title: Commission's recommendation for the broad guidelines of the economic policies of the Member States and the Community drawn up in conformity with article 103(2) of the Treaty establishing the European Community

text:
        COMMISSION OF THE EUROPEAN COMMUNITIES
                                          Brussels, 23.04.1997
                                          COM(97) 168 final
          Commission's Recommendation
for the Broad Guidelines of the Economic Policies
    of the Member States and the Community
          drawn up in conformity with Article 103 (2) of the
            Treaty establishing the European Community
 ---pagebreak---  ---pagebreak---                                    Table of contents
1. Main objectives: growth, employment and convergence                1
2. Growth and stability-oriented macroeconomic policy mix             2
3. Price and exchange rate stability                                  3
4. Sound and efficient public finances                                4
5. Structural reforms to promote growth and employment                7
   5.1.   Better functioning product and services markets             8
   5.2.   Fostering labour market reforms and investment in knowledge 8
                                                                        /**-
 ---pagebreak---         Broad Guidelines of the Econome Policies
         of the Member States and the Community
 1. Main objectives: growth, employment and convergence
Since the summer of 1996, when the previous Guidelines were adopted, a moderate recovery in
economic activity has taken hold in the Community. Supply-side fundamentals continue to
improve whereas demand prospects are brightening. These developments in combination with
an increasingly well-balanced macroeconomic policy mix and the emerging improvement in
confidence should allow for a gradual strengthening in output growth to about its trend rate this
year and to well-above-trend next year.
ïn the present environment, two fundamental policy concerns should be given prominence, with
success on both fronts being mutually reinforcing. Firstly, although employment is expected to
 increase moderately in the short run, there is a need to raise the Community's low employment
rate and to reduce unemployment significantly. Secondly, despite appreciable strides in recent
years towards the goals of price stability and sustainable public finances, further progress is
required in achieving and maintaining a high degree of nominal convergence so that a significant
number of Member States will be in a position to participate in EMU as from 1 January, 1999.
In the coming quarters, it is of crucial importance ~ also for growth and employment — to
 avoid any doubt about the fulfilment of the Maastricht criteria and the 1999 launch date for the
 single currency so as to reassure European citizens and businesses that the opportunities brought
 by EMU will indeed be seized. Since the pursuit of sounder budgetary positions will bring
 important growth and employment benefits over the medium term, continuing budgetary
consolidation efforts are in the interest of all Member States.
With the Single Market and EMU, the Community is becoming one of the most important
economic entities in the world. Its medium to longer term potential in terms of technological
progress, labour and wealth creation is considerable. In order to exploit fully this potential for
raising the standard of living, the Community must progressively achieve a high employment
rate. Such a performance would also help to safeguard the sustainability of pension schemes, in
a reformed manner, which form an integral part of the social protection systems in the Member
States.
Restoring a sustained, high rate of non-inflationary growth is the most favourable way, both
from a political and social point of view, of achieving a long-lasting solution to the
Community's unemployment problem and of making further headway towards sound public
finances. Furthermore, since structural deficiencies continue to restrain both growth and the
degree to which growth can be translated into additional employment, most Member States need
to implement structural reforms. However, policies to improve competitiveness and the
functioning of product, services and labour markets will bear full fruit when the economy is
expanding rapidly and is generating a high number of jobs.
                                                                                /lb
 ---pagebreak---  An employment-friendly growth must be supported by higher investment, both private and
 public. Due to the relatively weak private investment trends since the early 1990s and the
 squeeze on public investment, the current investment rate in the Community is rather low. The
 current investment ratio, if maintained over the medium term, would sustain a rate of growth of
 only a little over 2 per cent per year. It is essential therefore that the currently favourable
 investment conditions, in terms of high profitability and lower interest rates, are fully exploited.
In addition, the realisation of the transeuropean transport, energy and communication networks
should be actively pursued, with the Community financial instruments and the EIB playing a key
role and with a greater involvement of the private sector. Moreover, investment in human
resources, knowledge and skills should also be stepped up.
Against this background, the Member States and the Community institutions are urged, in
conformity with Article 102(a) of the Treaty, to conduct their economic policies with a view to
making significant progress towards sustainable, non-inflationary growth and a high level of
employment, which are among the objectives stipulated in Article 2 of the Treaty. To this end,
they are also called upon to co-ordinate their policies (Articles 3a, 102a and 103) within the
context of increased integration of the Member States' economies.
2. Growth and stability-oriented macroeconomic policy mix
The present Guidelines reaffirm that the achievement of sustained, investment-supported output
growth and job creation over the medium term without inflationary tensions continues to require
a common macroeconomic policy strategy which builds further on the following three elements,
as formulated in the 1996 Guidelines:
     "A stability-oriented monetary policy whose task is not undermined by inappropriate
     budgetary and wage developments;
     sustained efforts to consolidate the public finances in most Member States consistent with
     the objectives of their convergence programmes;
     nominal wage trends consistent with the price stability objective; at the same time, real
     wage developments should be below the increase in productivity in order to strengthen the
     profitability of employment-creating investment.
The more the stability task of monetary policy is facilitated by appropriate budgetary measures
and wage developments, the more monetary conditions, including exchange rates and long-term
interest rates, will be favourable to growth and employment."
With regard to medium-term prospects, it is important that policy-makers, the social partners and
economic agents take fully into account the fact that EMU will imply a genuine regime change,
fundamentally affecting the way macroeconomic policies and wage trends are set.
(i) A common monetary policy under the responsibility of an independent European Central
     Bank will have price stability as its primary objective while, without prejudice to this
     objective, supporting the general economic policies in the Community so as to contribute to
     the achievement of the objectives laid down in Article 2 of the Treaty.
 ---pagebreak--- (ii) The Treaty provisions in the field of budgetary policy (Articles 104 to 104c) and the
      Stability and Growth Pact will work in the direction of sound and disciplined budgetary
      policies. Subject to these legal provisions, responsibility for budgetary policies will reside
      with the sovereign national governments which will have to co-ordinate theiF budgetary
      policies in the framework of the Broad Economic Policy Guidelines.
(iii) As regards wages, which are determined by autonomous social partners according to
      individual countries' practices, stability-oriented monetary and budgetary policies and the
      impossibility of exchange rate movements within the euro area will reinforce both the
      conditions and the incentives for an adequate evolution. These incentives should also be
      strengthened by an intensified social dialogue, where possible and according to prevailing
      traditions, at the national level. Àt the Community level, the Commission, in conformity
      with Article 118B, will continue to develop the social dialogue, notably en macroeconomic
      policy issues, with a view tc building on the common understanding on the economic policy
      strategy !aid down it: the Guidelines. The European social partners' contribution on the
      macioeconomic framework transmitted to the Dublin European Council constitutes an
      important step in the right direction which should be encouraged.
If all actors involved live up to the new exigencies, the macroeconomic policy mix will continue to
favour sustained high and employment-creating growth in the Community. The achievement of
EMU will thus be conducive to 'locking in' the fundamental change in the macroeconomic policy
mix which has been progressively established in the Community.
3.      Price and exchange rate stability
Price stability ~ The Community has made considerable headway towards price stability and
inflation convergence which is an essential requirement both for achieving sustained medium-
term growth and for adopting a single currency. Inflation in the Community on average is
expected to fall to VA per cent in 1997, the lowest rate since the Community's inception. In the
EMU perspective, the Community should aim at bringing down its average inflation rate to 2 per
cent and to target such a level over the medium term.
In February 1997, nine Member States (Belgium, Denmark, Germany, France, Luxembourg, the
Netherlands. Austria, Finland and Sweden) had an inflation rate1 of two per cent or less. Having
already achieved a satisfactory degree of price stability, these countries will need to sustain this
performance over the medium term. Against the background of a sustained recovery, Ireland
and the United Kingdom2 will need to maintain a policy aimed at preventing any resurgence of
underlying inflationary pressures and, where adequate, progressing towards lower inflation.
In Spain, Italy and Portugal, the average rate of inflation' has edged down to the 3 to 3.5 per cent
range in February 1997, but in this month the inflation rate on a year earlier reached about 2.5
per
     As measured by the arithmetic average of the latest twelve monthly harmonised indices (HICP)
     relative to the arithmetic average of the twelve monthly harmonised indices of the previous period.
