title: Recommendation for a Council opinion in accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 on the updated convergence programme of Slovenia, 2005-2008

text:
Important legal notice

|

52006SC0112

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 Slovenia, 2005-2008  /* SEC/2006/0112 final */

	[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 1.2.2006SEC(2006) 112 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 Slovenia, 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 Slovenia 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 Slovenia and, based on its assessment below, has adopted a recommendation for a Council opinion on it.Assessment(1) The second update of the Slovene convergence programme, covering the period 2005-2008, was submitted on 8 December 2005. The updated programme broadly follows the model structure and data provision requirements for stability and convergence programmes specified in the new code of conduct[3].(2) In its opinion of 8 March 2005 on the previous update of the convergence programme, covering the period 2004-2007, the Council invited Slovenia to (i) seize all opportunities to accelerate the reduction of the general government deficit and (ii) undertake further measures to improve the long-term sustainability of the public finances, including the reforms of the pension and health-care systems.(3) Following a transition recession in the early nineties, the Slovene economy fully restored robust GDP growth averaging nearly 4% over the last decade. Inflationary pressures have been successfully curbed and consumer price growth approached the EU average by the end of 2005. The general government balance slipped in 1997 and stayed negative since then, with deficits averaging 3% of GDP on an ESA95 basis in the period 2000-2004.(4) The macroeconomic scenario, where GDP growth is projected to remain at around 4% throughout the programme period against buoyant domestic demand, appears plausible. Cyclical conditions are likely to improve gradually; the negative output gap, estimated to have stood at 1% of GDP in 2005, is forecast to close by the end of the period. The growth assumptions do not include the impact of a reform plan approved in October 2005, which is expected to accelerate growth to over 5% on average after 2008. This seems somewhat optimistic, especially as the programme fails to provide details on how the structural reforms would affect (potential) growth.(5) In 2005, inflation became volatile but continued to decline on average, dropping to 2.5% by the end of the year (3.7% in 2004). The government remained committed to prudence in regulating administered price increases and indirect tax changes. Moreover, regular adjustments of excise duties to counteract the adverse effects of high oil prices helped in reining inflation. Furthermore, disinflation has been fostered by ERM II membership. The tolar has stayed very close to the central parity of 239.64 SIT/EUR ever since Slovenia joined ERM II on 28 June 2004. The long-term interest rate spread has been fluctuating within, and occasionally even much below, 100 basis points since April 2004, closely mirroring the development of bond yields in the euro area. The monetary authorities recognise constraints in adjusting the policy interest rates to keep inflation under control in the run-up to EMU entry. Over the programme horizon, inflation is expected to settle at around 2.5%, which seems realistic but further removal of the remaining structural rigidities needs to be pursued. With a view to introducing the euro in the beginning of 2007, the programme sees as crucial wage moderation and sound public finances.(6) As regards budgetary implementation in 2005, the general government deficit for 2005 is estimated at 1.7% of GDP in the Commission services’ autumn 2005 forecast, against a target of 2.1% of GDP set in the previous update of the convergence programme. The preliminary outcome is better than expected as revenues had been underestimated based on the new direct tax regime, in force since January 2005.(7) The updated programme aims at creating conditions for a successful EMU integration while catching-up with average EU income levels. The budgetary strategy is geared to keeping the general government deficit well below 3% of GDP and targets to achieve the medium-term objective (MTO) for the budgetary position as meant in the Stability and Growth Pact by 2008. To that end, the programme announces tax reform measures, leading to a drop in the share of revenue as a percentage of GDP by 1.8%, and measures on the expenditure side, resulting in a decline in the expenditure ratio by 2.5% of GDP. The programme envisages a back-loaded consolidation path. In the beginning of the programme period, the general government deficit is expected is to linger at 1.7% of GDP and then slowly decrease, to 1.4% in 2007 and further to 1.0% of GDP in 2008. Compared with the previous programme, the new update postpones the target of achieving a deficit of 1% of GDP by one year against a broadly unchanged macroeconomic scenario.(8) Based on Commission services’ calculations according to the commonly agreed methodology and consistent with the information in the programme, the structural balance, i.e. in cyclically-adjusted terms and net of one-off and other temporary measures, is envisaged to improve by 0.2 percentage point of GDP over the programme horizon. The structural deficit stood at 1¼% of GDP in 2005. Following a slight deterioration, to reach 1½% of GDP in 2006, the deficit is expected to improve gradually thereafter. The new programme sets the medium-term objective (MTO) for the budgetary position in the meaning of the Stability and Growth Pact at a structural deficit of 1.0% of GDP, to be reached by 2008. As the programme’s MTO is more demanding than the minimum benchmark (estimated at a deficit of almost 2% of GDP), its achievement should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The programme’s MTO is at an appropriate level because it lies within the range indicated for euro area and ERM II Member States in the Stability and Growth Pact and the code of conduct, adequately reflecting the debt ratio and average potential output growth in the long term.(9) The risks attached to the budgetary targets are broadly balanced. Slovenia has established a track record of better-than-projected budgetary outcomes in the recent years, also supported by an effective budgetary mechanism of containing general government expenditures in response to an unexpected revenue shortfall. Furthermore, the assumptions on growth may turn out better than projected, should the structural reforms be implemented timely. However, the absence of clear schedules for cutting government spending to offset the revenue loss due to the tax reform and, especially, in light of the recent decision to re-introduce indexation of pensions to wages, may make the realisation of the targets difficult. In particular, the high share of mandatory expenditure (more than 80% of the overall outlays) is rooted in the rigid regulatory framework, which still awaits political consensus to be restructured in a more flexible way.(10) In view of this risk assessment, the budgetary stance, as outlined in the updated programme, seems to provide a sufficient safety margin against breaching the 3% of GDP threshold for the deficit with normal macroeconomic fluctuations throughout the programme period. The strategy also seems sufficient to ensure that the programme’s MTO will be reached in 2008, as planned. However, the pace of adjustment towards the programme’s MTO is not fully in line with the Pact, which sets a “benchmark” in the annual improvement in the structural balance at 0.5% of GDP for euro-area and ERM-II Member States and specifies that the adjustment should be higher in good economic times. While cyclical conditions improve steadily over the programme horizon the structural balance is planned to improve by only 0.25% of GDP.