By Viktoria Dendrinou
BRUSSELS--The European Union warned Italy, Spain, Portugal and five other countries that their budgets for next year risk violating the bloc's spending rules.
In assessments published Wednesday as part of the eurozone's new system of budget oversight, the European Commission, the EU's executive arm, said the 2017 spending plans of Italy, Spain, Portugal, Belgium, Cyprus, Lithuania, Slovenia and Finland risk violating the bloc's spending rules and urged them to ensure they meet EU targets.
The EU introduced stricter fiscal rules for countries using the euro in 2013 as a response to the sovereign-debt crisis, which had put the future of the eurozone into doubt. The main goal of the rules is to keep public debt in check.
Officials in Brussels get to review eurozone budgets before they are adopted by national parliaments. If they identify major problems, authorities can issue formal recommendations that can lead to fines against governments that refuse to follow them.
Under the pact, eurozone governments have to bring their deficits to below 3% of gross domestic product, while debts can't be higher than 60% of GDP. But the rules allow some budget items to be stripped out, including the cost of extraordinary events.
In an effort to help boost growth in the region, the commission also recommended Wednesday that the eurozone pursues a fiscal expansion of up to 0.5% of GDP in 2017.
The recommendation signals an attempt by the commission to shift away from the austerity-focused fiscal policy advocated during the financial crisis,toward one that can help the region's recovery.
"Those who have budgetary leeway should spend and invest more," said EU Economic Affairs Commissioner Pierre Moscovici.
But he also cautioned that countries who fall short of their fiscal targets need first to focus on complying with their budget commitments.
The opinion on Italy's budget could be a setback for Italian Prime Minister Matteo Renzi ahead of a national referendum next month on key constitutional changes.
The Italian premier has often clashed with the EU over economic matters, and repeatedly called for more flexibility within EU fiscal rules--most recently to allow increased spending due to the migration crisis and the country's reconstruction efforts after several earthquakes.
The EU's economic forecasts, published earlier this month, showed the country's budget deficit would be at 2.4% of gross domestic product this year and next, and 2.5% of GDP in 2018. This is significantly higher than 1.8% deficit Italy promised to achieve by 2017.
The commission said France's 2017 budget plans were "broadly compliant" with EU rules. But the commission warned of a "significant shortfall in fiscal effort" compared with the recommended level and warned that the country, home to the eurozone's second biggest economy, could exceed the bloc's deficit limits if Paris leaves its policy unchanged.
Spending plans by Ireland, Latvia, Malta, Austria were also found to be "broadly compliant" with EU rules, while the budgets of Germany, Estonia, Luxembourg, Slovakia and the Netherlands, were deemed fully compliant.
Greece didn't submit its budget plan for assessment as it is currently in a bailout program.
Write to Viktoria Dendrinou at email@example.com
(END) Dow Jones Newswires
November 16, 2016 09:23 ET (14:23 GMT)
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