EU Commission eyes excessive deficit procedures for Greece

    BRUSSELS (ANA-MPA / M. Spinthourakis) -- Greece has failed to take the necessary measures to cut its fiscal deficit, according to recommendations made last spring by the EU Council, the European Commission announced on Wednesday, before recommending that the country be placed under excessive deficit procedures of Article 104(8) of the Treaty of Maastricht.

    In practice, this means that the European Commission will recommend to the Council a new framework of actions regarding the Greek economy, which will be specified with procedure under Article 104(9) by early 2010.

    Specifically, the Commission considered that no effective action has been taken to deflect the heightened deterioration in the budgetary position in 2009 (-12.7 percent, according to the autumn forecast, as opposed -3.7 percent committed by the previous government), citing an insufficient response by Greek authorities. On the expenditure side, the 2009 budget execution pointed to sizeable expenditure overruns (2½ percentage points of GDP) in 2009, of which more than half is attributed to higher-than-budgeted outlays for compensation of employees and increased capital spending.

    The Commission, therefore, recommended the Council to conclude that Greece has not taken effective action, according to Article 104(8) of the Treaty.

    In the case of France, Ireland, Spain and the UK, it concluded that effective action had been taken. However, due to unexpected economic events, in other words the worsening global crisis at the turn of the year, which impacted the budget balances beyond the control of governments, the existing deadlines and implied annual structural adjustment were judged as unrealistic.

    Under these circumstances, the SGP permits the Council to issue revised recommendations including a revised deadline, on the basis of a Commission proposal. The deadlines have therefore been extended by one year for this group.

    EU Commissioner on Monetary Affairs, Joaquin Almunia, commenting on the EU executive’s statement, said everyone agreed on the need to draft clear and credible exit strategies from the crisis to limit fiscal deficit and public debts, which have dramatically risen because of the crisis.

    The Stability and Growth Pact offers the basis for such exit strategies, through an excessive deficit procedure and with stability and convergence programmes to be published next January.

   

   

   

   

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