(11) The programme invokes a temporary deviation on the basis of “major structural reforms”, as meant in the revised Stability and Growth Pact and the new code of conduct. The departure from the Pact’s benchmark for the speed of structural adjustment is requested by the additional fiscal effort to cope with the revenue shortfall due to the tax reform and against the negative output gap, expected to close only by the end of the programme period. However, the structural reforms on which the temporary deviation is based are insufficiently detailed. Furthermore, the programme does not provide a cost-benefit analysis nor evidence of a significant beneficial impact on the long-term sustainability of public finances. Therefore, the temporary deviation from the adjustment path towards the programme’s MTO is not in line with the revised Stability and Growth Pact.(12) Gross government debt is relatively low and will remain so over the programme period. In 2005, the debt is estimated to have fallen to 29.3% of GDP. The programme foresees a slight increase in the debt ratio in the next two years, peaking at 29.8% of GDP in 2007. By 2008, the debt is forecast to fall to 29.4%, as a favourable stock-flow adjustment is anticipated.(13) With regard to the sustainability of public finances, Slovenia appears to be at high risk on grounds of the projected budgetary costs of ageing populations. The relatively low debt ratio will contribute to limit the budgetary impact of ageing. However, Slovenia will still face a very large increase in government expenditure. Even though the 1999 pension reform has significantly alleviated future increase in expenditure, its effects have been partly offset by a new indexation rule, i.e. moving from partial to full indexation to wages. Further changes in the pension schemes, as recognised by the programme, will prove necessary at some point to contain future increase in government expenditure and reduce the risk to long-term sustainability. If no further measures are taken to relieve the pressures of age-related expenditure, the long-term sustainability of public finances will be undermined. A careful planning and timely adoption of measures are key in this regard.(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. However, long-term sustainability of public finances is not explicitly identified as the policy priority. Measures remain vague and do not allow an assessment of the feasibility of the strategy in the longer term.(15) The national reform programme of Slovenia, submitted on 28 October 2005 in the context of the renewed Lisbon strategy for growth and jobs, identifies adoption of the euro in 2007 as the key priority. Geared to create conditions for a successful EMU integration, including by improving the quality of the public finances, the updated convergence programme bears a close link with the NRP’s comprehensive list of policy measures. However, as a number of measures remain largely unspecified, the budgetary implications of the actions outlined in the national reform programme have not been included in the budgetary projections of the convergence programme.The updated programme aims at containing inflation close to the EU average while projecting a gradual fiscal adjustment path. In view of the above assessment, it would be appropriate for Slovenia to:i) make a more rapid progress towards achieving the programme’s MTO, especially by specifying and implementing the measures underlying the planned reduction of the expenditure ratio as well as by frontloading the adjustment effort;ii) undertake further measures to improve the long-term sustainability of the public finances, particularly in relation to the pension 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 Slovenia, 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:(1) Following a transition recession in the early nineties, the Slovene economy fully restored robust GDP growth averaging nearly 4% over the last decade. Inflationary pressures have been successfully curbed and consumer price growth approached the EU average by the end of 2005. The general government balance slipped in 1997 and stayed negative since then, with deficits averaging 3% of GDP on an ESA95 basis in the period 2000-2004.(2) In its opinion of 8 March 2005 on the previous update of the convergence programme, covering the period 2004-2007, the Council invited Slovenia to (i) seize all opportunities to accelerate the reduction of the general government deficit and (ii) undertake further measures to improve the long-term sustainability of the public finances, including the reforms of the pension and health-care systems.(3) As regards budgetary implementation in 2005, the general government deficit for 2005 is estimated at 1.7% of GDP in the Commission services’ autumn 2005 forecast, against a target of 2.1% of GDP set in the previous update of the convergence programme. The preliminary outcome is better than expected as revenues had been underestimated based on the new direct tax regime, in force since January 2005.(4) On [14 February 2006] the Council examined the updated convergence programme of Slovenia, which covers the period 2005 to 2008. The updated programme broadly follows the model structure and data provision requirements for stability and convergence programmes specified in the new code of conduct[5].(5) The macroeconomic scenario underlying the programme envisages that real GDP will grow steadily at around 4% beyond 2005. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. Cyclical conditions are likely to improve gradually; the negative output gap, estimated to have stood at 1% of GDP in 2005, is forecast to close by the end of the period. The programme’s projections for inflation also appear realistic. As regards “major structural reforms” in the meaning of the Stability and Growth Pact, the programme presents comprehensive socio-economic reforms aiming to enhance the competitiveness of the Slovene industry, the implementation of which started in 2005. They are expected to boost GDP growth from 2008 onwards to over 5% per annum on average. The supporting analysis in the programme is not sufficiently detailed and the expected growth impact appears very optimistic.(6) The updated programme aims at creating conditions for a successful EMU integration while catching-up with average EU income levels. The budgetary strategy is geared to keeping the general government deficit well below 3% of GDP and targets to achieve the medium-term objective (MTO) for the budgetary position as meant in the Stability and Growth Pact by 2008. To that end, the programme announces tax reform measures, leading to a drop in the share of revenue as a percentage of GDP by 1.8%, and measures on the expenditure side, resulting in a decline in the expenditure ratio by 2.5% of GDP. The programme envisages a back-loaded consolidation path. In the beginning of the programme period, the general government deficit is expected is to linger at 1.7% of GDP and then slowly decrease, to 1.4% in 2007 and further to 1.0% of GDP in 2008. Compared with the previous programme, the new update postpones the target of achieving a deficit of 1% of GDP by one year against a broadly unchanged macroeconomic scenario.(7) 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 around ¼% of GDP. The programme sets the medium-term objective (MTO) for the budgetary position at a structural deficit of 1% of GDP and aims at achieving this position by 2008. As the programme’s MTO is more demanding than the minimum benchmark (estimated at a deficit of almost 2% of GDP), its achievement should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The programme’s MTO is at an appropriate level because it lies within the range indicated for euro area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term.