of the public finances in the medium term."

Brussels already launched action against Latvia, Lithuania, Malta, Poland and Romania in July following earlier procedures against France, Greece, Ireland and Spain.

Finance ministers from the 16 countries that use the euro agreed last week at a meeting in Sweden that countries would have to start taking action in 2011 against debt and public deficits.

The pact “must not be interpreted as offering one-way flexibility," eurogroup head and Luxembourg prime minister Jean-Claude Juncker has warned.

However, ministers from the full 27 EU nations failed to match that commitment at subsequent talks with Britain’s Chancellor Alistair Darling adamant that it was too early to start implementing broad ‘exit strategies.´

Deficits and related projections for long-term debt have expanded sharply as governments spent heavily on crisis-driven stimulus measures and social welfare programmes.

In Germany, negotiations over the incoming centre-right government have been complicated by the need to cut public deficits by €40 billion ($56 billion) between 2011 and 2013, according to a working paper leaked to the press.

The business-friendly Free Democrats (FDP) are demanding tax cuts of 25 billion euros.

Despite a steady stream of encouraging economic data since the summer, the economies of the 16-nation eurozone and 27-nation EU as a whole each shrank in the second quarter by a greater margin than initially thought, EU data showed on Wednesday.

Ireland’s battered economy produced a surprise result by returning to break-even point while the Czech Republic, Greece, Poland and Portugal also returned to growth.