Six EU members face Commission’s displeasure over excessive deficits

BRUSSELS – Six of the European Union’s 15 members face a scolding from Brussels for breaking the bloc’s budget rules or risking such a breach – clear evidence of the fiscal discipline fatigue that set in after the euro’s launch. The European Commission’s wake-up call tomorrow will be toughest on Italy, which will be warned against flouting the EU limit. Deficits in the Netherlands and euro outsider Britain broke the cap in 2003 but are expected to narrow. The move will come at a time of growing pressure to revamp the Stability and Growth Pact, which was designed to underpin the euro, and as the Commission awaits the outcome of a lawsuit it filed against finance ministers over its rules. Britain and the Netherlands ran 2003 deficits above the pact’s cap of 3 percent of gross domestic product (GDP), which was also the deficit limit set for euro entry. They will find themselves in the dock alongside Germany and France, whose deficits could top this cap for the third year running in 2004. But London and the Dutch are expected to cut their deficits and may escape the full brunt of disciplinary action that was launched against Berlin and Paris but suspended by finance ministers in November, against the Commission’s wishes. Harsher words are in store for Italy, which will be told it risks breaching the deficit cap, but has yet to show any signs of remedial action. Greece might be in for a similar warning. In a week in which countries accounting for more than three-quarters of the EU’s GDP will be told that they are above or nearing the cap, the only crumb of good news will be reserved for Portugal. Lisbon can expect to be removed from the list of budget offenders, three years after its one and only breach of the rules in 2001. The Netherlands revised its 2003 deficit up to 3.2 percent of GDP last week from the 3.0 percent figure previously issued by the EU’s statistics office. It wants to be censured in line with its staunch advocacy of budget discipline applied equally to all. «I expect the Commission to start the excessive deficit procedure,» Dutch Finance Minister Gerrit Zalm told Reuters on the sidelines of a weekend meeting of EU finance ministers. But the Dutch can expect to get off fairly lightly, as they are putting together a plan to redress the excessive deficit. Britain, which racked up a deficit of 3.2 percent in 2003, can also expect a light touch, as the Commission’s updated official forecasts, which will be released tomorrow, are expected to show the deficit falling back. The Commission is likely to be more hard hitting in its views on Italy and Greece, even though they have yet to breach the EU deficit limit. «It will show that budget surveillance really is being done case by case,» the EU source said. The Commission will point out Rome’s past overreliance on one-off measures to flatter its deficit figures and could reiterate its warnings against tax cuts planned by Prime Minister Silvio Berlusconi. The Commission may repeat past concerns about Greece’s debt but may credit Athens for planned measures to cut the deficit.

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