(8) The risks to the budgetary projections in the programme appear broadly balanced. On the one hand, Slovenia has established a track record of better-than-projected budgetary outcomes in the recent years, also supported by an effective budgetary mechanism of containing general government expenditures in response to an unexpected revenue shortfall. Furthermore, the assumptions on growth may turn out better than projected, should the structural reforms be implemented timely. However, the absence of clear schedules for cutting government spending to offset the revenue loss due to the tax reform and, especially, in light of the recent decision to re-introduce indexation of pensions to wages, may well impede the realisation of targets. In particular, the high share of mandatory expenditure (more than 80% of the overall outlays) is rooted in the rigid regulatory framework, which still awaits political consensus to be restructured in a more flexible way.(9) In view of this risk assessment, the budgetary stance in the programme seems to provide a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations throughout the programme period. Furthermore, it seems sufficient to ensure that the programme’s MTO is reached in 2008, as planned. However, the pace of the adjustment towards the programme’s MTO implied by the programme is not fully in line with the Stability and Growth Pact, which specifies that, for euro area and ERM II Member States, the annual improvement in the structural balance should be 0.5% of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times. While cyclical conditions improve steadily over the programme horizon the structural balance is planned to improve by only 0.25% of GDP.(10) According to the Stability and Growth Pact, “major structural reforms” with a verifiable impact on the long-term sustainability of the public finances should be taken into account when defining the adjustment path to the programme’s MTO or for allowing a temporary deviation from the programme’s MTO. The medium-term budgetary strategy outlined in the programme embodies a temporary deviation from the adjustment path towards the programme’s MTO. In particular, little or no adjustment towards the programme’s MTO occurs between 2005 and 2007, when the above mentioned economic reforms would be gradually implemented. However, the structural reforms on which the temporary deviation is based are insufficiently detailed. Furthermore, the programme does not provide a cost-benefit analysis nor evidence of a significant beneficial impact on the long-term sustainability of the public finances. Therefore, the temporary deviation from the adjustment path towards the programme’s MTO is not in line with the revised Stability and Growth Pact.(11) Gross public debt is estimated to have reached 29.0% of GDP in 2005, well below the 60% of GDP Treaty reference value. The programme projects a slight increase in the debt ratio in the next two years, peaking at 29.8% in 2007. By 2008, the debt is forecast to fall to 29.4% of GDP.(12) With regard to the sustainability of public finances, Slovenia appears to be at high risk on grounds of the projected budgetary costs of ageing populations[6]. The relatively low debt ratio will contribute to limit the budgetary impact of ageing. However, Slovenia will still face a very large increase in government expenditure. Even though the 1999 pension reform has significantly alleviated future increase in expenditure, its effects have been partly offset by a new indexation rule (moving from partial to full indexation to wages). Further changes in the pension schemes, as recognised by the programme, will prove necessary at some point to contain future increase in government expenditure and reduce the risk to long-term sustainability. If no further measures are taken to relieve the pressures of age-related expenditure, the long-term sustainability of public finances will be undermined. A careful planning and timely adoption of measures are key in this regard.(13) The envisaged measures in the area of public finances are broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. However, long-term sustainability of public finances is not explicitly identified as the policy priority. Measures remain vague and do not allow an assessment of the feasibility of the strategy in the longer term.(14) The national reform programme of Slovenia, submitted on 28 October 2005 in the context of the renewed Lisbon strategy for growth and jobs, identifies adoption of the euro in 2007 as the key priority. Geared to create conditions for a successful EMU integration, including by improving the quality of the public finances, the updated convergence programme bears a close link with the NRP’s comprehensive list of policy measures. However, as a number of measures remain largely unspecified, the budgetary implications of the actions outlined in the national reform programme have not been included in the budgetary projections of the convergence programme.In view of the above assessment, the Council notes that the programme aims at containing inflation close to the EU average while projecting a gradual fiscal adjustment path. The Council is of the opinion that it would be appropriate for Slovenia to:i) make a more rapid progress towards achieving the programme’s MTO, especially by specifying and implementing the measures underlying the planned reduction of the expenditure ratio as well as by frontloading the adjustment effort;ii) undertake further measures to improve the long-term sustainability of the public finances, particularly in relation to the pension system.Comparison of key macroeconomic and budgetary projections2004 | 2005 | 2006 | 2007 | 2008 |Real GDP (% change) | CP Dec 2005 | 4.2 | 3.9 | 4.0 | 4.0 | 3.8 |COM Nov 2005 | 4.2 | 3.8 | 4.0 | 4.2 | n.a. |CP Jan 2005 | 4.0 | 3.8 | 3.9 | 4.0 | n.a. |HICP inflation (%) | CP Dec 2005 | 3.6 | 2.5 | 2.5 | 2.4 | 2.4 |COM Nov 2005 | 3.6 | 2.6 | 2.5 | 2.5 | n.a. |CP Jan 2005 | 3.6 | 3.0 | 2.7 | 2.6 | n.a. |Output gap (% of potential GDP) | CP Dec 20051 | -1.4 | -1.2 | -0.7 | -0.3 | 0.0 |COM Nov 20055 | -1.2 | -0.9 | -0.5 | 0.2 | n.a. |CP Jan 20051 | -1.2 | -1.2 | -1.3 | -1.3 | n.a. |General government balance (% of GDP) | CP Dec 2005 | -2.1 | -1.7 | -1.7 | -1.4 | -1.0 |COM Nov 2005 | -2.1 | -1.7 | -1.9 | -1.6 | n.a. |CP Jan 2005 | -2.1 | -2.1 | -1.8 | -1.1 | n.a. |Primary balance (% of GDP) | CP Dec 2005 | -0.5 | -0.2 | -0.3 | -0.1 | 0.2 |COM Nov 2005 | -0.2 | -0.1 | -0.4 | -0.2 | n.a. |CP Jan 2005 | -0.3 | -0.4 | -0.2 | 0.4 | n.a. |Cyclically-adjusted balance (% of GDP) | CP Dec 20051 | -1.4 | -1.2 | -1.4 | -1.3 | -1.0 |COM Nov 2005 | -1.5 | -1.5 | -1.7 | -1.7 | n.a. |CP Jan 20051 | n.a | n.a | n.a | n.a | n.a. |Structural balance2 (% of GDP) | CP Dec 20053 | -1.4 | -1.2 | -1.4 | -1.3 | -1.0 |COM Nov 20054 | -1.5 | -1.5 | -1.7 | -1.7 | n.a. |CP Jan 2005 | n.a | n.a | n.a | n.a | n.a. |Government gross debt (% of GDP) | CP Dec 2005 | 29.5 | 29.0 | 29.6 | 29.8 | 29.4 |COM Nov 2005 | 29.8 | 29.3 | 29.5 | 29.2 | n.a. |CP Jan 2005 | 30.2 | 30.7 | 30.9 | 29.7 | 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 There are no one-off and other temporary measures in the programme. 4 There are no one-off and other temporary measures in the Commission services’ forecast. 5 Based on estimated potential growth of 3.7%, 3.5%, 3.5% and 3.5% 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] The programme has gaps in the compulsory and optional data prescribed by the new code of conduct. In particular, compulsory data on labour productivity growth are not available. Also missing are certain optional data concerning labour market developments, sectoral balances and general government debt developments. The table on general government expenditure by function is not included.[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] The programme has gaps in the compulsory and optional data prescribed by the new code of conduct. In particular, compulsory data on labour productivity growth are not available. Also missing are certain optional data concerning labour market developments, sectoral balances and general government debt developments. The table on general government expenditure by function is not included.[6] Details on long-term sustainability are provided in the technical assessment of the programme by the Commission services (http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm).


