European commission's spring forecasts put UK budget deficit this year at 12% of GDP – the highest in the European Union and worse than Treasury estimates
Katie Allen
The UK budget deficit will swell this year to overtake Greece, becoming the worst in the European Union, the European commission said today in a stark warning on the eve of the election.
The commission's spring economic forecasts put the UK deficit for this calendar year at 12% of GDP, the highest of all 27 EU nations and worse than the Treasury's own forecasts.
The country's budget shortfall was the third largest in the EU last year but will overtake both Greece and Ireland this year, according to the forecasts. Greece's measures to tackle its public finances problems are seen cutting the deficit there to 9.3% of GDP.
Worries about Britain's public finances – in their worst state since the end of the second world war – continue to unnerve financial markets and analysts are divided over whether a hung parliament will have the clout to rapidly reduce the deficit.
"The first thing for the new government to do is to agree on a convincing, ambitious programme of fiscal consolidation in order to start to reduce the very high deficit and stabilise the high debt level of the UK," said European economic and monetary affairs commissioner Olli Rehn.
"That's by far the first and foremost challenge of the new government. I trust whatever the colour of the government, I hope it will take this measure".
The deficit forecasts are an improvement on the commission's last outlook for the UK but they still paint a gloomier picture than the government itself.
In financial year terms, the commission's forecasts are for a worse deficit than predicted by Alistair Darling at his March budget. In 2010/11 the commission puts the deficit at 11.5% of GDP, compared with Darling's forecast for an 11.1% ratio of public sector net borrowing – the gap between tax and spending – to GDP.
The EU's executive did double its forecast for UK growth this year to 1.2% from 0.6%, in line with a March budget forecast for 1-1.5%. But in 2011 it warns growth will only pick up to 2.1%, significantly below a Treasury forecast of 3-3.5%.
It described a "a slow start to a protracted recovery", highlighting pressures on private consumption, a key growth driver, from employment worries and stagnant wages.
The Guardian
