Announced on Friday by the European Council, the news means that the trio is no longer subject to a corrective mechanism designed to reduce their deficits to ‘safe’ levels, as defined by EU fiscal rules. Slovenia and Ireland have been subject to the mechanism since 2009, Cyprus since 2010.
Cyprus’ original deadline to reduce its deficit was 2012, but an economic downturn in the country led this to be extended to 2016. By March this year, Cyprus was able to exit a financial agreement with the International Monetary Fund earlier than planned.
The council highlighted that Cyprus’ deficit had dropped below the required threshold “one year ahead of the deadline set”, standing at 1% of GDP in 2015.
“The [European] Commission’s 2016 spring forecast projects headline balances of -0.4% of GDP in 2016 and 0% of GDP in 2017 under a scenario of unchanged policies. The deficit is thus set to remain below the 3% of GDP over the forecast horizon,” it continued.
Likewise, Ireland had its deadline extended by the EU twice in the period 2013 to 2015. Between 2009 and 2015, Ireland reduced its deficit from a peak of 11.5% of GDP to 2.3% in 2015, and the commission’s spring forecast expects that figure to keep falling.
Slovenia has reduced its deficit from 15% of GDP in 2013 to 2.9% in 2015, with one deadline extension due to “unexpected adverse economic conditions”. This is expected to fall again to 2.4% of GDP this year and 2.1% next year.
The removal of the three countries from the excessive deficit procedure leaves only six member states still subject to the mechanism: the UK, Spain, Greece, France, Portugal and Croatia.
Both Portugal and Spain have missed deadlines to reduce their deficits to acceptable levels. But the commission announced in May it would postpone a decision on disciplinary action until after the UK’s referendum on EU membership and the general election in Spain.
The other countries are due to bring their deficits within limits this year, apart from France which has until 2017.
Under the excessive deficit procedure, countries with a deficit of more than 3% of GDP must commit to country-specific recommendations and targets to reduce the deficit, or face a fine of up to 0.2% of GDP.