title: 2005/175/EC: Commission Recommendation of 1 March 2005 concerning a coordinated programme for the official control of foodstuffs for 2005 (Text with EEA relevance)

text:
               5.3.2005

               EN

               Official Journal of the European Union

               L 59/27

         COMMISSION RECOMMENDATION
   of 1 March 2005
   concerning a coordinated programme for the official control of foodstuffs for 2005
   (Text with EEA relevance)
   (2005/175/EC)
   THE COMMISSION OF THE EUROPEAN COMMUNITIES,
   Having regard to the Treaty establishing the European Community,
   Having regard to Council Directive 89/397/EEC of 14 June 1989 on the official control of foodstuffs (1), and in particular Article 14(3) thereof,
   After consulting the Standing Committee on the Food Chain and Animal Health,
   Whereas:

               (1)

               It is necessary, with a view to the sound operation of the internal market, to arrange for coordinated food inspection programmes at Community level designed to improve the harmonised implementation of official controls of foodstuffs by the Member States.

               (2)

               Such programmes should place emphasis on compliance with Community legislation on foodstuffs, which is particularly designed to protect public health and consumer interests, and to ensure fair trade practices.

               (3)

               Directive 89/397/EEC lays down the general principles for the performance of official control of foodstuffs, including the inspections to be carried out by the competent authorities of the Member States. It also provides for the Commission to transmit annually a recommendation concerning a coordinated programme of inspections for the following year.

               (4)

               Commission Recommendation of 19 December 2003 concerning a coordinated programme for the official control of foodstuffs for 2004 (2), sets out certain recommendations for a coordinated programme of official controls, including the assessment of the bacteriological safety of cheeses made from raw or thermised milk. This investigation should be extended to other categories of cheeses made from pasteurised milk in order to be able to draw meaningful conclusions on the safety of these products.

               (5)

               Council Directive 93/99/EEC of 29 October 1993 on the subject of additional measures concerning the official control of foodstuffs (3) supplements the rules laid down in Directive 89/397/EEC. It provides that the official laboratories in Member States, as referred to in Article 7 of Directive 89/397/EEC, are to comply with the criteria set out in European Standard EN 45000 series, now replaced by EN ISO 17025:2000.

               (6)

               The implementation of coordinated programmes is without prejudice of all other official controls carried out by Member States in the framework of their national control programmes.

               (7)

               The results from the simultaneous implementation of national programmes and coordinated programmes may provide information and experience on which to base future control activities and legislation,

         HEREBY RECOMMENDS:
   1.   During 2005 Member States should carry out inspections and controls including, where indicated, taking samples and analysing such samples in laboratories, with the aim of:

               (a)

               assessing the bacteriological safety of cheeses made from pasteurised milk (continuation of the coordinated programme started in 2004 following the Recommendation of 19 December 2003 concerning a coordinated programme for the official control of foodstuffs for 2004);

               (b)

               assessing the bacteriological safety of mixed salads as regards Listeria monocytogenes;

               (c)

               assessing safety, quality and labelling of poultry meat as regards the use of water retention agents;

               (d)

               assessing the safety of certain foods for infants and young children as regards the levels for nitrate and patulin.

         2.   Although sampling and/or inspection rates are not set out in this Recommendation, Member States should ensure that those rates are sufficient to provide an overview of the subject under consideration in each Member State.
   3.   Member States should provide information as requested following the format of the record sheets set out in Annexes I to IV to help enhance the comparability of results. That information should be sent to the Commission, at the latest by 1 May 2006, accompanied by an explanatory report which should include comments on the results and on the enforcement measures taken.
   4.   Foodstuffs to be analysed under the coordinated programme for 2005 should be submitted to official laboratories complying with Article 3 of Directive 93/99/EEC. However, if such laboratories do not exist in Member States for certain analyses covered by this Recommendation, Member States may nominate other laboratories providing the capacity to carry out these analyses.
   5.   Bacteriological safety of cheeses made from pasteurised milk
   5.1.   Scope of the coordinated programme for 2005
   The aim of this element of the programme is to continue the microbiological investigation started in 2004 under the coordinated programme for 2004, which only focused on cheeses made from raw or thermised milk, in order to cover other cheeses made from milk submitted to a higher heat treatment than thermisation (i.e. pasteurisation). This extension of the coordinated programme is recommended in order to be able to draw meaningful conclusions on the safety of cheeses. The results of this investigation will be analysed and provided together with the results of the 2004 survey in order to have a general overview in this sector.
   5.2.   Sampling and method of analysis
   The investigations should concern fresh, soft and semi-hard cheeses made from milk which has been submitted to a pasteurisation process. The competent authorities of the Member States should take representative samples of these products, both at production and retail levels, including imported products, with a view to testing for the presence of Salmonella and Listeria monocytogenes and enumeration of Staphylococcus aureus and Escherichia coli. If Listeria monocytogenes is detected, the number of these bacteria should be enumerated. When samples are taken at retail level, tests may be limited to the presence of Salmonella and enumeration of Listeria monocytogenes. The samples, of 100 grams minimum each or of one cheese if less than 100 grams, should be handled hygienically, placed in refrigerated containers and sent immediately to the laboratory for analysis.
   Laboratories should be allowed to use a method of their choice provided that its level of performance matches the aim to be achieved. However, the most recent version of standard ISO 6785 or EN/ISO 6579 is recommended for the detection of Salmonella, the most recent versions of standards EN/ISO 11290-1 and 2 are recommended for detection of Listeria monocytogenes, the most recent version of EN/ISO 6888-1 or 2 is recommended for the enumeration of Staphylococcus aureus and the most recent version of standard ISO 11866-2,3 or ISO 16649-1,2 is recommended for the enumeration of Escherichia coli. Additional equivalent methods recognised by competent authorities may also be used.
   The overall level of sampling should be left to the judgement of the competent authorities of Member States.
   The results of the controls should be recorded on the model record sheet set out in Annex I.
   6.   Bacteriological safety of mixed salads as regards Listeria monocytogenes

   6.1.   Scope of the coordinated programme for 2005
   During recent years there has been an increase in the consumption of ready-to-eat food, such as mixed salads containing raw vegetables and other ingredients such as meat or seafood. That kind of product may pose a potential risk to public health due to the presence of pathogenic bacteria, such as Listeria monocytogenes. The implementation of specific hygiene measures, including appropriate shelf life and temperature control, are essential to avoid growth of pathogenic bacteria eventually present in the products and protect public health.
   The aim of this element of the programme is to assess the microbiological safety of pre-mixed salads containing raw vegetables and other ingredients such as meat or seafood, as regards Listeria monocytogenes in order to promote a high level of consumer protection and to collect information on the prevalence of these bacteria in such products.
   6.2.   Sampling and method of analysis
   The investigations should concern pre-packaged mixed raw vegetable salads containing meat or seafood or other ingredients which:

               (a)

               are not heat treated in the final package;

               (b)

               need cold storage;

               (c)

               are intended to be eaten without heat treatment or can be eaten without heat treatment before consumption.

