EU to end budget sanctions against Britain

Ending budget sanctions against Britain was recommended by the European Commission on Wednesday, as country’s deficit was under the 3 percent limit in the financial year 2006-2007.

EU criticism of Britain's budget was an embarrassment for Prime Minister Gordon Brown who managed the country's economy for 10 years as British Chancellor. Other EU finance ministers last year ordered him to rein in spending, based on EU forecasts of the British deficit that were above Brown's own.

They will now be asked to declare Britain in the clear as better-than-expected growth brought the deficit to 2.7 percent of gross domestic product in the last fiscal year, down from 3.2 percent in 2005-2006. The EU executive predicts that it will continue to shrink to 2.6 percent in this fiscal year and 2.4 percent the year after.

The EU's top economy official praised Britain for reducing the deficit "in a credible and durable way," telling the country to keep a tight grip on spending while times are good.

"The challenge now is to ensure that consolidation is pursued and if possible its pace strengthened, by adhering to the plans for expenditure restraint and by taking the opportunity from the continued favorable economic environment," said EU Economic and Monetary Affairs Commissioner Joaquin Almunia.

The EU warned that Britain's overall debt is mounting, rising to 42.5 percent of GDP last year from 39.6 percent the previous year. This is well below the EU's recommended limit of 60 percent.

Economic advice from Brussels does not carry the same weight in London as it would in countries that share the euro because the EU's rules are designed to keep the common currency stable. But the EU insists that even non-euro nations have a legal duty to "endeavor to avoid excessive deficits."