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European auditors ask Brussels for a hard hand with the most indebted countries

The Court of Auditors warns that Member States do not have the margin to face a new recession

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European auditors ask Brussels for a hard hand with the most indebted countries

No one knows when next recession is about to erupt. Nor with what force will it strike Europe. But economic cycles continue to exist, and European auditors believe that Member States are not preparing mselves as y should when skinny cows arrive. In a report released on Thursday, Court of Auditors points to high public debt of community partners as big weak point of twenty-eight if crisis returns to ground. Although he points out to players, study charges blame against referee: he regrets that European Commission has allowed rules to be systematically disobeyed, and accuses him of not exercising his job as a guarantor of public finances as he should.

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"The flexibility provisions introduced by Commission were not subject to duration of crisis period, and in practice y came too far," criticizes Neven mates, who is in charge of report and former IMF manager.

The Stability and Growth Pact is instrument with which European Commission can loosen or tighten noose to neck of defaulting countries. ECB president Mario Draghi often qualifies as anchor of confidence in European project. Its standards revolve around two figures (3% deficit over GDP and 60% of public debt). After years of warnings and fine threats, only Spain remains above first threshold in deficit.

The second, sovereign debt, is much more crowded: 15 EU countries exceeded it at close of 2017, including Greece (178.6%), Italy (131.8%), Portugal (125.7%), Belgium (103.1%) and Spain (98.3%). The auditors accuse commission of reducing requirement for adjustment and not paying sufficient attention to matter. "This is particularly worrisome in case of some Member States with high proportions of public debt, because in next recession, ir budgetary sustainability may cause concern in markets," y warn.

Despite high growth rates, independent Tax Liability Authority (AIREF) estimates that at least up to 2035 will have to be expected for Spanish public debt to fall below 60% of GDP, limit set in Maastricht criteria for Create single currency. European auditors believe that Brussels has sinned from flexibility, and urges it to use it more harshly. "The Commission should ensure that budgetary objectives are met within a reasonable timeframe and that stricter rules are applied to heavily indebted Member States," y say.

The context seems favorable on side of economy. The EU grows above 2%, and none of twenty-eight states walk on negative ground. However, it is not so clear that it is on side of politics. With Brexit of Fondo and Italia (one of most indebted economies) waving europhobia and criticizing intrusions of Brussels, most suitable moment for Community executive to embark on a spiral of reproaches is not just coming.

The macroeconomic boom is re, as European Commission remembers with last great mantra that has emerged from Brussels lecterns, that of solid recovery. That is why auditors are now estimating time to make sure that public debt ratios are declining at rate y owe. "In period of recovery and expansion between 2014 and 2018, structural balances of several heavily indebted countries have deviated from ir objectives or have converged on m at such a slow pace that it is far from being guaranteed a substantial improvement before The next recession, "says Neven mates.

The Court of Auditors sees it as necessary to have a margin of manoeuvre for recessions that are not currently in existence, so it calls on Commission to be didactic but firm. "Country-specific recommendations should include explicit adjustment requirements, with a clearer explanation of ir justification and risks if y do not apply," he advises.

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  • Central banks call on sourn euro countries to cut debt
  • European auditors criticize in a report inefficiencies of bird in Spain

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