| European Commission tells Britain to cut down budget deficit |
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BRUSSELS: The European Commission has told the British government to cut down its budget deficit to bring it in line with European Union rules. The commission said Wednesday Britain should take steps to reduce the shortfall below the EU ceiling of 3 per cent of GDP by 2006-20076 fiscal.
While this directive obviously put pressure on chancellor Gordon Brown, government officials indicated he has no immediate intention to effect major any changes. Besides, the EU has no powers to impose sanctions on Britain as the latter is not a member of the euro.
The commission's economic and monetary affairs commissioner Joaquin Almunia said the commission considers that U.K.'s deficit is likely to remain above the 3 per cent reference value in 2005-06 and 2006-07 in spite of the recently announced fiscal measures. "The Commission is asking the Council to endorse this opinion and to recommend that the deficit be brought below 3 per cent by the forthcoming 2006-07 financial year," he told a news conference.
Almunia said unless the country changes it fiscal policy, the deficit is likely to rise from 3.2 per cent of the GDP in 2004-2005 to 3.4 per cent in 2005-2006 before falling to 3.2 per cent in 2006-2007. He said the adjustment required was not huge and he was hopeful Britain would comply with this fiscal requirement.
The commission feels Britain's deficit is no longer deemed to be temporary although it projected the deficit would decline to 3.0 per cent of GDP in 2007-2008. It also noted that the country's public debt will stay below the EU cap of 60 per cent of the GDP, in spite of 44.5 per cent growth in 2007-2008 from 40.8 per cent in 2004-2005.
Meanwhile, a treasury spokesperson in London reacted to the directive saying the treasury's projections are fully consistent with the "prudent interpretation of the (EU) growth pact and we continue to meet our fiscal rules over the cycle and our public finances are sustainable". He emphasised that Brown has outlined the fiscal measures in his last month's pre-budget report and ""that process would not be affected by this".
Many British economists are of the view that Brown has allowed the public debt to move up and he will have to cut public spending or raise taxes before the next election.
EU's finance ministers are meeting in Brussels 24 January and if they back the commission's view, Britain will have six months to specify how it will cut the deficit.
The commission has initiated procedures against 12 of the EU's 25 countries for breaching this covenant. These include Germany, France and Italy and some new members, which are yet to join the euro zone.
Posted
on : Thu, 12 Jan 2006 20:10 GMT | Politics News
By : Rob Davis
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