Risk of explosion of debt in the EU programs
Risk «explosion» of debt to Member States because of economic crisis and the national recovery program highlights the annual report of the Commission for the Community budget, making imperative a coordinated recovery strategy as soon as possible.
Yesterday’s action of the Commission is a continuation of the discussion held at the last meeting of eurozone finance ministers, and the conclusions of the summit last week, by which EU leaders reaffirm their strong commitment to sound public finances and Stability and Growth Pact.
It is important that improvements be consistent with the economic recovery. There is a clear need for a reliable and credible exit strategy, including through improvements in the medium-term fiscal framework and medium through coordinated economic policies, was the European Council.
The Komision «bell rings» because of the rapid deterioration of the financial figures to all Member States. Indeed, the situation has taken dramatic proportions in countries in previous years had the largest growth rates, mainly due to the large exposure to mortgages, which led to the «bubble» property, as in Ireland, Spain and Great Britain.
Indicative of the derailment of public finances, the figures cited in the report Komision. For example, the Eurozone government debt in 2007 is not exceeded on average 66% of GDP. For 2009 the Commission expects an increase in debt at 77.7% of GDP at the end of 2010 to 83.8% of GDP.
That is an increase in debt to the tune of about 18 units in four years, which means that the consolidation of public finances that began with the establishment of the Euro at the end of the last decade essentially canceled by the crisis.
Typical is the case of Ireland, where the debt by 25% of GDP at the end of 2007 is expected at the end of 2010 to «land» in 79.7% of GDP, ypetriplasiastei over four years. In Greece, from 94.8% in 2007 will reach 108% in 2010.
According to the report, the amounts would provide Member States this year and next to support the real economy will reach a total of 600 billion euro (5% of GDP), net of government guarantees to banks since in most cases not activated (guarantees).
What the report for Greece
The excess of expenditure, but the shortfall in revenue and led to the derailment of the government deficit in Greece more than 5% of GDP last year, despite the limited impact of the crisis in the Greek economy, the report of the Committee referred to in the chapter in our country .
The Komision insists on spring forecast last May, under which the deficit will not fall below 3% of GDP by the end of 2010 without additional measures.
As the report points out, the deficit reached 5% of GDP in 2008 against 1.6% projected until December 2007 and 2.8% in April 2008. The disadvantage of this evolution is due to excess expenditure amounting to 2.25% of GDP and the shortfall in revenue by 1%.
Regarding public expenditure, the report states that exceeded budgeted for two main reasons: the increased cost of servicing public debt, as illustrated by the recent «crisis sprent» and «diversions» in primary government expenditure.
On the revenue shortfall is attributed to the «lower than expected performance» of increase.
It also notes that the deficit increased because of budget to pay back after the upward revision of Greek GDP.
The Commission maintains that the deficit will move «slightly more than 5% of GDP» because both a more cautious (on the part of the Commission) providing for the growth and the most skeptical estimates (the Commission) on the effectiveness of efforts boost revenue.
Overall, the Commission considers the economic policy of 2009 is «slightly restrictive».
The Commission refers to the measures announced, such as increasing taxes on cigarettes and alcohol, the increase in advances from the companies and the taxation of dividends, along with the completion of old tax outstanding, and the high sunk capital total income is expected to improve revenue yield of 1% of GDP.
From its side notes of expenditure measures as limiting recruitment in government, reducing the salaries of senior executives and 10% reduction in current expenditure, in total, will yield estimates that reduce costs by 0.25% of GDP .
And for 2010, the Commission reiterates its forecast of a deficit of 5.75%, noting that this does not include any measures taken to mitigate but also noting that no such measure has not yet been presented with clarity in the services.
The report points out that Greece is already in a surveillance system (excessive deficit procedure), while noting that on 27 October will assess the effectiveness of the government.
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