Important legal notice

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52006SC0025

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 the Czech Republic, 2005-2008  /* SEC/2006/0025 final */

	[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 11.1.2006SEC(2006) 25 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 the Czech Republic, 2005-2008(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 the Czech Republic 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 the Czech Republic and, based on its assessment below, has adopted a recommendation for a Council opinion on it.Assessment1.  The second update of the Czech Republic’s convergence programme, covering the period 2005-2008, was submitted on 24 November 2005. The programme broadly follows the model structure for stability and convergence programmes specified in the new code of conduct and provides all compulsory and most optional data prescribed by the new code of conduct.2.  On 5 July 2004 the Council decided that the Czech Republic was in excessive deficit. According to the Council recommendation under Article 104(7) of the same date, the excessive deficit has to be corrected by 2008. In its opinion of 18 January 2005 on the previous update of the Czech Republic’s convergence programme covering the period 2004-2007, the Council recommended the Czech Republic “to allocate higher-than-budgeted revenues to deficit reduction and adhere strictly to the medium-term expenditure ceilings for central government, which become legally binding from 2006.” Furthermore, the Czech Republic was invited “to step up the pension reform and to undertake the reform of the healthcare system to improve the long-term sustainability of the public finances.”3.  After achieving progress in economic reforms and in stabilisation by mid-1990s, the Czech Republic experienced macroeconomic imbalances, leading to a foreign-exchange crisis in May 1997 and to an economic recession in 1997-1999. Comprehensive structural reforms in the financial and enterprise sectors helped the economy to recover from 2000. Since then, real annual GDP growth has averaged about 3%, compared to an average annual growth rate of 1.7% in the EU.4.  The programme presents three scenarios for the macro-economic projections: a “baseline”, an “optimistic”, and a “pessimistic” scenario. The “baseline” scenario is considered as the reference scenario for assessing budgetary projections. It expects annual real GDP growth to be 4.8% in 2005 and 4.4% in 2006 followed by a slight decrease to 4¼% in 2007-2008. This is broadly in line with the Commission services autumn 2005 forecasts for the years 2005-2007. For the year 2008, growth is somewhat above the Commission services’ estimate of potential growth. The growth assumptions underlying the programme can thus be considered as plausible, tilted to favourable in the outer year. Due to possible overestimation of potential growth, cyclical conditions are likely to be more favourable than implied by the programme’s projections. Inflation is expected to increase from 1.5% in 2005 to 2.2% in 2006 and to slightly decrease to 2.0% in 2007, which appears relatively optimistic.5.  After a depreciation of the koruna/euro exchange rate by almost 15% between July 2002 and February 2004, the Czech currency joined in a regional trend of sustained appreciation until March 2005 and regained some 12% against the euro. This trend was temporarily reversed by a depreciation in March-April 2005, but the koruna resumed its appreciation trend in June 2005. Czech long-term interest rates remain low. Following their easing in the second half of 2004, the spread against the euro area fluctuated between 0 and 40 basis points for most of 2005. The convergence programme specifies that the Czech Republic is preparing for joining the euro area in 2010 and reconfirms that ERM II participation should be limited to the minimum required period. An indicative calendar for achieving full euro area membership recently published by the Ministry of Finance suggests a possible ERM II entry in the second half of 2007.6.  The general government deficit for 2005 is estimated at 3.2% of GDP, based on the Commission services’ autumn 2005 forecasts, against a targeted deficit of 4.7% of GDP in the previous update. The deficit outcome is expected to be influenced mainly by the budgetary performance of the central government, in particular of the state budget, which recorded (on a cash basis) higher-than-planned tax revenues and an under-execution of expenditures of about 1.5% of GDP.7.  This update aims at reducing the general government deficit to below the 3% of GDP reference value in 2008, in line with the Council recommendation under Article 104(7). In particular, it projects the deficit to be cut by over 2 percentage points of GDP between 2005 and 2008 and the primary deficit by 2.3 percentage points. However, excluding the impact of two one-off expenditures in 2005, the improvement in the nominal deficit over the period is only 1 percentage point of GDP. The deficit reduction mainly reflects a cut in the expenditure ratio (by 2.3 percentage points of GDP) over the programme period, while revenues are broadly unchanged (-0.2 percentage point). Public consumption and social transfers are the expenditure items that are planned to decline most as a percent of GDP. Public investment is foreseen to rise strongly, from 5% of GDP in 2004 to over 6% of GDP in 2008, well above the EU average (2.5% of GDP in 2005). Compared with the previous programme, the November 2005 update broadly confirms the planned adjustment, although the underlying macroeconomic scenario is considerably stronger.8.  Based on Commission services’ calculations on the basis of the programme according to the commonly agreed methodology, the structural balance is planned to improve only slightly over the programme period (by ½ percentage point of GDP). The planned fiscal effort is back-loaded and concentrated in years in which the output gap is projected to be positive. Indeed, in 2006 the fiscal position is expected to deteriorate. The update identifies a medium-term objective (MTO) for the budgetary position as meant in the Stability and Growth Pact of a structural balance of “around -1% of GDP”, which it expects to achieve by 2012.9.  As the programme’s MTO is more demanding than the minimum benchmark (estimated at a deficit of around 1½% 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 because it adequately reflects the debt ratio and average potential output growth in the long term.10.  The risks to the budgetary projections in the programme appear broadly balanced. On the one hand, the track record of cautious budgetary planning indicates that outcomes could be better than targeted (as was the case in 2004 and is expected by the Commission services also for 2005). The growth assumptions underlying the budgets have usually been realistic and the assumptions about tax elasticities cautious. Moreover, budgeted expenditures have not always been fully executed, mainly due to the possibility to carry over unspent funds from previous budgetary years. On the other hand, the programme refers to several (proposed) measures in the area of social spending which would increase expenditure under this heading rather than decrease it, as projected in the programme. Moreover, expenditure carryovers of more than 1% of GDP were accumulated in 2004 and Commission services expect their volume to further increase in 2005. If these sizeable carryovers were spent in addition to all budgeted expenditures – which cannot be excluded especially in the election year 2006 – budgetary outcomes could be worse than targeted, in particular in 2006. Furthermore, the growth assumption in the final year of the programme seems favourable.11.  In view of this risk assessment, the budgetary stance in the programme seems consistent with a correction of the excessive deficit by 2008 as recommended by the Council, which is the end-year of the programme. However, the envisaged adjustment path in structural terms could be strengthened, especially when the possibility of a much better outcome in 2005 and the upward revision of growth prospects are taken into account.12.  Between 2005 and 2008, government debt is expected to increase by ½ percentage point of GDP and reach almost 38% of GDP in 2008, well below the 60% of GDP reference value. The negative effect of the primary deficit is projected to be to a large extent compensated by a positive snowball effect whereby the negative contribution of a slightly increasing implicit interest rate should be more than offset by the continuation of high nominal GDP growth. The stock-flow adjustment is also expected to have a mitigating impact on the rise in debt.13.  With regard to the sustainability of public finances, the Czech Republic appears to be at high risk on grounds of the projected budgetary costs of ageing populations. While the debt ratio is currently relatively low in an EU perspective, the high deficit contributes to a rising debt ratio in the long-term projections until 2050, which increases the risk to debt sustainability. At the same time, the projected high increases of pension expenditure over the projection period are expected to put a significant burden on the public finances. A rigorous implementation of the planned consolidation of public finances over the medium term and a further strengthening of the budgetary position together with additional structural reforms to contain the increase in age-related expenditures, in particular on pensions and health care, appear to be of key importance in order to mitigate the risks to public finance sustainability[3].14.  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, the programme foresees the correction of the excessive deficit in line with the Council’s recommendations. It also presents measures to promote a growth- and employment-oriented allocation of resources, in particular by decreasing the weight of the public sector in the economy and by shifting the tax burden from direct to indirect taxation. However, while the government is aware of the problem of the long-term sustainability, the programme does not present concrete steps to address it.15.  The National Reform Programme of the Czech Republic, submitted on 14 October 2005 in the context of the renewed Lisbon strategy for growth and jobs, identifies long-term sustainability as the main challenge with implications for public finances. The budgetary implications of the limited number of concrete reform measures specified in the National Reform Programme are reflected in the budgetary projections of the convergence programme. The measures in the area of public finances envisaged in the convergence programme are in line with the actions foreseen in the National Reform Programme. In particular, the convergence programme outlines measures to support jobs and growth by changes in the revenue and expenditure structure (especially a shift of the tax burden from direct to indirect taxation and a cut in government consumption and transfers) and by making public investment a spending priority, but it does not present any concrete reform steps to address the problem of long-term sustainability. The programme further envisages a strengthening of the role of the medium-term expenditure ceilings by implementing the binding principles on the headings of the state budget and of the state funds and by inclusion of local governments in the budgetary planning process.In view of the above assessment and in the light of the recommendations made by the Council under Article 104(7) of 5 July 2004, it would be appropriate for the Czech Republic to:(i) strengthen the effort in the structural budgetary adjustment, in view of the small margin below the reference value targeted for 2008 (which is the deadline for the correction of the excessive deficit) and in order to fully take advantage of the upward revision of growth prospects compared to those underlying the Council recommendations;(ii) enhance the quality of budgetary planning, in particular by analysing causes of significant expenditure carryovers and reinforcing the medium-term expenditure ceilings;(iii) improve the long-term sustainability of the public finances, in particular by accelerating the pension reform and undertaking the reform of the healthcare system.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 the Czech Republic, 2005-2008THE 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[4], 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:16.  