Italy and Greece to meet EU budget rules in 2007

Giorgos · 10th October 2006, 09:56

Quote:

Italy and Greece to meet EU budget rules in 2007, Germany and France nearly in the clear
LUXEMBOURG Italy and Greece seem on track to bring their budget deficits under the EU ceiling of 3 percent in 2007, EU Economic and Finance Commissioner Joaquin Almunia said.

Germany should be one step ahead of them early next year, as it is likely to be formally cleared of EU sanctions for coming within the budget limit, he said Tuesday. France, too, is "close to the end" of sanctions, he said.

This will finally see the two largest economies that use the euro stick to EU rules designed to keep the 12-nation euro-zone stable. All are required to keep their budget deficits below 3 percent of gross domestic product, a target many have found hard to meet.

Italy's slow growth in recent years has seen it struggle with the EU limit but the new government headed by Premier Romano Prodi is determined to bring Rome in line.

Almunia backed budget plans outlined Monday by Italian Finance Minister Tommaso Padoa-Schioppa that aim to raise €1.1 billion (US$1.4 billion).

"If this budget is implemented as the government intends to implement it, Italy can end 2007 with a budget (deficit) below 3 percent," he told reporters after a late-night meeting between the 12 euro-zone ministers.

Padoa-Schioppa aims to bring the deficit down to 2.8 percent next year from an expected 4.8 percent in 2006 and faces an uphill battle to get support from business and both parliamentary houses for harsh new measures that include a clampdown on tax evasion.

An EU court ruling on sales tax would increase the deficit to above 4 percent, Almunia said.

But, he warned Greece that it could not accept its revised gross domestic product figures that counts in the country's black economy until the EU's statistical agency checked Athens' bookkeeping.

Greece's budget deficit would slide under 3 percent this year, from last year's 4.5 percent, thanks to one-off measures, Almunia said — measures he does not favor because they do not make lasting changes to the country's economy.

And next year, Greece should make the target without resorting to these measures, he said.

Almunia praised both Germany and France, saying the latest figures — and a higher tax take as their economies pick up steam — had cut their deficits below earlier projections.

Germany is now predicting 2.6 percent this year and the final figure could be even better, he said.

The situation in France had improved this year, he said, and the deficit should stay under the EU limit in 2007. Paris had not used one-off measures and this was a "very positive element," he said, praising the government for using better "quality" ways of balancing its books.

The 12 ministers agreed not to change the inflation standards they use for accepting new members of the currency zone, said Luxembourg Prime Minister Jean-Claude Juncker who leads the regular talks.

Lithuania complained bitterly earlier this year when its high inflation narrowly saw it miss the limit and keep it out of the euro-zone in 2007.

The euro-zone will beef up its presence in international economic debates, Juncker said. Although some governments were reluctant to give up national seats to a single euro representative, all ministers agreed the Commission should be a permanent member at meetings of the G-20 meetings between leading world economies.

Euro countries with their own seat should also work together and present euro-zone views, he said.

Finance ministers from all 25 nations meet later Tuesday and are expected to formally approve German and British efforts to cut their deficits this year.

Despite EU criticism of Hungary's ballooning budget deficit — expected to hit 10.1 percent of gross domestic product, by far the EU's largest — ministers on Tuesday seem set to give Budapest until 2009, one more year, to cut that down to 3.2 percent.

Hungary saw violent protests last month after a recording of Prime Minister Ferenc Gyurcsany was made public, with him saying the government had lied "morning, evening and night" about the state of the economy to increase the chances of electoral victory and had failed to implement reforms.

EU finance ministers will also debate raising the budget for the European Investment Bank, aiming for agreement by the end of the year on where in the world they should lend money. The EIB lends money — usually to developing nations — at attractive rates and keeps reserve funds to help rebuild regions hit by disaster

LUXEMBOURG Italy and Greece seem on track to bring their budget deficits under the EU ceiling of 3 percent in 2007, EU Economic and Finance Commissioner Joaquin Almunia said.

Germany should be one step ahead of them early next year, as it is likely to be formally cleared of EU sanctions for coming within the budget limit, he said Tuesday. France, too, is "close to the end" of sanctions, he said.

