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EU wants details of 2011 Spain's fiscal plans

Source: Reuters - Wed 16th Jun 2010

Spain's and Portugal's fiscal tightening plans this year and next are appropriately ambitious but both countries should spell out in more detail austerity steps planned for 2011, the European Commission said on Tuesday.

Apart from Spain and Portugal, in focus because of some financial market concerns about their ability to service debt, the European Union's executive Commission approved progress in fiscal consolidation also in 10 other EU countries.

It started disciplinary steps against three more countries - Cyprus, Denmark and Finland - for an expected breach of the 27-nation EU's rule that budget deficits must not exceed 3 percent of gross domestic product.

The Commission proposed that Finland bring its deficit below 3 percent next year, Cyprus in 2012 and Denmark in 2013.

Luxembourg and Bulgaria are now the only EU countries not in breach of the bloc's budget rules.

The Commission assessed the progress of fiscal consolidation in Belgium, the Czech Republic, Germany, Ireland, Spain, France, Italy, the Netherlands, Austria, Portugal, Slovenia and Slovakia, as required by EU finance ministers.

"In all cases we conclude that the measures taken were sufficient to achieve the 2010 targets and, in most cases, there is an invitation to specify as soon as possible measures to substantiate the targets for the years beyond 2010" the Commission said in a statement.

Economic and Monetary Affairs Commissioner Olli Rehn told a news conference in the French city of Strasbourg that Spanish and Portuguese fiscal consolidation plans announced so far were appropriately ambitious for this year and next.

But part of the announced tightening remained to be specified in detail, he said.

In response, Spanish Economy Secretary Jose Manuel Campa told Reuters Madrid awaited regional government spending cuts to clarify its 2011 austerity measures.

He said Portugal had to specify in more detail measures worth 1.5 percent of GDP out of the planned total of 2.6 percent for 2011. Spain should substantiate its plans for cuts worth 1.75 percent of GDP out of the announced 3.3 percent total.

"This assessment should be considered as early guidance for next year's budget. Overall, the current budgetary targets, including recent revisions appear to ensure an appropriate fiscal stance globally" he said.

Under pressure from markets, where the cost of borrowing has been rising sharply for Madrid and Lisbon, Spain announced on May 12 additional deficit-cutting steps under which it aims to bring the budget shortfall to 9.3 percent of GDP this year and to 6 percent in 2011 from 11.2 percent in 2009.

Portugal announced on May 8 additional deficit-reduction measures that aim to curb the shortfall to 7.3 percent of GDP this year, rather than the previously planned 8.3 percent, from 9.4 percent in 2009.

For 2011, Portugal plans to reduce the deficit to 4.6 percent.

Rehn reiterated the Commission's view that EU economic growth would solidify toward the year-end, totaling around 1 percent in 2010, and accelerate to about 1.75 percent in 2011.

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