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| Europe |
| Italy faces action on 'excessive' public debt |
| 2005-06-08 |
| The EUcrats fight back. it may (or may not) be a coincidence that this week they are attacking those who joined the Iraq coalition - Italy on this, UK on the rebate. No word on real action against either the French or the Germans, both of whom have ignored EU financial limits when/as it suits them. Italy on Tuesday became the the first country to face disciplinary action under the European Union's revamped stability pact amid fears that public borrowing in the eurozone is getting out of control. The European Commission wants to crack down on Italy's ballooning budget deficit to set an example to other countries and to prove that the eurozone can still maintain budgetary discipline. But finance ministers meeting in Luxembourg fear that borrowing in Germany, the eurozone's biggest economy, is just as worrying and could severely undermine the credibility of the pact. The opposition Christian Democrats, favourites to win German elections in the autumn, have warned that the German deficit could top the EU's 3 per cent of GDP limit until 2007. They do not expect it to fall back until 2009. The rising tide of red ink across the 12-country eurozone compounded an air of gloom at yesterday's meeting of the Ecofin council, held against the background of political uncertainty caused by a double rejection of the EU constitution. With markets fretting about the long-term prospects of the euro, JoaquÂŽn Almunia, EU monetary affairs commissioner, was determined to show that fiscal discipline had not broken down by starting proceedings against Italy. Mr Almunia's produced a report, adopted by the Commission in Strasbourg yesterday, highlighting how Italy had broken the pact's deficit ceiling in 2003 and 2004, but had disguised the fact through faulty statistics. He also predicted "excessive deficits" for 2005 and 2006 and said Italy's public debt at 106 per cent of GDP was far above the EU's 60 per cent target. "The report indicates that this situation is not exceptional," Mr Almunia said. The stability pact was made more "flexible" by EU leaders in March to save France from punitive actions, a move strongly criticised by the European Central Bank, which fears it will lead to a relaxation of fiscal discipline. It allows countries to escape action under the pact if their breach of the3 per cent ceiling is "small and temporary" and if they have sound underlying finances. The Commission's report will now be analysed by national Treasury officials. If endorsed it will be referred for further action to finance ministers, possibly in July. Silvio Berlusconi's government would then be asked to take action to curb the deficit. The only bright spot at the meeting was the publication by the International Monetary Fund report praising structural reforms in some countries, including Germany. Meanwhile, Mr Juncker said he would intensify efforts to get a deal on the EU budget at next week's summit in Brussels, culminating in a meeting with Tony Blair, British prime minister, next Tuesday to discuss the future of the UK's annual refund. |
| Posted by:too true |
| #2 Wait till Kyoto kicks in. They're doomed! Doomed, I tell ya. |
| Posted by: Alaska Paul 2005-06-08 11:41 |
| #1 One of these fine mornings we're going to wake up and find out that the German Central Bank is really pissed and that's the game's over. |
| Posted by: Shipman 2005-06-08 10:25 |