By Nick Mann | 30 May 2012
European Union member states are taking the necessary steps to improve their public finances, but not always in the most growth-friendly way, the European Commission said today.
In a series of assessments and recommendations for individual member states, the eurozone and the EU as a whole, the commission said countries should prioritise growth in their spending and revenue policies and invest any spare money in the economy.
Fiscal consolidation should be co-ordinated with measures to address imbalances in countries’ financial systems and their national economies, which were at the ‘root of the crisis’ for some member states.
Immediate action should also be taken to get people back into work by providing stronger jobs- and skills-matching and training, the commission added.
For the eurozone, it said steps towards full economic and monetary union could involve a banking union between the single currency members and specific financial supervision and deposit guarantees for the euro area.
Meanwhile, the ‘programme’ countries that have received bailout funds – Greece, Ireland, Portugal and Romania – received just one recommendation: ‘To implement the measures agreed under their programme.’
The commission raised particular concerns about France, saying its public deficit was ‘too high’ and debt was growing. More detail was needed on the measures the country planned to take to meet its 2013 deficit reduction targets and ‘additional efforts’ might be needed.
It added: ‘The high level of public debt poses a threat to the sustainability of public finances, and the recent rise in bond spreads suggests that markets are concerned about the country's fiscal position.’
For the 12 countries subject to more in-depth economic reviews due to significant imbalances in their economies, the commission concluded that these imbalances were ‘not excessive’ but needed to be addressed – ‘urgently’ in Spain and Cyprus’s case.
However, Bulgaria and Germany are on target to reduce their deficits to 3% of gross domestic product by 2013, the commission said. Germany cut its budget deficit to 1% of GDP in 2011 and is now expected to reduce it further to 0.9% this year and 0.7% in 2013, while Bulgaria’s was reduced to 3.1% in 2011, and is forecast to be 1.9% of GDP in 2012 and 1.7% in 2013. This means the countries will be taken out of the commission’s ‘Excessive Deficit Procedure’, which includes sanctions for failure to meet the targets.
Commission president José Manuel Barroso said the assessments and recommendations would help to enhance the competitiveness of the EU and its member states, as well as boosting growth and jobs and strengthening ‘decisively’ economic and monetary union.
‘Our recommendations are tailored for each member state, but form part of a coherent approach to rebalancing the European economy,’ he said. ‘We have made good progress: public finances are starting to improve and imbalances are beginning to be unwound. The direction is clear. We now need to redouble our efforts, at both the national and European levels, to move faster and further.’