     Ireland and the United Kingdom have not yet published HICP data in a manner which allows the
     calculation of the measure referred to in footnote Î. However, the Commission's own estimates, on
     the basis of available information, suggest that the inflation performance (HICP) in these two
     countries is in the 2 to 3 per cent range.
 ---pagebreak---   cent. In these three countries, it is essential to persevere with stability-oriented policies with a
  view to achieving an average rate of inflation of 2.5 per cent or less for the year 1997 and to
  ensure that the disinflation gains are preserved, and even improved upon, as the recovery gathers
  strength.
 In Greece, where progress in reducing inflation has been made over recent years, reinforced
 efforts are needed in order to bring inflation down to the official inflation targets of 4.5 per cent
 by the end of 1997 and to below 3 per cent by the end of 1998.
 Exchange rate stability — In conformity with Article 109m, all Member States must continue to
 treat their exchange-rate policies as a matter of common interest. Sounder and more credible
 economic policies and favourable developments relative to the US dollar have contributed to a
 more appropriate alignment of exchange rates within the Community. Financial market
 optimism on the prospects for a relatively wide participation in EMU from the outset has also
 helped in this regard. Finland and Italy entered the ERM in the autumn of last year and the vast
 majority of ERM currencies are now within or close to the former narrow bands of the
 mechanism. In this context, as well as with a view to participation in EMU, it is imperative that
 Member States maintain ~ and where appropriate intensify ~ their commitments to stability-
oriented macroeconomic policies. For countries which are not currently participating in the
ERM, these policies would also contribute to creating the conditions for making such
participation possible. Sound macroeconomic policy management creates the conditions for
stable exchange rates and low long-term interest rates within the Community and contributes to
a stable international monetary system.
4.      Sound and efficient public finances
In the Community as a whole, the actual budget deficit declined from 5 per cent of GDP in 1995
to 4.3 per cent of GDP in 1996. Slow economic growth in 1996 made efforts at budgetary
consolidation more difficult and masked the underlying improvement which was achieved. On
the basis of the budget measures decided upon until mid-April 1997, the net borrowing of
general government in the Community as a whole is likely to fall to just below 3 per cent of
GDP in 1997, declining further to 2.5 per cent of GDP in 1998.
In their budgets for 1997, a large majority of Member States have taken significant measures to
reduce their budget deficits to 3 per cent of GDP or less. It is of paramount importance that
Member States rigorously implement these budgets and take immediate corrective action in the
event of slippage from budgetary targets. As regards the budgets for 1998, an enactment of
additional deficit-reducing measures is required in most Member States. This would serve to
provide die needed confidence about the sustainability of the budgetary adjustment, especially in
those countries where the budget deficit is not expected to be clearly below 3 per cent of GDP in
1997 or where the 1997 budget contained temporary measures. This resolve is needed not only
to comply with the Maastricht budgetary criteria but also to make further progress towards the
attainment, over the medium-term, of the objective of a budgetary position close to balance or in
surplus in normal circumstances as stipulated in previous Guidelines and the Stability and
Growth Pact, thereby safeguarding a growth and stability-oriented macroeconomic policy mix.
 ---pagebreak--- It is necessary that budgetary adjustment programmes are credible and socially balanced. To be
credible, it is important that programmes are transparent and sustainable. Transparency requires
that commonly agreed accounting rules and economic principles are strictly applied. It also
requires that, in the presentation of their budgets, Member States clearly characterise the nature
of the announced deficit-reducing measures, indicating which «measures are one-off.
Furthermore, annual budgets and medium-term budgetary projections should clearly indicate the
underlying economic assumptions. To be sustainable, it is essential that deficit-reducing
measures are of a structural kind. Reliance on one-off measures and actions which have to be
reversed in subsequent years have in some cases been instrumental in heightening the pace of
budgetary consolidation. They do not, however, reduce the need for fundamental budgetary
adjustments and should therefore be complemented by lasting budgetary improvements.
Realising the economic rewards of budgetary consolidation crucial!}' hinges upon the quality of
the measures taken. ïn this respect, the present Guidelines reaffirm the general principles which
have been stipulated in previous Guidelines, Firstly, prominence should be given to restraining
expenditure as opposed to further increases in the overall tax burden. In this respect, action
needs to focus on structural measures to better control spending on public consumption, public
pension provisions, health care, unemployment compensation and subsidies. If tax increases are
unavoidable, care should be taken to minimise the adverse effects on growth and employment
and to avoid a revival of inflationary pressures. Secondly, action to permanently reduce the
share in GDP of public expenditure should be accompanied, to the extent possible and without
threatening the necessary reduction in budget deficits, by a shift in government spending
priorities towards productive activities such as investment in infrastructure, human capital and
active labour market initiatives. Thirdly, the desired reduction in the tax burden in most
Member States, especially on labour, should be enacted to the extent that tight expenditure
control makes tax reductions consistent with the achievement and maintenance of sound budget
balances. The Community policies in the area of taxation should be consistent with these
guidelines.
Given the interrelationship between taxation policy on the one hand and the Single Market,
EMU and the fight against unemployment on the other, Member States stand to gain from
increased co-operation in tax measures. Harmful competition between the tax regimes of the
different Member States should be avoided. In this respect, Member States are called upon to
examine the possibility of establishing a code of conduct.
As regards individual Member States, five ~ Denmark, Ireland, Luxembourg, the Netherlands
and Finland ~ already respected the 3 per cent reference value in 1996. In Denmark where the
budget balance is expected to turn slightly positive this year, it is important to consolidate this
performance over the business cycle, to keep the public debt-to-GDP ratio on a steady downward
trajectory and to reduce the growth in public expenditure, including in social transfers. Ireland
should take advantage of the current strong growth phase to intensify efforts to restrain public
expenditure, thereby making final progress towards a balanced budgetary position. A
continuation of the restrained expenditure policy is also essential in the Netherlands and Finland,
with a particular focus needed on social security transfers, offering the opportunity to lower
further non-wage labour costs or other employment-impeding taxes.
 ---pagebreak--- In Belgium, the budget deficit is expected to reach 3 per cent of GDP or less in 1997. On the
basis of current policies, the deficit is likely to fall further in 1998. To put the public finances on
a sustainable footing, the Belgian government should strictly adhere to its new convergence
programme. Particular attention should be given to ensuring sound social security accounts,
with key elements being the introduction of effective mechanisms to better control health care
spending and the continued pursuit of pension reforms.
In Germany, the budget deficit is expected to reach 3 per cent of GDP or less in 1997. On the
basis of current policies, the deficit is likely to fall slightly further in 1998. The German
government has made a firm commitment to take all the necessary measures to respect the 3 per
cent reference value in 1997 and should take the necessary action to arrest the upward trend of
the public debt-to-GDP ratio already in the current year. The pace of budgetary consolidation
should be maintained in 1998 in line with the new convergence programme. Continued
budgetary consolidation should focus on a permanent reduction in the share of government
spending in the economy which would facilitate the introduction of structural reforms in the tax
and social security systems without threatening a strict adherence to the budgetary objectives of
the new convergence programme.
In Spain, the budget deficit is expected to reach 3 per cent of GDP or less in 1997. On the basis
of current policies, the deficit is likely to fall slightly further in 1998. In their 1998 budget, the
Spanish authorities, which are fully committed to reaching the deficit target of 3 per cent of GDP
in 1997, should pursue further budgetary consolidation as envisaged in the new convergence
programme. It is important to continue the implementation of structural deficit-reducing
measures, particularly to curb current expenditure and improve the efficiency in budgetary
management.
In France, the budget deficit is expected to reach 3 per cent of GDP or less in 1997. On the basis
of current policies, the deficit might not fall further in 1998, reflecting in part the expiration of
one-off measures. It is essential that budgetary consolidation is sustained over the medium term
by implementing its recently agreed convergence programme without fail. In particular, it is
necessary to contain health spending and to balance the social security accounts and to ensure
that the envisaged tax reductions, in themselves supportive to growth and employment, will not
slow down the pace of deficit reduction.
