18 February 2004, 14:13  EU sees risks to German deficit - cutting plans

BRUSSELS, Feb 18 - The European Commission said on Wednesday that Germany might be unable to meet its commitment to reduce its budget deficit to within EU limits by 2005 if growth was slower than expected or spending targets overshot. In its last round of assessements of the medium-term budget plans of European Union states, the Commission also delivered judgments on Spain, Belgium and Portugal. On Germany, it questioned the country's growth forecasts. "The Commission sees two main risks that endanger Germany's commitment to bring the deficit below three percent of GDP by 2005," the EU executive said in a statement, referring to the deficit limit set under the Stability and Growth Pact. "The first risk concerns the real growth forecast for 2005," it said, noting Berlin expected a 2.25 percent GDP rise that year, but the Commission forecast 1.8 percent. It noted Germany had included a forecast for its deficit of about three percent of GDP in 2005 and the Commission said it believed this scenario was more realistic. The Commission has taken legal action against EU states after they waived the budget rules for France and Germany last year, but is also mulling ways to revamp the pact to make it more flexible.||

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