The euro zone's collective public deficit should fall below 3% of output by 2013, European Central Bank president Jean-Claude Trichet said today. He said this would represent a milestone in reining in swollen national budgets.
'Recent forecasts indicate that the euro area as a whole is on track to bring the deficit to GDP ratio below the 3% reference value by 2013 and to stop the adverse debt dynamics caused by the financial crisis,' Mr Trichet told a banking conference in Frankfurt.
Euro zone countries are supposed to maintain public deficits of no more than 3% and work towards a balance or even a surplus in times of economic growth. But almost all have exceeded that level owing in part to public spending aimed at buffering economies from the effects of the global economic crisis.
Countries such as Greece, Ireland and Portugal are struggling in particular to cut their deficits, while euro zone powerhouse Germany has passed legislation that requires the government to essentially eliminate its own by 2016.
Mr Trichet warned euro zone authorities, however, against resting on their laurels since those three countries must still implement painful structural reforms to boost growth and employment and curb soaring public debt.
There is 'absolutely no reason for complacency in the euro area,' he stressed.
Chronic losses stemming from poor fiscal policies in one country can 'have spillover effects on other members of the currency union,' the ECB President noted, a lesson brought home by the Greek debt crisis on the entire 17-nation euro zone.