On [24 January 2006] the Council examined the updated convergence programme of the Czech Republic, which covers the period 2005 to 2008. The programme broadly follows the model structure for stability and convergence programmes specified in the new code of conduct and provides all compulsory and most optional data prescribed by the new code of conduct.17.  After achieving progress in economic reforms and in stabilisation by mid-1990s, the Czech Republic experienced macroeconomic imbalances, leading to a foreign-exchange crisis in May 1997 and to an economic recession in 1997-1999. Comprehensive structural reforms in the financial and enterprise sectors helped the economy to recover from 2000. Since then real annual GDP growth averaged about 3%, compared to an average annual growth rate of 1.7% in the EU. The programme contains three different scenarios for the macroeconomic and budgetary projections: an “optimistic” scenario, a “baseline” and a “pessimistic” scenario. The “baseline” scenario is considered as the reference scenario for assessing budgetary projections because, assessed against currently available information, it appears to be based on plausible growth assumptions, tilted to favourable in the outer year. It envisages that real GDP growth will slightly decrease from 4.8% in 2005 to 4.3% on average over the rest of the programme period. Due to possible overestimation of potential growth, cyclical conditions are likely to be more favourable than implied by the programme’s projections. The programme’s projections for inflation appear to be on the low side.18.  On 5 July 2004, the Council decided that the Czech Republic was in excessive deficit. According to the Council recommendation under Article 104(7) of 5 July 2004, the excessive deficit has to be corrected by 2008. In its opinion of 18 January 2005 on the previous update of the Czech Republic’s convergence programme covering the period 2004-2007, the Council recommended the Czech Republic “to allocate higher-than-budgeted revenues to deficit reduction and adhere strictly to the medium-term expenditure ceilings for central government, which become legally binding from 2006”. Furthermore, the Czech Republic was invited “to step up the pension reform and to undertake the reform of the healthcare system to improve the long-term sustainability of the public finances”.19.  The general government deficit for 2005 is estimated at 3.2% of GDP, based on the Commission services’ autumn 2005 forecasts, against a targeted deficit of 4.7% of GDP in the previous update. The deficit outcome is expected to be influenced mainly by the budgetary performance of the central government, in particular of the state budget, which recorded higher-than-planned tax revenues and an under-execution of expenditures of about 1.5% of GDP.20.  This update aims at reducing the general government deficit to below the 3% of GDP reference value in 2008, in line with the Council recommendation under Article 104(7). In particular, it projects the deficit to be cut by over 2 percentage points of GDP between 2005 and 2008 and the primary deficit by 2.3 percentage points. However, excluding the impact of two one-off expenditures in 2005, the improvement in the nominal deficit over the period is only 1 percentage point of GDP. The deficit reduction mainly reflects a cut in the expenditure ratio (by 2.3 percentage points of GDP) over the programme period, while revenues are broadly unchanged (-0.2 percentage point). Public consumption and social transfers are the expenditure items that are planned to decline most as a percent of GDP. Public investment is foreseen to rise strongly, from 5% of GDP in 2004 to over 6% of GDP in 2008, well above the EU average (2.5% of GDP in 2005). Compared with the previous programme, the November 2005 update broadly confirms the planned adjustment, although the underlying macroeconomic scenario is considerably stronger.21.  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 by ½% of GDP. The programme sets the medium-term objective (MTO) for the budgetary position at a structural deficit of “around” 1% of GDP, which it does not aim to achieve within the programme period. As the programme’s MTO is more demanding than the minimum benchmark (estimated at a deficit of around 1½% of GDP), its achievement should fulfil the aim of providing safety margin against the occurrence of an excessive deficit. The programme’s MTO is at an appropriate level because it adequately reflects the debt ratio and average potential output growth in the long term.22.  The risks to the budgetary projections in the programme appear broadly balanced. On the one hand, the track record of cautious budgetary planning indicates that outcomes could be better than targeted (as was the case in 2004 and is expected by the Commission services also for 2005). The growth assumptions underlying the budgets have usually been realistic and the assumptions about tax elasticities cautious. Moreover, budgeted expenditures have not always been fully executed, mainly due to the possibility to carry over unspent funds from previous budgetary years. On the other hand, the programme refers to several (proposed) measures in the area of social spending which would increase expenditure under this heading rather than decrease it, as projected in the programme. Moreover, expenditure carryovers of more than 1% of GDP were accumulated in 2004 and Commission services expect their volume to further increase in 2005. If these sizeable carryovers were spent in addition to all budgeted expenditures – which cannot be excluded especially in the election year 2006 – budgetary outcomes could be worse than targeted, in particular in 2006. Furthermore, the growth assumption in the final year of the programme seems favourable.23.  In view of this risk assessment, the budgetary stance in the programme seems consistent with a correction of the excessive deficit by 2008 as recommended by the Council, which is the end-year of the programme. However, the envisaged adjustment path in structural terms could be strengthened, especially when the possibility of a much better outcome in 2005 and the upward revision of growth prospects are taken into account.24.  The debt ratio is estimated to have reached 37.4% of GDP in 2005, well below the 60% of GDP Treaty reference value. The programme projects the debt ratio to increase by ½ percentage point over the programme period.25.  With regard to the sustainability of public finances, the Czech Republic appears to be at high risk on grounds of the projected budgetary costs of ageing populations. While the debt ratio is currently relatively low in an EU perspective, the high deficit contributes to a rising debt ratio in the long-term projections until 2050, which increases the risk to debt sustainability. At the same time, the projected high increases of pension expenditure over the projection period are expected to put a significant burden on the public finances. A rigorous implementation of the planned consolidation of public finances over the medium term and a further strengthening of the budgetary position together with additional structural reforms to contain the increase in age-related expenditures, in particular on pensions and health care, appear to be of key importance in order to mitigate the risks to public finance sustainability[5].26.  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, the programme foresees the correction of the excessive deficit in line with the Council’s recommendations. It also presents measures to promote a growth- and employment-oriented allocation of resources, in particular by decreasing the weight of the public sector in the economy and by shifting the tax burden from direct to indirect taxation. However, while the government is aware of the problem of the long-term sustainability, the programme does not present concrete steps to address it.27.  The National Reform Programme of the Czech Republic, submitted on 14 October 2005 in the context of the renewed Lisbon strategy for growth and jobs, identifies long-term sustainability as the main challenge with implications for public finances. The budgetary implications of the limited number of concrete reform measures specified in the National Reform Programme are reflected in the budgetary projections of the convergence programme. The measures in the area of public finances envisaged in the convergence programme are in line with the actions foreseen in the National Reform Programme. In particular, the convergence programme outlines measures to support jobs and growth by changes in the revenue and expenditure structure (especially a shift of the tax burden from direct to indirect taxation and a cut in government consumption and transfers) and by making public investment a spending priority, but it does not present any concrete reform steps to address the problem of long-term sustainability. The programme further envisages a strengthening of the role of the medium-term expenditure ceilings by implementing the binding principles on the headings of the state budget and of the state funds and by inclusion of local governments in the budgetary planning process.In view of the above assessment and in the light of the recommendations under Article 104(7), the Council is of the opinion that the Czech Republic should:(i) strengthen the effort in the structural budgetary adjustment, in view of the small margin below the reference value targeted for 2008 (which is the deadline for the correction of the excessive deficit) and in order to fully take advantage of the upward revision of growth prospects compared to those underlying the Council recommendations;(ii) enhance the quality of budgetary planning, in particular by analysing causes of significant expenditure carryovers and reinforcing the medium-term expenditure ceilings;(iii) improve the long-term sustainability of the public finances, in particular by accelerating the pension reform and undertaking the reform of the healthcare system.Comparison of key macroeconomic and budgetary projections2004 | 2005 | 2006 | 2007 | 2008 |Real GDP (% change) | CP Nov 2005 | 4.4 | 4.8 | 4.4 | 4.2 | 4.3 |COM Nov 2005 | 4.4 | 4.8 | 4.4 | 4.3 | n.a. |CP Dec 2004 | 3.8 | 3.6 | 3.7 | 3.8 | n.a. |HICP inflation (%) | CP Nov 2005 | 2.6 | 1.5 | 2.2 | 2.0 | 2.1 |COM Nov 2005 | 2.6 | 1.7 | 2.9 | 2.6 | n.a. |CP Dec 2004 | 2.7 | 3.2 | 2.6 | 2.2 | n.a. |Output gap (% of potential GDP) | CP Nov 20051 | -1.9 | -0.8 | -0.1 | 0.3 | 0.8 |COM Nov 20055 | -1.4 | -0.2 | 0.6 | 1.2 | n.a. |CP Dec 20041 | -1.3 | -0.9 | -0.4 | 0.3 | n.a. |General government balance (% of GDP) | CP Nov 2005 | -3.0 | -4.8 | -3.8 | -3.3 | -2.7 |COM Nov 2005 | -3.0 | -3.2 | -3.7 | -3.3 | n.a. |CP Dec 2004 | -5.2 | -4.7 | -3.8 | -3.3 | n.a. |Primary balance (% of GDP) | CP Nov 2005 | -1.8 | -3.5 | -2.5 | -2.0 | -1.2 |COM Nov 2005 | -1.8 | -1.9 | -2.3 | -1.9 | n.a. |CP Dec 2004 | -4.0 | -3.4 | -2.4 | -1.7 | n.a. |Cyclically-adjusted balance (% of GDP) | CP Nov 20051 | -2.4 | -4.5 | -3.8 | -3.4 | -3.0 |COM Nov 2005 | -2.5 | -3.1 | -3.9 | -3.8 | n.a. |CP Dec 20041 | n.a. | n.a. | n.a. | n.a. | n.a. |Structural balance2 (% of GDP) | CP Nov 20053 | -1.9 | -3.4 | -3.8 | -3.4 | -3.0 |COM Nov 20054 | -2.0 | -2.0 | -3.9 | -3.8 | n.a. |CP Dec 2004 | n.a. | n.a. | n.a. | n.a. | n.a. |Government gross debt (% of GDP) | CP Nov 2005 | 36.8 | 37.4 | 37.1 | 37.9 | 37.8 |COM Nov 2005 | 36.8 | 36.2 | 36.6 | 36.9 | n.a. |CP Dec 2004 | 38.6 | 38.3 | 39.2 | 40.0 | 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 fiscal notification (0.5% in 2004) and from the programme (1.1% in 2005); both deficit-increasing. 4 One-off and other temporary measures taken from the Commission services’ autumn 2005 forecast (0.5% of GDP in 2004, 1.1% in 2005; both deficit-increasing). 5 Based on estimated potential growth of 3.5%, 3.5%, 3.6% and 3.7% respectively in the period 2004-2007. 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] 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.[3] Details on long-term sustainability are provided in the technical assessment of the programme by the Commission services, to be published at the website:http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm[4] 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[5] Details on long-term sustainability are provided in the technical assessment of the programme by the Commission services, to be published at the website:http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm


