EC: Bulgaria Only EU State with Acceptable 2010 Budget Deficit

Bulgaria will be the only country in the European Union to show a deficit below 3% of GDP in 2010, the European Commission said in a report on Tuesday.

None of the other 26 EU member states will achieve this EU-mandated budgetary limit. The commission expects the total EU government deficit to be 7,5% of GDP next year, roughly triple the level recorded in 2008.

The Commission report predicts that Bulgaria will experience a financial turnaround in 2010, followed by recovery in 2011. Its inflation rate will fall slightly in 2010, to 2,3%.

The European Union's economy will generally recover gradually over the next two years, while unemployment and government budget deficits continue to climb. The commission's forecasts show that the region's economic prospects have improved steadily over the past six months.

Recovery will remain uneven, however, with some economies emerging from recession faster than others. The U.K. economy is expected to grow 0,9% next year and 1,9% in 2011, outpacing the euro-zone average. Ireland and Spain, by contrast, are expected to remain in recession next year before recovering in 2011.

The commission also warned that, while financial markets generally are improving, the banking sector is still fragile and credit markets remain stagnant. It cautioned that EU financial companies could face "substantial" losses in the near future.

The Commission warns it will not be lenient with countries that have large budget deficits, warning that some governments will be ordered to start reducing their budget gaps faster than others. It is due to issue a set of recommendations on November 11, including harsh criticism for Greece, which is expected to have a budget deficit worth 12.7% of GDP this year.

For the full text of the report on Bulgaria click HERE