Optimistic economic outlooks attacked

The European Union has criticised
the UK and other European nations for having “optimistic” growth
assumptions and bloated deficits.

The UK must tackle
“uncertainty” in plans to cut its deficit, the EU said.

EU rules say government deficits
must be below 3 per cent of GDP, but the UK’s deficit is expected to hit $273
billion – or 12.6 per cent  of GDP – this
year.

Germany, France, Spain and Italy
were also warned they were over-reliant on economic recovery to meet debt
targets.

Brussels was commenting on plans by
some of the biggest EU countries to bring down public spending.

As was reported earlier in the
week, the report warned that the UK was not on course to cut its deficit in
line with EU rules by a deadline of 2015.

“The absence of detailed
departmental spending limits is a source of uncertainty,” the European
Commission said.

In the run-up to next week’s
Budget, UK chancellor Alistair Darling has defended the government’s approach
to the deficit, arguing that cutting it too quickly by reducing government
spending would risk harming the UK’s emergence from recession.

The shadow chancellor, George
Osborne, said the report’s conclusions – that the government needed to cut
spending more rapidly – were “a heavy blow for Gordon Brown’s credibility”.

One of the other countries
criticised was Spain. The report said Spain’s forecast that it would cut its
deficit to 3 per cent of GDP in 2013 from 11.4 per cent in 2009 was based on
“markedly” optimistic growth forecasts.

The pace of bank restructuring in
Spain, which the EU said posed a risk to growth, was also attacked as being too
slow

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