In Italy, the budget deficit may reach 3 per cent of GDP in 1997, if the measures already taken in
the 1997 budget and in March of this year have a full effectiveness, and, if necessary, further
measures are taken by the Italian government. On the basis of current policies, the deficit might
increase again in 1998, reflecting the expiration of one-off measures. A further reduction should
be envisaged in the 1998 budget to provide assurance regarding the continuity of adjustment and
to place public finances on a sound medium-term footing. Measures taken in 1997 which had a
temporary nature should be replaced by structural measures with a permanent impact on the
budget. The conditions for a durable consolidation of the Italian budget should be specified in
the convergence programme which the Italian authorities are invited to present as soon as
possible.
 ---pagebreak--- In Austrias the budget deficit is expected to reach 3 per cent of GDP or less in 1997. On the
basis of current policies, the deficit is likely to fall slightly further in 1998. The Austrian
government is urged to take all the necessary measures to meet its budget deficit target of 3 per
cent of GDP in 1997 and to secure the sustainability of its budgetary consolidation efforts in
subsequent years through a programme of ongoing and, where necessary, reinforced structural
adjustments.
In Portugal, the budget deficit is expected to reach 3 per cent of GDP or less in 1997. On the
basis of current policies, the deficit is likely to fall slightly further in 1998. The new strategic
agreement between the government and the social partners should be strictly complied with in
order to achieve significant progress in reforming public administration and the social security
and taxation systems.
In Sweden, the budget deficit is expected to reach 3 per cent of GDP or less in 1997. On the
basis of current policies, the deficit is likely to fall considerably further in 1998. Budgetary
adjustment should concentrate on curbing the growth of expenditure, especially social transfers,
and on reducing, as far as possible, taxation on households and firms so as to improve incentives
to economic activity and work.
In the United Kingdom, the budget deficit is expected to reach 3 per cent of GDP or less in 1997.
On the basis of current policies, the deficit is likely to fall considerably further in 1998. It is
 recommended to adhere firmly to the path of deficit reduction envisaged in the budget for
 1997/98.
 As regards Greece, where announced measures are expected to lead to a further reduction in the
government budget deficit in 1997, sustained efforts on a wide range of fronts are required in
order to meet the targets of the convergence programme, including reinforced efforts to widen
the tax base, to increase the efficiency of the tax administration and of the tax collection system,
to curb government spending and to pursue and extend privatisation plans.
In some of the above Member States, further progress in reducing the government deficit ratio in
 1998 is likely to be limited or indeed absent, in part reflecting the expiration of one-off
measures. Consequently, in their budgets for next year, these Member States should take this
fact into account.
5. Structural reforms to promote growth and employment
In order to safeguard and promote the EC's competitiveness and employment in a world of free
trade and constant technological change, it is essential that Member States and the Community,
in line wkh the Broad Guidelines for Economic Policies, intensify their efforts to modernise
their markets for goods, services and labour. In order to augment the ability of the Member
States' economies to adapt to changing conditions and to enhance the growth potential, there is
also a need to promote innovation, research and development and to improve education and
training                                                                                systems.
 ---pagebreak---  To increase the efficiency of environmental policies, they should rely on more market-based
 instruments, including fiscal ones, both at the national level and — if EU-wide action appears
 necessary — at the level ofti^eCommunity.
 5.1. Better functioning product and services markets
 As part of the strategy to foster growth and employment, while maintaining low inflation, it is
 essential to improve the operation of product and service markets, to stimulate competition and to
 ensure efficient price setting. This was the rationale for the Single Market Programme (SMP), the
 importance of which has clearly been highlighted in the Commission's recent evaluation3. The
 conclusion of that evaluation was that on the one hand Member States' product markets are now
generally highly integrated; on the other hand, the markets for services are less integrated, although
the situation has improved significantly since the start of the SMP. Particular problems clearly
remain. Services, especially construction, insurance and banking, should become the subject of
more attention, particularly on the need to fully implement Single Market legislation.
Furthermore, product markets associated with public procurement continue to escape the full force
of competition; other product markets, notably pharmaceuticals, continue to be excessively
regulated by the Member States. Consumers face higher prices as a result. State aids continue to
distort markets and blunt competition without any sign of improvement. Taxation around the
Community is continuing to segment markets and to increase price differentiation. Product
standards, especially the concept of "mutual recognition" is another area where progress has been
too slow. The business environment for SMEs should be improved.
Competition in, and the efficiency of, product and service markets will be improved by making the
Single Market work better, with additional Member State commitment to: (i) implement fully and
ensure proper enforcement of the existing legislative framework, in particularly in the telecom
sector; (ii) complete the legal framework in areas such as taxation and company law and the
liberalisation of the energy markets; (iii) reduce the burden of over-regulation and to revise or
remove national, market fragmenting measures; and (iv) avoid using state aids to postpone
essential restructuring. The Commission's Action Plan on the Single Market proposes a number
of concrete actions that should be in place before 1 January 1999 to redynamise the Single Market.
5.2. Fostering labour market reforms and investment in knowledge
The positive experience of a number of Member States permits some important policy conclusions
to be drawn both on the content and on the implementation of reforms. Firstly, structural reforms
need to be comprehensive in scope, as opposed to limited or occasional measures, so as to address
in a coherent manner the complex issue of incentives in creating and taking up a job. This
     See Commission Communication on "The impact and effectiveness of the Single Market"
     (COM(96)520, October 1996) and "Economic Evaluation of the Internal Market" (European
     Economy, Reports and Studies, No. 4, 1996).
                                                       8
 ---pagebreak--- approach allows policy complementarities to be exploited, thereby increasing the overall
effectiveness of reforms and, by enhancing their social and political acceptability, reducing the
likelihood of policy reversal. Secondly, mechanisms to monitor the impact of reforms on the
labour market and on employment help assess the effectiveness of the reforms and indicate the
need for possible changes in priorities or implementation. As a result, the multi-annual
employment programmes need to focus more on the interplay between the Guidelines and
specific labour market measures whereas the Joint Employment Reports, which monitor their
application, need to pay particular attention to the identification of good practices arising from
the Member States policies.
A wide array of measures aimed at reinforcing labour market efficiency have been adopted in
recent years at the national level and important reforms are currently under discussion in a
number of Member States. This process should continue and, where necessary, be intensified.
In this context priority should usefully be given to actions aimed at increasing the employment-
intensity of growth through the implementation of pragmatic measures which would reconcile
the attachment of EU citizens to high social standards and the need to open, to a certain degree,
the relatively compressed wage cost structure in most Member States. These measures include:
(i) more differentiation in wage agreements according to qualifications and regions in order to
      reflect adequately differences in productivity levels as well as the introduction of temporary
      entry wages for the young, inexperienced or long-term unemployed. This is an important
      task for the social partners;
(ii) soundly-financed reductions in non-wage labour costs or lower income taxes at the lower
      end of the wage scale;
(iii) new patterns of work organisation, including more flexible working-time arrangements,
      tailored to the specific needs of firms and workers; greater use of voluntary part-time work;
      and the promotion of local employment initiatives.
Moreover, measures to increase the employment-intensity of growth should be linked with the
necessary re-orientation of government spending in favour of inter alia education, vocational
training and research and development.
The shift towards active labour market policies should be closely linked to the reform of taxation
and social protection systems so as to ensure incentives, as well as possibilities, for job-seekers
to take up a job or to participate in other employment-enhancing activities. In addition, these
reforms need to be supported by a stronger employment orientation in other policies. In
particular, measures undertaken with the assistance of the Community's structural funds should
also fit into the global employment strategy and the multi-annual employment programmes of
the Member States.
 ---pagebreak---  ---pagebreak---                                                                   ISSN 0254-1475
                                                           COM(97) 168 final
                                             DOCUMENTS
EN                                                                       10 01
                                    Catalogue number : CB-CO-97-165-EN-C
                                                             ISBN 92-78-18925-1
Office for Official Publications of the European Communities
L-2985 Luxembourg


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		52012DC0324

			Recommendation for a COUNCIL RECOMMENDATION on Portugal’s 2012 national reform programme and delivering a Council opinion on Portugal’s stability programme for 2012-2016 /* COM/2012/0324 final */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on Portugal’s 2012 national reform
programme
and delivering a Council opinion on Portugal’s stability programme for
2012-2016

THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 121(2) and 148(4)
thereof,
Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1],
and in particular Article 5(2) thereof,
Having regard to the recommendation of the
European Commission[2],
Having regard to the resolutions of the
European Parliament[3],
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[4], 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 July 2011, the
Council adopted a recommendation on Portugal’s national reform programme for 2011.
