Croatia deficits under scrutiny

The Commission recommends placing Croatia in the excessive debt procedure

The European Commission today recommended that European Union member states take action to encourage Croatia to reduce its debt and deficit to levels permitted under EU rules.

Croatia’s deficit amounted to 5% of the country’s gross domestic product (GDP) in 2012 and is forecast to increase in both 2013 and 2014, the Commission said.

It is asking EU finance ministers to place Croatia in the “excessive deficit procedure” and set deadlines for the government to bring the Croatian deficit below 3% by 2016.

Under EU laws, member states are required to keep their deficits below 3% of GDP and their total government debt below 60% of GDP.

The Commission predicted that EU finance ministers would discuss the recommendation at their meeting in Brussels on 28 January 2014.

If ministers adopt the recommendation, it will not be binding on Croatia.

The council has the power to issue revised recommendations, where earlier ones have been ignored, and can suspend the delivery of EU cohesion funding.

Eurozone members that ignore recommendations issued to them under the excessive deficit procedure face fines of up to as much as 0.2% of GDP.

Finance ministers meeting in Brussels today issued Poland with a new recommendation on bringing its deficit to below 3%, observing that it had failed to comply with an earlier recommendation from June.

Neither Poland nor Croatia are members of the eurozone.

Malta, Denmark, Cyprus, Austria, Belgium, Czech Republic, the Netherlands, Portugal, Slovenia, Slovakia, France, Ireland, Greece, Spain and the UK are also currently subject to the excessive deficit procedure.

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