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EU's Rehn warns Italy and Spain to avoid excess deficits

The European Commission has warned that five eurozone member countries are at risk of breaching the bloc's debt and deficit rules. Brussels has assumed new budget surveillance powers to identify problems early.

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EU warning on eurozone budgets

EU Economy Commissioner Olli Rehn (pictured) said on Friday that Italy and Spain were among five eurozone members likely to breach European Union deficit rules in 2014, with the bloc not allowing fresh borrowing to amount of more than 3 percent of a nation's gross domestic product.

In a sign of Brussels' new resolve to intervene when it sees risks, Italy was denied the right to class some spending under a special investment exemption as the executive found the nation was heading away structurally from agreed targets.

Malta, Luxembourg and Finland were also in danger of failing to meet spending targets, the Commission said.

New supervisory powers

The EU's budgetary surveillance drive is a new step towards spotting fiscal problems early on in a bid to support sustainable growth as the bloc emerges from a protracted recession.

"Today we reach a milestone in the implementation of Europe's strengthened economic governance," Olli Rehn commented on the executive's first-ever assessment of national draft budgets.

"In an economic and monetary union, national budgetary decisions can have an impact well beyond national borders," he added while justifying the analysis.

Brussels said Germany and Estonia were the only two nations on track to fully comply with the bloc's deficit targets next year.

Berlin was reminded, though, it should do more to stimulate domestic demand and trim its export-driven trade imbalance.

hg/ipj (AFP, dpa)

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