title: Recommendation for a Council opinion in accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 on the updated convergence programme of Cyprus, 2005-2009

text:
Important legal notice

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52006SC0227

Recommendation for a Council opinion in accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Cyprus, 2005-2009  /* SEC/2006/0227 final */

	[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 22.2.2006SEC(2006) 227 finalRecommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Cyprus, 2005-2009(presented by the Commission)EXPLANATORY MEMORANDUMBackgroundThe Stability and Growth Pact, which entered into force on 1 July 1998, is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation. In 2005, the Pact was amended for the first time. The reform acknowledged the Pact’s usefulness in anchoring fiscal discipline but sought to strengthen its effectiveness and economic underpinnings as well as to safeguard the sustainability of the public finances in the long run.Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[1], which is part of the Pact, stipulates that Member States have to submit, to the Council and the Commission, stability or convergence programmes and annual updates thereof (Member States that have already adopted the single currency submit (updated) stability programmes and Member States that have not yet adopted it submit (updated) convergence programmes). The first convergence programme of Cyprus was submitted in May 2004. In accordance with the Regulation, the Council delivered an opinion on it on 5 July 2004 on the basis of a recommendation from the Commission and after having consulted the Economic and Financial Committee. In accordance with the same procedure, updated stability and convergence programmes are assessed by the Commission and examined by the Committee mentioned above, while the Council may examine them.In these programmes, Member States need to specify their medium-term objective for the budgetary position and set out the policy measures to achieve and maintain it, including the accompanying economic assumptions. Following the reform of the Pact, the medium-term objective should be differentiated for individual Member States in the light of the economic and budgetary heterogeneity in the Union, including as regards the fiscal risk to sustainability. Other elements of the reform are that a more symmetrical approach to fiscal policy over the cycle through enhanced budgetary discipline in economic good times should be achieved, while “major structural reforms” with a verifiable impact on long-term sustainability should be taken into account for a temporary deviation from the medium-term objective or the adjustment path towards it.Taking into account the Commission services’ autumn 2005 forecast, the code of conduct[2], the commonly agreed methodology for the estimation of potential output and cyclically-adjusted balances and the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008, the Commission has examined the recently submitted update of the convergence programme of Cyprus and, based on its assessment below, has adopted a recommendation for a Council opinion on it.Assessment1.  Cyprus submitted its second update of the convergence programme covering the period 2005 to 2009 on 14 December 2005, later than the deadline of 1 December specified in the new Code of Conduct[3], reflecting the authorities’ wish to incorporate the budgetary measures announced in the second week of December. The programme broadly follows the model structure for stability and convergence programmes specified in the code of conduct[4].2.  On 5 July 2004, the Council decided that Cyprus was in excessive deficit. According to the Council recommendation under Article 104(7) of the same date, the excessive deficit had to be corrected by 2005. In its opinion of 8 March 2005 on the previous update of the convergence programme, covering the period 2004-2008, the Council invited Cyprus to implement with vigour the measures envisaged to bring the deficit below 3% of GDP by 2005, ensure that the debt ratio started to decline by then, and pursue pension and health reforms.3.  Supported by robust productivity and employment growth, Cyprus’ real GDP growth (3½%) was among the highest in the EU over the last decade. Net borrowing vis-à-vis the rest of the world (the external deficit) has expanded (4¾% of GDP in 2004) due to competitiveness losses and increased competition in some of Cyprus' main export sectors. This was largely matched by the borrowing needs of the public sector, which posted a deficit above 4% of GDP in 2004. HICP inflation remained below 3% for most of the decade.4.  The update envisages real GDP growth just above 4% over the period 2006-2009, based on an expected strengthening of final domestic demand and a positive contribution by the external sector. This is plausible until 2007, but slightly favourable in 2008 and 2009. As a result, cyclical conditions, as measured by the output gap, might be more favourable than implied by the programme’s projections. The external deficit is projected to steadily decrease, from 5⅓% of GDP in 2006 to 2¾% in 2009.5.  Annual HICP inflation, which remained at around 2% in 2005 in spite of higher energy and unprocessed food prices, is projected to hover around that level throughout the programme period. This projection appears realistic. Since ERM II entry on 2 May 2005, the CYP/EUR exchange rate has stayed close to the central rate. Government bond yields decreased in the course of 2005, falling below 4% at the beginning of 2006. The spread vis-à-vis euro area yields has narrowed to less than 100 basis points. Cyprus aims at achieving euro area membership on 1 January 2008.6.  The current update estimates the 2005 deficit outcome at 2½% of GDP, compared with 2¾% of GDP in the Commission services’ autumn 2005 forecast and just below 3% in the previous update. The difference with the previous update mainly reflects about 0.5% of GDP better than expected interest expenditure.7.  Building on the deficit reduction to below 3% of GDP in 2005, the update aims at further consolidating public finances until 2009, when the deficit would approach 0.5% of GDP and the gross debt 53½% of GDP. After reaching 0.75% of GDP in 2005, the primary surplus is projected to rise gradually to 1¾% of GDP in 2009. The narrowing of the deficit reflects a cut in the expenditure ratio by around 4% of GDP that is less than fully compensated by a decline in the revenue ratio (by 2%). The adjustment is based on structural cuts in current primary expenditure, savings on interest expenditure and a combination of structural and one-off measures on the revenue side. The more gradual adjustment over the period 2006-2008 compared to the previous programme reflects slightly lower GDP growth.8.  According to the Commission services’ calculations on the basis of the programme using the commonly agreed methodology, the structural deficit (i.e. the cyclically-adjusted general government deficit net of one-off and other temporary measures) would improve from around 3% of GDP in 2005 to about 0.5% in 2009, i.e. by more than 0.5 percentage points of GDP per year on average, against the background of a gradually closing output gap. The lack of improvement in the structural balance in 2007 reflects the anticipated deterioration of Cyprus' net position vis-à-vis the EU budget, as temporary compensating grants associated with accession to the EU are terminated in 2006. The update clearly identifies its medium-term objective (MTO) as a structural deficit of 0.5% of GDP, and targets to achieve it in 2009. As this MTO is more demanding than the minimum benchmark (estimated at a deficit of close to 2% of GDP), its achievement should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The programme’s MTO is at an appropriate level as it lies within the range indicated for euro area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term.9.  The risks to the budgetary projections in the programme appear broadly balanced. Given Cyprus’ strong specialisation in tourism, the risks for the macroeconomic scenario are mainly associated with geopolitical developments in the region. Moreover, the macro outlook in 2008 and 2009 is slightly optimistic and tax projections seem somewhat favourable. However, the Cypriot government has so far over-achieved the budgetary targets and the update reiterates its commitment to adopt additional measures if needed to achieve the projected adjustment.10.  Taking account of the estimated outcome for 2005 and of the balance of risks to the budgetary targets, the budgetary stance in the programme seems consistent with a correction of the excessive deficit by 2005, in line with the Council recommendation under Article 104(7). From 2008, it also seems sufficient to provide a safety margin against breaching the 3% of GDP deficit reference value with normal macroeconomic fluctuations, and to ensure that the programme’s MTO (-0.5% of GDP) is almost reached in 2009. The pace of adjustment towards the programme’s MTO implied by the programme is broadly in line with the Stability and Growth Pact.11.  Government debt is estimated to have been 70½% of GDP in 2005, above the 60% of GDP reference value. The update projects a steady decline in the debt ratio, to 53½% in 2009, as a result of rising primary balances, high nominal GDP growth, and, from 2006, debt-reducing stock flow adjustments (decumulation of sinking funds). The risks to these developments appear broadly balanced. The debt ratio seems to be on a sufficiently diminishing path.12.  With regard to the sustainability of public finances, Cyprus appears to be at high risk on grounds of the projected budgetary costs of ageing populations. Implementing rigorously the planned consolidation of public finances over the medium term will alleviate the risks to long-term sustainability and, as recognized in the programme, substantial pension and healthcare reform measures will also be necessary to contain the projected high increase in age-related expenditure in the period up to 2050 and to reduce the risk to long-term sustainability.13.  The envisaged measures in the area of public finances are broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. In particular, Cyprus is on track to correct its excessive deficit by the deadline set by the Council and does the necessary to achieve its MTO, while the debt ratio is on a declining path from 2005 onwards. The programme also projects a declining external imbalance.14.  The National Reform Programme of Cyprus, submitted on 11 November 2005 in the context of the renewed Lisbon strategy for growth and jobs, identifies the following challenges with significant implications for public finances (i) promoting R&D and innovation and facilitation of ICT diffusion; (ii) upgrading of basic infrastructures; (iii) enhancing human capital development and (iv) social cohesion. The budgetary implications of the actions outlined in the National Reform Programme are reflected in the budgetary projections in the update of the convergence programme. The envisaged measures in the area of public finances are consistent with the priorities foreseen in the National Reform Programme. In particular, the update outlines measures to monitor and better control public spending.In view of the above assessment, the structural adjustment planned over the programme period after bringing the deficit below 3% of GDP in 2005 is to be welcome. In the light of the recommendations made by the Council under Article 104(7) of 5 July 2004, it would be appropriate for Cyprus to:-  in line with the updated convergence programme, ensure through measures of a permanent nature that budgetary consolidation towards the programme’s medium-term objective is sustained after the excessive deficit has been corrected;-  control public pension expenditure and implement further reforms in the areas of pensions and health care in order to improve the long-term sustainability of the public finances.Recommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Cyprus, 2005-2009THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community,Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[5], and in particular Article 9(3) thereof,Having regard to the recommendation of the Commission,After consulting the Economic and Financial Committee,HAS DELIVERED THIS OPINION:15.  