By Francesco Guarascio
BRUSSELS (Reuters) - European Union countries should do more to reduce their economic imbalances by tackling high levels of public and private debt in several EU states, the European Commission said on Friday.
The EU executive is in charge of monitoring public finances in the 28-nation bloc and of issuing warnings over potential bottlenecks.
Oversight procedures give the European Commission the power to reject national budgets and impose fines on countries that do not correct their imbalances, but so far the EU executive has refrained from adopting sanctions.
"Against the background of growing external risks and increased volatility in financial markets, it is urgent to strengthen the fundamentals of our economies," the EU Commission Vice President Valdis Dombrovskis said on Friday in a statement, after the publication of technical reports on EU countries' challenges and reforms' efforts.
"A number of member states still need to be more decisive in tackling persistent vulnerabilities, such as high public and private debt," he said, reiterating a frequent warning.
The EU oversight is carried out in the form of reports published during the so-called European semester, a procedure introduced after the 2007-2008 global financial crisis.
High public debt remains a major problem especially in Italy (132.4 percent of Gross Domestic Product estimated in 2016), Belgium (106.6 percent) and France (96.8 percent).
The Commission warned Paris that the "high and growing public debt coupled with deteriorated competitiveness and productivity growth could be a source of significant risks looking forward".
For Rome, it said this was already "the source of vulnerability for the economy".
Private debt is a common problem, particularly in northern European countries, including the Netherlands, Sweden, Ireland and Britain.
"Household indebtedness remains relatively high, but has fallen from its peak in 2009," the EU executive said in the report on the British economy. "At the same time, household balance sheets are relatively strong."
Portugal, which is under strict observation after the minority centre-left government tried to revert some of the austerity measures imposed with a bailout from international lenders, was warned that both its private and public debt remain a source of concern and a "major vulnerability".
The Commission repeated its warning to Germany to correct its excessive current account surplus, which signals "subdued investment" and an excessive level of savings. The appeal comes as Berlin is further increasing its surplus which is expected to remain above the 8 percent ceiling this year and in 2017.
There were no reports on Greece and Cyprus as the two countries are under a more comprehensive supervision linked to ongoing bailout programmes.
To avoid interfering with Irish elections in Ireland, the Commission's report on Ireland will be published later on Friday.