Only a few days after their entry into the European Union, the European Commission initiated an excessive deficit procedure (EDP) against six of the new members (Cyprus, Hungary, Malta, Poland, the Czech Republic and Slovakia). In accordance with the SGP, joining the EU actually requires adherence to the norm of 3% of GDP with regard to public deficit, a norm that the above-mentioned countries had greatly exceeded in 2003. According to the Commission, because this exceeding of the norms did not, in the wording of the SGP, arise from ‘an unusual event outside the control of national authorities, or a severe economic downturn’, the EDP was therefore initiated. In July 2004, the EU Council confirmed the existence of these public deficits and formulated recommendations with a view to putting an end to them as quickly as possible. It is clear that the penalties provided in the EDP will not apply to the new members of the EU (European Commission, 2004b, p. 69). At the same, blacklisting these countries could have some negative impact on the risk premium of their public debt securities, which would have the effect of putting an even greater strain on their public accounts.1 At all events, adherence to the limit of 3% is one of the conditions for entry into the Eurozone, something that the new members of the EU hope to achieve before the end of the decade. Finally, still in accordance with the SGP, by joining the EU the new members have committed themselves to having a structurally balanced budget, even a surplus.
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- Fiscal Policies of the CEECs After Joining the EU
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