The European Commission has told Britain its budget deficit is too big and has urged it to speed up plans to bring down the overspending. It recommends London should cut its excessive budget shortfall to below the European Union’s ceiling of three percent of gross domestic product by the 2006-2007 fiscal year.
This is the third year in a row that the UK has overshot the limit, and it is projected to do so next year as well. The figures have been between 0.2 and 0.5% too high.
The EU has no power to sanction London since it is not a member of the euro. European Monetary Affairs Commissioner Joaquin Almunia underscored that Britain is not the only one in contravention of the rules.
“After the inclusion of UK in this group of countries in excessive deficit, we have now 12 member states in excessive deficit; Six are new member states, six are old member States, and five of them are in the euro zone.”
Budapest was told its planned deficit-cutting action would not be enough to meet its 2005 and 2006 targets. Hungary’s 2005 budget deficit is estimated at above six percent of GDP. Slovakia and the Czech Republic are considered to be doing far better. It is expected that they will close on the three percent target by 2007 and 2008.
The EU’s finance ministers will consider the commission’s recommendations at their next meeting, on Jan 24th. Almunia says he is sure Britain would comply, given that the adjustment required is reasonable, and economic prospects are improving.