On [14 March 2006], the Council examined the updated convergence programme of Cyprus, which covers the period 2005 to 2009.16.  Supported by robust productivity and employment growth, Cyprus’ real GDP growth (3½%) was among the highest in the EU over the last decade. Net borrowing vis-à-vis the rest of the world (the external deficit) has expanded (4.8% of GDP in 2004) due to competitiveness losses and increased competition in some of Cyprus' main export sectors. This was largely matched by the borrowing needs of the public sector, which posted a deficit of 4.1% of GDP in 2004. HICP inflation remained below 3% for most of the decade.17.  On 5 July 2004, the Council decided that Cyprus was in excessive deficit. According to the Council recommendation under Article 104(7) of the same date, the excessive deficit had to be corrected by 2005. In its opinion of 8 March 2005 on the previous update of the convergence programme, covering the period 2004-2008, the Council invited Cyprus to implement with vigour the measures envisaged to bring the deficit below 3% of GDP by 2005, ensure that the debt ratio started to decline by then, and pursue pension and health reforms.18.  The current update estimates the 2005 deficit outcome at 2½% of GDP, compared with 2¾% of GDP in the Commission services’ autumn 2005 forecast and just below 3% in the previous update. The difference with the update mainly reflects a 0.5% of GDP better than expected interest expenditure.19.  The new programme broadly follows the model structure and data provision requirements for stability and convergence programmes specified in the new code of conduct[6]. The update was submitted 2 weeks beyond the 1 December deadline set in the code of conduct reflecting the authorities’ wish to incorporate the budgetary measures announced in the second week of December.20.  The macroeconomic scenario underlying the programme envisages real GDP growth just above 4% over the period 2005-2009. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions until 2007 and slightly favourable ones in 2008 and 2009. As a result, cyclical conditions, as measured by the output gap, might be more favourable than implied by the programme’s projections. The programme’s projections for inflation appear realistic.21.  Building on the deficit reduction to below 3% of GDP in 2005, the update aims at further consolidating public finances until 2009, when the deficit would approach 0.5% of GDP. After reaching 0.75% of GDP in 2005, the primary surplus is projected to rise gradually to 1¾% of GDP in 2009. The narrowing of the deficit reflects a cut in the expenditure ratio by around 4% of GDP that is less than fully compensated by a decline in the revenue ratio (by 2%). The adjustment is based on structural cuts in current primary expenditure, savings on interest expenditure and a combination of structural and one-off measures on the revenue side. The more gradual adjustment over 2006-2008 compared to the previous programme reflects slightly lower GDP growth.22.  Over the programme period, the structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is planned to improve on average by more than 0.5% of GDP per year, from a deficit of around 3% of GDP in 2005 to about 0.5% in 2009. The lack of improvement in the structural balance in 2007 reflects the anticipated deterioration of Cyprus' net position vis-à-vis the EU budget, as temporary compensating grants associated with accession to the EU are terminated in 2006. The programme sets the medium-term objective (MTO) for the budgetary position at a structural deficit of 0.5% of GDP and aims to achieve this position by 2009. As this MTO is more demanding than the minimum benchmark (estimated at a deficit of close to 2% of GDP), its achievement should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The programme’s MTO is at an appropriate level as it lies within the range indicated for euro area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term.23.  The risks to the budgetary projections in the programme appear broadly balanced. Given Cyprus’ strong specialisation in tourism, the risks for the macroeconomic scenario are mainly associated with geopolitical developments in the region. Moreover, the macro outlook in 2008 and 2009 is slightly optimistic and tax projections seem somewhat favourable. However, the Cypriot government has so far over-achieved the budgetary targets and the update reiterates its commitment to adopt additional measures if needed to achieve the projected adjustment.24.  Based on the estimated outturn for 2005 and taking account of the balance of risks to the budgetary targets, the budgetary stance in the programme seems consistent with a correction of the excessive deficit by 2005 as recommended by the Council. In addition, it seems to provide a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations from 2008. Furthermore, it seems sufficient to ensure that the programme’s MTO is almost reached by 2009, as envisaged in the programme. In the years following the correction of the excessive deficit, the pace of adjustment towards the programme’s MTO implied by the programme is broadly in line with the Stability and Growth Pact, which specifies that, for euro area and ERM II Member States, the annual improvement in the structural balance should be 0.5% of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad times.25.  The debt ratio is estimated to have reached 70.5% of GDP in 2005, above the 60% of GDP Treaty reference value. The programme projects the debt ratio to decline to 53½% in 2009. The risks to the projected evolution of the debt ratio appear to be broadly balanced. In view of this risk assessment, the debt ratio seems to be sufficiently diminishing towards the reference value.26.  With regard to the sustainability of public finances, Cyprus appears to be at high risk on grounds of the projected budgetary costs of ageing populations. Implementing rigorously the planned consolidation of public finances over the medium term will alleviate the risks to long-term sustainability and, as recognized in the programme, substantial pension and health care reform measures will also be necessary to contain the projected high increase in age-related expenditure in the period up to 2050 and to reduce the risk to long-term sustainability.27.  The envisaged measures in the area of public finances are broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. In particular, Cyprus is on track to correct its excessive deficit by the deadline set by the Council and does the necessary to achieve its MTO, while the debt ratio is on a declining path from 2005 onwards.28.  The National Reform Programme of Cyprus, submitted on 11 November 2005 in the context of the renewed Lisbon strategy for growth and jobs, identifies the following challenges with significant implications for public finances: (i) promoting R&D and innovation and facilitation of ICT diffusion; (ii) upgrading of basic infrastructures; (iii) enhancing human capital development and (iv) social cohesion. The budgetary implications of the actions outlined in the National Reform Programme are reflected in the budgetary projections in the update of the convergence programme. The envisaged measures in the area of public finances are consistent with the priorities foreseen in the National Reform Programme. In particular, the update outlines measures to monitor and better control public spending.In view of the above assessment, the Council welcomes the structural adjustment planned over the programme period after bringing the deficit below 3% of GDP in 2005. In the light of the recommendations under Article 104(7), the Council invites Cyprus to:-  in line with the updated convergence programme, ensure through measures of a permanent nature that budgetary consolidation towards the programme’s medium-term objective is sustained after the excessive deficit has been corrected;-  control public pension expenditure and implement further reforms in the areas of pensions and health care in order to improve the long-term sustainability of the public finances.Comparison of key macroeconomic and budgetary projections2004 | 2005 | 2006 | 2007 | 2008 | 2009 |Real GDP (% change) | CP December 2005 | 3.8 | 4.1 | 4.2 | 4.2 | 4.2 | 4.3 |COM Nov 2005 | 3.8 | 3.9 | 4.0 | 4.2 | n.a. | n.a. |CP December 2004 | 3.6 | 4.0 | 4.4 | 4.5 | 4.5 | n.a. |HICP inflation (%) | CP December 2005 | 1.9 | 2.1 | 2.0 | 2.0 | 2.0 | 2.0 |COM Nov 2005 | 1.9 | 2.3 | 2.1 | 2.1 | n.a. | n.a. |CP December 2004 | 2.1 | 2.6 | 2.2 | 2.1 | 2.0 | n.a. |COM Nov 2005 | -0.9 | 0.5 | 0.3 | 0.7 | n.a. | n.a. |CP December 2004 | -1.3 | 0.7 | 1.8 | 2.0 | 2.5 | n.a. |Cyclically-adjusted balance (% of GDP) | CP December 20051 | -3.6 | -2.2 | -1.8 | -1.8 | -1.2 | -0.6 |COM Nov 2005 | -3.9 | -2.5 | -2.7 | -2.6 | n.a. | n.a. |CP December 2004 | -4.3 | -2.7 | -1.7 | -1.5 | -0.9 | n.a. |Structural balance2 (% of GDP) | CP December 20053 | -4.6 | -3.1 | -2.1 | -2.1 | -1.5 | -0.6 |COM Nov 20054 | -4.9 | -3.1 | -2.7 | -2.6 | n.a. | n.a. |CP December 2004 | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |Government gross debt (% of GDP) | CP December 2005 | 71.3 | 70.5 | 67.0 | 64.0 | 56.9 | 53.5 |COM Nov 2005 | 72.0 | 70.4 | 69.1 | 67.4 | n.a. | n.a. |CP December 2004 | 74.9 | 71.9 | 69.2 | 65.7 | 58.1 | n.a. |Notes: 1 Commission services calculations on the basis of the information in the programme. 2 Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures. 3 One-off and other temporary measures taken from the programme (one-off revenues of 1.0% of GDP in 2004, 0.9% of GDP in 2005, and 0.3% of GDP in 2006-2008). 4 One-off and other temporary measures taken from the Commission services’ autumn 2005 forecast (1.0% of GDP in 2004 and 0.6% of GDP in 2005). 5 Based on estimated potential growth of 4.0%, 3.5%, 3.5% and 3.5% respectively in the period 2004-2007. 6 The 2006 deficit projection was made under a no-policy change scenario, since the 2006 draft budget was not available at the cut-off date of the Commission services autumn 2005 forecast, which also partially explains a higher deficit projection for 2007. Source: Convergence programme (CP); Commission services’ autumn 2005 economic forecasts (COM); Commission services’ calculations. |[1] OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005(OJ L 174, 7.7.2005, p. 1). All the documents referred to in this text can be found at the following website: http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm[2] “Specifications on the implementation of the Stability and Growth Pact and guidelines on the format and content of stability and convergence programmes”, endorsed by the ECOFIN Councilof 11 October 2005.[3] Opinion of the Economic and Financial Committee on the "Specifications on the implementation of the Stability and Growth Pact and guidelines on the format and content of stability and convergence programmes", endorsed by the ECOFIN Council of 11 October 2005.[4] The programme provides all compulsory and most of the optional data prescribed bythe code of conduct.[5] OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005(OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm[6] The programme provides all compulsory and most of the optional data prescribed by the code of conduct. Optional data on labour market developments (in particular, employment (hours worked) and labour productivity (hours worked)) and on the contributions to potential GDP growth are missing.


