The European Commission said today (17 January) that Spain’s budget for this year is “broadly” in line with EU targets and Portugal claimed that it met its 2016 goals. However, there were less positive signs from Italy and Lithuania.
The EU executive is responsible for assessing eurozone countries’ budgets and can require additional fiscal measures if public expenses go beyond limits set by EU rules.
Brussels found that Spain’s “fiscal effort is met in 2017”, according to a Commission official. This means the country does not have to adopt additional spending cuts or taxes.
“We do not call for measures now, but we ask the government to stand ready to take additional measures should heightened risks materialise,” the official added.
The Commission delivered its opinions on the 19 countries of the euro currency zone in November but waited for a final decision on Spain’s budget because Madrid had not yet presented a budget as it had no government then.
“Spain has recorded good economic performance and we invite the Spanish authorities to continue to correct their excessive budget deficit and implement key structural reforms,” Commission Vice-President Valdis Dombrovskis added.
Separately, the EU executive also assessed Lithuania’s 2017 budget and found it “at risk of non-compliance” with EU targets.
Dombrovskis insisted the Baltic country’s deficit and debt “are well below the required targets of 3% and 60% of gross domestic product respectively”.
The budget may be considered in line with EU rules if the country is found eligible for some fiscal leeway – a decision that Brussels will take this spring.
Italy got off less lucky than Spain, as the Commission asked it to reduce its budget deficit this year, a Treasury source said, signalling that Brussels wants Rome to reverse plans to overshoot previously agreed targets.
The executive is seeking a 0.2% point reduction in Italy’s structural deficit, a measure adjusted for swings in the business cycle, the source said.
A spokesman for the Commission said earlier today that Brussels had sent a letter to Italy as part of “ongoing dialogue” over the country’s budget plan.
Italy’s government will decide in the coming days if, and how, to respond to the Commission request, the Treasury source said.
The government’s 2017 budget deficit goal is set at 2.3% of gross domestic product (GDP), up from 1.8% agreed previously with Brussels.
Spain’s Iberian neighbour Portugal ended last year with a budget deficit of no more than 2.3% of GDP, below the 2.5% target agreed with Brussels and down from 4.4% in 2015, Socialist Prime Minister Antonio Costa said.
“With the numbers we have at our disposal I can guarantee here today that the 2016 deficit will not exceed 2.3%. Or, as I have said repeatedly, the deficit was comfortably below the limit set by the European Commission,” Costa told lawmakers in the first parliamentary debate of 2017.
“Against all predictions of disaster… Yes, we’ve met the commitments. Yes, there was an alternative. And yes, we’ve achieved the results,” he said, referring to the reversal of austerity measures of the previous administration by his government, which came to power in late 2015 and raised some pensions and wages.
EU rules require countries to cut their “structural” budget deficits by at least 0.5% of GDP every year until they reach balance or surplus. Italy’s budget raises the structural deficit by 0.6%.