Most euro zone countries will
reduce their budget deficits this year even though the recession in the single
currency area is likely to continue but some, like Spain, will badly miss
agreed targets, European Commission forecasts showed on Friday.
France and Portugal will also
miss their debt targets, the EU's executive said. All three countries have
already indicated as much and will now hope for more leeway from Brussels.
The European Union executive said
the euro zone economy would shrink 0.3 percent in 2013 after a 0.6 percent
recession last year, but the aggregated budget deficit will fall to 2.8 percent
of GDP from 3.5 percent. The euro slipped on the back of
the forecasts.
The euro zone is consolidating
its public finances to regain market trust after excessive government spending,
real-estate bubbles and lack of competitiveness triggered a sovereign debt
crisis that sent the euro zone into recession.
Under EU budget rules, sharpened
at the peak of the crisis in late 2011, euro zone countries can face fines if
they fail to take action to meet deficit reduction targets set by EU finance
ministers.
Progress has been uneven among
the 17 countries sharing the euro. The main laggard was Spain, which
badly missed the 6.3 percent of GDP deficit target for 2012 with a result of
10.2 percent. Even money the government spent on recapitalizing banks, the 2012
deficit is still well above target at 7.0 percent of GDP.
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