         The competent authorities of the Member States should take samples of those products at retail level, preferably in supermarkets, with a view to testing for the presence and enumeration of Listeria monocytogenes at the same time. One sample consists of one sample unit (one unopened package). The samples, possibly taken in proximity to the expiry date, should be placed in refrigerated containers and sent immediately to the laboratory for analysis. The temperature of storage and the shelf-life of the products should be recorded at the time of sampling and the information included in the explanatory report accompanying the results of the investigation.
   At the laboratory, the sample should be treated in order to ensure that all ingredients are thoroughly mixed.
   The most recent versions of standard EN/ISO 11290-1 and 2 are recommended for detection and enumeration of Listeria monocytogenes. However, laboratories should be allowed to use a method of their choice provided that its level of performance matches the aim to be achieved.
   The overall level of sampling should be left to the judgement of the competent authorities of Member States.
   The results of these controls should be recorded on the model record sheet set out in Annex II.
   7.   Safety, quality and labelling of poultrymeat as regards the use of water retention agents
   7.1.   Scope of the coordinated programme for 2005
   Recent sampling in certain Member States has shown a significant number of products placed on the market with excessive added water and hydrolysed proteins used as water retention agents in poultry meat and poultry meat preparations.
   Article 5(1) of Council Directive 71/118/EEC of 15 February 1971 on health problems affecting the production and placing on the market of fresh poultrymeat (4) prohibits the placing on the market of fresh poultrymeat where agents that specifically promote water retention have been used.
   A recent Commission Staff Working Document (SEC(2004) 1130) has also drawn to the attention of Member States that although water retention agents may be used in poultry preparations and products, their use must be according to codes of good practice approved by Member States or to good manufacturing practices and with due regard to the rules applicable to consumer protection including food labelling legislation, as provided in Directive 2000/13/EC of the European Parliament and of the Council of 20 March 2000 on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs (5).
   The aim of this element of the programme is to verify at Community level the correct implementation of Directive 71/118/EEC as regards the use of water retention agents in chilled and frozen poultrymeat (chicken breast) and their use in frozen poultry (chicken breast) preparations in order to promote consumer protection and to check for correct labelling.
   7.2.   Sampling and method of analysis
   For sampling, analysis and calculation of results, the competent authorities of the Member States should follow the analytical protocol described in Annex V.
   It is recommended to focus the sampling on wholesale supplies of frozen chicken breast as well as retail sales of chilled and frozen chicken breast. The overall level of sampling should be left to the judgement of the competent authorities of Member States.
   The results of the following controls should be recorded on the model sheet set out in Annex III.
   8.   Safety of certain foods for infants and young children as regards the levels for nitrate and patulin
   8.1.   Scope of the coordinated programme for 2005
   Foodstuffs containing contaminants exceeding the levels which are toxicologically acceptable may pose a potential risk to public health, especially for sensitive groups of the population such as infants and young children. The presence of contaminants can be reduced by means of good manufacturing or agricultural practices.
   In order to protect public health, specific maximum levels of nitrate and patulin in food intended for infants and young children have been set in Commission Regulation (EC) No 466/2001 of 8 March 2001 setting the maximum levels for certain contaminants in foodstuffs (6) and Commission Regulation (EC) No 655/2004 of 7 April 2004 amending Regulation (EC) No 466/2001 as regards nitrate in foods for infants and young children (7).
   The aim of this element of the programme is to verify that foods intended for infants and young children placed on the market do not exceed the maximum levels of nitrate and patulin established in Community legislation in order to ensure a high level of consumer protection.
   8.2.   Sampling and method of analysis
   The competent authorities of the Member States should take representative samples of foods for infants and young children, in particular the foods containing carrots, potatoes, leafy vegetables and apple products at, in particular, the retail level, without ignoring the production and import (if relevant), with a view to testing for nitrate (foods containing carrots, potatoes and leafy vegetables) and patulin (foods containing apple products other than processed cereal-based foods).
   Sampling and analysis methods set out in the following Community legislation are recommended for the official control of the levels of nitrate and patulin:

               —

               Commission Directive 2002/63/EC of 11 July 2002 establishing Community methods of sampling o
                  ofor the official control of pesticide residues in and on products of plant and animal origin and repealing Directive 79/700/EEC (8), as regards nitrate,

               —

               Commission Directive 2003/78/EC of 11 August 2003 laying down the sampling methods and the methods of analysis for the official control of the levels of patulin in foodstuffs (9), as regards patulin.

         The overall level of sampling should be left to the judgement of the competent authorities of Member States.
   The results of the following controls should be recorded on the model sheet set out in Annex IV.

      Done at Brussels, 1 March 2005.

            For the Commission

         Markos KYPRIANOU

            Member of the Commission

      (1)  OJ L 186, 30.6.1989, p. 23.

      (2)  OJ L 6, 10.1.2004, p. 29.

      (3)  OJ L 290, 24.11.1993, p. 14. Directive as last amended by Regulation (EC) No 1882/2003 of the European Parlament and of the Council (OJ L 284, 31.10.2003, p. 1).

      (4)  OJ L 55, 8.3.1971, p. 23. Directive as last amended by Regulation (EC) No 807/2003 (OJ L 122, 16.5.2003, p. 36).

      (5)  OJ L 109, 6.5.2000, p. 29. Directive as last amended by Directive 2003/89/EC (OJ L 308, 25.11.2003, p. 15).

      (6)  OJ L 77, 16.3.2001, p. 1. Regulation as last amended by Regulation (EC) No 208/2005 (OJ L 34, 8.2.2005, p. 3).

      (7)  OJ L 104, 8.4.2004, p. 48.

      (8)  OJ L 187, 16.7.2002, p. 30.

