Tags: EU | EU | Britain | Deficit

EU Tells Britain to Cut Deficit Faster

Wednesday, 17 Mar 2010 10:48 AM


The European Union's executive told Britain on Wednesday to speed up its deficit cuts, warning that the government is too optimistic about economic growth — a warning Britain says it will ignore.

A European Commission report says Britain is currently ignoring a 2014-2015 deadline set by other EU nations to bring its deficit down to an EU target of 3 percent of gross domestic product.

This is the longest deadline for any EU government. Most plan to reduce deficits by 2012.

The EU asks Britain to make sure the deficit doesn't grow any more in 2010-2011 and to "strengthen the pace" of budget cuts so that Britain could hit the 3 percent target by 2015 and start reversing its swelling overall public debt.

It also warns Britain that the economic climate over the next few years could be "distinctly less favorable" than Britain is currently assuming.

British Treasury chief Alistair Darling said Tuesday Britain would tip back into recession if it followed the budget cuts the EU recommends.

It would take 25 billion pounds out of the British economy and risk "seriously derailing the economy and tipping our economy back into recession," he told reporters.

He said he had no plans to heed the EU's recommendations. Britain is not a member of Europe's currency union and faces no real threat of sanctions if it ignores what the EU says.

"We make our own decisions in the U.K. and as long as we are in government and I am the Chancellor that will remain the position," he said.

However, EU criticism of the size of Britain's deficit adds to political pressure on Darling's Labour party ahead of a general election expected in May.

Darling says he has the "most aggressive plan of any advanced economy" to reduce the deficit. He intends to reduce its deficit from 12.7 percent of GDP in the 2009/2010 fiscal year to 5.6 percent of GDP in 2013/2014 and 4.7 per cent in 2014/2015.

The EU says he is postponing most of the cuts until after 2011 with a "tight overall spending envelope" until 2015. It criticizes Britain for not setting detailed spending limits for government departments, saying this is "a source of uncertainty."

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