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Government deficit and debt under the Maastricht Treaty.

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M2 PRESSWIRE-28 February 2005-UK Government: Government deficit and debt under the Maastricht Treaty(C)1994-2005 M2 COMMUNICATIONS LTD

RDATE:28022005

In the calendar year 2004 general government net borrowing, as measured on the Maastricht Treaty and Stability and Growth Pact bases, is provisionally estimated as GBP35.8 billion. This compares with net borrowing of GBP35.9 billion in 2003.General government net borrowing is referred to as "government deficit "in the Maastricht Treaty.

General government net borrowing in calendar year 2004 was equivalent to 3.1 per cent of gross domestic product, compared with 3.3 per cent in 2003.

Net borrowing for financial year 2003/4 was 3.2 per cent of gross domestic product. This exceeded three per cent, the reference value in the protocol for an excessive deficit, for the first time since 1996/7.The reference period on which the United Kingdom is assessed is the financial year, not the calendar year.

At end 2004 general government gross consolidated debt at nominal value was GBP481.4 billion, equivalent to 41.6 per cent of gross domestic product, compared with GBP437.4 billion (39.7 per cent) at the end of 2003.It was GBP441.2 billion (39.5 per cent)at the end of March 2004. Although the debt has risen, it is still substantially below the reference point value of 60 per cent for excessive debt.

Background

Article 104 of the 1992 Maastricht Treaty on European Union obliges member states to avoid excessive budgetary deficits. This article also sets out a procedure, the Excessive Deficit Procedure, to identify and counter such excessive deficits, including the possibility of financial sanctions.

The Protocol on the Excessive Deficit Procedure, annexed to the Maastricht Treaty, defines two criteria and reference values for compliance. These are a deficit to Gross Domestic Product (GDP) ratio of three per cent, and a debt to GDP ratio of 60 per cent.

In 1997 the Stability and Growth Pact was adopted by the European Union. This clarified and strengthened the Maastricht Treaty provisions on fiscal discipline in European Economic and Monetary Union. The full provisions took effect when the euro currency was launched on 1 January 1999.

EU Member States have to report their actual and...

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