This will finally see the two largest economies that use the euro stick to EU rules designed to keep the 12-nation euro-zone stable. All are required to keep their budget deficits below 3 percent of gross domestic product, a target many have found hard to meet.

Italy's slow growth in recent years has seen it struggle with the EU limit but the new government headed by Premier Romano Prodi is determined to bring Rome in line.

Almunia backed budget plans outlined Monday by Italian Finance Minister Tommaso Padoa-Schioppa that aim to raise €1.1 billion (US$1.4 billion).

"If this budget is implemented as the government intends to implement it, Italy can end 2007 with a budget (deficit) below 3 percent," he told reporters after a late-night meeting between the 12 euro-zone ministers.

Padoa-Schioppa aims to bring the deficit down to 2.8 percent next year from an expected 4.8 percent in 2006 and faces an uphill battle to get support from business and both parliamentary houses for harsh new measures that include a clampdown on tax evasion.

An EU court ruling on sales tax would increase the deficit to above 4 percent, Almunia said.

But, he warned Greece that it could not accept its revised gross domestic product figures that counts in the country's black economy until the EU's statistical agency checked Athens' bookkeeping.

Greece's budget deficit would slide under 3 percent this year, from last year's 4.5 percent, thanks to one-off measures, Almunia said — measures he does not favor because they do not make lasting changes to the country's economy.

And next year, Greece should make the target without resorting to these measures, he said.

Almunia praised both Germany and France, saying the latest figures — and a higher tax take as their economies pick up steam — had cut their deficits below earlier projections.

Germany is now predicting 2.6 percent this year and the final figure could be even better, he said.

The situation in France had improved this year, he said, and the deficit should stay under the EU limit in 2007. Paris had not used one-off measures and this was a "very positive element," he said, praising the government for using better "quality" ways of balancing its books.

The 12 ministers agreed not to change the inflation standards they use for accepting new members of the currency zone, said Luxembourg Prime Minister Jean-Claude Juncker who leads the regular talks.

Lithuania complained bitterly earlier this year when its high inflation narrowly saw it miss the limit and keep it out of the euro-zone in 2007.

The euro-zone will beef up its presence in international economic debates, Juncker said. Although some governments were reluctant to give up national seats to a single euro representative, all ministers agreed the Commission should be a permanent member at meetings of the G-20 meetings between leading world economies.

Euro countries with their own seat should also work together and present euro-zone views, he said.

Finance ministers from all 25 nations meet later Tuesday and are expected to formally approve German and British efforts to cut their deficits this year.

Despite EU criticism of Hungary's ballooning budget deficit — expected to hit 10.1 percent of gross domestic product, by far the EU's largest — ministers on Tuesday seem set to give Budapest until 2009, one more year, to cut that down to 3.2 percent.

Hungary saw violent protests last month after a recording of Prime Minister Ferenc Gyurcsany was made public, with him saying the government had lied "morning, evening and night" about the state of the economy to increase the chances of electoral victory and had failed to implement reforms.

EU finance ministers will also debate raising the budget for the European Investment Bank, aiming for agreement by the end of the year on where in the world they should lend money. The EIB lends money — usually to developing nations — at attractive rates and keeps reserve funds to help rebuild regions hit by disaster

LUXEMBOURG Italy and Greece seem on track to bring their budget deficits under the EU ceiling of 3 percent in 2007, EU Economic and Finance Commissioner Joaquin Almunia said.

Germany should be one step ahead of them early next year, as it is likely to be formally cleared of EU sanctions for coming within the budget limit, he said Tuesday. France, too, is "close to the end" of sanctions, he said.

This will finally see the two largest economies that use the euro stick to EU rules designed to keep the 12-nation euro-zone stable. All are required to keep their budget deficits below 3 percent of gross domestic product, a target many have found hard to meet.

Italy's slow growth in recent years has seen it struggle with the EU limit but the new government headed by Premier Romano Prodi is determined to bring Rome in line.

Almunia backed budget plans outlined Monday by Italian Finance Minister Tommaso Padoa-Schioppa that aim to raise €1.1 billion (US$1.4 billion).

"If this budget is implemented as the government intends to implement it, Italy can end 2007 with a budget (deficit) below 3 percent," he told reporters after a late-night meeting between the 12 euro-zone ministers.

