The European Commission on Wednesday took disciplinary steps against six European Union (EU) members as economic stimulus spending pushed up their budget deficit beyond the EU limit.
"For the member states where the general government deficit climbed above the three-per cent reference value in 2008, the commission on Wednesday adopted excessive deficit reports," the EU's executive arm said in a statement.
The move was seen as the first step in the EU's procedure for addressing excessive deficits.
Against the backdrop of the ongoing economic downturn, budgetary positions are estimated to have deteriorated markedly in 2008 in the six EU countries, namely Ireland, Spain, France, Latvia, Greece and Malta.
All six had a budget deficit of more than 3 percent last year.
The EU's Stability and Growth Pact requires member states to keep their budget deficit below three per cent of their gross domestic product (GDP) in normal times.
But the pact allows certain flexibility in exceptional circumstances such as the current economic crisis.
It is estimated the French budget deficit reached 3.
2 per cent in 2008 and was set to increase to 4.
4 per cent in 2009 before falling to below three per cent in 2011 due to enormous spending on financial bailouts and economic stimulus measures.
In 2008, for the first time in several years, Spain is estimated to have recorded a budget deficit estimated at 3.
4 per cent of its GDP and the figure will rise to 5.
8 per cent this year.
The commission said exceptional circumstances are considered where appropriate.
"In all other cases, the commission will use the full flexibility imbedded in the revised Stability and Growth Pact when considering the next steps under the excessive deficit procedure in the weeks to come," said Joaquin Almunia, EU commissioner for Economic and Monetary Affairs.
As to the other 10 EU member states, including Germany and Britain, the commission said although they managed to keep their budgetary deficit under the 3-percent ceiling in 2008, their budgetary position could get worse since a majority of them have adopted fiscal stimulus measures in 2009 to cope with the economic crisis, coupled with the adverse impact of the downturn.
After successfully reaching a close-to-balance budget in 2007 and 2008, Germany, the EU's biggest economy, faces deterioration in its public finances due to overall worsened economic situation and as a result of the steps undertaken to counter the sharp slowdown caused by the global economic and financial crisis.
It was forecast that Germany's budget deficit will hit three per cent of GDP this year and climb further to four per cent in 2010.
Given the sharp deterioration in the global economy and distress in the financial sector, the budgetary strategy is subject to downside risks, the commission warned.
Hard hit by the financial crisis, Britain's budget deficit was estimated at 5.
5 per cent in the fiscal year into 2009 and is forecast to peak at 8.
2 per cent in the next year.
"We are going through a very serious crisis that is taking its toll on public finances," Almunia said.
If targeted with excessive deficit procedure, an EU member state would usually be required to bring its swelling deficits back in a certain period and only euro zone countries could in theory face penalty if they fail to do so.
Considering the current situation and the need to boost the economy through public spending, it was widely expected that the EU would be ready to allow more time for its member states to cut deficits, while Almunia downplayed the possibility of any penalty.
"Nobody is thinking about sanctions," he said.