MercoPress. South Atlantic News Agency

Europe Calls on Bulgaria, Cyprus, Denmark and Finland to Reduce Budget Deficits

Olli Rehn, Commissioner for economic and monetary affairs

Government deficits in Bulgaria, Cyprus, Denmark and Finland have gone too far over the 3% of GDP reference value for the European Union and need to be brought down through stronger budget consolidation measures, concluded the European Commission in reports considered on Wednesday.

In contrast, the report on Luxembourg concludes that this country is meeting the treaty criteria. In the five cases reviewed, the excessive deficits are considered exceptional because they result from a serious economic recession.

The reports, drawn up under the corrective arm of the Stability and Growth Pact (SGP), take due account of the most recent economic prospects and all other relevant factors. They attempt to determine whether the government deficits remain close to the reference value and whether the excess is exceptional and temporary.

“A vast majority of member states currently have a government deficit in excess of 3% of GDP. The European Commission’s spring 2010 forecast shows that the recovery is underway in the European Union, although it is set to be a gradual one. Our attention should therefore turn to returning to sustainable public finances as soon as possible,” commented Olli Rehn, the commissioner for economic and monetary affairs.

Bulgaria

The public deficit announced by Bulgaria is excessive because it reached 3.9% of GDP in 2009; it is considered temporary, however. This year’s projected deficit is below 3% of GDP, in spite of considerable uncertainties.

Cyprus

In their April 2010 notification, the Cypriot authorities reported a government deficit of 6.1% of GDP in 2009 and a gross public debt of 56.2% of GDP, on a rising trend for 2010. The Commission’s spring forecast shows that the excess is not temporary. The executive also concludes that the treaty criterion on debt is not being met either.

Denmark

The announced government deficit of 5.4% of GDP for 2010 is considered excessive and is not temporary, as evidenced by the spring forecasts.

Finland

The announced deficit of 4.1% of GDP for 2010 is found to be excessive but temporary, because the spring forecasts show that it will drop to 2.9% of GDP.

Luxembourg

The government deficit is expected to reach 4.2% of GDP in 2010, although the spring forecasts place it at only 3.5%, which can be considered close to the reference value. It is also considered temporary.