High levels of government debt are an ongoing concern for the European Union, who have singled out six Eurozone countries who are in breach of the regulations set out by the Commission. Belgium, Italy, Austria, Portugal and Slovenia have all been highlighted as not being on course to conform to the regulations set out to control government deficits.
The European Commission has also raised concerns over the high levels of government debt in Italy, which it considers to be a potential problem for the Eurozone as a whole. Italy is the third largest economy in the Eurozone, and fourth largest in the EU as a whole, but its predicted growth rates are one of the lowest.
The EU economic affairs commissioner Pierre Moscovici has written to the Italian government saying that “Italy’s public debt remains a key vulnerability. Given the size of the Italian economy, it is a source of common concern for the euro area as a whole.”
The second largest economy in the Eurozone, France, has also failed in its attempts to cut its deficit in line with EU targets. French president Emmanuel Macron is one of the EU leaders who have vowed to cut public spending in the new annual budget, and France is expected to return its deficit to less than 3% of GDP as set out in the Stability and Growth Act.
Macron is looking to set out an ambitious reform program to address the concerns in order to boost the Eurozone economy. Valdis Dombrovskis, the commission vice president responsible for the euro said that “The main message to France is the importance of correction of (the) excessive deficit this year”
The chief of the European Commission Jean-Claude Juncker has said it is important to take action now, with the bloc’s economy likely to have the “wind in our sails” after Brexit. Dombrovskis added. That “We need to use good times to build an economy that is less vulnerable to economic shocks and more able to respond to them”
With Brexit looming, the EU also plans to make improvements to the Eurozone bailout fund which would be transformed into the “European Monetary Fund” as well as a “Budget Line” contingency fund. EU economic affairs commissioner Pierre Moscovici commented that “On what happens to be the day of Philip Hammond’s budget, we have a good news for him — we are closing the excessive deficit procedure for the UK”
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