The Canadian Press - ONLINE EDITION
Posted: 04/10/2013 6:15 AM | Comments: 0
Last Modified: 04/10/2013 10:47 AM
BRUSSELS - The European Commission turned up the heat on Spain and Slovenia Wednesday, warning that the two struggling countries are facing "excessive" problems fixing their economies, while France's government came under pressure to get its debt under control.
In its health-check of European Union countries with debt and deficit problems, the Commission singled out Spain and Slovenia as countries where swift action was needed. Both countries have been hit by recession, high unemployment and ailing financial sectors.
The Commission's report recommended that the two countries must both move swiftly to fix their ailing banking sectors — either through recapitalizing or winding down some banks — to ensure a path toward sustainable growth.
As well as being the EU's executive branch in Brussels, the Commission is also the 27-country bloc's economic watchdog, with the power to identify and pressure countries with vulnerable economies into taking action.
Unveiling the Commission's finding, Olli Rehn, the EU's top economic official, said that Spain must maintain the reform momentum since country faces "formidable challenges."
The report added that "high domestic and external debt levels continue to pose serious risks for growth and financial stability" in Spain.
Spain, the EU's fifth-largest economy with a 1.04 trillion euro gross domestic product, is in its 18th month of recession with an unemployment rate of more than 26 per cent. The country's problems stem from its banking industry, which has been struggling under toxic property loans and assets since Spain's property bubble collapsed in 2008.
Spain has already received 40 billion euros in European Union assistance for its financial sector on the condition that it overhaul its banking sector. The country's government has also embarked on a program of harsh austerity measures to bring its deficit down from the current 6.94 per cent of GDP, way above the EU target of 3 per cent.
The Commission also warned that Slovenia faces a "substantial" risk from high corporate debt, bad loans and deteriorating public finances.
Markets have started worrying about Slovenia because of the nation's shaky banks, also reeling from a burst real estate bubble and unpaid property loans. While its overall public debt load of 48 per cent of its GDP is below the EU average of 85 per cent, the country of 2 million is already facing difficulties refinancing its debt, with its borrowing costs increasing steadily over the past months.
That has fueled fears it could soon find itself unable to afford to raise money on the international bond markets and become the sixth country among the 17 EU countries that use the euro — after Greece, Portugal, Ireland, Spain and Greece — to seek a rescue loan package.
The Commission identified 11 other countries in its report with deficit and debt problems, but said their problems were not as bad as Spain and Slovenia's. The countries were: Belgium, Bulgaria, Denmark, France, Italy, Hungary, Malta, the Netherlands, Finland, Sweden and the United Kingdom.
However, Rehn did warn that France, the second-largest economy in the EU, must strengthen its reform effort to regain competitiveness, and show "decisive action" to tackle its growing debt burden.
"There are too main challenges for France: the deterioration of its exports performance ... and the elevated level of public debt," he said.
The "high and increasing" debt burden is weakening France's position to react to any adverse shocks, thereby endangering the domestic economy and even the eurozone as a whole, it warned.
"France's public sector indebtedness represents a vulnerability, not only for the country itself but also for the euro area as a whole," the report said.
France's debt is set to exceed 93 per cent of its GDP by the end of this year, the Commission said.
With the French economy in recession and persistently high unemployment, the government in Paris is struggling to get the budget deficit under control and is set to miss this year's target of 3 per cent of GDP.
The EU will decide in May whether to grant France an additional year to meet the target or to launch a procedure that could lead to economic sanctions.
Have you found an error, or know of something we’ve missed in one of our stories? Please use the form below and let us know.
Having problems with the form?Contact Us Directly
RCMP at offices of construction firm in charge of police HQ reno
Teen's death manslaughter, court rules
Roommate sentenced to 15 years for grisly killing
Obama: US re-establishing relations with Cuba
Trucking firm in mourning after driver killed in crash
Bombers fire coach Etcheverry
Tickets to In Flames show on sale Friday
ELA granted charitable status
Treaties among documents to be on display at CMHR
17% approval blamed on rebels
Latest BlackBerry isn't a 'rehash,' says CEO
Holiday Checkstop Program out in full force
Pedestrian in hospital after being hit by bus
Pakistan buries victims of school massacre
D-Day vet receives Legion of Honour
Poll indicates turmoil in the NDP has upset business leaders
Dad happy Rehtaeh Parsons' name public again
NYC premiere of Rogen film cancelled as threats fly
Canada man finds woman for free trip around world
New initiative to make air travel easier
AP Exclusive: Sydney hostage planned daring escape
Man arrested after woman found dead in motel
Third time's the charm for bloated Hobbit
Wholesale industry rebounds in October
Return to Dog River so much fun you could spit
Generosity our hallmark
Mainly sunny today, but chilly
On-site tap rooms pondered at local craft breweries
Combining Hanukkah and Christmas doesn’t have to be like mixing oil and eggnog
Magnotta jury asks question on Day 2 of deliberations
Irish lawmakers open probe into banking crisis
Inquest resumes into fatal Quebec blaze
Israel suffers sharp rebuffs from Europe
Church of England appoints first female bishop
Afghan insurgents storm bank in south, killing 10
McDonald's in Japan limits orders of fries