Cyprus could face EU fines for failing to tackle deficits

Cyprus could face EU fines for failing to meet its shared commitments on debt and deficit ceilings after being singled out by EU Commissioner Olli Rehn during an EU financial forecast presentation today.

Rehn said Cyprus – along with Malta, Belgium, Hungary and Poland – has failed to tackle its excessive deficits and would be receiving stern letters from Brussels in the coming days.

“I have already given an early warning to the ministers of these countries during the last Ecofin Council (held on Tuesday) and will be sending letters with our requests to these specific member states,” Rehn said.

Last month Rehn highlighted Cyprus and Belgium: “As examples of those which could be at risk (of EU sanctions) if they do not make significant adjustments to their public finances within the next couple of months”

The government has said that its 2012 budget is geared towards reducing its fiscal deficit to 2.3 per cent from around 6.0 per cent in 2011.

The comments were made during this morning’s presentation on the EU’s latest growth forecasts, which predict the eurozone will grow by just 0.5 per cent with unemployment stuck at 9.5 per cent as world trade growth slows. 

Cyprus’ forecast annual economic growth is 0.3 per cent.

“Stagnation of GDP is expected in the coming quarters well into 2012…. (but) on the upside, confidence might return faster than assumed if (governments) prove their worth.” Rehn said

The EU wide prediction is also a marked contrast to the 1.4 per cent growth that the EU forecast six months ago.

His comments follow news that Italy has found buyers for all €5 billion worth of 12 month bonds, although the yield rose to 6.087 per cent from 3.57 per cent for a similar auction that took place in last month, suggesting a drop in investors’ confidence. 

Click on the link below to read Cyprus’ financial forecast.

 

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