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News : EU Economy Last Updated: May 29, 2013 - 5:31 PM

France, Spain and Netherlands get more time to cut budget deficits
By Finfacts Team
May 29, 2013 - 3:29 PM

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The European Commission announced Wednesday that it was giving three of the biggest economies in the Eurozone - - France, Spain, the Netherlands - - and two other countries more time to meet their deficit targets as the executive of the European Union relaxed its austerity policies. It warned that the region’s economy was deteriorating fast and needed urgent action or Europe faced the prospect of social and political unrest.

France, the European Union’s second-biggest economy, was given two extra years to cut its deficit to 3% of GDP (gross domestic product), extending the deadline to 2015. The Commission has agreed a deficit target of 3.9% of GDP for this year and 3.6% in 2014.

José Manuel Barroso, European Commission president, told France to use the extra time “wisely” to restore lost competitiveness, by reducing labour and social security costs. “We’re not offering an easy way out, we’re being demanding,” he said at a news conference.

The Commission recommendations require the approval of heads of EU governments.

The Netherlands, another core European economy, was given just an additional year to meet the official deficit goal of 3%. Its 2013 target is 3.6%.

The Commission gave Spain an extra two years to cut its deficit. So Madrid has until 2016 to reach the 3% level. In 2012, when Spain was given a banking bailout, it was also allowed to extend the fiscal adjustment period to 2014 to meet the 3% target. Spain’s new deficit targets are: 6.5% in 2013, 5.8% in 2014 and 4.2% in 2015.

Poland and Slovenia got two extra years to meet their targets.

A summary of today's reports warns that economic reforms were slower than “desirable” to trigger  growth, warning that despite the quieter atmosphere in the financial markets, the EU faced significant economic risks in the near term.

“The impact on society of several years of low or no growth is far reaching, with very high levels of unemployment and rising poverty in several parts of Europe,” the summary says. “The dim prospect for labour market improvements in the short term will be a further test for the welfare systems of member states. It will take time for the positive effects of today’s decisions to work their way through into a more dynamic, growing, job-creating economy.

The Commission removed Italy, Latvia, Lithuania, Romania and Hungary from the so-called Excessive Deficit Procedure, which will result in the release EU funds to them.

The Commission gave Belgium until September to take new measures to get its fiscal situation in order or risk a fine. The country will stay under deficit surveillance. It also placed Malta in its deficit-monitoring program and said that Slovenia, whose banking problems have led to speculation it may need a bailout, must undertake an independent audit of its financial sector.

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