title: Commission Recommendation (EU) 2017/432 of 7 March 2017 on making returns more effective when implementing the Directive 2008/115/EC of the European Parliament and of the Council

text:
               11.3.2017

               EN

               Official Journal of the European Union

               L 66/15

         COMMISSION RECOMMENDATION (EU) 2017/432
   of 7 March 2017
   on making returns more effective when implementing the Directive 2008/115/EC of the European Parliament and of the Council
   THE EUROPEAN COMMISSION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Article 292 thereof,
   Whereas:

               (1)

               Directive 2008/115/EC of the European Parliament and of the Council (1) lays down common standards and procedures to be applied in Member States for returning illegally staying third-country nationals.

               (2)

               The Schengen Evaluation Mechanism (2) and the information collected through the European Migration Network (3) have allowed for a comprehensive assessment of how Member States implement the Union policy on return.

               (3)

               The evaluations indicate that the margins of discretion left to the Member States by Directive 2008/115/EC led to an inconsistent transposition in national legislations, with a negative impact on the effectiveness of the Union return policy.

               (4)

               Since the entry into force of Directive 2008/115/EC, and in the light of the increasing migratory pressure on the Member States, the challenges that the Union return policy needs to respond to have increased and brought this aspect of the European comprehensive migration policy to the forefront. In its Conclusions of 20-21 October 2016 (4), the European Council called for reinforcing national administrative processes for returns.

               (5)

               The Malta Declaration of Heads of State or Government (5) of 3 February 2017 highlighted the need for a review of EU return policy based on an objective analysis of the way in which the legal, operational, financial and practical tools available at Union and national level are applied. It welcomed the Commission's intention to rapidly present an updated EU Action Plan on Return and to provide guidance for more operational returns by the EU and Member States and effective readmission based upon the existing acquis.

               (6)

               In view of the current increase in the number of third-country nationals illegally entering and staying in the Member States, and in order to ensure appropriate capacity to protect those in need, it is necessary to use to the full extent the flexibility provided for in Directive 2008/115/EC. A more effective implementation of that Directive would reduce possibilities of misuse of procedures and remove inefficiencies, while ensuring the protection of fundamental rights as enshrined in the Charter of Fundamental Rights of the European Union.

               (7)

               This Recommendation provides guidance on how the provisions of Directive 2008/115/EC should be used for achieving more effective return procedures, and call on the Member States to take the necessary measures to remove legal and practical obstacles to return.

               (8)

               An effective Union return policy requires efficient and proportionate measures for the apprehension and identification of illegally staying third-country nationals, swift processing of their cases, and adequate capacity to ensure their presence in view of return.

               (9)

               Organising return requires a streamlined and well integrated organisation of multi-disciplinary competences at national level. In addition, it demands procedures and instruments that allow information to be made promptly available to the competent authorities, as well as cooperation between all actors that are involved in the different procedures.

               (10)

               Multi-disciplinary trained and competent staff gathering all relevant competences is needed to ensure that national authorities are able to respond to the needs, particularly in circumstances where Member States are confronted with a significant burden in implementing the obligation to return illegally staying third-country nationals. In organising this integrated and coordinated approach, Member States should make full use of the available Union financial instruments, programmes and projects in the field of return, in particular of the Asylum, Migration and Integration Fund. In this context, the Member States should also take into account the migratory pressure that the competent authorities are dealing with.

               (11)

               In accordance with Article 6(1) of Directive 2008/115/EC, the Member States should systematically issue a return decision to third-country nationals who are staying illegally on their territory. The legislation and the practice in the Member States does not give full effect to this obligation in all circumstances, thereby undermining the effectiveness of the Union return system. For instance, certain Member States do not issue return decisions following a negative decision on an asylum claim or a residence permit, or do not issue such decisions to illegally staying third-country nationals who do not hold a valid identity or travel document.

               (12)

               Depending on the institutional set-up of the Member States, in particular when different authorities deal with the process, a return decision is not necessarily or immediately followed by a request to the authorities of third-countries to verify the identity of the illegally staying third-country national and to deliver a valid travel document.

               (13)

               In accordance with Article 13 of the Schengen Borders Code (6), a person who has crossed a border illegally and who has no right to stay on the territory of the Member State concerned shall be apprehended and made subject to procedures respecting Directive 2008/115/EC.

               (14)

               Directive 2008/115/EC establishes that the state of health of the third-country nationals concerned shall be taken into account when implementing that Directive, and that emergency health care and essential treatment of illness must be provided pending return. It is however essential to ensure that removals of illegally staying third-country nationals are enforced and measures are taken to prevent behaviour aimed at hampering or preventing return, such as false new medical claims. Moreover, it is also necessary to put in place measures tackling in an efficient manner asylum applications made merely to delay or frustrate the enforcement of return decisions.