      (9)  OJ L 203, 12.8.2003, p. 40.
   ANNEX I
   BACTERIOLOGICAL SAFETY OF CHEESES MADE FROM PASTEURISED MILK
   Member State: _

               Bacterial groups/criteria (1)

               Sampling stage

               Product identification

               Number of samples

               Analysis results (2)

               Measures taken (number and kind) (3)

               S

               A

               U

                  Salmonella spp.

               n=5 c=0
               Absent in 25 g

               Production

               unripened soft (fresh) cheese

               ripened soft cheese

               semi-hard cheese

               Retail

               unripened soft (fresh) cheese

               ripened soft cheese

               semi-hard cheese

                  Staphylococcus aureus

               n=5 c=2
               m=100 cfu/g
               M=1 000 cfu/g

               Production

               unripened soft (fresh) cheese

               ripened soft cheese

               semi-hard cheese

               Retail

               unripened soft (fresh) cheese

               ripened soft cheese

               semi-hard cheese

                  Escherichia coli

               n=5 c=2
               m=100 cfu/g
               M=1 000 cfu/g

               Production

               unripened soft (fresh) cheese

               ripened soft cheese

               semi-hard cheese

               Retail

               unripened soft (fresh) cheese

               ripened soft cheese

               semi-hard cheese

               A

               P

               ≤ 100 cfu/g

               > 100 cfu/g

                  Listeria monocytogenes

               n=5 c=0
               Absent in 25 g

               Production

               unripened soft (fresh) cheese

               ripened soft cheese

               semi-hard cheese

               Retail

               unripened soft (fresh) cheese

               ripened soft cheese

               semi-hard cheese

      (1)  The number of sample units (n) to be taken may be reduced when sampling at retail level. When a reduced sampling is made this should be indicated in the report.

      (2)  S=Satisfactory, A=Acceptable, U=Unsatisfactory; in the case of Listeria monocytogenes A=Absence, P=Presence. As regards Staphylococcus aureus and Escherichia coli, the result is satisfactory if all the values observed are < m, acceptable if maximum of c values are between m and M, and unsatisfactory if one or more values are > M or more than c values are between m and M.

      (3)  For reporting enforcement measures it is recommended to use the following categories: verbal warning, written warning, improved in-house control required, recall of product required, administrative penalty, court action, other.
   ANNEX II
   MICROBIOLOGICAL SAFETY OF MIXED SALADS
   (as regards Listeria monocytogenes)
   Member State: _

               Bacterial pathogens

               Product identification (1)

               Number of samples

               Analysis results

               Measures taken (number and kind) (2)

               Detection in 25 g

               Enumeration cfu/g

               Absence

               Presence

               <10

               10-99

               100-999

               ≥1 000

                  Listeria monocytogenes

      (1)  The product should be identified based on its main ingredients.

      (2)  For reporting enforcement measures it is recommended to use the following categories: verbal warning, written warning, improved in-house control required, recall of product required, administrative penalty, court action, other.
   ANNEX III
   SAFETY, QUALITY AND LABELLING OF POULTRY MEAT AS REGARDS THE USE OF WATER RETENTION AGENTS
   Member State: _

               Sample code

               Name of product and label description

               Packer/processor and health mark

               Ingredient list

               Label: chicken declaration

               %
               moisture

               %
               fat

               %
               nitrogen

               %
               protein

               %
               ASH

               Hydroxyproline
               g/100g

               Excess hydroxy proline
               g/100g

               %
               Carbo hydrate

               Calculated chicken content
               Using 3.85 factor

               Corrected chicken content
               Where hydrxiproline greater than 0,08

               Measures taken
               (number and kind) (1)

      (1)  For reporting enforcement measures it is recommended to use the following categories: verbal warning, written warning, improved in-house control required, recall of product required, administrative penalty, court action, other.
   ANNEX IV
   SAFETY OF CERTAIN FOODS FOR INFANT AND YOUNG CHILDREN AS REGARDS THE LEVELS FOR NITRATE AND PATULIN
   Member State: _
   1.   NITRATE

               Sampling stage

               Product identification

               Number of samples

               Analysis results (mg/kg)

               Measures taken
               (number and kind) (1)

               <100

               100-150

               151-200

               >200

               Retail

               Production

               Import
               (if any)

   2.   PATULIN

               Sampling stage

               Product identification

               Number of samples

               Analysis results (μg/kg)

               Measures taken
               (number and kind) (1)

               <10

               10-25

               >25

               Retail

               Production

               Import
               (if any)

      (1)  For reporting enforcement measures it is recommended to use the following categories: verbal warning, written warning, improved in-house control required, recall of product required, administrative penalty, court action, other.
   ANNEX V
   ANALYTICAL PROTOCOL
   Procedure to determine chicken or added water content and collagen-based proteins in chicken breast products
   FRESH CHICKEN BREAST (CHILLED OR FROZEN)
   If the chicken breast does not contain any added proteins, stabilisers, or other ingredients then the method to calculate added water uses the official EC method for extraneous water (Commission Regulation (EEC) No 1538/91 (1)). The minimum sample for the official method is five boneless skinless chicken breasts. The added water can be determined from a plot of water/protein ratio against extraneous water in boneless skinless chicken breast (Figure 1). The water protein ratio for boneless skinless chicken breast with no added water is 3,28 and for 2 % extraneous water (the limit for boneless skinless chicken breast) the water/protein ratio is 3,40.
   FROZEN CHICKEN BREAST PREPARATIONS
   1.   Sample receipt and storage

               1.1.

               For wholesale, each sample normally consists of one 10 kg box of frozen boneless skinless chicken breast product. For retail, a minimum of five boneless skinless chicken breasts, with the same durability date or lot marking, should be taken.

               1.2.

               On receipt samples should be checked to ensure that any packaging has not been damaged and that the sample is in good frozen condition (if frozen).

               1.3.

               On receipt the samples should be stored frozen (– 18 °C ± 4 °C) prior to analysis.

         2.   Object and scope

               2.1.

               This method determines the chicken content (and added water by difference) and collagen-based proteins in skinless, boneless chicken breast products. It involves determination of protein nitrogen, moisture, ash, fat and hydroxyproline.

         3.   Principle

               3.1.

               The (apparent) fat-free chicken content is calculated using the protein nitrogen content and a nitrogen factor for boneless skinless chicken breast (Section 9). If collagen based proteins have been added to the chicken breast, then the contribution of these proteins must first be subtracted from the total protein nitrogen. The total chicken content is calculated by adding the fat content to the fat-free chicken content. A measure of the added water can be calculated by subtracting all the chicken components (chicken content, ash, and carbohydrate) from 100.

         4.   Health and safety

               4.1.

               The method uses a number of potentially hazardous pieces of equipment such as a heavy duty mincer and a homogeniser, and the appropriate safety precautions should be taken.

         5.   Pre-training requirements

               5.1.

               Training in the use of industrially sized butchery equipment is required.