(4)       On 23 November 2011, the
Commission adopted the second Annual Growth Survey, marking the start of the second
European Semester of ex-ante and integrated policy coordination, which is
anchored in the Europe 2020 strategy.
(5)       On 2 March 2012, the
European Council endorsed the priorities for ensuring financial stability,
fiscal consolidation and action to foster growth. It underscored the need to pursue
differentiated, growth-friendly fiscal consolidation, to restore normal lending
conditions to the economy, to promote growth and competitiveness, to tackle
unemployment and the social consequences of the crisis, and to modernise public
administration.
(6)       On
2 March 2012, the European Council also invited the Member States participating
in the Euro Plus Pact to present their commitments in time for inclusion in
their stability or convergence programmes and their national reform programmes.
(7)       On 2 May 2012, Portugal
submitted its stability programme covering the period 2012-2016 and on 7 May
2012, Portugal submitted its national reform programme.
(8)       On 17 May 2011, the
Council adopted Implementing Decision 2011/344/EU to make available to Portugal
medium-term financial assistance for a period of three years from 2011 to 2014
in accordance with Council Regulation (EU) No 407/2010 of 11 May 2010 establishing
a European financial stabilisation mechanism. The accompanying Memorandum of
Understanding signed on the same day and its successive supplements lay down
the economic policy conditions on the basis of which the financial assistance
is disbursed.
(9)       Portugal has made good
progress on a number of fronts, but significant challenges remain. Achieving
the fiscal targets remains essential if the government is to regain full market
access within the programme period. To limit the risks to the 2012 fiscal
targets, rapid and determined implementation of the structural-fiscal measures
of the programme is paramount. At the same time, the government needs to focus
on reforms that address Portugal’s competitiveness challenges. The 2012 budget
does not pursue earlier plans of a ‘fiscal devaluation’. This makes it all the
more important to adopt rapidly additional structural reforms in the labour and
product markets with a view to reducing labour costs, increasing flexibility
and lowering entry barriers. Perseverance and resolve on the part of the
government will be required to overcome strong vested interests that stand in
the way of reforms.
(10)     Overall,
the Third Review of the Economic Adjustment Programme has concluded that Portugal's
implementation of the conditionality set out in the Memorandum of Understanding
remains on track. In particular, the fiscal deficit target for 2011 (5.9% of
GDP) has been overachieved by resorting to a transfer of banks' pension funds
to the state amounting to 3½ per cent of GDP. Despite this one-off operation,
the structural consolidation in 2011 was large and amounted to 3½ per cent of
GDP. Banks are on track to meet the capital
requirements under the Programme by the end of the year but capital positions
have to improve further in 2012 in line with Programme requirements and as a
result of the European Banking Authority’s requirement to cater for sovereign
exposures, the special on-site inspection programme and the planned transfer of
banks’ private pension plans.
(11)     The decline of GDP in 2011
was less marked than forecast, as exports and consumption performed better than
foreseen. However, the fourth quarter of 2011 and beginning of 2012 showed weak
domestic demand, a sharp rise in unemployment and low business confidence. According
to the Commission spring forecast, the outlook for 2012 has deteriorated and
GDP is now projected to fall by 3.3 per cent, i.e. three percentage points more
than in the autumn forecast. Economic growth in 2013 will also be more limited
than originally expected. While the external adjustment has so far been
remarkably fast, with Portuguese exports gaining market shares outside the EU
and imports falling considerably, its persistence is still uncertain. Given the
large external debt Portugal has accumulated, very substantial further
adjustment of a structural nature is required.
(12)     The
budget for 2012 targets a government deficit of 4.5% of GDP, which is in line
with the Economic Adjustment Programme requirements and
with the Council recommendations given to Portugal under the Excessive Deficit Procedure. Medium-term fiscal consolidation plans presented in the stability
programme are also consistent with the Economic Adjustment Programme's deficit
headline targets and a deficit-to-GDP ratio of 3% of GDP is expected by 2013. The 2012 budget includes consolidation measures amounting to more
than 5% of GDP, which are made up of permanent structural measures. Two thirds
of the measures are on the expenditure side and include a significant cut of
public sector wages and pensions, a reduction in the number of government
employees by 2% (full-time equivalent) and a rationalisation of state-owned
enterprises. On the revenue side, the budget envisages a reduction in tax
exemptions, an increase in the number of goods and services taxed at the
standard VAT rate, higher personal income and corporate taxes, an increase in
excise taxes and enhanced efforts to fight tax evasion and fraud. The deficit
is expected to decrease further to 1.8% of GDP in 2014 and 1% of GDP in 2015.
The main risks to the budgetary targets are mainly related to the state-owned
enterprise sector and local and regional governments. In terms of the
structural balance, the fiscal structural adjustment is expected to be over 7
percentage points of GDP in 2011-2012. The MTO of -0.5% of GDP adequately
reflects the requirements of the Stability and Growth Pact. As regards public
debt, it is expected to peak at 115.7% of GDP in 2013 and gradually decline
thereafter.
(13)     The success of the Economic
Adjustment Programme depends crucially on the implementation of a wide range of
structural reforms that will remove the rigidities and bottlenecks that
underlie the economy’s decade-long stagnation. Noticeable
progress has been made until now. The far-reaching and ambitious reform agenda
is on track in the areas of labour market, health care, housing, judiciary and
the insolvency and regulatory framework including competition. Also,
privatisations so far have been highly successful. In network industries, progress
was more mixed. In particular, in the energy sector a comprehensive strategy to
eliminate the sector's rising debt by tackling excessive rents remains to be
fleshed out.
(14)     A strategic re-programming
of the Structural Funds is underway, with a focus on support to youth
employment and competitiveness (in particular SMEs). The new measures
strengthen actions in the areas of employment passport, training and
professional qualifications and access to finance for Small and Medium
Enterprises.
(15)     Portugal has made a number
of commitments under the Euro Plus Pact. The commitments, and the
implementation of the commitments presented in 2011, relate to improving
competitiveness, the employment rate and the sustainability of public finances,
while strengthening financial sustainability.