               (15)

               Directive 2008/115/EC, while obliging the third-country national illegally staying to leave the Union, requires return decisions to be enforced only by the issuing Member States. A return process can be launched in every Member State that apprehends the same illegally staying third-country national. Mutual recognition of return decision, as provided for by Council Directive 2001/40/EC (7) and Council Decision 2004/191/EC (8), would accelerate return process and deter unauthorised secondary movements within the Union.

               (16)

               Detention can be an essential element for enhancing the effectiveness of the Union's return system, which should only be used if no other sufficient but less coercive measures can be applied effectively in accordance with Article 15(1) of Directive 2008/115/EC. In particular, where necessary, to ensure that illegally staying third-country nationals do not abscond, detention can allow for a successful preparation and organisation of return operations.

               (17)

               The maximum duration period of detention currently used by several Member States is significantly shorter than the one allowed by Directive 2008/115/EC and which is needed to complete the return procedure successfully. These short periods of detention are precluding effective removals.

               (18)

               Deadlines for lodging appeals against decisions related to return diverge significantly among Member States, ranging from few days to one month or more. In compliance with fundamental rights, the deadline should provide enough time to ensure access to an effective remedy, while taking into account that long deadlines can have a detrimental effect on return procedures.

               (19)

               Irregularly staying third-country nationals should be granted the right to be heard by the competent authorities before any individual measure which would affect him or her is taken.

               (20)

               Under Directive 2008/115/EC, an automatic suspensive effect of appeals against return decisions should be granted when there is a risk that the third-country national concerned would be exposed to a real risk of ill-treatment in case of return, in violation of Articles 19(2) and 47 of the Charter of Fundamental Rights of the European Union, as interpreted by the Court of Justice of the European Union (9).

               (21)

               A large number of Member States conduct repetitive assessments of the risk of refoulement all along the different phases of the asylum and return procedures, which can cause the unnecessary delays in the return of illegally staying third-country nationals.

               (22)

               Return of an unaccompanied minor to the third country of origin and reunification with the family may be in the best interests of the child. The prohibition to issue return decisions to unaccompanied minors, which exists in the national legislation of several Member States, does not give full effect to the Member States' obligation to take due account of the child's best interests, and to pay attention to the circumstances of each individual case. Such prohibitions can create unintended consequences for illegal immigration, inciting unaccompanied minors to embark on perilous journeys in order to reach the Union.

               (23)

               Decisions on the legal status and on the return of unaccompanied minors should always be based on individual, multi-disciplinary and robust assessments of their best interests, including family tracing and home assessment. Such assessment should be adequately documented.

               (24)

               In line with Article 17 of Directive 2008/115/EC which defines the conditions under which Member States can use detention in relation to unaccompanied minors and of families with minors as a measure of last resort and for the shortest appropriate period of time, Member States should ensure the availability of alternatives to detention for children. Where however, no such alternatives exist, an absolute prohibition of detention in such cases, may not give full effect to the obligation to take all necessary measures to ensure return, leading to annulment of return operations due to absconding.

               (25)

               Pending the adoption of proposal for a Regulation of the European Parliament and of the Council on the use of the Schengen Information System for the return of illegally staying third-country nationals (10), Member States should make full use of the possibility to enter an alert on entry ban in accordance with Article 24(3) of Regulation (EC) No 1987/2006 of the European Parliament and of the Council (11).

               (26)

               This Recommendation should be addressed to all Member States bound by Directive 2008/115/EC.

               (27)

               Member States should instruct their national authorities competent for carrying out return-related tasks to apply this Recommendation when performing their duties.

               (28)

               This Recommendation complies with the fundamental rights and the principles recognised by the Charter of Fundamental Rights of the European Union. In particular, this Recommendation ensures the full respect for human dignity and the application of Articles 1, 4, 14, 18, 19, 24 and 47 of the Charter and has to be implemented accordingly,

         HAS ADOPTED THIS RECOMMENDATION:

      REINFORCED AND BETTER RETURN CAPACITIES

               (1)

               To address the procedural, technical, and operational obstacles to more effective returns, Member States should by 1 June 2017 reinforce their capacity to carry out the return of illegally staying third-country nationals by ensuring an integrated and coordinated approach.

               (2)

               The objectives of such an integrated and coordinated approach in the area of return should be to:

                           (a)

                           ensure swift return procedures and substantially increase the rate of return;

                           (b)

                           mobilise, as needed, law enforcement and immigration authorities, and coordinate actions with judicial authorities, detention authorities, guardianship systems, medical and social services, to ensure availability of swift and adequate multi-disciplinary responses from all authorities involved in the return procedures;

                           (c)

                           ensure that a sufficient number of trained and competent staff, from all authorities with competences in the return procedures, are available to respond swiftly, and if necessary on a 24/7 basis, particularly when facing an increasing burden in implementing the obligation to return illegally staying third-country nationals;

                           (d)

                           depending on the specific situation of the Member State, deploy additional staff at the external borders of the Union with the mandate and capacity to take immediate measures to determine and verify the identity and the legal status of the third-country nationals and immediately refuse entry or issue return decisions to those who have no right to enter or to stay in the Union.

               (3)

               The integrated and coordinated approach in the area of return should fulfil, in particular, the following tasks:

                           (a)

                           carry out swift medical examinations to avoid potential abuses in the situations referred to in point 9(b);

                           (b)

                           liaise and exchange relevant operational information with other Member States and the European Border and Coast Guard Agency for the fulfilment of their objectives and tasks;

                           (c)

                           make full use of the relevant IT systems, such as Eurodac, the Schengen Information System (SIS) and the Visa Information System (VIS), to obtain timely information on the identity and legal situation of the third-country nationals concerned.

               (4)

               Member States should ensure that units or bodies tasked to ensure the integrated and coordinated approach are allocated all the necessary human, financial and material resources.

      SYSTEMATIC ISSUANCE OF RETURN DECISIONS

               (5)

               For the purpose of ensuring that return decisions are systematically issued to third-country nationals who either do not have or no longer have a right to stay in the European Union, Member States should:

                           (a)

                           put in place measures to effectively locate and apprehend third-country nationals staying illegally;

                           (b)

                           issue return decisions regardless of whether the illegally staying third-country national holds an identity or travel document;

                           (c)

                           make the best use of the possibility provided for in Article 6(6) of Directive 2008/115/EC to combine in one act or to adopt simultaneously the decision on the ending of a legal stay and the return decision, provided that the relevant safeguards and provisions for each individual decision are respected.

               (6)

               Member States should ensure that return decisions have unlimited duration, so that they can be enforced at any moment without the need to re-launch return procedures after a certain period of time. This should be without prejudice to the obligation to take into account any change in the individual situation of the third-country nationals concerned, including the risk of refoulement.

               (7)

               Member States should systematically introduce in return decisions the information that third-country nationals must leave the territory of the Member State to reach a third country, to deter and prevent unauthorised secondary movements.

               (8)

               Member States should make use of the derogation provided for under Article 2(2)(a) of Directive 2008/115/EC when this can provide for more effective procedures, in particular when facing significant migratory pressure.

      EFFECTIVE ENFORCEMENT OF RETURN DECISIONS

               (9)

               For the purpose of ensuring swift returns of illegally staying third-country nationals, Member States should:

                           (a)

                           in accordance with Directive 2013/32/EU of the European Parliament and of the Council (12), organise proceedings for the swift examination of applications for international protection in an accelerated or, where considered appropriate, border procedure, including where an asylum application is made merely to delay or frustrate the enforcement of a return decision;

                           (b)

                           take steps to prevent potential abuses related to false new medical claims aimed at preventing removal, for instance by ensuring that medical personnel appointed by the relevant national authority is available to provide an objective and independent opinion;

                           (c)

                           ensure that return decisions are followed without delay by a request to the third country of readmission to deliver a valid travel documents or to accept the use of the European travel document for return issued in accordance with Regulation (EU) No 2016/1953 of the European Parliament and of the Council (13);

                           (d)

                           make use of the instrument of mutual recognition of return decisions provided for by Directive 2001/40/EC and Decision 2004/191/EC.

               (10)

               For the purpose of effectively ensuring removals of illegally staying third-country nationals, Member States should:

                           (a)

                           use detention as needed and appropriate in the cases provided for in Article 15(1) of Directive 2008/115/EC, and in particular where there is a risk of absconding as provided for in points 15 and 16 of this Recommendation;

                           (b)

                           provide in national legislation for a maximum initial period of detention of six months that can be adapted by the judicial authorities in the light of the circumstances of the case, and for the possibility to further prolong the detention until 18 months in the cases provided for in Article 15(6) of Directive 2008/115/EC;

                           (c)

                           bring detention capacity in line with actual needs, including by using where necessary the derogation for emergency situations as provided for in Article 18 of Directive 2008/115/EC.

