May 22, 2017 / 9:35 AM / 3 months ago

EU says euro zone fiscal stance improves, France still above limits

BRUSSELS, May 22 (Reuters) - Euro zone countries have improved their fiscal stance, a sign of the bloc's growing financial stability, but France and Spain remain above deficit limits set by EU rules and Italy still faces "urgent" challenges, the EU Commission said on Monday.

The assessment came in a regular report that the EU executive publishes every spring to recommend economic reforms to the 28 EU member states and take disciplinary measures against those with unbalanced fiscal positions.

The 19-country euro zone has lowered its total budget deficit to 1.5 percent of the bloc's gross domestic product (GDP) in 2016. The gap is to fall further this year and next, well below the 3 percent of GDP required by EU rules.

The EU as a whole had an aggregate deficit of 1.7 percent last year, which is also set to decrease.

Because of improving public finances in Portugal and Croatia, the Commission said it wanted to end a disciplinary budget procedure against them. The Commission's view will have to be backed by EU finance ministers later this year.

But the economic recovery and improvements in budget positions were "uneven," Economics Commissioner Pierre Moscovici said.

France, the euro zone's second largest economy, remains under thy disciplinary procedure for its deficit above 3 percent of GDP. The gap is set to go down this year but to grow again above the threshold in 2018, contrary to EU recommendations, unless the government appointed by French President Emmanuel Macron approves new economic reforms in coming months.

Spain, Greece and Britain also remain under the disciplinary procedure for their excessive deficits, the Commission said.

Italy has very high public debt, the blocs' second biggest after Greece, and is included in a group of countries that face "urgent challenges".

The Commission considered additional budget measures adopted by Rome in April as sufficient to keep Italy's accounts in line with EU rules for this year. (Reporting by Francesco Guarascio @fraguarascio)

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