Spending Squeeze Ahead For EU Accession Countries
Many of the EU’s new members will have to make billions in savings in order to join the euro, according to figures published on Tuesday.
According to a report released by the European Commission some new members will need to more than halve their budget deficits before they can join the single currency. Euro rules mean that budget deficits - which is the amount of money the government takes in tax minus the amount it spends - must be lower than 3 percent of GDP. But the figures show that six out of ten new member states would have to take drastic measures to bring their deficits down below that ceiling. The deficit in the Czech Republic is 12.9 percent, while Hungary, Cyprus and Malta are also deeply in the red with deficits of 5.9, 6.3 and 9.7 percent respectively. This means that Prague would have to reduce its deficit by approximately €7 billion ($ 8.5 billion) before it can apply to join the single currency, assuming growth remains roughly constant. The Baltic states - Estonia, Lithuania and Latvia - along with Slovenia have sufficiently healthy finances to join the euro as soon as possible, but the others will either have to cut public spending or raise taxes to bring the deficits down to acceptable levels.