Page last updated at 12:32 GMT, Wednesday, 18 February 2009

EU acts as budget deficits bulge

Queue at a job centre in Spain
Public finances have been hit by the economic downturn

The European Commission has taken disciplinary steps to tackle swelling budget deficits in six EU countries.

It said that France, Greece, Spain, Ireland, Latvia and Malta had breached EU rules by allowing their budget deficits to exceed 3% of GDP in 2008.

The global downturn has taken its toll on public finances as countries try to spend their way out of recession.

The Commission said it would issue a deadline in March for the countries to reduce their deficits.

Exceptional circumstances

The countries will now be subject to the EU's excessive deficit procedure and countries will be invited to take steps to reduce their deficits.

Ireland: 9.5%
Spain: 5.8%
Latvia: 5%
France: 4.4%
Greece: 3.7%
Source: EU (% of GDP)

The Commission, the executive arm of the EU, said it would be flexible when considering the six cases given the "exceptional circumstances" of the economic downturn.

Joaquin Almunia, EU economic and monetary affairs commissioner, said that public finances were under stress because of the sharp global financial and economic crisis.

"Public finances deteriorated further as many many member states adopted fiscal measures to support demand and job creation this year," he added.

The rules are part of the EU's Stability and Growth Pact.

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