Spain, Portugal and France likely to be spared further austerity despite poor EC forecasts

 

Spain, Portugal and France are likely be spared pressure by Brussels to impose more austerity, despite forecasts today from the European Commission showing that they will miss their deficit reduction targets.

Under the terms of the eurozone’s new Fiscal Compact member states are required to limit their annual borrowing to 3 per cent of GDP. But in its Winter forecast the Commission said that Spain’s deficit this year will come in at 6.7 per cent while Portugal’s borrowing is expected to be 4.9 per cent. The deficit of France, the currency bloc’s second largest member, is projected by the Commission to be 3.7 per cent of GDP.

Despite this the Commission Vice-President Olli Rehn signalled today that the organisation would refrain from using its powers under the Compact to levy fines on excessive borrowers and would instead give them more time to meet their fiscal commitments. “In the case of Spain, it seems that the structural fiscal effort has been undertaken and that there has been also an unexpected shortfall of growth” he said. Ministers from France and Portugal also said today that they would ask Brussels to push back the target by a year, as they blamed pinned the blame for their respective borrowing overshoots on the weak eurozone economy. The Commission now expects the 17 nation bloc to contract by 0.3 per cent over the course of 2013. Last autumn it expected 0.1 per cent growth.

The decision on granting deficit reduction extensions will be taken by the Commission in May, Mr Rehn said. States will need to show that that they missed their targets because of the unavoidable costs of the eurozone’s recession rather than a failure to rein in spending. In an encouraging sign for Paris, the Commission’s document noted that much of France’s deficit overshoot is attributable to the recession. France is expected by the Commission to grow by 0.1 per cent over 2013, when it previously expected growth of 0.4 per cent.

However, some prominent German voices today called for a harder line to adopted by the Commission on deficits, particularly with regard to France. Joerg Asmussen, a German representative on the European Central Bank board, told Reuters that Francois Hollande’s administration in Paris needed to do more to bring its spending into line with its revenues. “It’s a matter of credibility that France takes appropriate steps as quickly as possible to correct this missing target” he told Reuters. Michael Fuchs, a senior member of Germany’s Christian Democrats, referred to France as the eurozone’s “problem child”.

The Spanish government of Mariano Rajoy has pushed through a host of labour market reforms in the past twelve months, but Madrid’s deficit in 2012 still came in 10.2 per cent thanks to a deep recession which has pushed unemployment up to 25 per cent. The Spanish economy contracted by 1.4 per cent in 2012 and is set to shrink by a similar amount this year, according to the Commission.

Portugal, which has received a bailout from its eurozone neighbours, is seen as contracting by 1.9 per cent, following a 3.2 per cent shrinkage in 2012. France is expected to eke out 0.1 per cent growth, following a flat 2012. Italy is seen contracting by 1 per cent this year, after a steep 2.2 per cent fall last year.

The Commission’s forecasts are bleakest for Greece, whose economy is seen shrinking for a sixth successive year in 2013. It is expected to contract by 4.4 per cent, before finally managing a 0.6 per cent expansion in 2014. Unemployment is expected to peak this year at 27 per cent.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Life and Style
Suited and booted in the Lanvin show at the Paris menswear collections
fashionParis Fashion Week
Arts and Entertainment
arts + ents
News
i100
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project