Spain and Italy warned about budget plan compliance

Spain and Italy warned about budget plan compliancebigstock European Union Flag 5391213

Draft budgets drawn up by Spain and Italy for next year have been warned by the European Commission that they may not fully comply with new debt and deficit rules. Plans by France and Holland have only just met regulations.

Spain’s spending plans showed that it was unlikely for the country to return to EU financial regulations until 2016. Finland, Luxembourg and Malta are also on the brink of non-compliance. If non-compliance is found to be true, the countries will be

required to amend their budgets and re-submit them to their respective national parliament.

EU rules state that members of the Eurozone must balance their budgets by cutting deficits. Some flexibility is permitted if a country’s deficit falls below 3% GDP, the EU ceiling, and their debt levels are proven to be decreasing. Minimising public debt is also a requirement.

A number of Eurozone member countries are under “budgetary surveillance” by the European Commission, including Austria, Belgium, Croatia, Estonia, Finland, France, Germany, Italy, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Slovakia, Slovenia, and Spain.

Countries that were rescued by EU bailouts in dire circumstances such as Cyprus, Greece and Portugal have not been incorporated in this review.

Deflation is a serious concern in the Eurozone at this time and could pose huge economic problems if it continues by potentially make debt problems worse and decreasing consumer spending. Prices fell in October in 11 countries of the Eurozone as well as the region as a whole, but over the past years prices have risen, showing a significantly slowed pace of growth.

The European Central Bank has attempted to address the threat of deflation by cutting interest rates.