               (11)

               In relation to illegally staying third-country nationals who intentionally obstruct the return processes, Member States should consider using sanctions in accordance with national law. These sanctions should be effective, proportionate and dissuasive and should not impair the achievement of the objective of Directive 2008/115/EC.

      PROCEDURAL SAFEGUARDS AND REMEDIES

               (12)

               Member States should:

                           (a)

                           merge in one procedural step, to the extent possible, administrative hearings conducted by the competent authorities for different purposes, such as for the granting of a residence permit, for return or for detention. New ways of holding such hearings of third-country nationals, such as the use of video-conferencing, should also be developed;

                           (b)

                           provide for the shortest possible deadline for lodging appeals against return decisions established by national law in comparable situations, to avoid misuse of rights and procedures, in particular appeals lodged shortly before the scheduled date of removal;

                           (c)

                           ensure that the automatic suspensive effect of appeals against return decisions is granted only when this is necessary to comply with Articles 19(2) and 47 of the Charter;

                           (d)

                           avoid repetitive assessments of the risk of breach of the principle of non-refoulement, if the respect of that principle has already been assessed in other procedures, the assessment is final and there is no change in the individual situation of the third-country nationals concerned.

      FAMILY AND CHILDREN

               (13)

               To ensure respect of the rights of the child, and taking fully into account the best interests of the child and family life under Article 5 of Directive 2008/115/EC, Member States should:

                           (a)

                           establish clear rules on the legal status of unaccompanied minors allowing either to issue return decisions and carry out returns or to grant them a right to stay;

                           (b)

                           ensure that decisions on the legal status of unaccompanied minors are always based on an individual assessment of their best interests. This assessment should systematically take into consideration whether return of an unaccompanied minor to the country of origin and reunification with the family is in their best interests;

                           (c)

                           put in place targeted reintegration policies for unaccompanied minors;

                           (d)

                           ensure that the assessment of the best interests of the child is systematically carried out by the competent authorities on the basis of a multi-disciplinary approach, that the unaccompanied minor is heard and that a guardian is duly involved.

               (14)

               In respect of the fundamental rights and of the conditions set by Directive 2008/115/EC, Member States should not preclude in their national legislation the possibility to place minors in detention, where this is strictly necessary to ensure the execution of a final return decision insofar as Member States are not able to ensure less coercive measures than detention that can be applied effectively in view of ensuring effective return.

      RISK OF ABSCONDING

               (15)

               Each of the following objective circumstances should constitute a rebuttable presumption that there is a risk of absconding:

                           (a)

                           refusing to cooperate in the identification process, using false or forged identity documents, destroying or otherwise disposing of existing documents, refusing to provide fingerprints;

                           (b)

                           opposing violently or fraudulently the operation of return;

                           (c)

                           not complying with a measure aimed at preventing absconding imposed in application of Article 7(3) of Directive 2008/115/EC, such as failure to report to the competent authorities or to stay at a certain place;

                           (d)

                           not complying with an existing entry ban;

                           (e)

                           unauthorised secondary movements to another Member State.

               (16)

               Member States should provide that the following criteria are taken into due account as an indication that an illegally staying third-country nationals poses a risk of absconding:

                           (a)

                           explicit expression of the intention of non-compliance with a return decision;

                           (b)

                           non-compliance with a period for voluntary departure;

                           (c)

                           an existing conviction for a serious criminal offence in the Member States.

      VOLUNTARY DEPARTURE

               (17)

               Member States should only grant voluntary departure following a request by the third-country national concerned, while ensuring that the third-country national is well informed of the possibility of submitting such an application.

               (18)

               Member States should provide in the return decision for the shortest possible period for voluntary departure needed to organise and proceed with the return, taking into account the individual circumstances of the case.

               (19)

               In determining the duration of the period for voluntary departure, Member States should assess the individual circumstances of the case, in particular the prospects of return and the willingness of the illegally staying third-country national to cooperate with competent authorities in view of return.

               (20)

               A period longer than seven days should only be granted when the illegally staying third-country national actively cooperate in view of return.

               (21)

               No period for voluntary departure should be granted in the cases provided for in Article 7(4) of Directive 2008/115/EC, notably when the illegally staying third-country poses a risk of absconding as provided for in points 15 and 16 of this Recommendation and in cases of previous convictions for serious criminal offences in other Member States.

      ASSISTED VOLUNTARY RETURN PROGRAMMES

               (22)

               Member States should have operational assisted voluntary return programmes by 1 June 2017, which should be in line with the common standards on Assisted Voluntary Return and Reintegration Programmes developed by the Commission in cooperation with Member States and endorsed by the Council (14).

               (23)

               Member States should take action to improve their process of disseminating information on voluntary return and assisted voluntary return programmes to illegally staying third-country nationals, in cooperation with national education, social and health services.

      ENTRY BANS

               (24)

               For the purpose of making full use of the entry bans, Member States should:

                           (a)

                           ensure that entry bans start being valid on the day in which the third-country nationals leave the EU so that their effective duration is not unduly shortened; this should be ensured in cases where the date of departure is known to the national authorities, notably in cases of removal and of departure in conjunction with an assisted voluntary return programme;

                           (b)

                           put in place means to verify if a third country national illegally staying in the European Union has left within the period for voluntary departure, and to ensure an effective follow-up in the case this person has not left, including by issuing an entry ban;

                           (c)

                           systematically enter an alert on entry ban in the second generation Schengen Information System, in application of Article 24(3) of Regulation (EC) No 1987/2006; and

                           (d)

                           put in place a system for issuing a return decision in cases where illegal stay is discovered during an exit check. Where justified, following an individual assessment and in application of the principle of proportionality, an entry ban should be issued in order to prevent future risks of illegal stay.

      Done at Brussels, 7 March 2017.

            For the Commission

         Dimitris AVRAMOPOULOS

            Member of the Commission

      (1)  Directive 2008/115/EC of the European Parliament and of the Council of 16 December 2008 on common standards and procedures in Member States for returning illegally staying third-country nationals (OJ L 348, 24.12.2008, p. 98).

      (2)  Council Regulation (EU) No 1053/2013 of 7 October 2013 establishing an evaluation and monitoring mechanism to verify the application of the Schengen acquis and repealing the Decision of the Executive Committee of 16 September 1998 setting up a Standing Committee on the evaluation and implementation of Schengen (OJ L 295, 6.11.2013, p. 27).

      (3)  Council Decision 2008/381/EC of 14 May 2008 establishing a European Migration Network (OJ L 131, 21.5.2008, p. 7).

      (4)  European Council conclusions of 20-21 October 2016, EUCO 31/16.

      (5)  European Council press release 43/17 of 3 February 2017.

      (6)  Regulation (EU) 2016/399 of the European Parliament and of the Council of 9 March 2016 on a Union Code on the rules governing the movement of persons across borders (Schengen Borders Code) (OJ L 77, 23.3.2016, p. 1).

      (7)  Council Directive 2001/40/EC of 28 May 2001 on the mutual recognition of decisions on the expulsion of third country nationals (OJ L 149, 2.6.2001, p. 34).

      (8)  Council Decision 2004/191/EC of 23 February 2004 setting out the criteria and practical arrangements for the compensation of the financial imbalances resulting from the application of Directive 2001/40/EC on the mutual recognition of decisions on the expulsion of third-country nationals (OJ L 60, 27.2.2004, p. 55).

      (9)  Judgment of the Court of Justice of the European Union, case C-562/13 of 18 December 2014.

      (10)  COM(2016) 881 final.

      (11)  Regulation (EC) No 1987/2006 of the European Parliament and of the Council of 20 December 2006 on the establishment, operation and use of the second generation Schengen Information System (SIS II) (OJ L 381, 28.12.2006, p. 4).

      (12)  Directive 2013/32/EU of the European Parliament and of the Council of 26 June 2013 on common procedures for granting and withdrawing international protection (OJ L 180, 29.6.2013, p. 60).

      (13)  Regulation (EU) 2016/1953 of the European Parliament and of the Council of 26 October 2016 on the establishment of a European travel document for the return of illegally staying third-country nationals, and repealing the Council Recommendation of 30 November 1994 (OJ L 311, 17.11.2016, p. 13).

