The European Commission warned Romania, Bulgaria and Latvia to curb spending and continue with reforms in order to meet their budget goals.
„I am concerned that the countries assessed envisage a loosening of fiscal policies in 2007 at a time of favorable economic growth,” European Union Monetary Affairs Commissioner Joaquin Almunia said today in a statement accompanying commission reports on their budget programs. „This is not consistent with the objective or running prudent fiscal policies and ensuring sustainable convergence.” Romania, which joined the EU on January 1 along with Bulgaria, must take „more ambitious” steps to cut spending, the commission, the EU's executive agency, said today. The International Monetary Fund said yesterday that Romania should control its widening budget deficit by either raising revenue or cutting government spending or exceed the EU limits in its first year within the bloc. In the government's target of a budget deficit of 2.8% of GDP this year „revenue is overestimated and wage expenditure is under estimated,” the IMF's head of mission for Romania, Emanuel van der Mensbrugghe, said. „The underlying deficit is 3.8% of GDP.” The EU requires member states to keep the budget deficit below 3% GDP.
Bulgaria, the EU's poorest member, pledged economic growth of at least 6% a year in a three-year program that aims to raise living standards to EU levels. Bulgaria is „encouraged to maintain strong budgetary positions,” Almunia said in the statement. The commission also urged Bulgaria to continue reforming its health-care system. The commission released budget reports today on Bulgaria, Romania, Latvia, Spain and Belgium today. Latvia abandoned its euro-adoption date of January 2008 because inflation soared to the fastest in the EU. The average annual inflation rate is expected to rise above 6% this year. „The worsening of the budgetary situation in 2007 is not in line with a prudent fiscal policy aimed at ensuring sustainable convergence, including by reducing the external imbalance and containing inflation,” the commission said.
The Latvian Cabinet accepted a committee proposal to fight inflation by balancing the budget through 2008, create surpluses in 2009 and 2010 and pass a real-estate tax. If the government applies the recommendations in the proposal, inflation could drop from an average of 6.5% to 6.7% this year, to 2.5% to 2% by 2011, according to a statement e-mailed by the finance ministry yesterday. The plan needs to be accepted by parliament to go into affect. The commission commended Spain for its „sound fiscal policy” and warned Belgium that while it noted the country's efforts to reduce debt, there were „risks to the achievement of budgetary targets.” (Bloomberg)