HEREBY RECOMMENDS that Portugal
should take action within the period 2012-2013 to:
Implement the measures as laid down in
Implementing Decision 2011/344/EU and further specified in the Memorandum of
Understanding of 17 May 2011 and its subsequent supplements.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 02.08.1997, p. 1
[2]               COM(2012)324 final
[3]               P7_TA(2012)0048 and P7_TA(2012)0047
[4]               Council Decision 2012/238/EU of 26 April 2012


Avis juridique important

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52003PC0387

Recommendation for a Council Decision on the approval of certain amendments to be made to Articles 3 and 7 of the Monetary Agreement between the Italian Republic, on behalf of the European Community, and the Vatican City State and, on its behalf, the Holy See and authorising the Italian Republic to give effect to these amendments  /* COM/2003/0387 final - CNB 2003/0142 */

Recommendation for a COUNCIL DECISION on the approval of certain amendments to be made to Articles 3 and 7 of the Monetary Agreement between the Italian Republic, on behalf of the European Community, and the Vatican City State and, on its behalf, the Holy See and authorising the Italian Republic to give effect to these amendments(presented by the Commission)EXPLANATORY MEMORANDUMThe Vatican City State concluded a Monetary Convention [1] with the Italian Republic prior to the Maastricht Treaty of 1992, in particular allowing it to mint certain volumes of Italian lira coins. On 29 December 2000, in the framework of the introduction of the euro, the Italian Republic concluded, on behalf of the Community, a new monetary agreement [2] with the Vatican City State, and, on its behalf, the Holy See ("the Monetary Agreement"), aimed at replacing the Monetary Convention.[1]   Convenzione monetaria tra la Repubblica Italiana e lo Stato della Città del Vaticano il 3 dicembre 1991 - Aggiornamento alla GU 06/05/97. Monetary Convention between Italy and the Vatican City ratified by Italy under Law 119/1994. Published in the Official Journal of the Italian Republic n° 43 of 22 February 1994.[2]    OJ C 299, 25.10.2001, p. 1.The Monetary Agreement reflects most of the elements of the Monetary Convention. However, the maximum number of coins which can be minted by the Vatican City State under the new ceilings is lower than the maximum number of coins which was explicitly authorised by the Monetary Convention, both under normal and special circumstances. Accordingly, on 23 January 2003, Mr Tremonti, Minister of Economy and Finance of Italy, informed the Council Presidency that, in line with a request from the Holy See, his country proposed that the Monetary Agreement be modified with a view to increasing the total value of euro coins which the Vatican City State is authorised to issue each year.The amendments to be made to Articles 3 and 7 of the Monetary Agreement provide for an increase in the total issue ceiling for euro coins which the Vatican City State may issue from EUR 670,000 to EUR 1 million per year. The additional amounts of euro coins the Vatican City State may issue under three special circumstances - in the year when the Holy See becomes vacant, in each Holy Jubilee Year and in the year of the opening of an Ecumenical Council - is also to be increased from EUR 201,000 to EUR 300,000. These new ceilings fully correspond to the maximum numbers of coins which were explicitly authorised under the Monetary Convention. The total face value of euro coins issued by the Vatican City State each year forms part of the annual ceiling of euro coins issued by the Italian Republic which is submitted to the ECB for prior approval under Article 106(2) of the EC Treaty.The negotiating mandate given in Council Decision 1999/98/EC [3] of 31 December 1998 to the Italian Republic ended with the conclusion of the Monetary Agreement. Pursuant to Art. 111(3) EC, a recommendation from the Commission, specifying the amendments to be made to the Monetary Agreement is, therefore, necessary. The ECB is to be consulted. The amendments to be made to the Monetary Agreement by the Italian Republic, on behalf of the Community, will follow the adoption of the Council Decision.[3]   OJ L 30, 04/02/1999, pp. 35-36.2003/0142 (CNB)Recommendation for a COUNCIL DECISION on the approval of certain amendments to be made to Articles 3 and 7 of the Monetary Agreement between the Italian Republic, on behalf of the European Community, and the Vatican City State and, on its behalf, the Holy See and authorising the Italian Republic to give effect to these amendmentsTHE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community, and in particular Article 111(3) thereof,Having regard to the recommendation from the Commission [4],[4]   OJ C XXX, yy/yy/yy, p. zz.Having regard to the opinion of the European Central Bank [5],[5]   Opinion delivered on xxxxxx (Official Journal).Whereas:(1) Under a Monetary Agreement signed on 29 December 2000 between the Italian Republic, on behalf of the European Community, and the Vatican City State and, on its behalf, the Holy See [6]  ("the Monetary Agreement"), the Vatican City State has been entitled to use the euro as its official currency and has been entitled to grant legal tender status to euro banknotes and coins.[6]   OJ C 299, 25/10/2001, pp. 1-4.(2) Under the Monetary Agreement, the Vatican City State has also been entitled to issue euro coins for a maximum annual face value of EUR 670 000 and, for additional amounts of EUR 201 000, under three special circumstances, namely in the year when the Holy See becomes vacant, in each Holy Jubilee Year and in the year of the opening of an Ecumenical Council.(3) An earlier Monetary Convention between the Vatican City State and the Italian Republic allowed the former to annually mint lira coins for a maximum annual face value of LIT 1 billion subject to a maximum annual number of 100 million coins [7].[7]   Convenzione monetaria tra la Repubblica Italiana e lo Stato della Città del Vaticano il 3 dicembre 1991 - Aggiornamento alla GU 06/05/97. Monetary Convention between the Italian Republic and the Vatican City ratified by the Italian Republic under Law 119/1994. Published in the Official Journal of the Italian Republic n° 43 of 22 February 1994.(4) The Monetary Convention also allowed the Vatican City State to mint additional lira coins for a total of LIT 300 million and, subject to a maximum number of 30 million coins, under three special circumstances, i.e. in the year when the Holy See becomes vacant, in each Holy Jubilee Year and in the year of the opening of an Ecumenical Council.(5) The maximum number of coins which can be minted by the Vatican City State under the new Monetary Agreement is lower than the maximum number of coins which was explicitly authorised by the Monetary Convention, both under normal and special circumstances. An increase in the annual and exceptional face values of euro coins which the Vatican City State is authorised to issue is therefore desirable. The total face value of euro coins issued by the Vatican City State each year forms part of the annual ceiling of euro coins issued by the Italian Republic which is submitted to the ECB for prior approval under Article 106(2) of the EC Treaty.(6) On 3 January 2003, the Italian Republic officially requested [8] to increase the maximum annual face value of euro coins the Vatican City State may issue under both normal and exceptional circumstances. The new ceilings proposed by the Italian Republic fully correspond to the maximum numbers of coins which were explicitly authorised under the Monetary Convention.[8]  Letter from Mr Tremonti, Minister of Economy and Finance of the Italian Republic, to Mr Christodoulakis, President of the Council, of 3 January 2003.(7) The Italian Republic should be authorised to give effect to the amendments to the Monetary Agreement.HAS DECIDED AS FOLLOWS:Sole Article1. The Monetary Agreement shall be modified as follows:a) Article 3 shall be replaced by the following:"As from 1 January 2004, the Vatican City State may issue euro coins for a maximum annual face value of EUR 1,000,000".b) Article 7 shall be replaced by the following:"In the year when the Holy See becomes vacant, the Vatican City State may issue coins, in addition to the maximum amount laid down in Article 3, totalling EUR 300,000.In each Holy Jubilee Year, the Vatican City State may issue coins, in addition to the maximum amount laid down in Article 3, totalling EUR 300,000.In the year of the opening of an Ecumenical Council the Vatican City State may issue coins, in addition to the maximum amount laid down in Article 3, totalling EUR 300,000."2. The Italian Republic is hereby authorised to make the necessary amendments to the Monetary Agreement of behalf of the Community.Done at Brussels,For the Council The President


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		52012DC0313

			Recommendation for a COUNCIL RECOMMENDATION on France’s 2012 national reform programme and delivering a Council opinion on France's stability programme for 2012-2016 /* COM/2012/0313 final  */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on France’s 2012 national reform programme
and delivering a Council opinion on France's stability programme for 2012-2016
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 121(2) and 148(4)
thereof,
Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1], and in particular Article 5(2)
thereof,
Having regard to Regulation (EU) No
1176/2011 of the European Parliament and of the Council of 16 November 2011 on
the prevention and correction of macroeconomic imbalances[2], and in particular Article 6(1)
thereof,
Having regard to the recommendation of the
European Commission[3],
Having regard to the resolutions of the
European Parliament,[4]
Having regard to the conclusions of the
European Council,
Having regard to the opinion of the
Employment Committee,
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[5],
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 July 2011, the
Council adopted a recommendation on France’s national reform programme for 2011
and delivered its opinion on France’s updated stability programme for 2011-2014.
(4)       On 23 November 2011, the
Commission adopted the second Annual Growth Survey, marking the start of the second
European Semester of ex-ante and integrated policy coordination, which is
anchored in the Europe 2020 strategy. On 14 February 2012, the Commission, on
the basis of Regulation (EU) 1176/2011, adopted the Alert Mechanism Report[6], in which it identified France as
one of the Member States for which an in-depth review would be carried out.
(5)       On 2 March 2012, the
European Council endorsed the priorities for ensuring financial stability,
fiscal consolidation and action to foster growth. It underscored the need to pursue
differentiated, growth-friendly fiscal consolidation, to restore normal lending
conditions to the economy, to promote growth and competitiveness, to tackle
unemployment and the social consequences of the crisis, and to modernise public
administration.
(6)       On
2 March 2012, the European Council also invited the Member States participating
in the Euro Plus Pact to present their commitments in time for inclusion in
their stability or convergence programmes and their national reform programmes.
(7)       On 4 May 2012, France
submitted its updated stability programme covering the period 2012-2016 and, on
13 April 2012, its 2012 national reform programme. In order to take account of
their interlinkages, the two programmes have been assessed at the same time.
