EBRD's Buiter sees more budget pressure in new EU

Buiter told a conference in Prague that the needs for infrastructure and environmental investments in central Europe would further burden already deeply unbalanced budgets.

Assistance from EU funds will not be sufficient, and there is a question over its size under the bloc's new budget beginning in 2007.

"The deficits are serious. They are ugly things," Buiter said. "And the pressure on these budgets is going to increase."

The largest new EU entrants are running budget gaps above the ceiling of three percent of gross domestic product, a level set in EU Stability and Growth Pact rules.

The three percent level is also a target they must meet to adopt the euro, despite the fact that a number of current euro zone members violate the rule.

Buiter said the Polish fiscal deficit would reach 7.6 percent of GDP this year, followed by a 6.2 percent gap in the Czech Republic, 4.5 percent shortfall in Hungary and 3.9 percent in Slovakia.

Buiter, who said he spoke on his own behalf and not for the EBRD, pointed to the uncertainty of the size of assistance from EU's structural and cohesion funds in the next budgetary period of the bloc.

Those EU members who are net contributors to the union's budgets are pushing for cutting the spending in the next budget that will run from 2007 to 2013.

Buiter also spoke in favour of enlarging the union further to include Turkey, which has long strived to open accession talks. The EU is due to decide by the end of this year whether it will start negotiations with the mainly muslim country of 70 million people.

"I am a strong proponent of the earliest possible membership of Turkey," Buiter said.

"From the economic point of view it clearly makes sense and I cannot imagine EU members would throw away the once-in-a- lifetime chance to embed this 99 percent Islamic but politically secular country into a set of stable democratic institutions in the EU."



Source: Reuters