BRUSSELS (AP) — The European Union’s monetary affairs commissioner says that five countries face sanctions under the bloc’s new spending rules because they are not doing enough to cut their budgets.Olli Rehn warned Belgium, Cyprus, Hungary, Malta and Poland may be the first to get penalised under the EU’s strengthened stability and growth pact set to come in force in mid-December.
Under the new rules, sanctions for countries that break the caps on budget deficits and debt levels become more automatic, in an effort to prevent a worsening of the debt crisis.
Rehn said “What we need now is unwavering implementation… I will start using the new rules of economic governance from day one.”
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
BRUSSELS (AP) — The European Union has warned that the 17-country eurozone could slip back into recession next year as the debt crisis shows alarming signs of spinning out of control.
The EU’s economic watchdog, the European Commission, said Thursday its central forecast is that the eurozone will grow by only a paltry 0.5 per cent in 2012. That’s way down on the 1.8 per cent prediction it in the spring.
“Growth has stalled in Europe, and there is a risk of a new recession,” The EU’s Monetary Affairs Olli Rehn said in a statement. “While jobs are increasing in some member states, no real improvement is forecast in the unemployment situation in the EU as a whole.”
The sharp cut in the forecast comes as the eurozone’s debt crisis has spread alarmingly to Italy, the single currency bloc’s third-largest economy. The interest rate on Italy’s 10-year bonds has reached the same levels that forced Greece, Portugal and Ireland to request multibillion euro bailouts.
Speculation that Premier Silvio Berlusconi will officially resign within days and be replaced by leading economist and former Commissioner Mario Monti has helped calm the market mood somewhat Thursday.
Greece, meanwhile, remains in political chaos as party leaders have failed for several days to appoint an interim governments, putting the country in serious danger of defaulting on its massive debts before the end of the year.
EU unemployment will be stuck at 9.5 per cent for the foreseeable future, the Commission warned.
The report also contained some worrying figures for some individual member states.
Italy is unlikely to fulfil its promise of balancing its budget by 2013 if recently promised austerity and reform measures aren’t implemented. According to the forecast, which does not take into account the most recent promises, Italy will still run a deficit of 1.2 per cent, with debt close to 119 per cent of economic output.
Berlusconi has come under so much pressure that he promised to resign as soon as the new budget has been passed. The Commission this weeks started a verification mission in Rome to check on Italy’s efforts, with the International Monetary Fund to follow soon.
Rehn warned that if several states don’t soon implement additional measures to get their spending budgets control, he will start using new powers to sanction overspenders set to come into force in the coming weeks.
“What we need now is unwavering implementation,” Rehn said. “On my part, I will start using the new rules of economic governance from day one.”
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