EU members warned of imbalances in economies

Twelve EU states have been warned that parts of their economies are showing dangerous imbalances that require further, detailed investigation.

At the same time, Germany has been alerted that the European Commission is considering looking at the imbalance of its exports, which far outweigh imports.

The alert mechanism is part of the EU’s new surveillance procedure over members’ budgets and economies, designed to pick up and correct risky developments.

Based on 10 macro-economic indicators, the alerts will be followed through with in-depth investigations into the issues raised in each country.

If this confirms the fears are well founded the commission will follow through with recommendations in May, which each country is obliged to act on.

Olli Rehn, vice-president for economic and monetary affairs said: “This new tool is a meaningful step towards correcting the imbalances which built up over the years. Sound fiscal policies and early detection and correction of risky economic imbalances are necessary conditions to return to more sustainable growth and jobs.”

The indicators cover a loss of competitiveness, a high level of indebtedness — both public and private — asset price bubbles, export market share and unemployment increases, setting thresholds for changes that if countries breach will be considered a warning sign.

Four countries including Ireland are considered to have breached these thresholds in six of the ten indicators, Greece in five, and three countries — Germany, Denmark and Slovenia have breached two.

While figures have been made available for Ireland, Greece, Portugal andRomania, going back as far as 1996 for some indicators, there will be no specific investigation or recommendations as their problems are already being addressed as part of their bailout programmes.