MORE than half the countries in the European Union have serious long-term problems in their economy, the European Commission is expected to say in a report tomorrow.

The executive body is set to announce that the sustainability of public finances in 13 of the EU’s 25 member states is not yet assured, as high levels of debt and growing pension liabilities continue to challenge their governments. The report into the so-called Broad Economic Policy Guidelines, examines how successful European countries have been in making their economies more competitive.

A leaked copy of the report shows it singles out Greece and Hungary as the only two states facing budget deficit problems in the near term.

But it says the problem of ageing populations is one that far more countries have yet to deal with. The report says: “The analysis shows that despite recent efforts to assure the long-term viability of public finances, (this) remains a serious problem in a majority of member states.”

France, Germany and Italy, the largest eurozone economies, are on the list, as are Belgium, Spain, Portugal and Greece, along with Poland, Slovenia, Slovakia, the Czech Republic, Hungary and Malta, which joined the EU last year.

Last month France and Germany escaped disciplinary measures from the Commission, despite exceeding the limit on deficits of 3 per cent set out in the Growth and Stability Pact. Italy, Greece and Belgium have also fallen foul of the pact as all have national debt levels roughly equivalent to 100 per cent of GDP. The EU limit is 60 per cent of GDP.

Julien Seetharamdoo, of Capital Economics, said “Serious problems probably only refers to a few countries where national GDP debt ratios are very high. If for some reason long term interest rates increase then their debt repayments will increase and that could affect sustainability of their finances.”

The European Commission refused to confirm details of the report.

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