EU gives Greece official warning
EU ministers gave an official warning to Greece today to get its finances in order by the end of next year and bring its annual budget deficit in line with the union’s spending rules or face hefty fines.
The 25 finance ministers, meeting in Brussels, said “further efforts are needed” to cut spending.
They ordered Athens to comply with rules underpinning the euro currency making sure it reins in its deficit under the limit of 3% of gross domestic product.
“Greece shall put an end to the present excessive deficit situation as rapidly as possible” and at the latest by the end of 2006, the ministers said.
They also chided Athens for mismanagement of the government’s spending books, calling on Greece to “further pursue the efforts to improve the collection and processing of general government data”.
The ministers said accounts of official spending figures had to be improved “to ensure the prompt and correct supply” of figures to the EU’s statistics agency, which compiles deficit figures across the EU.
The finance ministers also ordered Greece to submit regular updates to them on progress made in ensuring that misreporting of deficit data does not occur again.
Unless Greece cuts its annual deficit to under 3% of GDP – down from 5.5% in 2004 – the European Commission could launch a legal action against it, which could lead to fines under the euro zone’s stability rules.
The decision to put Greece on notice for violating the euro zone’s rules by running deficits of more than 3% of GDP is the most drastic action the EU has taken to date.
France and Germany – the euro zone’s two biggest economies – narrowly avoided that prospect by pledging to get their deficits under the 3% mark by 2005.
Greece, however, is different. Last year, the EU discovered it had reported flawed economic figures in recent years and hid massive cost overruns from the 2004 Olympics.
Later today, the finance ministers were to consider a plan to tax aviation fuel to generate funds to fight global poverty.
The proposal is unlikely to draw unanimous backing, and the plan has been attacked by airlines as a threat to their survival.
“Carriers across Europe survive on low profit margins,” said Sylviane Lust, director general of the International Air Carrier Association. “This taxation initiative would further jeopardise the competitiveness.” Aviation fuel is not currently taxed.
