MercoPress. South Atlantic News Agency

EC expected to act on countries swelling budget deficits

The European Commission is expected to set deadlines on Tuesday for France, Greece, Ireland, Spain and the UK to rein in their swelling budget deficits. Under EU rules, countries are expected to keep their budget shortfalls below 3% of gross domestic product (GDP).

Greece will be given until 2010 to meet the target, France and Spain until 2012 and Ireland and the UK until 2013, a Brussels official told BBC News.

A shorter time-frame indicates it should be easier to meet the target.

If a country fails to meet the deadline, despite having taken the recommended actions to rein in the deficit, the commission - the EU executive arm - sets a new deadline, the official said.

Being outside the Euro zone, the UK “is not strictly speaking bound by the rules, but the UK endeavours to respect them”, said the official, who requested anonymity.

The rules are part of the EU Stability and Growth Pact.

“The pact is not about sanctioning [countries] - it's about showing the markets that we're correcting the situation, rather than running deficits”.

The global downturn has battered public finances across Europe, sharply reducing tax revenues in many cases while increasing the bill for unemployment benefits.

Further pressure on budgets is exerted by fiscal stimulus packages, adopted by the UK and some other governments to ease the short-term pain of recession and revive economic activity.

The official said the deterioration in the UK's public finances had brought it under the commission's surveillance mechanism since mid-2008.

In 2009 the Republic of Ireland is forecast to have a budget deficit of 11%, the commission said in January. Its estimated 2009 deficits for the other countries were: UK - 8.8%, Spain - 6.2%, France - 5.4%, Greece - 3.7%.