Padoa-Schioppa aims to bring the deficit down to 2.8 percent next year from an expected 4.8 percent in 2006 and faces an uphill battle to get support from business and both parliamentary houses for harsh new measures that include a clampdown on tax evasion.

An EU court ruling on sales tax would increase the deficit to above 4 percent, Almunia said.

But, he warned Greece that it could not accept its revised gross domestic product figures that counts in the country's black economy until the EU's statistical agency checked Athens' bookkeeping.

Greece's budget deficit would slide under 3 percent this year, from last year's 4.5 percent, thanks to one-off measures, Almunia said — measures he does not favor because they do not make lasting changes to the country's economy.

And next year, Greece should make the target without resorting to these measures, he said.

Almunia praised both Germany and France, saying the latest figures — and a higher tax take as their economies pick up steam — had cut their deficits below earlier projections.

Germany is now predicting 2.6 percent this year and the final figure could be even better, he said.

The situation in France had improved this year, he said, and the deficit should stay under the EU limit in 2007. Paris had not used one-off measures and this was a "very positive element," he said, praising the government for using better "quality" ways of balancing its books.

The 12 ministers agreed not to change the inflation standards they use for accepting new members of the currency zone, said Luxembourg Prime Minister Jean-Claude Juncker who leads the regular talks.

Lithuania complained bitterly earlier this year when its high inflation narrowly saw it miss the limit and keep it out of the euro-zone in 2007.

The euro-zone will beef up its presence in international economic debates, Juncker said. Although some governments were reluctant to give up national seats to a single euro representative, all ministers agreed the Commission should be a permanent member at meetings of

http://www.iht.com/articles/ap/2006/..._Ministers.php

Rev · 9th November 2006, 03:04

Quote:

Commission says Greek deficits will stay within acceptable limits until 2008

By Constantine Kallergis - Kathimerini

BRUSSELS - As expected, the European Commission yesterday anticipated Greece’s exit from the fiscal supervision procedure in its fall economic forecasts report.

The report forecasts that Greece’s budget deficit will equal 2.6 percent of its gross domestic product (GDP) both this year and next and will drop to 2.4 percent in 2008. In every case, it will be below the 3 percent limit deemed acceptable by the EU’s Maastricht Treaty.

The excessive deficit procedure under Article 104, Paragraph 9 of the Maastricht Treaty had been invoked against Greece on February 16, 2005. Its case will be examined next April, using the final figures of the 2006 budget and the available data from the implementation of the 2007 budget. If these data confirm yesterday’s positive forecasts, Economic and Monetary Affairs Commissioner Joaquin Almunia will officially recommend that Greece exit the procedure. The final decision will be made by the Council of European Finance Ministers (Ecofin) in June 2007.

In presenting the report, Almunia made no specific comments about Greece other than to observe that the budget deficit will be within the allowed limit until 2008, at least.

The deficit forecasts for 2007 by the Greek government and the Commission differ slightly. In its report, the Commission notes that the Greek government forecasts a deficit equal to 2.4 percent of GDP without resorting to any one-off measures the Commission has warned against but through cutting public spending by 0.25 percent of GDP and correspondingly increasing revenue, especially through indirect taxes. The Commission itself forecasts Greece’s 2007 deficit at 2.6 percent of GDP, because of a slightly lower GDP growth forecast and skepticism about the claim to reduce public expenditure, a skepticism “based on lessons from the past,” as it notes.

The Commission further notes that all the data on which it based its forecasts do not include Greece’s recently-announced upward revision of its GDP, made, according to the Greek government, by including gray economy activities. The Commission, which is highly skeptical about the magnitude of the revision (25 percent) has referred the matter to Eurostat, its statistics service. On the basis of Eurostat’s investigation and recommendations, Greece’s economic statistics will be revised next year.

In its report, the Commission takes note of Greece’s continued high growth in 2006, based mostly on private investment (especially in the construction sector), while the growth of private consumption slowed down and public consumption almost leveled off as a result of the government’s efforts to rein in spending. For 2007, the Commission forecasts a slight slowdown in the construction sector and a further slowdown in private consumption but a recovery in public investment.

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