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Member states ask EU to change its accounting rules

Countries say changes to accounting protocols could help cut their budget deficits.
Aug 17th 2010, 5:18 PM 250 0

NINE EUROPEAN UNION member states have written to the European Commission asking it to change its accounting rules in a bid to try and artificially lower their official budget deficits.

The countries, mostly from Eastern Europe, have asked the bloc to consider changing its classifications so that the costs of reforming their various pension schemes do not count towards their budget deficits.

Lithuania, Latvia, Bulgaria, Sweden, Slovakia, Hungary, Romania, Poland and the Czech Republic say that reform of their pensions systems, while expensive, create long-term benefit while inflating their short-term budget shortfalls.

In a letter obtained by Reuters today, the countries backed a German proposal to introduce new penalties for countries which exceed the Union’s ‘glass ceiling’ of running a budget deficit of more than 3% of GDP.

But they wrote:

Maintaining the current approach to debt and deficit statistics would result in unequal treatment of Member States and thus effectively punish reforming countries.

The European Commission has described the proposal to change budgeting rules as a “relevant” one, but insiders believe it would be difficult to change the rules as they form part of the Stability and Growth Pact, amendments to which would require the assent of all 27 member states.

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“There is likely to be some understanding for the position of the nine countries, but it is difficult to say how far it will go,” one source told Reuters. “To change the accounting rules everybody has to be on board, and some are not.”

Ireland is likely to face massive penalties from the EU one way or another, after its official statistical agency Eurostat ruled that Ireland’s costs of recapitalising Anglo Irish Bank would not be discounted from its budget deficit – meaning its deficit could be up to 24% of GDP, eight times the EU limit.

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Gavan Reilly

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