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Government proposes fiscal rule correction

ZAGREB, Dec 27 (Hina) - The government on Friday sent to parliament a final bill of amendments to the Fiscal Responsibility Act correcting the current fiscal rule.

Finance Minister Slavko Linic said the current rule, stipulating that budgetary expenditures must be reduced by one percentage point of gross domestic product annually, was impossible to comply with in conditions of a five-year recession.

He said that complying with the current rule would lead to a deficit increase, reducing the government's ability to impact economic growth.

The government has proposed new categories and if parliament adopts them, it would have to define in the medium term the structural deficits expressed in the GDP percentage and control them, said Linic.

In its medium term programmes, the government would have the obligation to ensure a minimum 0.5% reduction of the structural deficit annually until the state deficit drops below 3% of GDP and public debt below 60% of GDP.

The government has also proposed the possibility of introducing a temporary fiscal rule until a medium term programme of structural changes is adopted. Linic said the programme would be adopted in March.

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