FACTBOX-European Commission's in-depth review of EU economies

by Reuters
Wednesday, 5 March 2014 11:43 GMT

By Martin Santa BRUSSELS, March 5 (Reuters) - The European Commission published on Wednesday the findings of its in-depth review of 17 countries of the European Union that it checked for macro economic imbalances. Below is a short country-by-country summary of the report. FRANCE * Its trade balance and ability to compete have deteriorated, public debt is growing. France will miss both its headline deficit and structural adjustment targets. ITALY * Must tackle very high public debt and weak competitiveness, caused by sluggish productivity growth. * High public debt puts a heavy burden on the economy. Improvement in structural budget balance, which excludes the effects of the economic cycle and one-off revenues and spending, this year is insufficient because of the high debt. GERMANY * Its persistently high current account surplus does not create risks similar to large deficits but it still deserves very close attention. Berlin should aim to boost domestic demand and investment and strengthen growth potential. * Germany is expected to make adequate progress toward reducing its public debt ratio. SPAIN * Adjustment in progress. Yet magnitude and inter-related nature of the imbalances, in particular high domestic and external debt levels, mean that risks are still present. BELGIUM * High public debt remains a concern for the sustainability of public finances. Ability of manufacturing to compete internationally has been hampered. BULGARIA * Ongoing deleveraging of non-financial corporations could limit investment and growth in some sectors in the short and medium term. Labour market policies and the educational system have not been effective. CROATIA * Big external liabilities, declining export performance, highly leveraged firms and fast-increasing general government debt, all within a context of low growth and poor adjustment capacity. * On current trends, in the absence of additional measures, Croatia risks missing its deficit targets by a large margin in 2014. DENMARK * Expected to have sustainably corrected its excessive deficit in 2013. Denmark no longer faces substantial macroeconomic risks. FINLAND * Weak export performance in recent years, driven by industrial restructuring, cost and non-cost competitiveness factors, deserves continued attention. HUNGARY * Weakened exchange rate, poor growth potential and elevated financing costs have kept debt from declining. Hungary is not expected to meet its medium-term objective and its structural balance is projected to deteriorate in 2014. IRELAND * Financial sector developments, private and public sector indebtedness, and, linked to that, the high gross and net external liabilities and the situation of the labour market mean that risks are still present. LUXEMBOURG * Not experiencing macroeconomic imbalances. Growth model is based on an efficient financial sector, which has weathered the crisis well. MALTA * No longer experiencing macroeconomic imbalances. Financial stability indicators remain sound. Continuation of current prudent supervisory and risk-taking practices is key. THE NETHERLANDS * Macroeconomic developments regarding private sector debt and ongoing deleveraging, coupled with remaining inefficiencies in the housing market, deserve attention. Expected to miss deficit target this year, but more measures could be adopted. SLOVENIA * Risks stemming from the losses in cost competitiveness, the corporate debt overhang, the increase in government debt and an economic structure characterised by weak corporate governance warrant very close attention. SWEDEN * Developments regarding household indebtedness, coupled with inefficiencies in the housing market, continue to warrant attention. THE UNITED KINGDOM * Developments in the areas of household debt, linked to the high levels of mortgage debt and structural characteristics of the housing market, as well as unfavourable developments in export market shares, continue to warrant attention. (Reporting by Martin Santa and Jan Strupczewski)

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