On to the UK first. Brussels is seeking clearer plans from the UK on how the country can cut down its deficit and move away from being the second country in EU with biggest deficit after Ireland. This could only come through a budget that either focuses on reduced spending or higher taxes yet the British government is currently reluctant on releasing plans before the elections next year. The budget has already been the subject of various debates after the UK was put in the same group with Ireland and Latvia who still have low but quickly rising debt levels.
From the FT:
It wants the budget deficit to start to fall significantly in 2010-11, rather than the Treasury’s plan for consolidation to start a year later and for the deficit to fall below 3 per cent of national income by 2013-14, when the Treasury projects it will still be running a deficit almost twice as large.
The Commission also called for the government to “set out how the fiscal framework will be applied in the future”, reflecting the fact that the government’s fiscal rules have been blown apart by the financial crisis.
On to another part of EU. The EU government is seeking reduction in budget deficits, which for several EU countries have been deteriorating. Target has been set at 3% of GDP and anything beyond that merits a legal process calling for cuts in spending or higher taxes.
From WSJ Economy:
In its latest assessments, the commission said Poland, Lithuania, Romania and Malta have excessive budget deficits, triggering a legal process that forces states to curb spending or raise taxes to reduce their budget shortfalls.
Poland has until 2012 bring its deficit to the acceptable level while Lithuania and Romania have until 2011. Malta only have until next year.