title: 2011/25/EU: Commission Recommendation of 14 January 2011 establishing guidelines for the distinction between feed materials, feed additives, biocidal products and veterinary medicinal products  Text with EEA relevance

text:
               15.1.2011

               EN

               Official Journal of the European Union

               L 11/75

         COMMISSION RECOMMENDATION
   of 14 January 2011
   establishing guidelines for the distinction between feed materials, feed additives, biocidal products and veterinary medicinal products
   (Text with EEA relevance)
   (2011/25/EU)
   THE EUROPEAN COMMISSION,
   Having regard to the Treaty on the Functioning of the European Union,
   Having regard to Regulation (EC) No 767/2009 of the European Parliament and of the Council of 13 July 2009 on the placing on the market and use of feed, amending European Parliament and Council Regulation (EC) No 1831/2003 and repealing Council Directive 79/373/EEC, Commission Directive 80/511/EEC, Council Directives 82/471/EEC, 83/228/EEC, 93/74/EEC, 93/113/EC and 96/25/EC and Commission Decision 2004/217/EC (1), and in particular Article 7(1) thereof,
   Whereas:

               (1)

               The distinction between feed materials, feed additives and other products such as veterinary drugs has implications for the conditions for their placing on the market, depending on the relevant applicable legislation,

               (2)

               Feed business operators and national competent control authorities are frequently confronted with questions regarding the classification of products, which might jeopardise the marketing of feed throughout the European Union.

               (3)

               In order to avoid inconsistencies in the treatment of such products, to facilitate the work of the national competent authorities and to help the interested economic operators to act in a framework providing an appropriate level of legal certainty, non-binding guidelines for the distinction between feed materials, feed additives and other kinds of products should be established.

               (4)

               The measures provided for in this Recommendation are in accordance with the opinion of the Standing Committee on the Food Chain and Animal Health,

         HAS ADOPTED THIS RECOMMENDATION:
   For the distinction between feed materials, feed additives and other kinds of products the guidelines provided in the Annex to this Recommendation should be taken into account.

      Done at Brussels, 14 January 2011.

            For the Commission

            The President

         José Manuel BARROSO

      (1)  OJ L 229, 1.9.2009, p. 1.

      ANNEX

         GUIDELINES FOR THE DISTINCTION BETWEEN FEED MATERIALS, FEED ADDITIVES AND OTHER PRODUCTS

      These guidelines are intended to assist the national competent authorities and the feed business operators to enforce and to apply the relevant legislation.
      They are based on the provisions laid down in the legislative framework governing the different kinds of products concerned, with a particular view to the definitions of these products provided therein, in order to identify indications for a distinction between the product types.
      For any product, the criteria proposed for the distinction between the different kinds of products should not be applied subsequently but simultaneously in order to create a profile of each specific product, taking into account all its characteristics. None of the criteria can be used exclusively or takes precedence over another.
      Analogy with other products cannot be used as a discriminatory criterion but may be helpful to review a decision already made based on the application of the established criteria. However, it can also be used to check for consistency.
      1.   Feed legislation

      1.1.   Legal texts

      The following definitions can be found in the relevant legislation:

                  Article 3(4) of Regulation (EC) No 178/2002 (1):
                  ‘feed’: any substance or product, including additives, whether processed, partially processed or unprocessed, intended to be used for oral feeding to animals.
                  Following on from this broad definition of feed, recital 3 of Regulation (EC) No 767/2009 states that ‘feed may take the form of feed materials, compound feed, feed additives, premixtures or medicated feedingstuffs.’

