The budgetary position of euro zone countries improved last year, but governments failed to capitalise on the opportunities provided by the highest economic growth for a decade, the European Commission said today.
The Commission acknowledged, in a review of how countries scored against the economic targets for 2000 agreed by the European Union's heads of state last spring, that budget deficits were falling in all 12-nation euro zone nations.
But it said that with growth in the EU an estimated 3.4 per cent in 2000, countries should have gone further, for example by cutting government expenditure, to put finances in shape.
Budgetary consolidation progressed in 2000 to the extent that actual positions improved in all countries. However, the improvement essentially stemmed from higher than anticipated growth, the Commission said in its report on the implementation of the so-called Broad Economic Policy Guidelines.
Clearly, euro area member states as a whole did not seize the opportunity to improve underlying positions. The European Union executive said it estimated the aggregate budget deficit for the euro area, including Greece, fell half a percentage point to 0.7 per cent.
It warned however that some of the budget deficit targets governments have set themselves for future years are not likely to be fully met , partly because tax cuts in many countries have not been offset by tighter spending.
In January the Commission took unprecedented step of recommending that Ireland should be formally censured for pursuing economic policies inconsistent with agreed European guidelines.
The Commission believes Mr McCreevy's December budget could seriously contributeto overheating in the Irish economy.