(For more on Europe’s sovereign-debt crisis, see EXT4.)
Jan. 11 (Bloomberg) -- Belgium won a reprieve from speeded- up European deficit sanctions after imposing an emergency spending freeze, in a test case of tougher rules meant to help quench the debt crisis.
The European Commission said Belgium, Malta and Cyprus bowed to euro-area pressure to make mid-course corrections that will prevent their 2012 deficits from veering away from targets.
The new rules provide “teeth to act when countries fail to bring their deficits under control and reduce their debt,” European Union Economic and Monetary Commissioner Olli Rehn said in a statement in Brussels today. “I am determined to fully use this new powerful set of tools from Day One.”
The budgetary concessions mark a tentative victory for new EU deficit-control policies designed to overcome investors’ skepticism about the euro area’s response to the two-year-old fiscal crisis.
At the same time, the commission escalated its fiscal battle with Hungary, a euro non-member that is seeking EU and International Monetary Fund assistance to put its public finances in order.
Hungary is relying on “one-off revenues” instead of making lasting reforms to the budget, the commission said. While Hungary doesn’t face financial sanctions, the ruling will color the aid talks.
Poland, eastern Europe’s largest country, was also judged to be taking the right steps to reduce its deficit.
--Editor: Jones Hayden
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