ECONOMY

EU says Greece, UK and Portugal should speed up deficit cuts

BRUSSELS (Reuters) – Greece, Portugal and Britain seem on track with their plans to cut their budget deficits but should cut them faster in years ahead, the European Commission said in a draft report seen by Reuters yesterday. The Commission will adopt today its assessments of the long-term fiscal plans of the three countries as well as those of Sweden and Estonia. The long-term programs say how European Union countries plan to reach a balanced budget or surplus – their medium-term policy goal. EU finance ministers have launched disciplinary procedures against Greece, Portugal and Britain for running budget deficits above 3 percent of GDP – the EU ceiling under the Stability and Growth Pact which underpins the euro single currency. They gave Greece until 2006 to cut the gap to within the EU limit. Portugal got until 2008 and Britain until the end of its fiscal year in March 2007. In its draft assessment of Greek fiscal plans until 2009, obtained by Reuters, the Commission said: «While the fiscal stance in the program seems consistent with a correction of the excessive deficit by 2006, the pace of adjustment in subsequent years, especially after 2007, should be strengthened in order to exploit strong growth prospects and address the risks of higher-than-expected deficits from 2008.» Greece estimates it halved its budget deficit to 2.6 percent in 2006 and sees it falling to 2.4 percent of GDP in 2007, 1.8 percent in 2008 and 1.2 percent in 2009. The Commission sees the deficit at 2.6 percent this year and 2.4 percent in 2008. On Portugal, the draft assessment said: «The program is broadly consistent with a correction of the excessive deficit by 2008, conditional on a full and effective implementation of the measures announced therein and, most likely, on further measures in case of lower-than-projected economic growth.» Portugal sees its budget gap falling to 3.7 percent of GDP this year from 4.6 percent in 2006 and then to 2.6 percent in 2008. The Commission forecasts higher deficits of 4.0 percent this year and 3.9 percent in 2008. Outside the eurozone, Britain’s fiscal plans also appeared to match its 2006/2007 fiscal year deadline to reduce its budget shortfall but «the adjustment path should be strengthened thereafter, especially toward the end of the projection period,» the draft said. The Commission also noted the British plan did not say what the country’s medium-term budgetary objective was, as required by the Stability and Growth Pact, and it was not possible to infer that from deficit projections made until 2011/2012. Britain wants to cut the deficit incrementally to 1.4 percent in 2011/2012 in annual steps, each of which is smaller than the 0.5 percentage point stipulated by EU rules.