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Page last updated at 17:25 GMT, Tuesday, 24 March 2009

EU urges action to curb deficits

Job centre in Portsmouth, UK
UK unemployment has risen above two million - the highest rate since 1997

The European Commission has set deadlines for France, Greece, Ireland, Spain and the UK to rein in their swelling budget deficits.

Under EU rules, countries are expected to keep their budget shortfalls below 3% of gross domestic product (GDP).

Greece has been given until 2010 to meet the target, France and Spain until 2012, Ireland until 2013 and the UK until 2013-14, the commission said.

A shorter time-frame indicates it should be easier to meet the target.

EU finance ministers are due to discuss the deadlines next month and once adopted, the five countries will have six months to specify their plans for reducing their deficits.

If a country fails to meet the deadline, despite having taken the recommended actions to rein in the deficit, the commission - the EU's executive arm - sets a new deadline, a Brussels official told BBC News.

Being outside the eurozone, the UK "is not strictly speaking bound by the rules, but the UK endeavours to respect them", said the official, who requested anonymity.

DEFICIT FORECASTS 2009
Ireland: 11%
UK: 9.5%
Spain: 6.2%
France: 5.6%
Greece: 3.7%
Source: European Commission (% of GDP)

The UK has been under the commission's "excessive deficit procedure" since July 2008.

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

"The pact is not about sanctioning [countries] - it's about showing the markets that we're correcting the situation, rather than running deficits," the official told the BBC.

The global downturn has battered public finances across Europe, sharply reducing tax revenues in many cases while increasing the bill for unemployment benefits.

Further pressure on budgets is exerted by fiscal stimulus packages, adopted by the UK and some other governments to ease the short-term pain of recession and revive economic activity.

In 2009 the Republic of Ireland's budget deficit is forecast to rise to 11% of GDP, the commission says. The estimated 2009 deficits for the other countries are: UK - 9.5%, Spain - 6.2%, France - 5.6%, Greece - 3.7%.

UK government gross debt, close to 40% of GDP in 2007-8, is expected to rise to nearly 70% of GDP in 2013-14.



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