EU gives UK six months to show how it can cut budget deficit

European Union finance ministers today ordered Britain to rein in public spending and bring its budget deficit under the EU limit by the end of March 2007.

Britain has six months to explain how it will cut its deficit to below 3% of gross domestic product.

Ministers backed the European Commission’s view that Britain’s deficit will be around 3.1 percent in the fiscal year 2006-07, “despite fiscal measures announced in December.”

“In such circumstances, the excess can no longer be considered as exceptional or temporary,” they said in a statement.

Chancellor Gordon Brown did not attend the regular monthly meeting in Brussels, which challenges his December forecast that the deficit would stay under 3 percent next year.

The assessment is an embarrassment for Brown, who prides himself on his prudent financial management as he is groomed to succeed Prime Minister Tony Blair.

The European Commission said Brown could not blame an “unusual event” or a severe economic downturn for its deficit as growth was above potential in 2004-05.

The EU cannot fine Britain because the nation has not adopted the euro and is not bound by the same rules of the pact that underlines the common currency.

However, EU Economic and Monetary Affairs Commissioner Joaquin Almunia has said he was confident Britain would comply with recommendations intended to keep European economies in good order even though the British budget situation is far less serious than other EU countries.

The British Treasury insists that Britain has the lowest average debts and deficits of any other major European economy.

It forecasts the deficit to fall to 3% in 2005-06, 2.7% in 2006-07 and down to 1.5% by 2010-11.