Six of the ten economies which joined the EU last year have deficits of 3% or more.1 Moreover, in a number of the countries, one-off fiscal measures are disguising the true extent of the structural budget problems. At present, procedural steps under Article 104 of the EC Treaty (excessive deficit procedure) have been instigated against six of the 12 euro-area countries.
And six of the ten new ember states are involved in ongoing procedures under Art. 104. The development of the debt ratios tells a similar story. In seven euro-area countries the debt ratio overshot the 60% reference value in 2004. In three of these countries, Germany, France and Portugal, there has actually been a sharp increase in the debt ratio since 2000.