The Netherlands curbed its 2004 budget deficit to meet European Union requirements and EU finance ministers should therefore end the disciplinary action taken against it, the European Commission said today.
The Netherlands exceeded the EU's budget deficit limit of 3.0 per cent of gross domestic product in 2003 with a shortfall of 3.2 per cent.
EU finance ministers therefore told it in June 2004 to cut the deficit to below the threshold by 2005. That recommendation was one of the first steps in the Stability and Growth Pact's excessive deficit procedure, which is launched against member states breaching the 3 per cent limit, established to safeguard the EU's public finances and the euro.
Further potential steps against a country which does not bring its finances in order include more detailed instructions and eventually fines, although this has never happened yet.
The Dutch deficit shrank to 2.3 per cent of GDP already in 2004 and in April Monetary Affairs Commissioner Joaquin Almunia said he would propose ending the excessive deficit procedure after forecasting the gap would shrink further to 2.0 per cent this year and 1.6 per cent in 2006.
"The Commission recommends to the Ecofin Council (of finance ministers) to abrogate its June 2004 decision, thereby closing the excessive deficit procedure," the Commission said in a statement.
If the council of finance ministers declares the Netherlands in the clear at its next meeting on June 6th-7th, there will still be nine countries left in the excessive deficit procedure and two more likely to join in coming weeks.
In the euro zone, Germany, France and Greece are already in breach of the deficit rules and the Commission is likely to declare Portugal and Italy above the limit soon. Among the non-euro members, the Czech Republic, Cyprus, Hungary, Malta, Poland and Slovakia all exceed the 3 per cent limit.