Commission Assesses Convergence Programmes Of Hungary, Sweden And United Kingdom

by Carla Johnson, Investors Offshore.com, London

24 January 2008

The European Commission on Wednesday published its assessment of the convergence programmes of Sweden, Hungary and the United Kingdom.

Having examined its updated convergence programme, the European Commission suggested that Sweden’s budgetary stance is a sound one, as it has surpassed its medium-term objective, a surplus of 1% of GDP, by a large margin and plans for equally safe positions in the years ahead.

The pace of fiscal consolidation in the United Kingdom appears insufficient, according to the EC, and should be strengthened significantly.

It went on to add that with regard to Hungary, the budgetary stance in its updated programme seems broadly consistent with a durable correction of the excessive deficit by 2009.

However, for this to happen, the government needs to implement the planned budgetary measures and structural reforms fully and effectively. The EC suggested that Hungary is at high risk with regard to the long-term sustainability of its public finances, while the United Kingdom is at medium risk and Sweden at low risk.

Economic and Monetary Affairs Commissioner Joaquín Almunia explained that:

“The three convergence programmes examined today show how diverse Member States' fiscal policy challenges and responses are. Sweden expects to run a budget in surplus throughout the programme period, already has low and rapidly declining debt, and is at low risk with regard to the long-term sustainability of its public finances."

"In the UK, the budgetary situation is expected to deteriorate significantly in the present fiscal year and the projections for the following years appear rather optimistic considering that it is facing a less favourable economic situation. Consequently, the UK should aim to substantially improve its budgetary position and significantly strengthen the pace of fiscal consolidation throughout the programme period."

"Hungary must take adequate action to ensure the correction of the excessive deficit as planned, where necessary through additional measures. Reinforcing fiscal governance and completing the structural reforms which are essential to improve the long-term sustainability of public finances are crucial in moving towards lasting convergence.”

The Commission also assessed the Stability Programmes of Finland, Germany, Luxembourg and the Netherlands. On 30 January it will examine a second group of programmes, and all the programmes are then expected to be discussed at the 12 February EU Finance Ministers Council. The remaining programmes will be assessed by the Commission in February.

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