By Dave Graham and Krista Hughes
GOTHENBURG, Sweden, Oct 1 (Reuters) - Euro zone finance ministers were split on Thursday on when to start withdrawing fiscal support to the economy with some ready to accept 2011 as the starting point and others keen to avoid date-setting now.
The European Commission has said most European Union countries should start cutting their ballooning budget deficits from 2011 to prevent debt from spiralling out of control.
Public finances in the 27-nation bloc are overstretched after governments spent hundreds of billions of euros to cushion the impact of the worst economic downturn since World War Two.
The chairman of euro zone finance ministers Jean-Claude Juncker endorsed the 2011 date in testimony to the European Parliament on Tuesday and Belgian Finance Minister Didier Reynders backed it on Thursday.
"From the beginning of 2011, there will be time to go towards balanced budgets," Reynders told reporters before the meeting of ministers in the southern Swedish city of Gothenburg.
But EU diplomats said Britain, France, Italy, Greece, Spain and Portugal did not want to set any dates at this stage, even though they agreed fiscal consolidation was necessary.
"Every country will have to define its exit strategy in its own due time. I don't think that we can have a precise, or a common schedule," Portuguese Finance Minister Fernando Teixeira dos Santos told reporters.
"We need a flexible approach on that," he said.
There was agreement that the stimulus, which for the EU as a whole will total some 2 percent of gross domestic product this year and next, should remain in place until economic recovery is firmly rooted.
Swedish Finance Minister Anders Borg, whose country holds the rotating EU presidency, said the European economy was "moving to a tentative recovery", but stressed that policy would have to remain very expansionary "for the coming period".
NEW FORECASTS DUE
Juncker expects the euro zone economy to grow 0.3-0.5 percent in 2010 after a 4 percent contraction expected this year and the Commission will present it growth forecasts for all of the EU countries in early November.
EU Economic and Monetary Affairs Commissioner Joaquin Almunia said a more detailed discussion of dates could only take place once these forecasts were known.
"We should monitor the position of our economies. The Commission will publish forecasts for 2011 on Nov. 3 so that is the moment to decide this," Almunia told Reuters.
Almunia also said the euro zone ministers would discuss the single currency's appreciation to prepare a position ahead of a G7 meeting in Istanbul at the weekend. [ID:nL1472296]
At the Pittsburgh G20 summit last week, leaders agreed on the need to rebalance the world economy, which many officials say implies a discussion on exchange rates. However, it made no official mention of currencies, turning the focus to Istanbul.
An exit strategy is also important to reassure markets that the government borrowing spree cannot last forever.
If recovery gathered pace in 2010 and there was no additional stimulus, EU government debt levels would hit 100 percent of GDP in 2016, and rise to 120 percent in 2020 unless policies change, the Commission has said.
EU debt was 61.5 percent of GDP in 2008.
The Commission has said most countries would need to cut their budget deficits by much more than 0.5 percent of GDP a year and some by more than 1 percent -- for several years -- to break the trend of fast-rising debt.
If growth next year was stronger than expected, any windfall revenues should be fully used to reduce borrowing, it said.
Deficit cuts will be made harder by the fact that the crisis will have reduced potential EU growth even below the 1 percent a year that is expected as societal ageing takes its toll.
"Therefore, lacklustre growth rates should not be considered as a reason for delaying the exit strategy," the Commission has said in a document prepared for the meeting. (Additional reporting by Anna Willard, Mia Shanley, Marcin Grajewski, Veronica Ek and Niklas Pollard, editing by Mike Peacock)