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March 3, 2021
BUSINESS

Brussels to tell Warsaw to cut budget gap, Bucharest may follow

Tomorrow, the Commission will publish its recommendations on the deficits of Lithuania and Malta, which may receive similar deadlines.

BRUSSELS – The European Union’s executive arm will give Poland until 2011 on Wednesday to bring its growing budget deficit under the bloc’s cap of 3 percent of the country’s economic output, a draft proposal showed. In recommendations to be sent for approval by EU finance ministers, the European Commission will say Poland, the biggest ex-communist member of the bloc, should cut its deficit by about 2 percentage points starting in 2010, the draft said.


“The Polish authorities should put an end to the present excessive deficit situation as rapidly as possible and at the latest by 2011,” said the document, obtained by Reuters.


The recommendation will be made under the EU’s excessive-deficit procedure, which can lead to fines for euro zone countries that persistently top the EU’s cap or a freeze in EU aid funds for EU members not using the single currency. Having a deficit below 3 percent of GDP is also a criterion for adopting the euro, which Poland wants to achieve in 2012 or slightly later. If Poland cuts its deficit to beneath 3.0 percent of gross domestic product in 2011, this would mean in practice it could adopt the euro only in 2013, since the Commission would have to confirm this was the case during 2012.


As in many other EU countries, Poland’s budget deficit has ballooned and exceeded the bloc’s limit, with recession cutting state revenues and pro-growth measures emptying the coffers. On Wednesday, the Commission will also publish its recommendations on the deficits of Romania, Lithuania and Malta, which may receive similar deadlines as Poland. The Commission expects 21 of the EU’s 27 countries to have deficits above 3 percent of GDP this year. Romania’s deficit is seen at 5.1 percent of GDP this year and 5.6 percent next, compared with 5.4 percent last year. Lithuania, among the hardest hit by the economic downturn, is forecast to see its deficit swell to 5 percent of GDP this year and 8 percent in 2010, despite austerity measures.

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