EU sets out priorities for states' budgets
By Gabriele Steinhauser |
January 13, 2011, Thursday
|
Print Edition
Print Edition
EUROPEAN Union governments must make further cuts to their budgets, overhaul their pension systems, and make sure their banks are less volatile, the EU said yesterday as it set out the priorities for states' budgets for 2012.
The EU's Executive Commission also said countries with a large current-account surplus need to boost domestic demand - a request likely to face strong opposition from Europe's economic powerhouse Germany, which said its strong exports are the result of painful labor market reforms over the past decade.
The current account measures a country's balance of exports, imports and other capital flows. So far, reform pressures have focused on countries such as Greece, Ireland and Portugal, whose big budget or current-account deficits have been blamed for turmoil on bond markets in recent months.
Yesterday's recommendations kicked off the so-called European Semester that EU governments agreed to last year, which aims for closer coordination of state budgets. While the commission won't have the power to veto a government's spending plan, it can give warnings and eventually sanction countries that break the EU's deficit caps.
The commission set out 10 key measures, which form the base for an assessment of states' budgets over the coming months.
The recommendations, dubbed the Annual Growth Survey, are meant to prevent governments from building up the kind of deficits and vulnerable economies that triggered the current debt crisis, which has already required multibillion bailouts for Greece and Ireland.
"Without major changes in the way the European economy functions, Europe will stagnate and be condemned to a viscous circle of high unemployment, high debt and low growth," Monetary Affairs Commissioner Olli Rehn said.
A new wave of stress tests, scheduled for February and March, should help accelerate the restructuring of banks, Rehn said.
The EU's Executive Commission also said countries with a large current-account surplus need to boost domestic demand - a request likely to face strong opposition from Europe's economic powerhouse Germany, which said its strong exports are the result of painful labor market reforms over the past decade.
The current account measures a country's balance of exports, imports and other capital flows. So far, reform pressures have focused on countries such as Greece, Ireland and Portugal, whose big budget or current-account deficits have been blamed for turmoil on bond markets in recent months.
Yesterday's recommendations kicked off the so-called European Semester that EU governments agreed to last year, which aims for closer coordination of state budgets. While the commission won't have the power to veto a government's spending plan, it can give warnings and eventually sanction countries that break the EU's deficit caps.
The commission set out 10 key measures, which form the base for an assessment of states' budgets over the coming months.
The recommendations, dubbed the Annual Growth Survey, are meant to prevent governments from building up the kind of deficits and vulnerable economies that triggered the current debt crisis, which has already required multibillion bailouts for Greece and Ireland.
"Without major changes in the way the European economy functions, Europe will stagnate and be condemned to a viscous circle of high unemployment, high debt and low growth," Monetary Affairs Commissioner Olli Rehn said.
A new wave of stress tests, scheduled for February and March, should help accelerate the restructuring of banks, Rehn said.
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