         6.   Apparatus

               6.1.

               Scales capable of weighing with accuracy better than ± 0,1 g.

               6.2.

               Heavy-duty mincing machine and/or blender capable of homogenising frozen chicken breasts.

                  Note: No make of mincer is recommended, however, the mincer used should have sufficient power to mince frozen or quick-frozen chicken to produce a homogeneous mixture corresponding to that obtained from a mincer fitted with a 4 mm hole disc.

               6.3.

               Apparatus as specified in ISO 1442:1997 (BS 4401 — 3:1997), for the determination of water content.

               6.4.

               Apparatus as specified in ISO 937:1978 (BS 4401 — 2:1980), for the determination of protein content or equivalent.

               6.5.

               Apparatus as specified in ISO 936:1998 1998 (BS 4401 — 1:1998) for the determination of total ash.

               6.6.

               Apparatus as specified in BS 4401 — 4:1970 for the determination of total fat.

               6.7.

               Apparatus as specified in ISO 3496:1994 (BS 4401 — 11:1995) for the determination of hydroxyproline.

         7.   Procedure

      Note: The sample must be kept frozen until analysed in accordance with paragraphs 7.1 to 7.10 (below) begins.

               7.1.

               Remove the sample from the packaging and place in a large pre-cleaned plastic tray covered with foil to prevent moisture loss.

               7.2.

               Mince or homogenise portions of the sample and return to the plastic tray. Continue this process until the entire sample has been minced/homogenised.

               7.3.

               Using a clean large plastic spoon mix all the minced sample together taking care to ensure that all ‘drip’ is re-incorporated.

               7.4.

               In the case of a wholesale sample, take a 2 kg aliquot of the sample or, in the case of the retail, take all of it if less than 2 kg, and finely homogenise in a blender or food processor.

                  Note: The remaining 8 kg of the wholesale sample can be disposed of.

               7.5.

               Take two 50 g aliquots (for DNA if required) from the 2 kg and transfer to a suitably sized container. Place the remainder in a clean, labelled plastic bag or for convenience divide into 200 g sub-samples. Any sample that is not taken immediately for analysis should be stored frozen.

               7.6.

               Take a sample of the homogenised material and determine the moisture content in accordance with ISO 1442.

               7.7.

               Take a sample of the homogenised material and determine the nitrogen content in accordance with ISO 937 (or equivalent).

               7.8.

               Take a sample of the homogenised material and determine the ash content in accordance with ISO 936.

               7.9.

               Take a sample of the homogenised material and determine the fat content in accordance with BS 4401 — 4.

               7.10.

               Take a sample of the homogenised material and determine the hydroxyproline content in accordance with ISO 3496.

         8.   Analytical quality control

               8.1.

               All laboratories should analyse in every batch a suitable reference material with assigned levels of nitrogen, moisture, fat, ash and hydroxyproline in duplicate, as a quality control check. Acceptable batches must have a measurement within two standard deviations of the assigned value. The duplicate analyses must be within the repeatability characteristics of the method.

         9.   Calculation of results
   The calculation of results has been taken from the Agency Food Surveillance Information Sheet 20/01 of December 2001, which can be found on the Agency’s website at the following address.
   http://www.food.gov.uk/science/surveillance/fsis-2001/20chick
   9.1.   Chicken content using the nitrogen factor
   Based on Stubbs and More (The Analyst 1919, 44, 125) involves the analysis of the sample for nitrogen, moisture, fat and ash.
   The data derived from the analysis is first used to calculate the apparent fat-free meat content as follows:

                  Apparent Fat-Free Meat Content = Total Nitrogen/NF × 100

               NF = nitrogen factor associated with the product analysed

         (3,85 for lean chicken breast meat, as recommended by AMC (The Analyst, 2000, 125, 1359-1366)). Note this factor has been found to apply to third country chicken.
   The measured fat content is then added to this figure to give the apparent total chicken content.

      Apparent Total Chicken Content = Apparent Fat-Free Chicken Content + fat

   9.2.   Added collagen protein
   Hydrolysed protein from collagen can be considered to be present in a sample if the determined hydroxyproline is higher than that naturally associated with lean chicken breast (AMC data 0,08 g/100 g — The Analyst, 2000, 125, 1359-1366)
   The calculation for the apparent total chicken content as used above assumes that all of the determined nitrogen is derived from the chicken muscle. If excess hydroxyproline is present, a correction is necessary.
   The percent nitrogen contributed by any collagen in a sample is calculated from the hydroxyproline as follows:

                  COLLAGEN NITROGEN = EXCESS HYDROXYPROLINE × 1,28

         The percent collagen nitrogen is then subtracted from the percent total nitrogen and the apparent total chicken content calculated as above.
   9.3.   Added water
   An estimate of the amount of added water can be made by subtracting the chicken content and all the added ingredients from 100 using the following equation:

                  Added water % = 100 – (Apparent Total Chicken Content + Ash + Carbohydrate + Other Ingredients)

               Carbohydrate = 100 – (protein + fat + ash + moisture)

         Where total protein = total nitrogen × conversion factor (6,25)

   From the above, the added water can be estimated as follows:

                  Added water % = 100 – (Apparent Total Chicken Content + Ash + Carbohydrate)

         9.4.   Measurement uncertainty
   The average measurement uncertainty for the determination of chicken content is estimated at just less than 3 % chicken content at the 95 % confidence limit. Therefore samples can be considered to be misdescribed if the determined meat content is 5 % less than that declared.
   Figure 1 — Extraneous water (%) in relation to limit values for water: protein

      (1)  OJ L 143, 7.6.1991, p. 11. Regulation as last amended by Regulation (EC) No 814/2004 (OJ L 153, 30.4.2004, p. 1).


