Cyprus Draft Budgetary Plan Broadly Compliant with SGP, says European Commission

The European Commission has concluded that 2018 Cyprus Draft Budgetary Plan is “broadly compliant” with the requirements of the Stability and Growth Pact (SFG), as announced today by Commissioner Pier Moscovici, in the official presentation of the “European Semester Package”.

According to the European Commission / DGECFIN findings, Cyprus Draft Budgetary Plan (along with the plans of Estonia, Ireland, Malta, and Slovakia), are “found to be broadly compliant with the requirements for 2018 under the SGP” and “for these countries, the plans might result in some deviation from each countrys medium-term objective (MTO) or the adjustment path towards it.”

The European Commission also announced that Cyprus is included in 12 Member States for which an “in-depth review” will follow in 2018. These are “the same countries identified as having imbalances in the previous round of the Macroeconomic Imbalances Procedure”, namely Bulgaria, Croatia, Cyprus, France, Germany, Ireland, Italy, the Netherlands, Portugal, Slovenia, Spain and Sweden. The Country Reports are part of the “Alert Mechanism Report (AMR)”, an integral tool of the European Semester, which aims to prevent or address imbalances that hinder the smooth functioning of Member States economies, of the euro area or of the EU as a whole.

For the rest of the Member States, the European Commission finds that the DBPs of Belgium, Italy, Austria, Portugal, and Slovenia, pose a risk of non- compliance with the requirements for 2018 under the SGP. The DBPs of these Member States might result in a significant deviation from the adjustment paths towards the respective MTO. For Belgium and Italy, non-compliance with the debt reduction benchmark is also projected.

In the case of Italy, the persisting high government debt is a reason of concern. In a letter to the Italian authorities, Vice-President Dombrovskis and Commissioner Moscovici informed that the Commission intends to reassess Italys compliance with the debt reduction benchmark in spring 2018.

For France, which could become subject to the preventive arm from 2018 onwards if a timely and sustainable correction of the excessive deficit is achieved, the DBP is found to be at risk of a non- compliance with the requirements for 2018 under the SGP, as the Commission Autumn 2017 Economic Forecast projects a significant deviation from the required adjustment path towards the MTO and non-compliance with the debt reduction benchmark in 2018.

For Spain, the DBP is found to be broadly compliant with the requirements for 2018 under the SGP, as the Commission Autumn 2017 Economic Forecast projects that the headline deficit will be below the Treaty reference value of 3% of GDP in 2018, although the headline deficit target is not projected to be met and there is a significant shortfall in fiscal effort compared to the recommended level.

The Commission also recommends that the Excessive Deficit Procedure (EDP) be closed for the United Kingdom. The Commission forecast confirms the timely and durable nature of the correction by the United Kingdom of its excessive deficit during the fiscal year 2016-2017.

For Romania, the Commission established that no effective action was taken in response to the Council recommendation of June and proposes that the Council adopts a revised recommendation to Romania to correct its significant deviation from the adjustment path towards the medium-term budgetary objective. In June 2017, the Council had issued a recommendation of an annual structural adjustment of 0.5% of GDP to Romania under the Significant Deviation Procedure (SDP). On the back of developments since and following the lack of effective action by Romania to correct its significant deviation, the Commission now proposes a revised recommendation of an annual structural adjustment of at least 0.8% of GDP in 2018.

Finally for six countries (Germany, Lithuania, Latvia, Luxembourg, Finland and the Netherlands), the DBPs are found to be compliant with the requirements for 2018 under the SGP and pose no risk for deviations.

The Commission invites the Council to discuss the package and endorse the guidance offered today and it looks forward to a fruitful debate with the European Parliament on the policy priorities for the EU and euro area.

Source: Cyprus News Agency