                  Article 3(2) of Regulation (EC) No 767/2009:
                  ‘feed materials’: products of vegetable or animal origin, whose principal purpose is to meet animals’ nutritional needs, in their natural state, fresh or preserved, and products derived from the industrial processing thereof, and organic or inorganic substances, whether or not containing feed additives, which are intended for use in oral animal-feeding either directly as such, or after processing, or in the preparation of compound feed, or as carrier of premixtures;
                  ‘carrier’: a substance used to dissolve, dilute, disperse or otherwise physically modify a feed additive in order to facilitate its handling, application or use without altering its technological function and without exerting any technological effect itself;
                  ‘feed intended for particular nutritional purposes’: feed which can satisfy a particular nutritional purpose by virtue of its particular composition or method of manufacture, which clearly distinguishes it from ordinary feed. Feed intended for particular nutritional purposes does not include medicated feedingstuffs within the meaning of Directive 90/167/EEC;
                  ‘oral feeding of animals’: the introduction of feed into an animal’s gastrointestinal tract through the mouth with the aim of meeting the animal’s nutritional needs and/or maintaining the productivity of normally healthy animals.

                  Article 2(2)(a) of Regulation (EC) No 1831/2003 (2):
                  ‘feed additives’: substances, micro-organisms or preparations, other than feed material and premixtures, which are intentionally added to feed or water in order to perform, in particular, one or more specific functions that are enumerated in Article 5(3) of the Regulation:(a)favourably affect the characteristics of feed;(b)favourably affect the characteristics of animal products;(c)favourably affect the colour of ornamental fish and birds;(d)satisfy the nutritional needs of animals;(e)favourably affect the environmental consequences of animal production;(f)favourably affect animal production, performance or welfare, particularly by affecting the gastro-intestinal flora or digestibility of feedingstuffs; or(g)have a coccidiostatic or histomonostatic effect.

                  Article 2(2)(h) of Regulation (EC) No 1831/2003:
                  ‘processing aids’: any substance not consumed as a feedingstuff by itself, intentionally used in the processing of feedingstuffs or feed materials to fulfil a technological purpose during treatment or processing which may result in the unintentional but technologically unavoidable presence of residues of the substance or its derivatives in the final product, provided that these residues do not have an adverse effect on animal health, human health or the environment and do not have any technological effects on the finished feed.
                  Moreover, recital 11 of Regulation (EC) No 767/2009 reads as follows: ‘(…). Feed materials are primarily used to meet animals’ needs, for example for energy, nutrients, minerals or dietary fibres. They are usually not chemically well-defined except for basic nutritional constituents. Effects which can be justified by scientific assessment and which are exclusive to feed additives or veterinary drugs should be excluded from the objective uses of feed materials. (…)’

            1.2.   Consequences for the distinction between feed materials and feed additives

      1.2.1.   Derivation from the legal texts

      —   ‘Feed additives are substances (…) other than feed material’: A product cannot be a feed material and a feed additive at the same time,
      —   ‘Animals’ nutritional needs’: It is not possible to indicate an exhaustive list of relevant elements but the following characteristics of feed materials can be considered to be the most important:
      —   ‘Principal purpose is to meet animals’ nutritional needs’ and ‘primarily used to meet animals’ needs’: Apart from the usual primary function of delivering nutrients to the animal, feed materials can have other purposes, for example if they are used as carriers or if they are not digestible in the animals' intestinal tract. This is in line with the aims of ‘oral feeding’ (‘meeting the animal’s nutritional needs and/or maintaining the productivity of normally healthy animals’) which corresponds to the primary intended use according to the ‘feed’ definition.
      1.2.2.   Criteria to be simultaneously considered in a case-by-case evaluation

      —   Production and processing method — chemical definition and level of standardisation or purification: Products of vegetable or animal origin in their natural state, fresh or preserved, and products derived from the simple processing thereof, as well as organic or inorganic substances can be considered feed materials (e.g. fatty acids or calcium carbonate). Chemically well-defined substances that are purified and give a certain level of standardisation guaranteed by the manufacturer might qualify as feed additives (e.g. aromatic oil specifically extracted from plant material). Nonetheless, certain feed materials are chemically well-defined substances and standardised (e.g. sucrose). On the other hand, natural products of whole plants and parts of these or products thereof resulting from a limited physical processing such as crushing, grinding or drying would be feed materials.
      —   Safety and mode of use: If for reasons of animal or human health it is necessary to set a maximum content of the product in the daily ration the products qualify for classification as additive. However, also for certain feed materials maximum inclusion rates apply. Feed additive status might offer improved scope for effective management of the product in terms of stability, homogeneity and with respect to over-dosage. Feed additives are usually used at low incorporation rates. However, many feed materials, such as mineral salts, are also used at low incorporation rates in the feed ration.
      —   Functionality: Feed additives are defined by their functions as laid down in Article 5(3) of Regulation (EC) No 1831/2003. However, these functions are not exclusive to feed additives. Thus, a feed material can also exert an additive function (e.g. as a thickener) but this should not be the only intended use.
      2.   Biocidal products

      2.1.   Legal texts

      The following definitions can be found in the relevant legislation:

                  Article 2(1) of Directive 98/8/EC (3):
                  ‘biocidal products’: active substances and preparations containing one or more active substances, put up in the form in which they are supplied to the user, intended to destroy, deter, render harmless, prevent the action of, or otherwise exert a controlling effect on any harmful organism by chemical or biological means;
                  ‘active substance’: a substance or micro-organism including a virus or a fungus having general or specific action on or against harmful organisms;
                  ‘harmful organism’: any organism which has an unwanted presence or a detrimental effect for humans, their activities or the products they use or produce, or for animals or for the environment.

                  Point 1(a) of Annex I to Regulation (EC) No 1831/2003:
                  ‘preservatives’: substances or, when applicable, micro-organisms which protect feed against deterioration caused by micro-organisms or their metabolites.

                  Article 1(2) of Directive 98/8/EC provides for the following:
                  ‘This Directive shall apply to biocidal products as defined in Article 2(1)(a) but shall exclude products that are defined or within the scope of the following instruments for the purposes of these Directives:
                  (…)

                              (o)

                              Council Directive 70/524/EEC of 23 November 1970 concerning additives in feedingstuffs, Council Directive 82/471/EEC of 30 June 1982 on certain products used in animal nutrition and Council Directive 77/101/EEC of 23 November 1976 on the marketing of straight feedingstuffs,

                        (…)’.

                  Annex V to Directive 98/8/EC contains an exhaustive list of 23 product types with an indicative set of descriptions within each type, including the following feed related product types:
                  Product-type 3: Veterinary hygiene biocidal products: Products in this group are biocidal products used for veterinary hygiene purposes including products used in areas in which animals are housed, kept or transported.
                  Product-type 4: Food and feed area disinfectants: Products used for the disinfection of equipment, containers, consumption utensils, surfaces or pipework associated with the production, transport, storage or consumption of food, feed or drink (including drinking water) for humans and animals.
                  Product-type 5: Drinking water disinfectants: Products used for the disinfection of drinking water (for both humans and animals).
                  Product-type 20: Preservatives for food or feedstocks: Products used for the preservation of food or feedstocks by the control of harmful organisms.

            2.2.   Consequences for the distinction between feed and biocidal products

      By virtue of Article 1(2) of Directive 98/8/EC, products that are defined or that fall under the scope of the feed legislation, including processing aids, are no biocidal products but are to be considered as feed (Precedence of the feed legislation over the legislation on biocidal products).
      Products in products types 3 and 4, as set out in Annex V to Directive 98/8/EC, are not considered to be feed.
      However, certain products could qualify for product types 5 or 20 and also be considered as feed, usually feed additives. Due to the above mentioned precedence of feed legislation over biocidal product legislation, such products are to be considered feed. Products to preserve feed or water for animals are not biocidal products. If such products are listed in product type 5 or 20, they are not intended to be administered to animals.
      3.   Veterinary medicinal products (VMPs)

      3.1.   Legal texts

      The following definitions can be found in the relevant legislation:

                  Article 1 of Directive 2001/82/EC (4):
                  ‘veterinary medicinal product’:

                              (a)

                              any substance or combination of substances presented as having properties for treating or preventing disease in animals; or

                              (b)

                              any substance or combination of substances which may be used in or administered to animals with a view either to restoring, correcting or modifying physiological functions by exerting a pharmacological, immunological or metabolic action, or to making a medical diagnosis;

                        ‘medicated feedingstuffs’: any mixture of a veterinary medicinal product or products and feed or feeds which is ready prepared for marketing and intended to be fed to animals without further processing, because of its curative or preventive properties or other properties as a medicinal product covered by the definition ‘veterinary medicinal product’.