The Commission has also assessed, in an in-depth review[7] under Article 5 of Regulation
(EU) No 1176/2011, whether France is affected by macroeconomic imbalances. The
Commission concluded that France is experiencing imbalances, although not
excessive.
(8)       Based on the assessment of
the stability programme pursuant to Council Regulation (EC) No 1466/97, the
Council is of the opinion that the macroeconomic scenario underpinning the
budgetary projections in the programme is optimistic. The Commission's 2012 spring
forecast projected GDP growth to reach 0.5% in 2012 and 1.3% in 2013, against
0.7% and 1.75%, respectively, according to the programme. After the deficit
came out better than expected at 5.2% of GDP in 2011, the programme plans to
bring it down to 3% of GDP in 2013, which is the deadline set by the Council
for correcting the excessive deficit, and to continue consolidation thereafter,
with a balanced budget to be achieved by 2016. The medium-term budgetary objective (MTO) of a balanced budget in
structural terms is expected to be reached within the programme period. The MTO
adequately reflects the requirements of the Stability and Growth Pact. Based on
the (recalculated) structural balance[8],
the planned average annual fiscal effort in 2010-2013 is in line with the
Council recommendation of 2 December 2009. Annual
progress in structural terms equivalent to a further 0.7% of GDP towards
achieving the MTO is projected to be made in 2014–16. According
to the programme, the growth rate of government expenditure, taking into
account discretionary revenue measures, is in line with the expenditure
benchmark of the Stability and Growth Pact. The adjustment path presented in
the programme is subject to risks. The macroeconomic scenario could turn out to
be less favourable as indicated by the Commission's 2012 spring forecast. Measures
are not sufficiently specified to reach the targets from 2013 onwards and to achieve
the recommended average annual fiscal effort. Furthermore, France's track
record when it comes to meeting expenditure targets is mixed. Therefore, it
cannot be ensured that the excessive deficit will be corrected by 2013 unless
the planned measures are sufficiently specified and additional ones implemented
as needed. Starting from 85.8% of GDP in 2011, the debt ratio is expected to
reach 89.2% in 2013 and to drop to 83.2% in 2016. According
to the programme, the debt reduction benchmark will be met at the end of the
transition period (2016).
(9)       Although additional
consolidation measures were adopted in the second half of 2011 and in February
2012, implementation of fiscal consolidation remains a major challenge.
Avoiding expenditure slippages by means of a strengthened fiscal effort based
on fully specified measures is vital to re-establishing a sustainable fiscal
position. In addition, it would be appropriate for France to seize
opportunities to accelerate the deficit reduction, in order to facilitate the
correction of the excessive deficit as planned. Concerning the long-term
sustainability of public finances and adequacy of future pensions, the 2010
pension reform is gradually being applied. However, it is not certain that the
system will be balanced by 2018, if employment and growth turns out lower than projected,
and the system is expected to fall into deficit after 2020. Moreover, the newly
created steering committee, which was established with the task of issuing an
annual opinion on the financial situation of the various pension schemes and
the conditions required to ensure balanced accounts by 2018, did not issue such
an opinion in 2011, making the assessment of the sustainability of the pension
system difficult.
(10)     The functioning of the French
labour market would be improved by further reducing labour market segmentation.
The professional security contract (CSP), which was introduced by the July 2011
law and merged two already existing contracts, shifts the burden of counselling
in the case of economic redundancies from employers to the public employment
services (Pôle emploi). This is a positive but limited step. Several
measures have also been taken or are under discussion to provide flexible work
arrangements for companies facing temporary difficulties. However, they do not
address specifically the segmentation of the labour market. In addition, the
review of employment protection legislation shows that the administrative
procedure for individual dismissals continues to entail uncertainties and
potentially large costs for employers. Finally, it is important to ensure that
any development in the minimum wage is supportive of employment, especially of
younger workers and the low skilled.
(11)     Following the pensions
reform, measures taken to encourage the employment of older workers, including
the requirement for companies to implement active age management, are steps in
the right direction. However, the related action plans generally lack ambition
and do not include measures such as reducing working time or offering positions
that would be specifically adapted to older workers. Moreover, some aspects of
the unemployment benefit system for older workers (duration, lack of
degressivity) may provide limited incentives to work. Finally, a more ambitious
strategy is needed in the field of adult learning so as to raise the
employability of the adult workforce.
(12)     To address youth
unemployment, the French authorities have committed to increasing the number of
apprenticeships from 600 000 to 800 000 by 2015. Several measures
were introduced in 2011 and 2012 in order to increase the quota of apprentices
in companies and to strengthen the penalties for companies which would fail to
comply. Despite these measures, the total number of apprenticeships is still
far from the objective. In addition, a recent report commissioned by the French
authorities showed that 40 % of SMEs consider that the skills of
apprentices do not match their needs. Hence, policies tackling youth
unemployment would benefit from greater consistency between the skills taught
in the education system and the needs of the labour market.
(13)     The merging of the
jobseekers’ placement services (ANPE) and the unemployment benefits agency
(UNEDIC) into a single body (Pôle emploi) has so far not produced the
expected results in terms of effectiveness and quality of services. The new
multi-annual tripartite agreement signed in January 2012 (between government,
social partners and Pôle emploi) on the functioning and services of Pôle
emploi for 2012-2014 is a step in the right direction. However, a number of
targets/objectives still remain to be fixed, making it difficult at this stage
to assess the ambition of the reform. The credibility of the reform is also
hindered by the budgetary and human resources constraints of the public
employment services.
(14)     In February 2012, France
adopted a 1.6 pp increase in VAT to 21.2 % and a 2 pp rise in social
levies on capital income and gains to 15.5 % to compensate for lower
employers’ social contributions. This is an appropriate measure to introduce a
more balanced taxation system that shifts the tax burden away from labour. As
noted in the in-depth review on macroeconomic imbalances conducted by the
Commission services, it could contribute to improving the cost competitiveness
of French exports, with potentially positive impacts on firms' profitability
and, in the longer term, on investment and non price competiveness However, the
focus of the reform is too narrow. In addition, while efforts have been made to
reduce tax expenditures, the latter have also been accompanied by rate hikes
which tend to increase the already high tax burden on labour. France has the
second lowest share of environmental taxation in the EU in tax revenues, which
indicates ample room for increasing such taxes. Lastly, no specific measures
have been taken to assess the efficiency of some reduced rates in achieving
their employment or social objectives (in particular for reduced VAT rates).
(15)     While a number of reforms have
been adopted to simplify the business environment and to remove restrictions on
some regulated trades and professions, they fall short of addressing barriers
to entry and restrictive conduct conditions in many others (e.g. veterinarians,
taxis, health sector, legal professions including notaries). As a result, there
is a need for a more horizontal and systematic review of remaining entry and
conduct restrictions in regulated professions to assess their necessity and
proportionality. As regards the retail sector, distributors should be allowed
to set their prices and other commercial terms freely so that consumers can benefit
from lower prices. Consumers would also benefit from other competition-enhancing
measures in this highly concentrated sector, such as lifting or reviewing
spatial planning restrictions and streamlining procedures for the setting-up of
new distribution outlets.
(16)     The intensity of
competition in a number of network industries (wholesale electricity, rail
sector) should be reinforced as reforms conducted so far in these sectors have
only yielded partial results. The degree of concentration in the electricity
market remains one of the highest in the EU. While the NOME law has had a
positive impact on competition, further steps are necessary to improve the access
of alternative operators to generation capacity in France, such as hydro-based
electricity generation. In rail transport, the entry of new companies remains
limited both in freight and in international passenger transport; in freight,
technical barriers to non-discriminatory access also remain.
(17)     The French export market
share has decreased by 19.4% between 2005 and 2010, one of the strongest
declines among Member States, and much above the threshold included in the
Alert Mechanism Report published by the Commission on 14 February 2012. In
their in-depth review for France, the Commission services concluded that the
losses in export market shares come from a deterioration of both cost and
non-price competitiveness, especially the latter. In particular, increasing
unit labour costs have put the profitability of French companies under pressure
and have constrained their ability to grow, to make the necessary investments
to improve their performance and to innovate. The policies taken to foster
innovation in the private sector should be monitored and complemented by
measures to restore the profitability of French companies.
