EU ministers tell Britain to cut budget deficit |
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Published
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Thu, 26 Jan 2006 02:10
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BRUSSELS: Finance ministers of European Union asked Britain to cut down its budget deficit, saying it is having excessive gap and it should reduce it within the 2006-2007 fiscal to the EU norm of below 3 per cent.
The European Commission, which ensures that member-countries follow the fiscal discipline that covers the euro, had recommended 11 January that Britain should be directed to reduce its budget deficit. The Commission felt unless Britain changed its fiscal policy, the overall government deficit would rise from 3.2 per cent of GDP in 2004-2005 to 3.4 per cent in 2005-2006 financial year. It would then fall again to 3.2 per cent in 2006-2007.
Economic and monetary affairs commissioner of the EU, Joaquin Almunia had then said he was sure Britain will comply with the recommendation of the finance ministers.
Significantly, the EU has no power to impose any financial sanctions on Britain as it is not a member of the euro and under the Stability and Growth Pact, which governs the single currency of the bloc, Britain is obliged only to try to avoid deficits that exceed the 3 per cent of GDP limit.
The ministers said Britain should reduce its structural deficit by 0.5 per cent of GDP between the 2005-2006 and 2006-2007 financial years. They gave the country six months to outline its proposals in this regard.
British chancellor Gordon Brown did not attend the monthly meeting of the finance ministers.
The treasury is of the view that the country has the lowest average debts and deficits among major European economy. It had said the deficit will fall to 3 per cent in 2005-06, 2.7 per cent in 2006-07 and down to 1.5 per cent by 2010-11.
The treasury has indicated that while it will comply with the Stability and Growth Pact’s deficit rules, there is no intention to change the policy.
At the finance ministers' meeting, France and Germany were praised for getting a grip on their deficits. French finance minister Thierry Breton said his country's deficit will be in compliance with the pact.
New deficit data on Germany, however, show that the country's public borrowing in 2005 could be 3.5 per cent or less. The Commission will decide on 1 February whether to press ahead with disciplinary action against Germany.
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