Monday, 15 March 2010

Will The BBC Report This?

EU to recommend more cuts for Britain | Reuters

According this report the European Commission's view coincides with that of the Conservative Party, ie that more cuts need to be made sooner rather than later. A view not shared by Labour and the Lib Dems, both of whom are more heartily committed to the EU project than the Tories. Nice irony.

Bet it doesn't appear on BBC, though.
By Marcin Grajewski

BRUSSELS (Reuters) - The European Commission will tell Britain to do more to cut its ballooning budget deficit in the medium term, saying the country's fiscal programme lacks ambition, a draft from the EU executive showed on Monday.

The draft, obtained by Reuters two days before publication, said the programme failed to guarantee Britain would meet a European Union deadline of 2014-15 for cutting the deficit to below the bloc's cap of 3 percent of economic output.

"The overall conclusion is that the fiscal strategy in the convergence programme is not sufficiently ambitious and needs to be significantly reinforced," said the draft, expected to be approved by the Commission on Wednesday.

"A credible timeframe for restoring public finances to a sustainable position requires additional fiscal tightening measures beyond those currently planned," it added.

Britain's plan envisages cutting the gap to 4.7 percent of gross domestic product in the fiscal year 2014-15 from 12.1 percent planned for 2010-2011. That means it will fail to meet the deadline given by EU finance ministers late last year.

But even this target may be missed because British economic growth could turn out lower than the government expects, the draft said.

"The achievement of the consolidation forecast by the UK authorities, is further clouded by the likelihood that the macroeconomic context could be less favourable than envisaged by the authorities, as well as the uncertainties relating to the banking sector loans and investments insured by the government."

The programme forecasts economic growth at 2.0 percent in 2010-11 and then 3.3 percent each year until 2014-15.
Brussels has little leverage to force Britain to follow its recommendation made under the 27-country EU's budget discipline rules. Britain is not a member of the 16-nation euro zone so cannot be fined for breaching the deficit limit.

Still, the assessment may prove embarrassing for Prime Minister Gordon Brown ahead of this year's general election.

The Commission will also publish on Wednesday its assessment of the fiscal programmes of Austria, Germany, Belgium, Spain, Finland, Ireland, Italy, France, the Netherlands and Slovakia.

They will then be studied by EU finance ministers. The ministers in theory can change the Commission's recommendation, but this happens rarely.

Budget deficits are swelling across the EU as the economic crisis undermined government revenues and fiscal stimulus programmes boosted spending.

The draft said Britain's fiscal plans for 2010-2011 appeared adequate but those for subsequent years seemed lax.

Britain should publish this year "the detailed departmental spending limits underlying the overall expenditure projections" for the period after 2010-11, it added.

(Editing by Dale Hudson)

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