EU wants UK deficit cut by 2016-17

The European Commission has criticised the UK for failing to cut its fiscal deficit to bring it in line with EU averages, but has given the new government two more years to do so, saying this is an important element in returning to self-sustaining growth, against a background of rising unemployment elsewhere in the EU28 and deficit issues in eight member states

The recommendation is made in the Commission’s Annual Growth Survey for 2015 which looks at overall economic performance across the 26 EU member states and makes specific country by country recommendations for improvements in order to create jobs and stimulate growth, as well as recommendations for the euro area as a whole.

In the case of the UK, the Commission recommends that the Council decides the country has not taken effective action to comply with its December 2009 recommendation to correct the excessive deficit by the financial year 2014-15.

In it analysis of economic imbalances which require policy action and monitoring, it says this is because the fiscal effort delivered was below the recommended annual average fiscal effort of 1.75% of GDP and the deficit last year stood at 5.2%. The Commission recommends giving the UK an extra two years, until financial year 2016-17, to bring its deficit below the 3% of GDP reference value.

Other EU28 countries singled out for criticism on deficit management included Croatia, Cyprus, France, Greece, Ireland, Portugal, Slovenia and Spain.

France is currently under an excessive deficit procedure. In its 2015 Stability Programme, the French government plans to correct the excessive deficit and bring it down by 2017 – in line with the Council’s recommendation on 10 March 2015 following the Commission’s proposal. The Council set a deadline of 10 June 2015 for France to take effective action.

The Commission also says it has prepared a report for Finland, which concludes that it does not comply with the debt and the deficit criterion of the Stability and Growth Pact. As a result,it is considering whether to bring Finland into the excessive deficit procedure as well.

Introducing the report, Pierre Moscovici, Commissioner for economic and financial affairs, taxation and customs, said: ‘Today we ask member states to ensure that the ongoing economic recovery is more than a seasonal phenomenon. Since the Juncker Commission's first day in office, our economic priorities have been to boost investment, support structural reforms and ensure the pursuit of responsible fiscal policies.

‘These recommendations are not about Brussels lecturing governments. They are about encouraging national efforts to deliver the jobs and growth that we collectively need.’

EU ministers will discuss the country-specific recommendations in June before EU heads of state and government endorse them on 25-26 June. They will be formally adopted in July. It is then up to member states to implement the recommendations by including them in their national policies and budget plans for 2015-2016.

Further information on specific country recommendations is available here

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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