(18)     France has made a number of
commitments under the Euro Plus Pact. These commitments, and the implementation
of the commitments presented in 2011, relate to fostering employment, improving
competitiveness and enhancing sustainability of public finances. The Commission
has assessed the implementation of the Euro Plus Pact commitments. The results
of this assessment have been taken into account in the recommendations.
(19)     In the context of the
European Semester, the Commission has carried out a comprehensive analysis of France’s
economic policy. It has assessed the stability programme and national reform programme,
and presented an in-depth review. It has taken into account not only their
relevance for sustainable fiscal and socio-economic policy in France but also
their compliance with EU rules and guidance, given the need to reinforce the
overall economic governance of the European Union by providing EU-level input
into future national decisions. Its recommendations under the European Semester
are reflected in recommendations (1) to (5) below.
(20)     In the light of this
assessment, the Council has examined France’s stability programme, and its
opinion[9]
is reflected in particular in recommendation (1) below.
(21)     In the light of the results
of the Commission’s in-depth review and this assessment, the Council has
examined France’s 2012 national reform programme and stability programme. Its
recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected
in particular in recommendations (2), (4) and (5) below,
HEREBY RECOMMENDS that France should
take action within the period 2012-2013 to:
1.           Reinforce and implement
the budgetary strategy, supported by sufficiently specified measures, for the
year 2012 and beyond to ensure a timely correction of the excessive deficit and
the achievement of the structural adjustment effort specified in the Council
recommendations under the Excessive Deficit Procedure. Thereafter, ensure an
adequate structural adjustment effort to make sufficient progress towards the
medium-term budgetary objective (MTO), including meeting the expenditure
benchmark, and ensure sufficient progress towards compliance with the debt
reduction benchmark. Continue to review the sustainability and adequacy of the
pension system and take additional measures if needed.
2.           Introduce further reforms to
combat labour market segmentation by reviewing selected aspects of employment
protection legislation, in consultation with the social partners in accordance
with national practices, in particular related to the administrative procedure
for individual dismissals; continue to ensure that any development in
the minimum wage is supportive of job creation and competitiveness; take actions
to increase adult participation in lifelong learning.
3.           Adopt labour market
measures to ensure that older workers stay in employment longer; improve youth
employability especially for those most at risk of unemployment, by providing
in particular more and better apprenticeship schemes which effectively address
their needs; step up active labour market policies and ensure that public
employment services are more effective in delivering individualised support.
4.           Take further steps to
introduce a more simple and balanced taxation system, shifting the tax burden from
labour to other forms of taxation that weigh less on growth and external
competitiveness, in particular environmental and consumption taxes; continue
efforts to reduce and streamline tax expenditures (notably those providing
incentives to indebtedness); review the effectiveness of the current reduced
VAT rates in support of job creation.
5.           Pursue efforts to remove
unjustified restrictions on regulated trades and professions, in particular in
services and the retail sector; take further steps to liberalise network
industries, in particular in the electricity wholesale market, develop energy
interconnection capacity and facilitate the entry of new operators into the
rail freight and international passenger transport sectors.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 02.08.1997, p. 1
[2]               OJ L 306, 23.11.2011, p. 25
[3]               COM(2012)313 final
[4]               P7_TA(2012)0048 and P7_TA(2012)0047
[5]               Council Decision 2012/238/EU of 26 April 2012
[6]               COM(2012) 68 final
[7]               SWD(2012)155 final
[8]               Cyclically adjusted balance net of one-off and
temporary measures, recalculated by the Commission services on the basis of the information provided in the programme, using
the commonly agreed methodology.
[9]               Under Article 5(2) of Council Regulation (EC) No
1466/97


				|

		52012DC0309

			Recommendation for a COUNCIL RECOMMENDATION on the United Kingdom’s 2012 national reform programme and delivering a Council opinion on the United Kingdom’s convergence programme for 2012-2017 /* COM/2012/0309 final  */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on the United Kingdom’s 2012 national
reform programme
and delivering a Council opinion on the United Kingdom’s convergence programme
for 2012-2017
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 121(2) and 148(4)
thereof,
Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1], and in particular Article 5(2)
thereof,
Having regard to Regulation (EU) No
1176/2011 of the European Parliament and of the Council of 16 November 2011 on
the prevention and correction of macroeconomic imbalances[2], and in particular Article 6(1)
thereof,
Having regard to the recommendation of the
European Commission[3],
Having regard to the resolutions of the
European Parliament[4],
Having regard to the conclusions of the
European Council,
Having regard to the opinion of the
Employment Committee,
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[5],
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 July 2011, the
Council adopted a recommendation on the United Kingdom’s national reform
programme for 2011 and delivered its opinion on the United Kingdom’s updated
convergence programme for 2011-2014.
(4)       On 23 November 2011, the
Commission adopted the second Annual Growth Survey, marking the start of the second
European semester of ex-ante and integrated policy coordination, which is
anchored in the Europe 2020 strategy. On 14 February 2012, the Commission, on
the basis of Regulation (EU) 1176/2011, adopted the Alert Mechanism Report[6], in which it identified the
United Kingdom as one of the Member States for which an in-depth review would
be carried out.
(5)       On 2 March 2012, the
European Council endorsed the priorities for ensuring financial stability,
fiscal consolidation and action to foster growth. It underscored the need to pursue
differentiated, growth-friendly fiscal consolidation, to restore normal lending
conditions to the economy, to promote growth and competitiveness, to tackle
unemployment and the social consequences of the crisis, and to modernise public
administration.
(6)       On 30 April 2012, the
United Kingdom submitted its convergence programme covering the period 2011-12
to 2016-17 and its national reform programme for 2012. In order to take account
of their interlinkages, the two programmes have been assessed at the same time.
The Commission has also assessed, in an in-depth review under Article 5 of
Regulation (EU) No 1176/2011, whether the United Kingdom is affected by
macroeconomic imbalances. The Commission concluded in its in-depth review[7] that the United Kingdom is
experiencing an internal imbalance, although not excessive.
(7)       Based on the assessment of
the 2012 convergence programme pursuant to Council Regulation (EC) No 1466/97,
the Council is of the opinion that the macroeconomic scenario underpinning
the budgetary projections in the programme is plausible. The objective of the
budgetary strategy outlined in the programme is to implement the necessary
fiscal consolidation to achieve the government's fiscal targets on net debt and
cyclically-adjusted current balance. The convergence programme does not include
a medium-term objective (MTO) as foreseen by the Stability and Growth Pact. According
to programme projections, the deadline to correct the
excessive deficit set by the Council in its recommendation of 2 December 2010 is expected to be missed by one year. The government deficit in
2014/15, the deadline set by the Council, is estimated at 4.4% of GDP, implying,
based on the (recalculated) structural deficit,[8]
an average fiscal effort of 1.25% of GDP between 2010/11 and 2014/15 which is
below the 1¾% effort set out in the Council recommendation under the Excessive Deficit
Procedure. Although the government has not deviated from its fiscal
consolidation strategy which initially, based on previous macroeconomic
projections, appeared sufficient to comply with EDP targets, the fiscal
performance and outlook have been affected by a deterioration of economic growth
prospects. Revenue measures have been significantly front-loaded in the
adjustment path of the fiscal consolidation. Almost 40% of the total annual
fiscal consolidation planned for the 2010-11 to 2014-15 period has been
achieved by the end of 2011-12, including 30% of the spending cuts and
two-thirds of the net tax increases. The potential revenue contribution from an
increased efficiency of the tax system, stemming from a review of the VAT rate
structure, remains relatively underexploited. According to the convergence
programme, the general government deficit is expected to be 8.3% of GDP in
2011-12, 5.9% in 2012-13, 6.0% of GDP in 2013-14, 4.4% of GDP in 2014-15, 2.9%
of GDP in 2015-16 and 1.2% of GDP in 2016-17. These estimates are somewhat
lower than those by Commission services, who in its 2012 spring forecast expect
a deficit of 6.1% of GDP in 2012-13 (which would be 7.9% without an upcoming
one-off pension fund transfer) and 6.5% of GDP in 2013-14. The differences stem
from a lower growth forecast and amendments made by Eurostat to UK data. Some
adjustments were made to the government’s fiscal plans in the 2011 Autumn
Statement to prioritise growth-enhancing expenditure, but public sector
investment is still set to fall sharply by 2014-15. Government debt, forecast
at 94.7% in 2013-14, is expected to peak in 2014-15.
