Eurozone nations lay out budget cuts

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http://news.yahoo.com/s/ap/20100607/ap_ ... isis/print

Eurozone nations lay out budget cuts
By AOIFE WHITE, AP Business Writer Aoife White, Ap Business Writer
45 mins ago

LUXEMBOURG – The 16 nations that use the euro will lay out plans to cut public spending Monday as they try to convince jittery markets that no more countries will need bailouts and that the debt crisis can be contained.

Despite a massive rescue plan and pledges to cut deficits, confidence in the currency and European countries' ability to handle heavy debt loads remains fragile — the euro has touched a series of four-year lows in recent days and stock markets have fallen.

The latest hit came from Hungary, which is not part of the common currency but where some government officials warned the country is close to default — two years after it received a bailout from the EU and the International Monetary Fund.

Hungary's government has tried to downplay those comments, but the impact — pushing the euro below $1.19 on Friday for the first time since March 2006 — highlights how closely market fears stalk the region.

Dutch Finance Minister Jan-Kees de Jager shrugged off the new drop, telling reporters that "the present exchange rate of the euro is at its historic average" and that eurozone average debt and deficit amounts are still below countries like the United States, Japan and Britain.

European nations pushed for an immediate start on budget cuts at a weekend Group of 20 meeting of finance ministers from leading rich and emerging countries. The U.S., by contrast, called for governments to take care withdrawing stimulus spending that supports growth.

EU Economy Commissioner Olli Rehn said Europe's governments need to tackle debt and deficit as a priority in an opinion piece to be published in French daily Le Monde on Tuesday.

Europe is "not out of danger," he warned, and budget cuts should be in place by 2011 "when the economic recovery should be picking up."

Rehn rated Hungary's latest crisis as "shadow boxing," telling reporters in Luxembourg that "it's not a real crisis."

Hungary's economy minister Gyorgy Matolcsy said the country is still aiming to bring its budget deficit — the gap between government spending and revenue — down to 3.8 percent this year, downplaying comments by officials that it could go as high as 7.5 percent.

However, trade unions warn that budget cuts could be going too far and could choke a fragile recovery that so far relies more on exports than domestic demand in European countries where people are still slow to spend and companies are reluctant to hire new workers.

Unemployment in the eurozone reached a ten-year high of 10.1 percent in April — adding extra welfare costs to governments struggling with higher outgoings, lower tax revenue and debt that has soared since they paid out hundreds of billions to shore up the region's banking system.

There is intense pressure on all countries to make cuts. Even Germany, Europe's largest economy with one of the region's lowest deficits, is laying out plans to cut social welfare benefits, slash public sector jobs and raise taxes.

Spain and Portugal were ordered to make bigger cuts last month and Greece has agreed to a harsh austerity program in return for a euro110 billion ($132 billion) EU-led rescue package. Italy also recently promised cutbacks.

Britain is likewise warning that it will need to squeeze public spending. British Prime Minister David Cameron said "the overall scale of the problem is even worse than we thought." He gave no details of possible cuts, but suggested that welfare programs and the civil service could be targeted.

Monday's talks between eurozone finance ministers will be followed by a meeting of most European Union finance ministers and EU officials who will thrash out plans for long-term ways to avoid a new economic crisis, including a proposal for more EU oversight of national budgets.

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Associated Press writers Emma Vandore in Luxembourg, Greg Keller in Paris, Pablo Gorondi in Budapest and Bob Barr in London contributed to this story.

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http://finance.yahoo.com/news/Germany-m ... l?x=0&.v=5

Germany moves to save $96 billion by 2014
German Cabinet completes major package of public savings amid debt crisis

Topics:International
Geir Moulson, Associated Press Writer, On Monday June 7, 2010, 10:33 am
BERLIN (AP) -- Germany will cut welfare benefits, introduce new taxes and shed government jobs to save as much as euro80 billion ($96 billion) through 2014 and set an example to the rest of Europe, Chancellor Angela Merkel said Monday.

The wide-ranging savings package finalized by the Cabinet includes cuts in payments to new parents, more taxation on the nuclear power industry, shedding 10,000 government jobs over four years, and delaying the building of a replica of a Prussian palace in the heart of Berlin.

While Germany's finances are in a better state than those of many others in the 16-nation eurozone, its budget deficit is still above the maximum allowed by European Union rules and it has been particularly keen to preach the virtues of solid budgets.

"Germany, as the biggest (European) economy, has the outstanding task of setting a good example," Merkel said at a news conference after her Cabinet thrashed out the package at a two-day meeting.

"I must say that the last few hours were a singular show of strength -- about euro80 billion needs to be saved though 2014 so that our financial future can once again stand solidly," she added.

"The last few months have shown -- in connection with Greece and other euro states -- what outstanding significance solid finances have, that they are the precondition for being able to live in stability and prosperity," Merkel said.

Germany had a budget deficit of 3.1 percent of gross domestic product last year. It is expected to exceed 5 percent this year, well above the European Union's 3 percent threshold, and Berlin says it aims to comply with the rules again by 2013.

In addition, even before the eurozone debt crisis the government had anchored a so-called "debt brake" in the constitution that forces it to cut back borrowing over the coming years.

Merkel's center-right coalition came to power last October pledging tax relief, but recently shelved tax cuts for at least the next two years.

In drawing up its package to tackle the deficit, it steered clear of cutting education spending or increasing income tax.

Planned overall spending in this year's budget is euro319.5 billion.

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http://www.upi.com/Top_News/Internation ... 275076172/

Report: Europeans must work longer
Published: May 28, 2010 at 3:49 PM

BRUSSELS, May 28 (UPI) -- The European retirement age should be raised to avoid smaller pensions and higher contributions in the future, the European Commission says.

The commission also recommended increasing the work week, Financial Times Deutschland said. A continued trend of relatively short hours and early retirement risks a "painful combination of "higher contributions and smaller payouts," officials said.

A report is to be presented to the EU by early summer, the EU Observer said.

Member countries set their own retirement ages. In France, men retire on average at 58.7 years old, while Germany just raised its retirement age from 65 to 67.

The commission said that on average Europeans retire at just over 60. It recommended raising the age so that Europeans do not spend more than one-third of their adult years in retirement.

French President Nicolas Sarkozy has proposed raising the retirement age there to 61 or 62. But the issue is a political hot potato, with 400,000 people joining protests Thursday.

Retirement is also causing tension between member states. German politicians criticized Greece for seeking economic assistance while its retirement age is 61 for all workers and lower for those in some fields.


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