ECONOMIC FORECASTS: MORE SIGNS OF RECOVERY, BUDGET AND EMPLOYMENT WARNINGS.

Controlling budgets.

Compared to 2003, government deficits are expected to deteriorate this year in several EU countries, though improvements in Germany, Spain, France, Austria and the United Kingdom will offset the trend. In the case of Denmark, Sweden and Finland, the deterioration is due to a fall in the surplus. In some cases, the situation calls for activation of budgetary surveillance systems provided for in the Treaty and the Growth and Stability Pact. The Commission therefore announces the following measures:

- Netherlands: the situation has deteriorated more than expected, Mr Solbes said, and the breach of the 3%-of-GDP deficit ceiling in 2003 requires the immediate preparation of a report on the existence of an excessive deficit (Article 104(3)). The Dutch Government announced measures to adjust the situation in 2004 at the informal EcoFin Council on April 2. The Commission recommends they be implemented without delay and will decide, on the basis of their effect, whether or not to initiate the next phases of the excessive deficit procedure (EDP).

- Italy: the situation is deteriorating considerably, said Mr Solbes, despite targeted measures, and the budget deficit went up to slightly below 2.5% of GDP in 2003 but is expected to exceed 3% of GDP in 2004. The interruption in the reduction of the national debt burden, which at 106% of GDP is the highest in the Euro-zone, is a further source of concern. This requires the immediate activation of the early-warning mechanism, which the Commission services are preparing.

- Greece: the situation continues to cause concern. Government data shows a budget deficit increase to just below 3% of GDP in 2003 and the Commission projects a deficit in excess of 3% in 2004. However, the data for 2003 are not validated by Eurostat and do not therefore provide a reliable basis for assessing the budgetary situation at this stage. A fact-finding mission is being prepared for the end of April in order to have more information about the budgetary situation in this country and decide on steps to be taken.

- Portugal seems to be on the right track, Mr Solbes said. The budget deficit has been maintained below 3% of GDP in 2002 and 2003. Portugal has therefore complied with the terms of the excessive deficit recommendation addressed to it in 2002. Accordingly, the Commission will propose the abrogation of the excessive deficit procedure.

- United Kingdom: the latest estimates show a budget deficit of 3.2% of...