The 10 countries identified as imbalanced by the EC are Belgium, Bulgaria, Denmark, Italy, Malta, the Netherlands, Finland, Sweden and the UK.
The full report is here - here's the top-line reasons for each:
Belgium:
Macroeconomic developments in the areas of external competitiveness of goods, and indebtedness, especially concerning the implications of the
high level of public debt for the real economy, continue to deserve attention.
high level of public debt for the real economy, continue to deserve attention.
More specifically, Belgium has experienced a long-term decline in its export market shares due to persistent losses in both cost and non-cost competitiveness.
While Belgian goods exports are gradually being reoriented towards more dynamic regions, the specialization in cost-sensitive intermediate products is intensifying...
Bulgaria
The impact of deleveraging in the corporate sector as well as the
continuous adjustment of external positions, competitiveness and labour markets deserve continued attention.
continuous adjustment of external positions, competitiveness and labour markets deserve continued attention.
More specifically, Bulgaria rapidly built up imbalances during the boom phase that coincided with its accession to the European Union. In a context of catching up, high foreign capital inflows contributed to the overheating of the domestic economy and a booming housing sector.
Denmark
The continuing adjustment in the housing market and the high
level of indebtedness in the household and private sector as well as drivers of external competitiveness, deserve continued attention.
level of indebtedness in the household and private sector as well as drivers of external competitiveness, deserve continued attention.
More specifically, there has been a weak export performance linked to a rise in unit labour costs due to high wage growth and, in particular, weak productivity growth.
Italy
Export performance and the underlying loss of competitiveness as
well as high public indebtedness in an environment of subdued growth deserve continued attention in a broad reform agenda in order to reduce the risk of adverse effects on the functioning of the Italian economy and of the Economic and Monetary Union, notably given the size of the Italian economy.
well as high public indebtedness in an environment of subdued growth deserve continued attention in a broad reform agenda in order to reduce the risk of adverse effects on the functioning of the Italian economy and of the Economic and Monetary Union, notably given the size of the Italian economy.
More specifically, in a context of elevated risk aversion in financial markets, Italy's high public debt weighs on the country's growth prospects through several channels, in particular the high tax burden needed to service the debt, funding pressures for Italian banks and thus for the private sector, increased macroeconomic uncertainty and a severely limited margin for countercyclical fiscal policies and growth-enhancing public expenditure.
Hungary
On-going adjustment of the highly negative net
international investment position, largely driven by private sector deleveraging in a context of high public debt and a weak business environment continue to deserve very close attention so as to reduce the important risks of adverse effects on the functioning of the economy.
international investment position, largely driven by private sector deleveraging in a context of high public debt and a weak business environment continue to deserve very close attention so as to reduce the important risks of adverse effects on the functioning of the economy.
Malta
The long-term sustainability of the public finances warrants attention
while the very large financial sector, and in particular, the strong link between the domestically-oriented banks and the property market poses challenges for financial stability and deserves continued monitoring.
while the very large financial sector, and in particular, the strong link between the domestically-oriented banks and the property market poses challenges for financial stability and deserves continued monitoring.
More specifically, the long-term sustainability of public finances is at risk due to the high projected cost of ageing and other sizeable contingent liabilities.
The Netherlands
Macroeconomic developments regarding private sector debt and deleveraging pressures, also coupled with remaining inefficiencies in the
housing market deserve attention.
housing market deserve attention.
Although the large current account surplus does not raise risks similar to large deficits, the Commission will also continue monitoring the developments of the current account in the Netherlands.
More specifically, rigidities and distortive incentives have built up over decades to shape house financing and sectorial savings patterns.
Finland
The substantial deterioration in the current account position and the weak
export performance, driven by industrial restructuring, as well as cost and non-cost competitiveness factors, deserve continued attention.
export performance, driven by industrial restructuring, as well as cost and non-cost competitiveness factors, deserve continued attention.
More specifically, the loss in competitiveness weakens the country's economic position and risks compromising future prosperity and living standards, especially as population ageing already poses a challenge in this regard.
Finland has rapidly lost world market shares and the current account balance has been on a downward trend, and even turned into a deficit in 2011, which is forecast to widen.
Sweden
Macroeconomic developments regarding private sector debt and
deleveraging, coupled with remaining inefficiencies in the housing market deserve continued attention.
deleveraging, coupled with remaining inefficiencies in the housing market deserve continued attention.
Although the large current account surplus does not raise risks similar to large deficits in other countries, the Commission will continue to monitor developments of the current account in Sweden.
The UK
Macroeconomic developments in the areas of household debt, linked to the high levels of mortgage debt and the characteristics of the housing market, as well as unfavourable developments in external competitiveness, especially as regards goods exports and weak productivity growth, continue to deserve attention.
More specifically, the UK faces tensions between the needs for deleveraging, maintaining financial stability and avoiding compromising investment and growth
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Cyprus must sell off the gold, amounting to three quarters of the country's reserves, to try to meet the soaring costs of its bail-out without any additional help from the European Union and IMF.
The extra financing burden, equivalent to a third of the island's annual GDP, is expected to push Cyprus into an economic meltdown and takes the cost of the Cypriot bail-out to over 135pc of the country's economic wealth.
Mario Draghi, the president of the ECB, has told Cypriot government that money from the gold sale cannot be used to reduce public debt but must be used to help pay back €9.1bn in emergency liquidity assistance (ELA) given to the central bank of Cyprus.
"The decision is going to be taken by the central bank. What is important, however, is that what is being transferred to the government budget out of the profits made out of the sales of gold should cover first and foremost any potential loss that the central bank might have from its ELA," he said.
Despite an original deal for €17.5 billion last month, the EU-IMF troika now estimates the cost of rescuing Cyprus from bankruptcy is €23.5bn, with all the additional money coming from the island.
Olli Rehn, the EU economic affairs commissioner, played down comparisons between "entirely different sets of figures", claiming that the €23.5bn was for "gross financing" with "additional financial buffers to allow for unexpected fiscal developments".
Mr Rehn admitted that there was "plenty of uncertainty about the exact trajectory of growth in Cyprus" and said he was unable to predict whether the size of the economic contraction in Cyprus would be "10pc, 12.5pc or 15pc".
"I don't deny that under the present circumstances, there is quite some uncertainty about the exact figure," he said.
Eurozone finance ministers also agreed to extend the repayment of EU-IMF loans to Ireland and Portugal for a further seven years, easing the pressure on both countries to exit their bail-out programs and resume normal borrowing.
A confidential EU-IMF analysis of Portugal's debt repayments, leaked on Thursday, predicts that even with extra time there is a "substantial funding risk", signalling the need for a second bail-out next year.
Portugal was plunged into a new round of political crisis last weekend after its constitutional court blocked austerity measures contained the country's 2013 budget, measures that are the condition of continued EU-IMF funding.
23 bn Cyprus debt means that every man, woman and child in Cyprus carries about € 23 000 debt. There is no economy. So where does anyone think that money will come from? Tourism? 7tn cu ft of gas under the sea? Draghi wants his €9bn ELA cash up front before the train goes over the cliff. Default. Euro exit. Why is everyone so scared to say those words?
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