      (14)  Council Conclusions of 9-10 June 2016.


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31995H0198

95/198/EC: Commission Recommendation of 12 May 1995 on payment periods in commercial transactions

Official Journal L 127 , 10/06/1995 P. 0019 - 0022

COMMISSION RECOMMENDATION of 12 May 1995 on  payment periods in commercial transactions (*) (Text with EEA relevance) (95/198/EC) THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Whereas on 21 April 1993 the European Parliament adopted a Resolution on the Commission's  communications to the Council 'Towards a European subcontracting market` and 'SME participation in  public procurement contracts in the Community` (1), calling on the Commission to make specific  proposals on late payments; Whereas on 30 June 1993 the Economic and Social Committee adopted an Opinion  (2) on the  'Commission staff working paper on the problem of the time taken to make payments in commercial  transactions` (3); Whereas in its White Paper on Growth, Competitiveness and Employment  (4) the Commission announced  an initiative concerning payment periods; Whereas on 25 May 1994 the Commission adopted a Communication on the implementation of an  integrated programme in favour of SMEs and the craft sector  (5); Whereas the European Parliament in its Resolution on the Integrated Programme emphasized that the  Commission should forward porposals to deal with the problem of late payment  (6); Whereas heavy administrative and financial burdens are placed on businesses, particularly small and  medium-sized ones, as a result of the length of payment periods in commercial transactions; whereas  overdue payments are a danger to the financial balance and even the survival of businesses; Whereas there has been a deterioration in payment practices in the majority of the countries of the  Community in recent years; whereas this deterioration has not been caused by economic factors  alone, but also reflects a structural trend in business relations; whereas the intensification of  trade and competition in the internal market could well bring about a general lengthening of  payment periods in the Community; Whereas the differences between the payment rules and practices in the Member States consitute an  obstacle to the proper functioning of the internal market; Whereas, without undermining contractual freedom as regards the determination of payment periods,  it is advisable to promote greater transparency of the time limits applicable between contracting  parties and to encourage adherence to the agreed deadlines; Whereas better information and training for businesses, in particular small and medium-sized ones,  in the matter of payment periods would help improve business practices in this area; Whereas the penalty system for overdue payments in the Member States must be such as both to  discourage late payment and fully compensate the creditors for the various costs incurred; Whereas a penalty system can be dissuasive only if it is accompanied by redress procedures which  are rapid, effective and inexpensive for the creditor; Whereas it is necessary to take supplementary measures in order to improve adherence to payment  periods in cross-border transactions; Whereas public authorities and public-law enterprises handle a considerable volume of payments to  businesses; whereas strict payment discipline on the part of these authorities would have a  spill-over effect on the economy as a whole; whereas current practices must be improved if public  procurement contracts really are to be opened up to businesses, particularly small and medium-sized  ones, HEREBY RECOMMENDS: Article 1 Objectives Member States are requested to take the necessary legal  and practical steps to ensure adherence to contractual payment periods in commercial transactions  and to improve payment periods for public procurement contracts. In particular, they are requested to take the most appropriate steps, to supplement their legal and  administrative systems, in order to: -  reinforce transparency in contractual relations, improve training and information in businesses  and mitigate the fiscal effects of late payments, -  ensure adequate compensation for late payments, -  guarantee appropriate redress procedures, -  eliminate difficulties specific to cross-border trade, -  improve payment for public procurement contracts. Article 2 Transparency, information and training, VAT 1.  Greater transparency of the payment  periods applicable in commercial transactions, should be encouraged. To this end, the Member States  are requested to: (a)  take the appropriate steps to encourage clear indication, in commercial contracts, of the  period applicable and the date at which the payment falls due, by, for example, a statement on the  invoice. Where there is no written contract or where the payment period has not been clearly  indicated on the invoice, they shall provide for a simple and clear rule which determines both the  payment period and the payment deadline legally applicable to the contract; (b)  encourage indication, on commercial documents, of any discounts and charges applicable to  early or late payment; (c)  encourage indication in commercial contracts of a period, following the receipt of goods or  services, during which the recipient may raise any objections regarding the quality or quantity  received. The legislation should contain a subsidiary rule which applies in the absence of any  provision in the contract; (d)  stipulate that notices of public procurement contracts or bills of quantities should contain  precise details of the payment periods and deadlines practised by the awarding authorities. 2.  Member States are requested to encourage public and private initiatives, including those of  professional organizations, designed to improve the information and training offered to businesses,  particularly small and medium-sized ones, in the management of payment periods. Such schemes may  involve, in particular: (a)  providing advice and legal assistance in the drafting of commercial documents and contracts; (b)  providing information and training on the most suitable payment rules and practices for  particular sectors, regions and countries, and on internal and external debt-recovery procedures; (c)  developing practical means of cash-flow management, in particular computing facilities, and  promotion electronic data interchange (EDI) within SMEs; (d)  recourse to debt-recovery techniques such as factoring. 3.  In view of the specific needs of SMEs and in particular the effects on their liquidity, which  are liable to arise from late payments, the Member States are resquested to provide that they enjoy  the most favourable payment periods under Council Directive 77/388/EEC (Sixth Directive on VAT)   (1). This concerns the possibility of: (a)  deferring payment of VAT until the corresponding invoice has been settled, for small  businesses at least; (b)  permitting small businesses to submit their VAT returns after longer periods. Article 3 Compensation for late payment Conditions should be created whereby the creditor can  be suitably compensated for damages incurred through late payment by the debtor. To this end,  Member States are requested to: (a)  recognize the right of creditors to interest on arrears as soon as the contractual or  statutory period has been exceeded; (b)  set a rate of interest for late payments, otherwise applicable in the absence of specific  provisions in the contract, at a level which is sufficiently dissuasive for bad payers; (c)  recognize, in addition to the right to interest on arrears, a right to other compensation for  damage incurred by the creditor through late payment. This compensation should cover, in  particular, the legal and administrative costs of recovery. Article 4 Redress procedures Steps should be taken to ensure that creditors to whom payment is  overdue have access to rapid, efficient and inexpensive redress procedures enabling them to obtain  payment and compensation for damages. To this end, Member States are requested to: (a)  encourage the introduction of procedures to settle claims without recourse to legal  proceedings, with a view to the rapid, efficient and inexpensive settlement of payment disputes; (b)  improve the effectiveness of simplified legal procedures for the settlement of claims in  respect of limited sums. These procedures should provide for simple, low-cost methods for taking  legal action. The thresholds for the applicaton of these procedures should be set at a level which  covers a considerable number of business transactions. There should be efficient conditions for  enforcing rulings made under these simplified procedures; (c)  improve the effectiveness of accelarated recovery procedures. These procedures should allow,  with fewer formalities and shorter time limits, the granting of a writ of execution when a debt is  not contested. These procedures should take place quickly, with a minimum of formalities and  financial cost to the creditor, and apply irrespective of the size of the claim. Article 5 Cross-border trade The difficulties which are specific to cross-border trade in  respect of payment should be eliminated. To this end, Member States are requested to: (a)  encourage better information and training in businesses on the management of payment periods  in cross-border trade; (b)  facilitate recovery procedures for cross-border debts which are not in dispute. In particular,  it should be made easier to obtain a writ of execution for such debts; (c)  take all necessary measures to facilitate and speed up the resolution of law suits and the  execution of judgments in the case of late cross-border payments. Article 6 Public procurement contracts Steps must be taken to ensure that public authorities  and public-law enterprises - the latter as defined in Council Directive 93/38/EEC  (1) - are  disciplined in the matter of payment. To this end, Member States are requested to: (a)  take steps to ensure that all the authorities concerned are aware of the consequences of late  payment on the financial well-being of economic operators; (b)  adhere to a period of 60 days for payments for public procurement contracts, without prejudice  to any shorter times currently in effect. Member States are requested to examine the extent to  which they can reduce the time it takes for public authorities to pay companies, and the extent to  which they can simplify the relevant existing rules; (c)  establish precise administrative procedures, including time limits, to ensure that public  payments are made as rapidly as possible. In particular, time limits should be fixed for the  completion of pre-payment administrative formalities, such as public works reception procedures; (d)  carry out regular checks on the payment periods of all authorities at all levels, the results  to be made available in an official publication; (e)  provide for payment - at the same time as the face value of the invoice is paid - of interest  on invoices not paid by the date specified in the contract. Appropriate checks should be made to  ensure that the public authorities adhere to this principle; (f)  make provision for sub-contractors to be paid within reasonable time limits under public  procurement contracts. Article 7 Report To enable the Commission to evaluate what progress has been made, Member  States are requested to forward a report to the Commission on action taken in respect of the  various elements of this Recommendation before 31 December 1997. Article 8 Addressees This Recommendation is addressed to the Member States. Done at Brussels, 12 May 1995. For the Commission Christos PAPOUTSIS Member of the Commission


