–Commission Approves Budget Actions Taken by 12 EU States

BRUSSELS (MNI) – The European Commission approved on Tuesday
actions taken by 12 European Union countries, including Spain and
Portugal, to cut their budget deficits this year and urged government to
specify as soon as possible their consolidation measures for the years
ahead.

Additional measures taken by Spain and Portugal are “appropriately
ambitious” and “imply substantial fiscal consolidation,” the Commission
said. And it added that it expects Spain and Portugal to “specify
measures in their 2011 budgets amounting to 1.75% and 1.5% of GDP
respectively in order to attain the new targets.”

“This assessment should be considered as early guidance for next
year’s budget,” the Commission said.

The Eurozone countries set up a E750 billion loan fund in early May
in a bid to shore up confidence in the Eurozone. As part of that deal,
Spain and Portugal agreed to take additional measures to decrease their
debt and deficit levels.

Portugal aims to reduce its budget deficit to 4.6% by 2011 from
9.4% in 2009, while Spain is aiming for a budget deficit of 6% in 2011,
down from 11.2% in 2009.

Under European Union budget rules, countries must limit their
budget deficits to 3% of GDP and their debt to less than 60%. If the
rules are broken, the countries must take advice from the EU’s executive
arm on how to fix the problem, entering a process known as the excessive
deficit procedure.

Worries about high debt and deficit levels have pressured the euro,
which has lost around 14% of its value against the dollar since the
beginning of the year.

Assessing the action taken by Belgium, the Czech Republic, Germany,
Ireland, Spain, France, Italy, the Netherlands, Austria, Portugal,
Slovenia and Slovakia, the Commission said it “concluded that the
authorities have acted in accordance with the recommendations.”

“In all cases we conclude that the measures taken were sufficient
to achieve the 2010 targets and, in most cases, there is an invitation
to specify as soon as possible measures to substantiate the targets for
the years beyond 2010,” the EU’s executive arm said in a statement.

“The current economic circumstances call for a coordinated fiscal
exit strategy in order to face both the necessity of a decisive fiscal
consolidation and the need to sustain the nascent economic recovery,”
European Commissioner for Economic and Monetary Affairs Olli Rehn said
in a statement.

“The current budgetary targets, including the revised targets of
Spain and Portugal, appear to ensure an appropriate overall fiscal
stance for the EU, but there is an evident need to advance more
forcefully on the structural agenda,” Rehn added.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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