European Commission warns Italy and Spain over 2014 draft budgets

The European Commission has warned Italy and Spain that their draft budgets for 2014 may not comply with new eurozone debt and deficit rules.

The European Union’s executive arm also said French and Dutch plans only just passed muster.

Non-complying countries may have to revise their tax and spending plans before re-submitting them to national parliaments.

It is the first time the Commission has done this.

The European Commission has warned Italy and Spain that their draft budgets for 2014 may not comply with new eurozone debt and deficit rules

Under EU rules, eurozone member states are obliged to cut deficits until they achieve a balanced budget or go into surplus.

They also have to reduce public debt levels.

The European Commission does give countries some flexibility if their deficit is below the EU ceiling of 3% of gross domestic product (GDP) and their debt levels are falling.

But when Italy, the eurozone’s third largest economy, asked for such leniency over its 2014 budget plans, the Commission refused because its public debt is still rising.

France, which has slipped back into recession, has taken steps to cut its deficit to below the 3% threshold, but its structural reform plans were only making “limited progress”, the Commission said.

Other countries at risk of breaking EU rules included Finland, Luxembourg and Malta.