EU attacks big trade and budget deficits
COUNTRIES like the UK, France and Italy are being investigated by the EU for allowing potentially dangerous economic imbalances to develop, commissioner Olli Rehn said yesterday.
Twelve EU countries have failed to address problems building up in their economies, Rehn said, and after further analysis the European Commission (EC) may send them advice and action plans on how to rectify them.
Countries in the Eurozone may face fines of up to 0.1 per cent of GDP for allowing such problems to develop.
The UK has lost export market share over the last decade, as well as having a “high level of public debt” and “a weak public finance situation,” the report said.
France has suffered from a “gradual deterioration of the trade balance”, while Italy has lost competitiveness since the mid-1990s, and “public debt is a concern, especially given the weak growth performance and structural weaknesses,” Rehn said. And Spain’s high levels of unemployment and post-housing boom woes will also face further investigation.
Rehn said that the financial crisis was exacerbated by the existence of such imbalances, and that removing them will increase confidence in the financial sector and among the wider public.
Countries with high trade deficits lost out in terms of price and cost competitiveness before the financial crisis, the report argued, and large household and corporate debts have stunted growth in recent years.
However, the data used comes from 2010, and the EC is only now looking to carry out further analysis with more recent data.
The Treasury acknowledged the findings, arguing that “this report underlines why the government is right to be getting a grip of the country’s debts”.
Greece, Portugal, Ireland and Romania will not face further action as they are already facing much closer scrutiny from the European Commission.