Report Questions ‘Sustainability’ of EU Growth Pact

Budgetary challenges within EU member states have focused attention on the sustainability of the European Stability and Growth Pact, according to a report by Standard & Poor’s. ‘Devolution of taxation responsibilities to sub-national governments in a number of member states, and the existing political and taxation autonomy of some sub-national governments in others, may hamper the ability of member states to meet their obligations under the pact,’ said Myriam Fernández de Heredia, a credit analyst with Standard & Poor’s. Portugal, Germany and France have been subjected to the European Commission’s excessive deficit procedure, the report noted. Devolution of tax and responsibilities has generally been less pronounced on the revenue side, thereby widening budgetary gaps, noted de Heredia. In some cases, notably Denmark, however, where devolution has been more pronounced on the revenue side, the central or federal government has reclaimed taxation control to reduce tax burdens, said Standard & Poor’s.


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