(8)       The run-up to the crisis
saw the housing market overheat, with house price-to-income ratios reaching
historic highs in the context of a growing housing supply shortage, leading to
the accumulation of high levels of mortgage debt. According to the Commission’s
in-depth review, high household debt constitutes an internal imbalance in the
United Kingdom's economy. Due to a high share of variable interest rate
mortgages, household finances are vulnerable to interest rates rises, with a
potentially destabilising knock-on effect on the economy as a whole via the
financial sector. A sustained and significant fall in household debt is only
likely if house prices fall relative to disposable income; however, if nominal
house prices were to fall rapidly it would risk pushing many households into
negative equity. Residential construction remains at record lows, due both to a
restrictive planning system and cyclical weakness, and wider housing market activity
is also still muted. In November 2011, the government published its housing
strategy for England, which aims to facilitate an increase in residential
construction, but significant uncertainty remains about the net impact of the
new system on housing development. Also, the housing strategy did not mention
the issue of property taxation, where the UK system combines a regressive
recurring tax (council tax) with a progressive transaction tax (the Stamp Duty
Land Tax - SDLT), which may play a role in cyclical developments in budget
revenues and financial stability. Some adjustments were made to SDLT rates in
the 2012 Budget, but only minor changes have been made in this field overall.
(9)       The UK has growing
challenges of unemployment and labour market participation. Unemployment in the
UK currently stands at 8.4 %. Youth unemployment is much higher, at 22.2 %,
and more than 38 % of the unemployed in the UK are under 25. 17.7% of
young people (16-24 year olds) are not in employment, education or training. Private
sector employment has been growing modestly, but not enough to offset
reductions in public sector employment and the growth of the workforce. The UK has an oversupply of low-skilled workers, for whom
demand is falling, and a shortage of workers with high-quality vocational and
technical skills that are particularly needed by goods producing and exporting
sectors in which the UK's performance is relatively weak. The main focus in vocational
education and training (VET) policy is on basic skills and level 2
qualifications, while the economy increasingly demands more advanced VET
qualifications. The UK also continues to have a relatively high number of
adults with very poor basic literacy and numeracy skills, who are not well
placed to benefit from vocational training. Early school-leaving has increased
by 3.3 pp. since 2005 and is above the EU average at 14.9 %; continued support
for low-income families is crucial to prevent school drop-outs.
(10)     The government has a
welfare reform agenda to help more people get into work, while supporting the
most vulnerable. The Universal Credit, which aims to simplify the benefit
system, has not yet been implemented, but considerable risks remain that the
positive impact of new policies on employment and incomes will be more than
offset by declining amounts available for benefits, so poverty, particularly
for families with children, risks increasing. Independent estimates forecast that
in 2020-21 absolute child poverty will reach its highest level since 2001-02,
and that the government will miss targets for reducing child poverty set down
in the Child Poverty Act. Insufficient access to childcare, in particular for
low earners, still causes significant problems and the government has not yet
come up with adequate plans to tackle this challenge. Cuts to support for
childcare also risk exacerbating the problem.
(11)     Financing conditions remain
tight, particularly for SMEs. Net lending to the corporate sector was negative
in 2011, while survey evidence shows that a significant number of SMEs are
credit constrained. Additionally, access to non-bank lending remains largely
restricted to bigger firms, and competition in the banking industry is limited.
Notwithstanding the steps taken by the authorities to improve the situation, the
Breedon task force on alternative debt markets estimated a substantial ongoing
financing gap over the next five years, especially for SMEs.
(12)     The UK has a challenge to
improve its energy and transport infrastructure, which is linked to laying the
foundations for long-term growth and competitiveness, and to addressing the
causes of the UK's lack of external competiveness in manufacturing sectors. The
UK needs substantial investment to upgrade its electricity generation capacity,
given the need to replace a large part of the existing generating capacity,
which will close over the next decade, and the need to meet the renewable
energy obligation and tighter carbon emissions standards. . The UK’s transport
sector faces shortcomings in the capacity and quality of its networks, which
could work against the government’s aim of rebalancing the UK economy towards
investment and exports. As part of the government’s fiscal consolidation strategy,
public sector net investment will fall sharply by 2014-15, which risks
exacerbating existing pressures on transport infrastructure unless alternative
funding sources can be secured.
(13)     In the context of the
European Semester, the Commission has carried out a comprehensive analysis of
the United Kingdom’s economic policy. It has assessed the convergence programme
and national reform programme, and presented an in-depth review. It has taken
into account not only their relevance for sustainable fiscal and socio-economic
policy in the United Kingdom, but also their compliance with EU rules and
guidance, given the need to reinforce the overall economic governance of the
European Union by providing EU-level input into future national decisions. Its
recommendations under the European Semester are reflected in recommendations
(1) to (6) below.
(14)     In the light of this
assessment, the Council has examined the United Kingdom’s convergence programme,
and its opinion[9]
is reflected in particular in recommendation (1) below.
(15)     In the light of the results
of the Commission’s in-depth review under Article 5 of Regulation (EU) No
1176/2011 and this assessment, the Council has examined the United Kingdom’s national
reform programme for 2012 and the United Kingdom’s convergence programme for
2012-17. Its recommendation under Article 6 of Regulation (EU) No 1176/2011 is
reflected in particular in recommendations (2), (3) and (6) below,
HEREBY RECOMMENDS that the United
Kingdom should take action within the period 2012-2013 to:
1.           Fully implement the
budgetary strategy for the financial year 2012/13 and reinforce the budgetary
strategy for the financial year 2013/14 and beyond, supported by sufficiently
specified measures, to ensure a timely correction of the excessive deficit in a
sustainable manner and the achievement of the structural adjustment effort
specified in the Council recommendations under the Excessive Deficit Procedure and
to set the high public debt ratio on a sustained downward path. Prioritise
growth-enhancing expenditure to avoid the risk that a further weakening of the
medium-term outlook for growth will negatively impact on the long-term
sustainability of public finances.
2.           Address the destabilising
impact of high and volatile house prices and high household debt by
implementing a comprehensive housing reform programme to increase housing
supply and alleviate problems of affordability and the need for state subsidy
of housing. Pursue further reforms to the mortgage and rental markets,
financial regulation and property taxation to prevent excessive volatility and
distortions in the housing market.
3.           Continue to improve the
employability of young people, in particular those not in education, employment
or training, including by using the Youth Contract. Ensure that apprenticeship
schemes are taken up by more young people, have a sufficient focus on advanced
and higher-level skills, and involve more small- and medium-sized businesses. Take
measures to reduce the high proportion of young people leaving school with very
poor basic skills.
4.           Step up measures to
facilitate the labour market integration of people from jobless households.
Ensure that planned welfare reforms do not translate into increased child
poverty. Fully implement measures aiming at facilitating access to childcare
services.
5.           Further improve the
availability of bank and non-bank financing to the private sector, in
particular to SMEs. Support competition within the banking sector, in
particular through measures to reduce barriers to entry, increase transparency
and facilitate switching between banks as recommended by the Independent
Commission on Banking and explore ways to improve access to venture and risk
capital and other forms of non-bank lending.
6.           Pursue a long-term
strategy for improving the capacity and quality of the UK’s network infrastructure,
including measures to address pressures in transport and energy networks by
promoting more efficient and robust planning and decision-making processes, and
harnessing appropriate public-private financing arrangements.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 02.08.1997, p. 1
[2]               OJ L 306, 23.11.2011, p. 25
[3]               COM(2012)309 final
[4]               P7_TA(2012)0048 and P7_TA(2012)0047
[5]               Council Decision 2012/238/EU of 26 April 2012
[6]               COM(2012) 68 final
[7]               SWD(2012)161 final
[8]               Cyclically adjusted balance net of one-off and
temporary measures, recalculated by the Commission services on the basis of the information provided in the programme, using
the commonly agreed methodology.
[9]               Under Article 9(2) of Council Regulation (EC) No
1466/97.