                  Article 2(2) of Directive 2001/82/EC provides for the following:

                     ‘In cases of doubt, where, taking into account all its characteristics, a product may fall within the definition of a ‘veterinary medicinal product’ and within the definition of a product covered by other Community legislation, the provisions of this Directive shall apply.’

                  Article 3(1) of the same Directive provides for the following:

                     ‘This Directive shall not apply to:

                                 (a)

                                 medicated feedingstuffs as defined in Council Directive 90/167/EEC of 26 March 1990 laying down the conditions governing the preparation, placing on the market and use of medicated feedingstuffs in the Community;
                                 (…)

                                 (d)

                                 any additives covered by Council Directive 70/524/EEC of 23 November 1970 concerning additives in feedingstuffs, where they are incorporated in animal feedingstuffs and supplementary animal feedingstuffs in accordance with that Directive;
                                 (…)’.

                  Article 13(3) of Regulation (EC) No 767/2009 reads as follows:
                  ‘The labelling or the presentation of feed materials and compound feed shall not claim that:

                              (a)

                              it will prevent, treat or cure a disease, except for coccidiostats and histomonostats as authorised under Regulation (EC) No 1831/2003; this point shall not, however, apply to claims concerning nutritional imbalances provided that there is no pathological symptom associated therewith;
                              (…)’.

            3.2.   Consequences for the distinction between feed and VMPs

                  —

                  If, after consideration of all the characteristics of an unclassified product, the conclusion is that it might be a VMP, it should be considered a VMP (precedence of the VMPs legislation over feed legislation, except for authorised feed additives).

                  —

                  Medicated feedingstuffs are not VMPs but, according to recital 3 of Regulation (EC) No 767/2009, a form of feed containing medicated pre-mixes and being subject to a prescription by a veterinarian.

                  —

                  Based on the definition of ‘particular nutritional purpose’ (see under point 1.1 above), the borderline between feed and veterinary medicinal products is set. The particular nutritional purposes such as ‘support of liver function in the case of chronic liver insufficiency’, ‘reduction of urate stones formation’ or ‘reduction of the risk of milk fever’ can be achieved by feed.

         (1)  OJ L 31, 1.2.2002, p. 1.

         (2)  OJ L 268, 18.10.2003, p. 29.

         (3)  OJ L 123, 24.4.1998, p. 1.

         (4)  OJ L 311, 28.11.2001, p. 1.


title: Council Recommendation of 12 July 2016 on the 2016 National Reform Programme of Ireland and delivering a Council opinion on the 2016 Stability Programme of Ireland

text:
               18.8.2016

               EN

               Official Journal of the European Union

               C 299/65

         COUNCIL RECOMMENDATION
   of 12 July 2016
   on the 2016 National Reform Programme of Ireland and delivering a Council opinion on the 2016 Stability Programme of Ireland
   (2016/C 299/16)
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,
   Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (1), and in particular Article 5(2) thereof,
   Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances (2), and in particular Article 6(1) thereof,
   Having regard to the recommendation of the European Commission,
   Having regard to the resolutions of the European Parliament,
   Having regard to the conclusions of the European Council,
   Having regard to the opinion of the Employment Committee,
   Having regard to the opinion of the Economic and Financial Committee,
   Having regard to the opinion of the Social Protection Committee,
   Having regard to the opinion of the Economic Policy Committee,
   Whereas:

               (1)

               On 26 November 2015, the Commission adopted the Annual Growth Survey, marking the start of the 2016 European Semester for economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 17-18 March 2016. On 26 November 2015, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report, in which it identified Ireland as one of the Member States for which an in-depth review would be carried out. On the same day, the Commission adopted a recommendation for a Council Recommendation on the economic policy of the euro area. This Recommendation was endorsed by the European Council on 18-19 February 2016 and adopted by the Council on 8 March 2016 (3). As a country whose currency is the euro and in view of the close interlinkages between the economies in the economic and monetary union, Ireland should ensure the full and timely implementation of the Recommendation.

               (2)

               The 2016 country report for Ireland was published on 26 February 2016. It assessed Ireland's progress in addressing the country-specific recommendations adopted by the Council on 14 July 2015 and Ireland's progress towards its national Europe 2020 targets. It also included the in-depth review under Article 5 of Regulation (EU) No 1176/2011. On 8 March 2016, the Commission presented the results of the in-depth review. The Commission's analysis leads it to conclude that Ireland is experiencing macroeconomic imbalances. In particular, it is essential to tackle the large stocks of net external liabilities and of public and private debt which constitute vulnerabilities, despite improvements.

               (3)

               On 29 April 2016, Ireland submitted its 2016 National Reform Programme and its 2016 Stability Programme. In order to take account of their interlinkages, the two programmes have been assessed at the same time.

               (4)

               Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds for the 2014-2020 period. As foreseen in Article 23 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council (4), where it is necessary to support the implementation of relevant Council recommendations, the Commission may request a Member State to review and propose amendments to its Partnership Agreement and relevant programmes. The Commission has provided further details on how it would make use of this provision in guidelines on the application of the measures linking the effectiveness of the European Structural and Investment Funds to sound economic governance.

               (5)

               Following the abrogation of the excessive deficit procedure, Ireland is in the preventive arm of the Stability and Growth Pact and subject to the transitional debt rule. In its 2016 Stability Programme, which is based on a no-policy-change assumption, the Government plans gradual improvements of the headline balance until reaching a surplus of 0,4 % of GDP in 2018. The revised medium-term budgetary objective — a structural deficit of 0,5 % of GDP — is expected to be reached in 2018. However, the annual change in the recalculated (5) structural balance of 0,1 % of GDP in 2016 does not ensure sufficient progress towards the medium-term budgetary objective. According to the Stability Programme, the government debt-to-GDP ratio is expected to fall to 88,2 % in 2016 and to continue declining to 85,5 % in 2017. The macroeconomic scenario underpinning these budgetary projections is plausible. However, the measures needed to support the planned deficit targets from 2017 onwards have not been sufficiently specified. Based on the Commission 2016 spring forecast, there is a risk of some deviation from the recommended fiscal adjustment in 2016, while Ireland is projected to be compliant in 2017 under unchanged policies. Ireland is forecast to comply with the transitional debt rule in 2016 and 2017. Based on its assessment of the Stability Programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that Ireland is expected to broadly comply with the provisions of the Stability and Growth Pact. Nevertheless, further measures will be needed to ensure compliance in 2016.

               (6)

               Efforts to broaden the tax base have been limited and recent tax measures have focused on cuts and reliefs. Further progress should be made towards making the tax system more efficient and growth-friendly. The Irish authorities conduct a rolling programme of tax expenditure reviews, the results of which are published in an annual report. However, the review process does not cover VAT-related tax expenditures and there is still scope to broaden the tax base through increases in the least distortionary taxes.

               (7)

               Cost-effectiveness, equal access and sustainability remain critical challenges to the healthcare system. Specific strands of reforms are progressing, but spending on pharmaceuticals, in particular owing to the high cost of single-supplier medicines, continues to weigh on cost effectiveness. Financial management and information systems remain weak and unequal access to primary care is still an issue. Approximately 40 % of the population has free access to general practitioners, while the rest bear the full cost. Significant uncertainty surrounds the broad reform of the healthcare system as the universal health insurance model is in a quandary.

