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EU faults Britain over missed deficit targets

14 May 2015, 17:35 CET
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EU faults Britain over missed deficit targets

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(BRUSSELS) - The EU said Wednesday that Britain had not done enough to meet budget deficit targets and would have to remain under Brussels oversight for another two years to make sure it does.

The European Commission said Britain, despite tough spending cuts, remained in breach of the 28-nation bloc's deficit rules and gave it another two years, to 2016-17, to put its fiscal house in order.

"These recommendations are not about Brussels lecturing governments," EU Commissioner for Economic Affairs Pierre Moscovici said.

"They are about encouraging national efforts to deliver the jobs and growth that we collectively need."

The Commission, the EU's executive arm, said Britain's budget deficit -- the shortfall between revenue and spending -- stood at 5.2 percent of annual economic output in the current 2014-15 financial year, still well above the EU limit of three percent.

European Union rules adopted since the 2008 global financial crisis give Brussels increased oversight powers to ensure member states meet the targets and so avoid a repeat of the crash which brought the economy to its knees.

For the 19 eurozone countries, Brussels can impose fines and other sanctions.

While it cannot go so far for non-euro Britain, keeping the country under an Excessive Deficit Procedure (EDP) may prove politically embarrassing for newly re-elected Prime Minister David Cameron.

Cameron fought the May 7 election on his stewardship of the economy, pushing through harsh spending cuts and promising more to come in order to put the public finances on the sound footing needed for sustainable economic growth.

He also promised voters a referendum on Britain's EU membership by 2017, and the Commission's report may be additional grist to the mill for anti-EU campaigners who resent what they see as interference by Brussels.

The Treasury in London conceded there was more work to be done but stressed that the government had made "significant progress in turning Britain around."

"We will continue working through our plan to build a resilient economy and bring our budget back to surplus," a statement said.

- Britain needs more savings -

EU Commissioner Moscovici reflected Brussels' wish to bring national deficits back into line, saying "the excessive deficit procedures have to end some day," he said.

The British government should accordingly rein in spending further so as to hit a headline deficit figure of 4.1 percent in 2015-16 and 2.7 percent in 2016-17, the EU Commission said.

The EU first put Britain under surveillance in 2008, giving it until 2009-10 to come into line with the rules.

But the global financial crisis put government finances everywhere under intense pressure and pushed the British deficit to 10.9 percent, with Brussels extending the deadline to 2014-15.

Many other EU member states, including powerhouse Germany, have breached the bloc's fiscal rules over the years, but there is a new-found determination in Brussels to enforce them in the aftermath of the 2008 crisis.

Croatia, Cyprus, France, Greece, Ireland, Portugal, Slovenia and Spain are currently on the EU's EDP list alongside Britain.

The Commission said Wednesday it would take Poland and Malta off the list after they had made progress, while proposing Finland be added as its public finances deteriorate.

The Commission's findings will be submitted for approval to the European Council, which groups the leaders of the 28 member states.

Stability and Growth Pact: country-specific 
recommendations 2015 - background guide

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