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Tuesday, July 6, 2010

U.K. Taking effective Action to Reign in Deficit, EU Says


The European Union said the U.K. has taken effective action to rein in its excessive budget deficit.

“The current economic circumstances call for a decisive fiscal consolidation, while not suffocating the nascent economic recovery,” EU Economic and Monetary Affairs Commissioner Olli Rehn said in a statement issued today in Brussels. “The budgetary targets presented by the U.K. government are in line with this strategy.”

U.K. Chancellor of the Exchequer George Osborne said on June 22 that the government will reduce spending on welfare benefits by 11 billion pounds ($16.7 billion) by April 2015 to help tackle the nation’s record budget deficit. The budget cuts the fiscal deficit by an extra 40 billion pounds by the end of this Parliament on top of the 44 billion pounds planned by the previous Labour government.

“Implementing the planned spending cuts - including a 25 percent reduction in departmental budgets in real terms on average over a four-year period - will be challenging,” the EU said today. “The new Office of Budget Responsibility and the new fiscal rule announced by the U.K. authorities should however contribute to improve the fiscal framework and limit the risks to the adjustment,” it said.

“Provided they are implemented as planned, the measures announced will strengthen confidence in the U.K.’s commitment to putting its public finances back on a sustainable path,” the EU said.