EU warns states on budget plans

June 7, 2011 - 10:14 AM

BRUSSELS (AP) — Plans by European Union governments to cut budget deficits and boost their economies are often too vague and not ambitious enough, the bloc's executive warned Tuesday as part of a broader effort to prevent another economic crisis.

For the first time this year, EU states had to submit their plans for government budgets and economic reforms to the European Commission as part of an annual exercise introduced last fall when the bloc was reeling from a steep economic downturn.

The Commission's country-by-country policy recommendations seek to catch unsustainable developments before they lead to another systemic crisis, like the one that has already pushed five EU states — the euro countries Greece, Ireland and Portugal as well as Romania and Latvia — to seek billions of euros in international help.

"However, some of the programs (submitted by member states) show an insufficient level of ambition and others are lacking specificity," Commission President Jose Manuel Barroso told journalists in Strasbourg, France.

Some states are not doing enough to cut government spending in line with EU rules and don't have clear plans for getting people back to work, according to the Commission's assessment. Long-term unemployment and joblessness among young people and women also are serious problems in countries that have not been so hard-hit by the crisis, the Commission warned.

The EU has had limits on government deficits and debts for years, but those rules were repeatedly flouted before the crisis. The budget and reform recommendations form part of a larger push to make those rules more effective — and broaden them to include dangerous trends such as housing and banking bubbles, but their implementation is still up to individual states and depends largely on naming and shaming by the Commission and other EU countries.

Separate legislation that would allow fines to be levied on country's whose finances and economies are out of line is currently being battled out by member states and the European Parliament.

"Our economies are now interdependent to a degree never before seen, and this demands that we cooperate more closely and effectively than we have in the past," Barroso said.

The recommendations give the EU an opportunity to point out flaws in more healthy economies, such as Germany, Austria and the Netherlands, at a time when much of its attention is focused on the already bailed-out countries. That is important because both Ireland and Spain, which are now facing severe fiscal challenges, were long seen as model states as problems in the housing markets and banking sectors were ignored.

Besides the budget plans, EU states also were asked to set out how they plan to reach broader goals such as boosting renewable energy, cutting carbon dioxide emissions and stopping children from dropping out of school.

While states are on track to meet those promises, "additional efforts will be needed to reach the targets in the areas of employment, research and development, energy efficiency, tertiary education and poverty reduction," Barroso said.