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31980H0907

80/907/EEC: Council Recommendation of 23 September 1980 on the ratification of the Torremolinos International Convention for the Safety of Fishing Vessels (1977)

Official Journal L 259 , 02/10/1980 P. 0029 - 0029 Spanish special edition: Chapter 07 Volume 2 P. 0209  Portuguese special edition Chapter 07 Volume 2 P. 0209

COUNCIL RECOMMENDATION of 23 September 1980 on the ratification of the Torremolinos International Convention for the Safety of Fishing Vessels (1977) (80/907/EEC)    THE COUNCIL OF THE EUROPEAN COMMUNITIES,  Having regard to the Treaty establishing the European Economic Community, and in particular Article 84 (2) thereof,  Whereas the Torremolinos International Convention for the Safety of Fishing Vessels (1977), can help to promote the safety of ships in general and the safety of fishing vessels in particular;  Whereas ratification or accession by all the Member States can accelerate the entry into force of this Convention,  HEREBY RECOMMENDS:       - that, where they have not already done so, the Member States ratify the Torremolinos International Convention for the Safety of Fishing Vessels (1977), or accede thereto as soon as possible and not later than 31 July 1982;       - that the Member States inform the Secretary-General of the Inter-Governmental Maritime Consultative Organization that they have ratified or acceded to the Convention with regard to this recommendation.            Done at Brussels, 23 September 1980.  For the Council  The President  J. SANTER


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31978H0584

78/584/EEC: Council Recommendation of 26 June 1978 on the ratification of Conventions on safety in shipping

Official Journal L 194 , 19/07/1978 P. 0017 - 0018 Greek special edition: Chapter 05 Volume 2 P. 0241  Spanish special edition: Chapter 07 Volume 2 P. 0117  Portuguese special edition Chapter 07 Volume 2 P. 0117

COUNCIL RECOMMENDATION  of 26 June 1978  on the ratification of Conventions on safety in shipping  (78/584/EEC)  THE COUNCIL OF THE EUROPEAN COMMUNITIES,  Having regard to the Treaty establishing the European Economic Community,  Having regard to the proposal from the Commission,  Having regard to the opinion of the European Parliament (1),  Having regard to the opinion of the Economic and Social Committee (2),  Whereas the European Council of 7 and 8 April 1978 declared that the prevention of and the fight against marine pollution, particularly from hydrocarbons, must be a major objective for Community action ; whereas it asked the Council, acting on a proposal from the Commission, and the Member States to take appropriate measures without delay within the Community and to adopt common attitudes in the appropriate international bodies on the swift implementation of existing international rules in this field, in particular those regarding minimum standards for the operation of ships;  Whereas there is a fundamental interest in seeing effective action undertaken to reduce the risks inherent in the transport of hydrocarbons, in particular the danger of severe coastal pollution as the result of accidents on the high seas, and whereas this fundamental interest is underlined by the European Communities' environment action programmes;  Whereas safety in shipping must be improved and the living and working conditions of crews and their level of competence better safeguarded;  Whereas Community action in this field in the framework of specialized international bodies, particularly the IMCO and the ILO and their respective Conventions, may be jeopardized if too long a period were to elapse between the conclusion of those Conventions and their entry into force;  Whereas the 1974 International Convention for the safety of life at sea (SOLAS) and the 1978 Protocol relating thereto and ILO Convention No 147 concerning minimum standards in merchant ships of 1976, which have not yet entered into force, can make a substantial contribution towards improving both technical and welfare standards affecting, respectively, the safety of ships and their equipment and the living and working conditions of their crews;  Whereas the 1973 Convention for the prevention of pollution by ships (MARPOL), as amended by the 1978 Protocol, can make a substantial contribution towards protecting the marine environment against pollution by ships, particularly oil tankers;  Whereas the signing and ratification by or the accession of all the Member States could accelerate the entry into force and increase the effectiveness of these Conventions,  HEREBY RECOMMENDS:       - that, where they have not already done so, the Member States, where appropriate, sign the following international conventions and ratify or accede to them:    - the 1974 International Convention for the safety of life at sea (SOLAS),       - the 1978 Protocol relating to the 1974 International Convention for the safety of life at sea,       - the 1973 International Convention for the prevention of pollution by ships (MARPOL), as amended by the 1978 Protocol,       - Convention No 147 concerning minimum standards in merchant ships, adopted by the International Labour Conference in 1976;       - that signing, ratification or accession by the Member States, as the case may be, take place by the following dates:    - the 1974 SOLAS Convention:  ratification or accession as soon as possible and, in any event, by 1 January 1979,    - the Protocol thereto (1978):    - signing as soon as possible and by 1 March 1979 at the latest,       - ratification as soon as possible and, in any event, by 30 June 1979,  (1)OJ No C 163, 10.7.1978, p. 17. (2)Opinion delivered on 21 June 1978 (not yet published in the Official Journal).        - the Protocol (1978) amending and supplementing the MARPOL Convention (1973) and Annex I thereto:    - signing by 1 June 1979,       - ratification by 1 June 1980,       - ILO Convention No 147:  ratification or accession by 1 April 1979;   - that the Member States inform in writing the Secretary-General of the Inter-Governmental Maritime Consultative Organization or the International Labour Organization, as appropriate, that their signing, ratification or accession has had regard to this recommendation.   Done at Luxembourg, 26 June 1978.  For the Council  The President  K.B. ANDERSEN


