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EU to forecast huge budget deficits for 2009-source

Published 05/01/2009, 07:11 AM
Updated 05/01/2009, 07:16 AM

BRUSSELS, May 1 (Reuters) - The European Commission is expected to forecast on Monday that the EU's collective budget deficit would soar to 6 percent of gross domestic product this year, a senior EU source said on Friday.

In 2008, the fiscal shorfall of the 27-nation European Union was 2.3 percent of GDP, but is bound to increase sharply as the recession hits government revenues and schemes to boost economic growth empty its coffers.

The EU's deficit ceiling is 3.0 percent of GDP, but the worst economic downturn since World War Two has prompted the Commission to be lenient about any disciplinary steps against member states.

The EU source, who asked not to be named, said that Germany, the bloc's biggest economy, would see its deficit grow to 3.9 percent of GDP in 2009 from last year's 0.1 percent.

In Spain, which has been hit especially hard by the collapse of the construction sector, the deficit would swell to 8.6 percent of GDP from 3.8 percent last year.

The source would not discuss other elements of the forecast, due to presented by EU Monetary Affairs Commissioner Joaquin Almunia on Monday morning.

Commission officials were not immediately available for comment. (Reporting by Marcin Grajewski; Editing by Victoria Main)

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