Cutting the deficit
March 18, 2010
Germany, France, Italy, Spain and Britain have all assumed stronger future economic growth than expected, according to the European Union's executive arm.
The European Commission, the EU's executive body, examined the long-term budget plans of 14 member states, and said in its report that in the majority of cases, growth assumptions were "rather optimistic" meaning that actual budgetary outcomes "might be worse than targeted."
Europe's biggest economy, Germany has forecast growth of 1.4 percent this year and 2 percent growth in 2011. However, the Commission has predicted that German gross domestic product (GDP) would only expand by 1.2 percent in 2010 and 1.7 percent in the following year.
The report said economic recovery was "more sluggish" than expected, and measures from 2011 onwards were not backed up by any concrete measures.
Targets will be missed
The EU has given countries a deadline of 2014-15 to rein in their budget deficits to 3 percent of GDP.
Britain came under fire from the Commission, which told ministers there to do more to cut their huge deficit. Currently, the country's budget deficit is expected to exceed 12 percent of GDP in 2010 and is not on target to meet the EU's deadline.
Prime Minister Gordon Brown's government has pushed back spending curbs in the run-up to an election expected in early May.
Finance Minister Alistair Darling on Tuesday described the Commission's recommendations under the assessment, which had been leaked to British media, as "absolute madness."
Concerns for France, Italy and Spain
The 2.5 percent growth predicted by France for 2011 onwards has also been highlighted by the EU Commission as "rather optimistic."
The economic plans for Italy were also said to be based on overly positive hopes for the future, and lacking in detail, according to the report. Italy's debts are set to peak at 117 percent of GDP in 2010 and fall below 115 percent in 2012.
The effectiveness of the austerity package on the euro zone's fourth largest economy, Spain, was questioned by the report. The Commission said Spain's forecasts that it would cut its deficit to 3 percent in 2013 from 11.4 percent in 2009 were based on "markedly" optimistic forecasts for economic growth after 2010.
The only countries that were on schedule to meet the EU's 3 percent of GDP target were Bulgaria and Estonia.
cb/Reuters/AFP
Editor: Nancy Isenson