EU warns 3 more countries over budget plans

AP News
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Posted: Nov 17, 2015 6:49 AM

BRUSSELS (AP) — The European Union warned Tuesday that another three of the 19 countries that use the euro, including Italy, the region's third-largest economy, are at risk of breaking the bloc's budget rules.

Though the EU's executive arm said no country's draft budget has been found to be seriously in breach of the rules, it said Italy, Austria and Lithuania risk overshooting deficit limits in 2016. The European Commission urged the three countries to revise their spending plans.

The three countries join Spain in facing the Commission's concerns. Spain was warned last month it was in breach of the deficit rules after its government presented budget plans early ahead of a year-end general election.

One of the rules governing the euro countries is that they must keep their budget deficits under 3 percent of annual GDP. If they don't, they must present plans to do so — or face fines.

Euro rules on budgets used to be fairly lax, contributing to a debt crisis in the region that nearly brought down the euro. As a result, the bloc has sought to better coordinate its fiscal policies, a regular assessment of national budgets from the Commission being one tool.

"Three years into the implementation of the euro area's new budgetary framework, most countries are compliant or broadly compliant with the requirements," said Pierre Moscovici, Commissioner for economic and financial affairs.

The European Commission said 12 countries currently meet that requirement but that, of those, the budget plans of Austria, Italy and Lithuania, risked a "significant" deviation from medium-term objectives.

Those under the strictures of a bailout program, currently only Greece and Cyprus, don't have to present plans. And Portugal didn't submit plans, apparently because it's effectively without a government following last month's general election. The others, apart from Spain, had presented plans that were said to be "broadly compliant" with 2016 requirements.

Commission Vice-President Valdis Dombrovskis said efforts to pursue more responsible budget policies are working in lowering interest rates governments have to pay to borrow money and are reducing public deficits to a planned 1.7 percent in 2016 from a projected 1.9 percent in 2015.

"For the first time since the beginning of the crisis, we see debt starting to fall, too," he said, referencing Commission forecasts projecting a slight decrease in the eurozone's debt burden to 90.5 percent of GDP next year from 91.6 percent this year.

Eurozone finance ministers will hold a special meeting on budget plans in Brussels on Nov. 23.

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Pylas contributed from London.