               (8)

               Infrastructure needs should be addressed in order to promote durable and balanced growth in the future. Following a peak of 5,2 % of GDP in 2008, public investment fell to a low of 1,8 % of GDP in 2013 before slightly recovering in 2014, when it was still well below the EU average. In addition, the crisis appears to have led to a structural shift in the composition of general government expenditure away from investment towards current spending. In 2010-2013, capital expenditure averaged only 4,8 % of the total, less than half the long-term average during 1995-2008. Seven years of sharply reduced government investment have had a negative impact on the quality and adequacy of infrastructure and the government support for intangible investments. There are key weaknesses in housing, water, public transport and climate change mitigation capacity. Demand for new housing currently exceeds supply by a wide margin in the country's main urban areas. As a result, residential property prices and rents in urban areas increased sharply in 2014, before growth slowed in 2015. There is currently no evidence of over-valuation, but constraints limiting the construction sector and the supply of housing, including some linked to public infrastructure, could generate risks of imbalances if they are not resolved. The shift in government expenditure has also affected public sector support to R & D and innovation, which was below 2007 levels in 2014. Currently, in terms of public R & D as a percentage of GDP, Ireland ranks 22nd in the Union. This has a negative impact on the competitiveness of SMEs.

               (9)

               Unemployment has fallen below the EU average and in March 2016 stood at 8,6 %. However, long-term unemployment and the low work intensity of households remain sources of concern. In particular, although the rate of long-term unemployment has decreased over recent years, the proportion of unemployed who are long-term unemployed remains high at 56,3 % in the fourth quarter of 2015, above the EU average of 48,3 %. In 2014 (latest comparable data), the percentage of the population living in very low work intensity (VLWI) households was the highest in the EU at 21,1 % and was especially prevalent for single-parent households. The proportion of children (aged 0 to 17) at risk of poverty or social exclusion (AROPE) fell to 30,3 % in 2014 but remains higher than the EU average of 27,8 %. The corresponding AROPE figure for single-parent households (62,5 % in 2014) is much higher than the EU average (48,2 %).

               (10)

               Ireland has begun rollout of the JobPath Programme to address the needs of the long-term unemployed and is developing an activation approach to encourage those with the potential and desire to play a more active role in the labour force. The challenge remains to expand job support services to those traditionally excluded from the labour market, including people with a disability and those with caring responsibilities. Overall, the welfare system has worked well to contain the effects of the crisis on poverty and inequality, but barriers to inclusive growth remain. Some progress has been achieved in tapering benefits, but concerns persist about inactivity traps for certain households. As a percentage of wages, net childcare costs in Ireland are among the highest in the Union, the second highest for couples and the highest for single parents. Concerns remain over the quality of childcare provisions. For example, in 2014 the percentage of graduates working in the early childhood education and care sector (15 %) remained well below the recommended level. Skills mismatches remain and skills shortages have emerged in certain areas, while upskilling and reskilling opportunities remain insufficient, and the decrease in education expenditure could have a negative impact on educational outcomes in the future.

               (11)

               The high leverage of the private sector reflects ongoing loan impairment issues. At the end of June 2015, private sector non-consolidated debt stood at 266,3 % of GDP, well above the euro area average. Although the non-performing loans ratio has been declining due to the economic recovery and restructuring activities, at the end of 2015 it remained among the highest in the euro area, at over 16 % of all domestic banks' loans. In addition, 14,7 % of the mortgage stock was in arrears at the end of 2015, while accounts in arrears of over two years represented almost 10 % of the total mortgage loan balance. While progress is being made, most mortgage restructuring is temporary, highlighting a risk of redefault, especially in the event of macroeconomic deterioration or external shock. Commercial real estate loans held by domestic banks and SME and business loans also remain areas of concern, with non-performing loan ratios of 37,3 % and 13,8 % respectively. While progress is being made, it will take much more time and effort to restructure these accounts sustainably. Personal insolvency procedures, bankruptcy, examinership (court protection under Irish law for companies in difficulty) and other means of partial debt relief intended to restore households and business to viability remain under-utilised. The introduction of the central credit registry has been slow, despite being critical to support prudent lending.

               (12)

               The Legal Services Regulation Act 2015 has been signed into law, but, at a late stage in the process, concessions were made to the legal professions that significantly reduced the initial ambition of the reform. Implementation of the new framework is only just starting and it is too early to be fully confident that it will boost competition and reduce costs. Legal services are an input to all sectors of the economy and their cost has a bearing on Ireland's competitiveness. An actual reduction in costs can be achieved only if the competition-enhancing and cost-reducing provisions of the planned regulatory framework become law following public consultation processes or incorporated in regulations to be issued by the Legal Services Regulatory Authority.

               (13)

               In the context of the European Semester, the Commission has carried out a comprehensive analysis of Ireland's economic policy and published it in the 2016 country report. It has also assessed the Stability Programme and the National Reform Programme and the follow-up given to the recommendations addressed to Ireland in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Ireland but also their compliance with EU rules and guidance, given the need to strengthen the EU's overall economic governance of the European Union by providing EU-level input into future national decisions. The recommendations under the European Semester are reflected in recommendations (1) to (3) below.

               (14)

               In the light of this assessment, the Council has examined the Stability Programme, and its opinion (6) is reflected in particular in recommendation (1) below.

               (15)

               In the light of the Commission's in-depth review and this assessment, the Council has examined the National Reform Programme and the Stability Programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected in recommendations (1) and (3) below.

         HEREBY RECOMMENDS that Ireland take action in 2016 and 2017 to:

               1.

               Following the correction of the excessive deficit, achieve an annual fiscal adjustment of 0,6 % of GDP towards the medium-term budgetary objective in 2016 and in 2017. Use windfall gains from strong economic and financial conditions, as well as from asset sales, to accelerate debt reduction. Reduce vulnerability to economic fluctuations and shocks, inter alia, by broadening the tax base. Enhance the quality of expenditure, particularly by increasing cost-effectiveness of healthcare and by prioritising government capital expenditure in R & D and in public infrastructure, in particular transport, water services and housing.

               2.

               Expand and accelerate the implementation of activation policies to increase the work intensity of households and address the poverty risk of children. Pursue measures to incentivise employment by tapering the withdrawal of benefits and supplementary payments. Improve the provision of quality, affordable full-time childcare.

               3.

               Finalise durable restructuring solutions to lower non-performing loans, to ensure debt sustainability of households and to encourage lenders to reduce the debt of excessively leveraged yet viable businesses. Accelerate the phasing-in of a fully operational central credit registry covering all categories of lenders and debtors.

      Done at Brussels, 12 July 2016.

            For the Council

            The President

         P. KAŽIMÍR

      (1)  OJ L 209, 2.8.1997, p. 1.

      (2)  OJ L 306, 23.11.2011, p. 25.

      (3)  OJ C 96, 11.3.2016, p. 1.

      (4)  Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ L 347, 20.12.2013, p. 320).

      (5)  The structural balance as recalculated by the Commission based on the information in the Convergence Programme, following the commonly agreed methodology.

