The financial credibility of at least six EU nations has been cast into doubt as it was announced that they have been unable to maintain a government deficit of less than three percent.
The EU Commission has called on the member states to trim the fat
Six European Union member states, including France, have gone too deeply into debt as they struggle to ward off recession, casting their financial credibility into doubt, the bloc's executive warned on Wednesday, Feb. 18.
But while the European Commission is set to launch legal proceedings against five of the six, officials stressed that the body was not looking at penalizing the offenders at this stage, instead calling on them to start trimming their deficits as early as this year.
"During a recession, the (EU financial stability) pact is not at all about sanctions. ... Nobody is thinking of sanctions," EU Economic and Monetary Affairs Commissioner Joaquin Almunia insisted during a press conference in Brussels.
Rather, "to overcome the recession and maintain citizens' confidence in the capacity of their public authorities ... we need to implement the pact," he said, adding that sticking to the rules was a question of credibility.
Up to three percent
EU Commissioner Joaquin Almunia has said there would be no penalties yet
Euro zone members France, Greece, Ireland, Malta and Spain, and non-euro country Latvia, saw their government deficits surge to more than 3 percent of gross domestic product (GDP) in 2008.
That breaches the EU's rules, under which national governments are allowed to run a budget deficit of up to three percent of GDP.
In March the commission will call for the opening of a so-called "excessive-deficit procedure" in the cases of France, Spain, Ireland, Greece and Latvia, Almunia said.
Such a procedure can culminate in a fine, but is usually concluded when member states and the commission agree to a budget plan which brings the deficit back under three percent.
About to break the barrier
The commission has made a gloomy forecast
Other EU member states also face a tough time as they struggle to keep their budgets under control.
Britain is already embroiled with the commission after its deficit hit 4.6 percent in 2008. Hungary is likewise beleaguered, having broken the three percent limit every year for the last decade.
And EU states including Italy and Poland could face action later in the year, as their deficits are expected to crash through the three percent barrier during the year.
According to commission forecasts, 12 of the EU's 27 member states will have an excess deficit by the end of 2009, with a further four breaking the rules in 2010.
Only Bulgaria, Finland and Luxembourg are expected to show a budget surplus this year.