World Economy

4 Eurozone Countries Risk Breaking Budget Rules

4 Eurozone Countries  Risk Breaking Budget Rules  4 Eurozone Countries  Risk Breaking Budget Rules

Italy, Lithuania, Austria and Spain risk breaking European Union rules with their 2016 budget plans, the European Commission said on Tuesday, while France might also not meet some of the fiscal targets set out by EU finance ministers.

It said, however, that the costs of Europe's migrant and refugee crisis would be treated as a special case, Reuters reported.

The commission, the EU executive arm, checks draft budget plans of eurozone countries every year to see if they are in line with the Stability and Growth Pact, which sets rules for EU budgets.

The rules say a government has to keep the headline budget shortfall below 3% of GDP and strive to balance its books in structural terms–excluding one-off revenues and spending and the effects of the business cycle.

To be in line with the rules, each year governments must reduce their structural deficit by at least 0.5% of GDP until they are close to balance or in surplus.

Significant Deviation

The commission pointed the finger this year at Italy, Lithuania, Austria and Spain. "The draft budgetary plans of these countries might result in a significant deviation from the adjustment paths towards the medium-term objective," it said.

France's 2016 draft budget was broadly compliant, the commission said, because the headline deficit was as required.

But France is under a disciplinary EU process, called the excessive deficit procedure, for having a budget gap higher than 3% of GDP. EU finance ministers set annual fiscal consolidation targets for countries under this procedure. The commission said Paris was at risk of missing these targets.

Without changes in current policies, France is also expected to have a deficit above the 3% limit in 2017, in breach of agreed targets, the commission estimated.

Brussels' analysis of France's budget was carried out before the Paris attacks of last weekend.

Spain, which faces elections in December, was in bigger trouble. "The draft budget plan... was found to pose a risk of non-compliance with the requirements for 2016. In particular, neither the recommended fiscal effort nor the headline deficit target for 2016 is forecast to be achieved," the commission said confirming an opinion issued in October.

Italy's draft budget plan is also at risk of non-compliance with EU fiscal rules, the commission said in a statement, urging Italy to take "the necessary measures within the national budgetary process to ensure that the 2016 budget will be compliant".

Meanwhile, Malta's budget for 2016 is set to be given the green light by the parliament after the European Commission said it conformed to EU rules.

The budget debate ended in parliament nearly two weeks ago but the votes were put off pending the green light by the EU.

Migrant Impact

It also said that the budget costs of the migrant crisis would be treated as an exceptional circumstance and not counted into the deficit calculations, but concessions will be made only after actual expenses are properly assessed.

Italy, Greece, Austria and Germany are all dealing with hundreds of thousands of asylum seekers from the Middle East and Africa who are fleeing conflicts and poverty in their countries.

The commission said it would monitor the situation closely to determine what was eligible and ensure that it did not impact 2015 and 2106 budget enforcement.

Overall, the aggregate eurozone budget deficit is to shrink to 1.7% in 2016 from 1.9% in 2015. Debt is also to fall slightly to just below 90% of GDP.