      (6)  Under Article 5(2) of Regulation (EC) No 1466/97.


				|

		52014DC0402

			Recommendation for a COUNCIL RECOMMENDATION on Belgium’s 2014 national reform programme and delivering a Council opinion on Belgium’s 2014 stability programme /* COM/2014/0402 final */

Recommendation for a
COUNCIL RECOMMENDATION
on Belgium’s 2014 national reform
programme
and delivering a Council opinion on Belgium’s 2014 stability programme
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 121(2) and 148(4)
thereof,
Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1], and in particular
Article 5(2) thereof,
Having regard to Regulation (EU) No
1176/2011 of the European Parliament and of the Council of 16 November 2011 on
the prevention and correction of macroeconomic imbalances[2],
and in particular Article 6(1) thereof,
Having regard to the recommendation of the
European Commission[3],
Having regard to the resolutions of the
European Parliament[4],
Having regard to the conclusions of the
European Council,
Having regard to the opinion of the
Employment Committee,
Having regard to the opinion of the
Economic and Financial Committee,
Having regard to the opinion of the Social
Protection Committee,
Having regard to the opinion of the
Economic Policy Committee,
Whereas:
(1)
On 26 March 2010, the European Council agreed to
the Commission’s proposal to launch a new strategy for growth and jobs, Europe
2020, based on enhanced coordination of economic policies, which will focus on
the key areas where action is needed to boost Europe’s potential for
sustainable growth and competitiveness.
(2)
On 13 July 2010, on the basis of the
Commission's proposals, the Council adopted a recommendation on the broad
guidelines for the economic policies of the Member States and the Union (2010
to 2014) and, on 21 October 2010, adopted a decision on guidelines for the
employment policies of the Member States, which together form the ‘integrated
guidelines’. Member States were invited to take the integrated guidelines into
account in their national economic and employment policies.
(3)
On 29 June 2012, the Heads of State or
Government decided on a Compact for Growth and Jobs, providing a coherent
framework for action at national, EU and euro area levels using all possible
levers, instruments and policies. They decided on action to be taken at the
level of the Member States, in particular expressing full commitment to achieving
the objectives of the Europe 2020 Strategy and to implementing the
country-specific recommendations.
(4)
On 9 July 2013, the Council
adopted a recommendation on Belgium’s national reform programme for 2013 and
delivered its opinion on Belgium’s updated stability programme for 2012-2016. On
15 November 2013, in line with Regulation (EU) No 473/2013[5], the
Commission presented its opinion on Belgium's draft budgetary
plan for 2014[6].
(5)
On 13 November 2013, the Commission adopted the
Annual Growth Survey[7],
marking the start of the 2014 European Semester of economic policy
coordination. On the same day, on the basis of Regulation (EU) No 1176/2011, the
Commission adopted the Alert Mechanism Report[8],
in which it identified Belgium as one of the Member States for which an
in-depth review would be carried out.
(6)
On 20 December 2013, the European Council
endorsed the priorities for ensuring financial stability, fiscal consolidation
and action to foster growth. It underscored the need to pursue differentiated,
growth-friendly fiscal consolidation, to restore normal lending conditions to
the economy, to promote growth and competitiveness, to tackle unemployment and
the social consequences of the crisis, and to modernise public administration.
(7)
On 5 March 2014, the Commission published the
results of its in-depth review for Belgium[9],
under Article 5 of Regulation (EU) No 1176/2011 on the prevention and
correction of macroeconomic imbalances. The Commission’s analysis leads it to
conclude that Belgium continues to experience macroeconomic imbalances, which
require monitoring and policy action. In particular, developments
with regard to the external competitiveness of goods continue to deserve
attention as a persistent deterioration would threaten macroeconomic stability.
(8)
On 30 April 2014, Belgium submitted its 2014 national
reform programme and its 2014 stability programme. In order to take account of
their interlinkages, the two programmes have been assessed at the same time.
(9)
The objective of the budgetary strategy outlined
in the 2014 Stability Programme is to reach a balanced budget in structural
terms by 2016 and to achieve the medium-term objective the year thereafter. The
programme confirms the previous medium-term objective of 0.75% of GDP, which
reflects the objectives of the Stability and Growth Pact, but its achievement
is postponed to 2017, one year later than the target year set in last year's
programme. The planned annual progress towards the medium-term objective is in
line with the adjustment required by the Stability and Growth Pact. According
to the programme, the expenditure benchmark is broadly met over the programme
period. The debt is above the Treaty reference value of 60% of GDP, at 101.5%
of GDP in 2013, and is expected to gradually decline to around 93% of GDP in
2017 according to the programme. Overall, the objectives of the programme are
in line with the requirements of the Stability and Growth Pact. The
macroeconomic scenario underpinning the budgetary projections in the programme,
which has been prepared by an independent institution (the Federal Planning
Bureau), is plausible. Growth projections are close to the projections of the
Commission 2014 spring forecast. The fiscal trajectory is not yet supported by
measures. The Commission spring forecast shows no structural improvement in
2014 and, under the usual no-policy-change assumption, a structural
deterioration in 2015. This puts the achievement of the targets at risk and
could lead to a significant deviation from the adjustment towards the
medium-term objective over 2014-15. Moreover, according to the Commission
spring forecast, Belgium will not be compliant with the debt rule in both 2014
and 2015. Based on its assessment of the programme and the Commission spring
forecast, pursuant to Council Regulation (EC) No 1466/97, the Council is of the
opinion that Belgium has brought its general government deficit sustainably
below 3% of GDP in 2013, but is at risk of significantly deviating from the requirements
of the preventive arm as from 2014.
(10)
Belgium has made substantial progress in
introducing more structural coordination arrangements. A Cooperation Agreement
on fiscal coordination concluded end of 2013 introduces a structural budget
balance rule (defined in line with the medium-term objective) at general
government level as required by the Fiscal Compact. Furthermore, it formalises
established coordination practice by making (i) the role of the
inter-governmental 'Consultative Committee' in the process official and (ii)
the advisory role of the High Council of Finance more explicit. In addition,
the Agreement foresees a strengthening of the monitoring role of the High
Council through the introduction of an explicit correction mechanism in case of
significant deviation from the agreed targets. Additional arrangements might be
needed to make targets beyond 2014 binding.
(11)
While Belgium has recently managed to curb the
rise in its public debt ratio, the public debt burden at 101.5% of GDP is high
and there are substantial liabilities and future obligations from pension
commitments. If these are to be covered whilst maintaining high standards of
living, future budgetary cost developments must be contained; activity and
employment rates should be increased; and international competitiveness must be
improved. In each of these areas, Belgium continues to face important
challenges. Although Belgium has taken steps in the right direction that will
produce effects in coming years, more ambitious action will be required, all
the more so as reforms are also unfolding in trading partners.
(12)
The overall tax level in Belgium is among the
highest in the EU and the tax burden is heavily skewed towards labour,
resulting in one of the largest tax wedges in the EU.  A number of specific
features of the tax system are environmentally harmful, such as the tax
treatment of company cars. Some targeted measures have been taken to decrease
labour costs for specific groups and to reduce the gap between gross and net
wages at the bottom of the pay scale. However, no significant shift of the tax
burden towards bases that are less detrimental to growth has taken place. First
reflections on a comprehensive tax reform to facilitate the achievement of
sustainability of public finances, support competitiveness and employment
growth, and preserve the environment have been launched. Such comprehensive tax
reform would need to involve shifting taxes away from labour, simplifying the
tax system, increasing VAT efficiency, broadening tax bases, reducing tax
expenditures, closing legislative loop-holes and phasing out environmentally
harmful subsidies.
(13)
Belgium faces a very significant projected
impact from ageing, with ageing costs projected to rise by more than 8% of GDP between
2010 and 2060, in particular from pensions and long-term care. The recently
initiated reform of social security for older people is set to have a positive
impact on their employment. Nevertheless, given the magnitude of the challenge,
additional efforts are required to achieve fiscal sustainability. These must take
account of the need to maintain the adequacy of old age social security
schemes. Measures are needed to link the statutory retirement age to
developments in life expectancy, to reduce the gap between the statutory and
effective retirement age, and to improve the cost-effectiveness of public
spending on long-term care.
(14)
Belgium faces a chronic underutilisation of
labour. Activity and employment rates are below the EU average and stagnant,
while long-term unemployment as a percentage of total unemployment remains
