Economy - - Nov 18,2016
The European Union has warned 8 Eurozone nations including Italy, Spain and Portugal, regarding the breach of EU rules due to excessive budget deficits.
Under EU rules, member countries are allowed to run an annual budget deficit of not more than 3% out of their total economic outputs. However, the warning complies for 2017, suggesting that the proposed budgets does not abide by the rules governing the single euro currency.
Italy has gone through a major financial crisis in the past few years and the recent incidents like the series of central Italy earthquakes and the migrant crisis have costed them a lot. EU Economic Affairs Commissioner Pierre Moscovici said that, they have no negative opinion against Italy and added that EU will surely take these incidents into account.
Spain and Portugal are under the scanner since the second and third quarter of the year. The EU Council met in August and decided against fining them and offering more time to comply with the rules of reduced deficits.
Last year, Spain’s deficit was 5.1% of the Gross Domestic Product (GDP), whereas Portugal stood at 4.4% deficit of their GDP. These two countries have been granted the access to EU’s structural funds that can be used to support economic development programs like agriculture, fisheries and regional constructions. EU President Jean-Claude Junker announced that, those who can afford needs to invest more, while those having lesser fiscal capabilities need to pursue reforms and growth-friendly fiscal consolidation.
The other 5 countries warned by the EU are Lithuania, Slovenia, Belgium, Finland and Cyprus. Although the rule for 3% budget deficit is applicable to all EU countries, only the 19 countries that use euro as their currency can be fined.
The EU has said that factors like Brexit and uncertainties after the US elections are weighing on European economies by slowing their growth.