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		52011SC0819

			Recommendation for a COUNCIL RECOMMENDATION on the National Reform Programme 2011 of the Czech Republicand delivering a Council opinionon the updated Convergence Programme of the Czech Republic, 2011-2014 /* SEC/2011/0819 final */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on the National Reform Programme 2011 of
the Czech Republic
and delivering a Council opinion
on the updated Convergence Programme of the Czech Republic, 2011-2014
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 9(3)
thereof,
Having regard to the recommendation of the European
Commission[2],
Having regard to the conclusions of the
European Council,
Having regard to the opinion of the Employment
Committee,
After consulting the Economic and Financial
Committee,
Whereas:
(1)
On 26 March 2010, the European Council agreed to
the European Commission's proposal to launch a new strategy for jobs and
growth, 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, 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[3], 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 12 January 2011, the Commission adopted the
first Annual Growth Survey, marking the start of a new cycle of economic
governance in the EU and the first European semester of ex-ante and integrated
policy coordination, which is anchored in the Europe 2020 strategy.
(4)
On 25 March 2011, the European Council endorsed
the priorities for fiscal consolidation and structural reform (in line with the
Council’s conclusions of 15 February and 7 March 2011 and further to the
Commission’s Annual Growth Survey). It underscored the need to give priority to
restoring sound budgets and fiscal sustainability, reducing unemployment
through labour market reforms and making new efforts to enhance growth. It
requested Member States to translate these priorities into concrete measures to
be included in their Stability or Convergence Programmes and National Reform
Programmes.
(5)
On 29 April 2011, the Czech Republic submitted
its 2011 National Reform Programme and on 5 May its 2011 Convergence Programme
update covering the period 2011-2014. In order to take into account the
interlinkages, the two programmes have been assessed at
the same time.
(6)
The global financial crisis, channelled through
the Czech economy's high trade openness, took a heavy toll on GDP growth and
unemployment in the Czech Republic. Real GDP declined by 4.1% in 2009, as a
result of the fall in exports and in domestic investment. The unemployment rate
increased significantly from 4.4% in 2008 to 7.3% in 2010, and the employment
rate fell by 2 percentage points between 2008 and 2010. However, the high
degree of exposure to international trade and a fast recovery in the Czech
Republic's main trading partners have also facilitated a quick rebound in the
real GDP growth rate in 2010 to 2.3% and will continue to support a moderate
recovery.
(7)
Based on the assessment of the updated Convergence
Programme pursuant to Council Regulation (EC) No 1466/97, the Council is of the
opinion that the macroeconomic assumptions underpinning the programme are
plausible in the first two years of the programme and too favourable
thereafter. The programme is based on a lower growth projection for 2012
compared with the Commission services 2011 Spring forecast, mainly on account
of a further sustained reduction in real government consumption expenditure,
which is not taken up in the Commission services' no-policy-change forecast for
2012. The programme foresees a reduction of the general government deficit
below 3% of GDP in 2013 and further to 1.9% of GDP in 2014. The planned
consolidation is mainly based on expenditure restraint. The proposed measures
are broadly sufficient to reach the target by 2013, as recommended by the
Council, but there are risks to the actual budgetary outcome of measures as
presented in the programme. Moreover, the attainment of the targets for the
outer years of the programme seems to rely largely on favourable cyclical
conditions and further efficiency gains in public administration, which may become
increasingly difficult to materialise. The achievement of the medium-term
budgetary objective is foreseen beyond the horizon of the programme. The
average annual fiscal effort over the period 2011-2013 is below 1% of GDP
recommended by the Council under the EDP procedure of 2 December 2009.
(8)
The Programme set out a clear objective to bring
the deficit in public finances below 3% of GDP by 2013. The challenge will be
to ensure that measures underlying the path for the deficit reduction in
2011-13, as well as in subsequent years, do not compromise long-term growth,
especially by safeguarding expenditure on education and public R&D, and
that they provide an adequate buffer for increases in expenditure entailed by
demographic developments.
(9)
The budgetary consolidation strategy includes
measures that affect VAT revenue: the lower VAT rate is planned to rise in 2012
and 2013, while the higher rate is to decrease in 2013. The government also
intends to increase the number of firms liable to VAT from 2013. According to
the Programme, these changes should result in an increase in tax receipts of
0.7% of GDP in 2012 and further by 0.1% of GDP in 2013. In addition, there
seems to be further scope for boosting revenue from indirect taxes, which stood
at 11.8% of GDP in 2010, compared to the EU average of 13.4%, and thereby
possibly shift taxes away from labour. Furthermore, the difference between
actual VAT revenue and the theoretical VAT liability is estimated to be
significantly above the EU average, substantiating the need for measures improving
tax compliance.
(10)
Given that the budgetary impact of ageing is
projected to be well above the EU average, the reform of the pension system is
an important issue. The government has put forward two sets of proposals. The
first package is expected to receive Parliamentary approval by September 2011
and targets the public Pay-As-You-Go pillar, which has been in deficit since
2009. It includes, among other measures, an increase in the statutory
retirement age, which will be unified at 67 years in 2041 for men and women. This
set of parametric reforms goes some way towards addressing the fiscal sustainability
problem; it may, however, not be sufficient to address the challenges created
by population ageing. The second package of measures, not yet formally approved
by the government, would consist in the introduction of a voluntary second
private pillar in 2013, with the aim to increase diversification in retirement
incomes and support their future adequacy by promoting the development of private
savings. However, the suggested form of the pillar creates few incentives to
join the scheme and may actually add to the long-term pressures highlighted
above. The operating costs of such pension funds also need to be carefully
analysed and kept as low as possible to ensure the effectiveness of the system.
(11)
The labour market is perceived as moderately
flexible and had not shown evidence of major dysfunctions before the global
financial crisis. Yet, some structural weaknesses are evident. A key challenge
concerns the severe difficulties that women with children face when
re-integrating into the labour market after maternity leave. The issue is
significant also because of its wider economic repercussions: longer spells out
of work, a high gender employment gap, and the highest gender pay gap among all
Member States. Early return to work remains difficult despite the government's
effort to give parents greater choice in determining the length of parental
leave. The problem can be attributed partly to the low willingness of firms to
provide part-time employment contracts, often used by employees with small
children in other Member States, and partly to limited availability of
affordable child-care facilities, especially for children below the age of
three.
(12)
While the overall unemployment rate remains
firmly below the EU average, long-term unemployment is on the rise,
particularly among the 20-29 years old. The low-educated as well as other
low-wage earners face considerable difficulties in finding employment. High
long-term unemployment is consistent with under-funded and relatively low-scale
active labour market policies and a low share of participants in regular
activation measures.
(13)
Inefficiencies in public administration, which
weigh on the business environment, could be addressed by comprehensively
implementing existing strategies. The government has launched a 'better
regulation' agenda in 2007 and an anti-corruption strategy for the years
2011-2012. They announce measures that are important to improve the quality of
the Czech legal and regulatory framework, which ranks below the EU average
according to international surveys, and strengthen the confidence of
businesses. A challenge is to stabilise the public administration, as frequent
and far-reaching reorganisations impede its efficiency. For doing so, it would
be important to adopt the Public Servant Act, which has been repeatedly
postponed. The government has recently adopted measures to increase the transparency
of public procurement. However, one element of the regulatory framework, namely
the specific type of company shares that permit a fully anonymous transfer of
wealth, remains prone to risks and therefore deserves attention.
(14)
The crisis is expected to have negativly impacted
on potential growth. Improving human capital is important, despite the high
ratio of young people enrolled in universities, and is hindered by insufficient
quality of training, as illustrated by the low ranking of Czech tertiary
education institutes in international surveys. Furthermore, spending
per student, in comparable prices, is in the lower quarter of the EU countries
and is especially limited for primary education. The National Reform Programme
outlines measures for all stages of education. A complex reform of tertiary education
has been in preparation for several years. Ensuring quality and efficient
tertiary education is important for competitiveness and innovation capacity.
(15)
The Commission has assessed the Convergence
Programme and National Reform Programme of the Czech Republic[4]. It has taken into account not only their relevance for sustainable
fiscal and socio-economic policy in the Czech Republic but also their conformity
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. In this
light, the Commission considers that the focus on
fiscal consolidation should be kept, while protecting growth-enhancing
expenditure. The long-term sustainability of public finances depends, to a
large extent, on the capacity to implement now the necessary pension reform.
Raising labour market participation, in particular of women, and job
opportunities for the long-term unemployed, are essential. Further steps to
improve the quality of public services and the regulatory framework, as well as
the quality of tertiary education, are crucial for competitiveness.
(16)
In light of this assessment, also taking into
account the Council Recommendation under Article 126(7) Treaty on the Functioning
of the European Union of 2 December 2009, the Council has examined the 2011
update of the Convergence Programme of the Czech Republic and its opinion[5] is reflected in particular in
its recommendations under (1) and (2) below. Taking into account the European
Council conclusions of 25 March 2011, the Council has examined the National
Reform Programme of the Czech Republic,
HEREBY RECOMMENDS that the Czech
Republic should take action within the period 2011-2012 to:
(1)
Implement the planned consolidation in 2011 and
take countervailing measures of a permanent nature in case of any revenue
shortfalls or expenditure slippages. Adopt fiscal measures as planned in the
programme for 2012 and underpin the target for 2013 by more specific measures.
Avoid cutting expenditure on growth-enhancing items and exploit the available
space for increases in indirect tax revenue, improve tax compliance, and reduce
tax evasion.
(2)
Introduce a comprehensive
pension reform in order to improve the long-term sustainability of public
finances and to ensure the future adequacy of pensions. Efforts should focus,
first, on further changes to the public pillar,
including a more rapid increase in the statutory retirement age than
planned, underpinned by measures
promoting the employment of older workers; and, second, on the development of
private savings. In this context, ensure that the envisaged funded scheme
attracts broad participation and is designed to keep administrative costs
transparent and low.
(3)
Enhance participation in the labour market by reducing
the barriers for parents with young children to re-enter the labour market
through increased availability and access to affordable childcare facilities. Increase
the attractiveness and availability of more flexible
forms of working arrangements, such as part-time jobs.
(4)
Strengthen the capacity of
the public employment service to increase the quality and effectiveness of
training, job search assistance and individualised
services, linking funding of programmes to results. In
consultation with stakeholders, introduce tailor-made training programmes, for older
workers, young people, low skilled and other vulnerable groups.
(5)
Take the necessary measures to improve the
quality of public services in areas essential for the business environment. In
this context speed up the implementation of the anti-corruption strategy in
line with the identified targets, adopt the Public Servants Act to promote
stability and effectiveness of the public administration, and revise the Commercial
Code to abolish anonymous shareholding.
(6)
Establish a transparent system of quality
evaluation of academic institutions and link it to its funding in order to
improve the performance of tertiary education.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 2.8.1997, p. 1.
[2]               OJ C, p. .
[3]               Maintained for 2011 by
Council Decision 2011/308/EU of 19 May 2011.
[4]               SEC(2011) 712.
[5]               Foreseen in Article 9(3) of Council Regulation (EC)
No 1466/97.