high. In most cases, the large tax wedge on labour, through interaction with
the benefit system, creates significant unemployment and inactivity traps for
most categories of workers. While action has been taken to reduce unemployment
traps for people with very low salaries, the trap has widened for most other
categories and inactivity traps remain pervasive. With labour costs remaining high,
recruitment policies tend to minimise risk and penalise outsiders such as the
young, the low-skilled and people with a migrant background, who, together with
elderly workers, show labour market participation rates well below the EU
average. Strong insider protection whereby changing job implies losing
entitlements (e.g. severance pay, early retirement, seniority benefits),
discourages professional mobility between jobs and sectors. Such inertia makes
active labour market policies in Belgium relatively inefficient and leads to a
situation where high unemployment in some areas and sectors exists alongside tight
labour markets and growth-hampering skills shortages in others. Youth
unemployment has increased significantly over the past year, with large
differences across the regions and groups. Addressing the
structural problem of skills mismatches will have to go hand in hand with
fighting the pressing problem of early school leaving and of youngsters leaving
education without qualifications. The sixth state
reform offers the opportunity to improve the efficiency and targeting of employment
policies, provided that cooperation between the federal and regional level is
optimised.
(15)
Belgium continues to experience worsening competitiveness,
including as regards non cost aspects. Notably, the ability of manufacturing to
compete internationally is eroding, which is reflected in diminishing margins for
producers and in job destruction. Belgium has traditionally relied on wage
indexation to maintain purchasing power. However, overshoots in total wage
growth have been corrected late and insufficiently. Moreover, the central wage
norm does not always allow for sectorial productivity developments and local labour
market conditions to be reflected adequately. Consequently, wages have grown
more quickly than productivity, leading to job and competitiveness losses. In
consultation with the social partners and in accordance with national practice,
Belgium would need to reform its system of wage formation so as to allow for
greater sectorial wage dispersion and for wages to be better aligned with
productivity developments. Prices in the retail sector remain higher than in
neighbouring countries, while restrictions in professional services impede the
development of innovative business models and restrain investment. Distribution tariffs for electricity remain among the highest in
Europe and their planned regionalisation adds to the uncertainty with regard to
the future evolution of distribution costs for end-users as the currently
frozen tariff does not cover distributors’ rising costs. If the country is to maintain high wages and at the same time create
new jobs, it must produce and sell more sophisticated and higher value added
goods in world markets than it is doing today. Belgium lacks fast-growing firms
in innovative sectors. Innovation support is considered complex and highly
fragmented. Where high added value activities do take off, their growth is
often hampered by the lack of sufficient skilled human resources.
(16)
Belgium is expected to fail to meet its 15%
reduction target for greenhouse gas emissions in the sectors not covered by the
EU emission trading system by 2020. While some initiatives are being undertaken,
they seem to lack coherent direction and the combined impact of measures on
reducing emissions, in particular from the transport sector and buildings,
remains unclear. The reduction of VAT on electricity could further undermine
efforts in that respect. Negotiations on a cooperation and burden-sharing
agreement between federal state and regions have not resulted in a clear distribution
of efforts. Road congestion is placing a heavy burden on the Belgian economy,
as compared with most other countries. The severity of the problem requires a
comprehensive policy response taking into account the potential of time differentiated
congestion charging, reviewing the favourable tax treatment of the private use
of company cars and fuel cards and increasing the efficiency of public
transport.
(17)
In the context of the European Semester, the
Commission has carried out a comprehensive analysis of Belgium’s economic
policy. It has assessed the stability programme and the national reform
programme. It has taken into account not only their relevance for sustainable
fiscal and socio-economic policy in Belgium but also their compliance with EU
rules and guidance, given the need to reinforce the overall economic governance
of the European Union by providing EU-level input into future national
decisions. Its recommendations under the European Semester are reflected in
recommendations (1) to (6) below.
(18)
In the light of this assessment, the Council has
examined Belgium’s stability programme, and its opinion[10] is reflected in
particular in recommendation (1) below.
(19)
In the light of the Commission's in-depth review
and this assessment, the Council has examined the national reform programme and
the stability programme. Its recommendations under Article 6 of Regulation (EU)
No 1176/2011 are reflected in recommendations (2), (4), and (5) below.
(20)
In the context of the European Semester the
Commission has also carried out an analysis of the economic policy of the euro
area as a whole. On the basis of this analysis, the Council has issued specific
recommendations for the Member States whose currency is the euro. Belgium
should also ensure the full and timely implementation of these recommendations,
HEREBY RECOMMENDS that Belgium should
take action within the period 2014-2015 to:
1.
Following the correction of the excessive
deficit, reinforce the budgetary measures for 2014 in the light of the emerging
gap of 0.5% of GDP based on the
Commission 2014 spring forecast, pointing to a risk of
significant deviation relative to the Stability and Growth Pact requirements.
In 2015, significantly strengthen the budgetary strategy to ensure the required
adjustment of 0.6% of GDP towards the medium-term objective, which would also
ensure compliance with the debt rule. Thereafter, until the medium-term
objective is achieved, pursue the planned annual structural adjustment towards
the medium-term objective, in line with the requirement of an annual structural
adjustment of at least 0.5% of GDP, and more in good economic conditions or if
needed to ensure that the debt rule is met in order to put the high general
government debt ratio on a sustained downward path. Ensure
a balanced contribution by all levels of government to the fulfilment of fiscal
rules including the structural budget balance rule, through a binding
instrument with an explicit breakdown of targets within a medium-term planning
perspective.
2.
Improve the balance and fairness of the overall tax
system and prepare a comprehensive tax reform that will allow shifting taxes away
from labour towards more growth friendly bases, simplifying the tax system,
closing loopholes, increasing VAT efficiency, broadening tax bases, reducing
tax expenditures and phasing out environmentally harmful subsidies.
3.
Contain future public expenditure growth relating
to ageing, in particular from pensions and long-term care, by stepping up
efforts to reduce the gap between the effective and statutory retirement age, bringing
forward the reduction of early-exit possibilities, promoting active ageing, aligning
the statutory retirement age and career length requirements to changes in life
expectancy, and improving the cost-effectiveness of public spending on long-term
care.
4.
Increase labour market participation, notably by
reducing financial disincentives to work, increasing labour market access for
disadvantaged groups such as the young and people with a migrant background,
improving professional mobility and addressing skills shortages and mismatches
as well as early school leaving. Across the country, strengthen partnerships of
public authorities, public employment services and education institutions to
provide early and tailor-made support to the young.
5.
Restore competitiveness by continuing the reform
of the wage-setting system, including wage indexation, in consultation with the
social partners and in accordance with national practice, to ensure that wage
evolutions reflect productivity developments at sectorial and/or company levels
as well as economic circumstances and to provide for effective automatic
corrections when needed; by strengthening competition in the retail sectors,
removing excessive restrictions in services, including professional services and
addressing the risk of further increases of energy distribution costs; by
promoting innovation through streamlined incentive schemes and reduced
administrative barriers; and by pursuing coordinated education and training policies
addressing the pervasive skills mismatches and regional disparities in early
school leaving.
6.
Ensure that the 2020 targets for reducing
greenhouse gas emissions from non-ETS activities are met, in particular as
regards buildings and transport. Make sure that the contribution of transport
is aligned with the objective of reducing road congestion. Agree on a clear distribution
of efforts and burdens between the federal and regional entities.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 2.8.1997, p. 1.
[2]               OJ L 306, 23.11.2011, p. 25.
[3]               COM(2014) 402 final.
[4]               P7_TA(2014)0128 and P7_TA(2014)0129.
[5]               OJ L 140, 27.5.2013, p.11.
[6]               C(2013) 8000 final
[7]               COM(2013) 800 final.
[8]               COM(2013) 790 final.
[9]               SWD(2014) 75 final.
[10]             Under Article 5(2) of Council Regulation (EC) No
1466/97.