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UK deficit projected to exceed rest of EU

The UK borrowing deficit will outstrip any other country in the EU this year, according to worrying figures from the European Commission.

In its spring economic forecast the group predicts UK net borrowing will be 12% of output in 2010 - a higher proportion than any other country in the 27-member block and above Greece's 9.3%.

The Commission revised growth estimates for the UK upwards - although the 2011 figures still undershot Government expectations - while it boosted predictions for the euro area as a whole as officials sought to calm nerves over the Greek debt crisis.

It also cut predictions for UK borrowing, but it still sees the budget deficit in the next two years as higher than projected by the Treasury.

The report forecasts net borrowing of 11.5% in the financial year to March 2011 and 9.4% the following 12-month period, compared to forecasts of 11.1% and 8.5% respectively.

"Restoring the UK public finances is a central task, as they have been greatly weakened by a combination of the severe downturn, its impact on previously tax-rich income and expenditure, the operation of automatic stabilisers and the fiscal stimulus," the report said.

UK growth is predicted to be 1.2% this year - in line with Government expectations - but the 2011 figure of 2.1% is lower than the official expectations.

As a whole, the EU expects the 27 European nation block to see growth of 1% this year and 1.7% in 2011, with growth dragged down by the shrinking economies of Spain, Greece and Ireland.

While Greece's deficit is not the highest in the EU, concerns about the government's ability to pay it back are higher because of its high debt levels and weak economy.

But the Commission insisted a €110bn (£94bn) bailout for the country would help stop the crisis spreading to other European nations.

EU commissioner Olli Rehn said investor fears that Spain and Portugal would be dragged into the fray was "overshooting".

He stressed the Greek case was "unique" because of its heavy debt level and because it "cheated" on its statistics for years.