European Union Supports UK Budget Cuts
On Tuesday, the executive body for the European Union praised the austerity plans that were announced by the new coalition government last month. The European Commission says that the plans should allow the UK to cut its budget deficit to less than the European Union’s cap.
In March, the Commission had embarrassed the Labour government, saying that their plans weren’t ambitious enough. Later, the European Union and Commission gave the country until 2014-15 to decrease the deficit to less than the bloc’s ceiling of 3% of gross domestic product from over 12% anticipated this year.
Now the Commission is supporting the new plans, saying that it will allow the country to meet the deadline. Olli Rehn, the European Union Monetary Affairs Commissioner, said that the current circumstances of the economy call for a decisive fiscal consolidation. The budget cuts presented by the UK are in line with the strategy, he added.
The Commission also said that the cuts will start in 2010-11, reducing about 1% of GDP, which will lead to a deficit of 2.3% of GDP by the deadline. These measures will boost the confidence of British public finance investors, it added.
The budget deficits of many European Union countries has ballooned due to the recession, which undermined government revenues and saw fiscal stimulus programs boost spending. However, since the debt crisis in Greece threatened to spread, many have governments started announcing austerity measures.
The Commission says that fiscal consolidation won’t be easy for Britain, as 75% of the overall deficit cut is coming from reduced spending. They added that implementing the planned cuts will be challenging, as this includes a 25% cut in departmental budgets during a 4-year period.