Local view for "http://purl.org/linkedpolitics/eu/plenary/2008-09-24-Speech-3-312"
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"en.20080924.33.3-312"2
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"The subject of the first question is covered in detail in the Commission’s 2008 report on public finances in the EMU. The only significant budgetary development which is not covered there is the recent launch of the excessive-deficit procedure for the United Kingdom.
Given that the budget deficit in the UK is expected by the Commission to exceed the 3% reference value in both fiscal years 2008-2009 and 2009-2010, in accordance with Article 104(6) of the Treaty, the Council has decided this year that an excessive deficit does exist in the United Kingdom. On the same occasion, in accordance with Article 104(7) of the Treaty, the Council set a deadline of one year for the correction of this excessive deficit.
More generally, in line with its mandate under the Treaty and the Stability and Growth Pact, the Commission is continuously monitoring the economic and budgetary development in Member States and stands ready to activate the instruments of budgetary surveillance where necessary.
The answer to the second question is positive, particularly with reference to the corrective arm. Since the 2005 reform, excessive deficits have been corrected, with currently only the UK and Hungary subject to the excessive-deficit procedure. Overall, in 2007 the euro area recorded its lowest structural fiscal deficit since 1973. Nevertheless, the application of the preventive arm has sometimes been uneven. So, in the April 2007 Berlin Declaration, the euro-area Finance Ministers committed themselves to reaching their medium-term budgetary objectives by 2010 at the latest. In principle this commitment was reiterated this year. At the same time, the 2005 reform introduced enough economic rationale into the pact to be able to react flexibly to serious disturbances where necessary, in particular through the revised flexibility clause and the incorporation of implicit liabilities in MTOs.
The functioning of the revised pact is well documented in the Commission reports on public finances in the EMU of 2006, 2007 and 2008 and in the accompanying communication. In this year’s report, the methodology proposed for incorporating implicit liabilities in the MTOs of the preventive arm is also presented.
Regarding the third question, according to the reformed Stability and Growth Pact, only under tightly constrained circumstances are budget deficits in EU Member States permitted to exceed the 3% reference value without resulting in the existence of excessive deficit. In particular, these deficits will always have to be close and also temporary. In addition, either the excess over the reference value must be exceptional, and/or it must include a deficit occurring under circumstances of severe economic downturn, which is defined as negative growth or accumulated loss of output.
If the deficit is close and temporary, various other element factors always need to be taken into account, but this must happen in a very balanced way. Other relevant factors include, for instance, growth-enhancing expenditure on research and development. However, a direct deduction of any spending items from the deficit is excluded. Finally, in any event, an annual structural fiscal improvement of the order of 0.5% of GDP as a benchmark must be delivered."@en1
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