				|

		52011SC0805

			Recommendation for a COUNCIL RECOMMENDATION on the National Reform Programme 2011 of Finlandand delivering a Council opinionon the updated Stability Programme of Finland, 2011-2014 /* SEC/2011/0805 final */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on the National Reform Programme 2011 of Finland
and delivering a Council opinion
on the updated Stability Programme of Finland, 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 5(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 25 March 2011, the European Council also
invited the Member States participating in the Euro Plus Pact to present their
commitments in time to be included in their Stability or Convergence Programmes
and their National Reform Programmes.
(6)
On 6 April 2011, Finland submitted its 2011-2014
Stability Programme update and its 2011 National Reform Programme. In order to
take account of the interlinkages, the two programmes have been assessed at the
same time.
(7)
At the trough of the global economic crisis, Finland experienced a very steep fall in GDP, given that the Finnish economy has
traditionally been reliant on the export performance of its main industries. In
2009, GDP contracted by 8.2%, driven by an exceptionally steep fall in exports
(20% fall in volume) and related adverse confidence effects on investment. The
unemployment rate increased by about 2 percentage points, rising from 6.4% of
the labour force in 2008 to 8.3% in 2010. The economic recovery has been
strong, with GDP expanding by 3.1% in 2010, sustained by both domestic demand
and a rebound in exports. After a brief dip in 2009, real-estate prices and housing
construction volumes rebounded rapidly to above the pre-crisis levels, raising
some concern about excessive expansion of the real-estate market. Finland emerged from the economic crisis with a general government deficit at 2.5% of GDP
in 2010 and debt at 48.5% of GDP.
(8)
Based on the assessment of the updated Stability
Programme pursuant to Council Regulation (EC) No 1466/97, the Council is of the
opinion that the macroeconomic scenario underlying the programme is plausible
for 2011-2012, but slightly too favourable thereafter. For 2011-2012, the
macroeconomic scenario is in line with the Commission services' Spring
forecast. For 2013-2015, the programme projects growth of about 2% of GDP,
which is slightly above the potential growth estimate of 1.5% and could
therefore be subject to some downside risks. The objective of the budgetary
strategy is to bring the deficit down to 0.9% of GDP in 2011 and 0.7% in 2012,
reflecting the cyclical improvement in the economy and some consolidation
measures already decided by the previous government. However, the Stability
Programme update does not plan any further fiscal consolidation over 2013-2015.
Risks to the budgetary targets appear to be balanced. The most notable risk
factor stems from the global macroeconomic environment, which has traditionally
had a strong impact on the export-reliant Finnish economy.
(9)
The latest programme update does not envisage
making use of the forecast improvement in economic conditions for budgetary
consolidation in the medium term. While the medium-term objective (MTO), set by
the Finnish authorities of a structural surplus of 0.5% of GDP, is projected to
be achieved in 2011, in the following years, the structural balance is set to
fall below the target.
(10)
Taking action to counter the effects of
population ageing has been one of the priorities of successive Finnish
governments. Reflecting these efforts, Finland appears to be at medium risk
with regard to the long-term sustainability of public finances. Nevertheless,
the country faces a strong and immediate demographic shift and a notable
sustainability gap still exists in public finances. This challenge has
implications for many policy areas. Population ageing will lead to a
significant rise in demand for ageing-related services, which are mostly
provided by local governments in Finland. Various studies have found that
productivity improvement in public services has been poor over the past few
years. The Finnish authorities have already implemented several reforms to
restructure public services and boost productivity at both central and local
government level. The relatively large investments in information technology in
the public sector have not yet shown up in productivity improvements, implying
that structural and administrative changes are needed to accompany investments.
Overall, there is still room for additional measures to achieve productivity
gains and cost savings in public service provision.
(11)
The current increase in long-term unemployment
is a cause for concern. Between 2005 and 2008, long-term unemployment fell
substantially, but it began to rise again in 2009. At the end of March 2011,
the number of long-term unemployed stood at 57 400, up 12 400 on the
previous year. Many of the long-term unemployed are currently in the 55–64 age group.
Due to retirement patterns, the greatest increase in unemployment will be among
45–54 year-olds. Although the long-term unemployment rate in Finland is below the EU average, the issue should be looked at in the context of securing
labour supply in the future and social inclusion. Experience shows that
long-term unemployment, in particular, increases the risk of poverty and social
exclusion. Although the Finnish authorities recognise the increase in long-term
unemployment as a pressing issue, so far no comprehensive strategy has been
designed to combat it. Finland expanded its active labour market policy (ALMP)
measures efficiently during the crisis to fight youth unemployment. While this
helped to reduce youth unemployment over 2010-2011, it still remains above the
EU average, and may warrant new measures. In the same way, reinforcement and
better targeting of ALMP measures would help to reverse the negative trend in
long-term unemployment..
(12)
In view of demographic changes, raising the
employment rate of older workers is important for public finances and crucial
to meet the demand for labour in the future. The Finnish pension system was
reformed in 2005 and pension benefits were linked to a life-expectancy
coefficient in 2009. However, the statutory pension age is currently not linked
to life expectancy. Given the continuing increase in life expectancy, such a
link would not only contribute to labour supply but also help to ensure
adequate pensions. Early retirement schemes have been reduced over the last few
years, but there is still some room for further measures to enhance employment
incentives among the elderly. For example, the extended unemployment benefit
for the elderly functions broadly in the same way as the abolished unemployment
pension. Despite improvements over the last decade, employment rates of older
workers and the effective exit age are low by Nordic standards. Disability is
very often the cause of early retirement. Increasing the effective retirement
age requires measures that also take into account the quality of working life,
including the well-being and health of employees. This is important in
particular in view of the high number of people on disability pensions. Since
2009, Finland has spent about EUR 14 million on projects to improve the working
environment. The impact of these initiatives merits to be assessed.
Participation in lifelong learning has traditionally been very high in Finland and will continue to be important given emerging new skills requirements and
demographic changes.
(13)
Greater competition, particularly in the
services sector, has become increasingly relevant for boosting productivity and
enhancing potential economic growth. Finland's remote location and sparse
population density weakens business competition, resulting in relatively low
productivity growth in non-tradable sectors. Existing business structures are
occasionally highly concentrated, particularly in the food industry or
wholesale and retail trade. This might contribute to the relatively high
consumer price level, although long transport distances could also play a role.
Retail prices are among the highest in the EU. Competition in the retail trade
continues to be partly hindered by regulations, despite some recent loosening,
and by barriers to foreign and domestic enterprises entering and exiting the
market.
(14)
Specific commitments under the Euro Plus Pact
are not explicitly set out in Finland's Stability and National Reform
Programmes but are expected to be submitted once the new government has been
formed.
(15)
The Commission has assessed the Stability
Programme and National Reform Programme[4], taking into account not
only their relevance for sustainable fiscal and socio-economic policy in Finland but also their conformity with EU rules and guidance, given the need to reinforce
the overall economic governance of the European Union. It considers that
consolidation measures should be specified for the medium term and that further
action is needed to improve the sustainability of public finances, including by
boosting public sector productivity. Further action is also needed to increase
incentives to work and to raise the effective exit age from the labour market,
as well as to enhance productivity and competition in the service sector
markets.
(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 June 2010, the Council has examined the
2011 update of the Stability Programme of Finland and its opinion[5]
is reflected in particular in its recommendations under (1) and (2) set out
below. Taking into account the European Council conclusions of 25 March 2011,
the Council has examined the National Reform Programme of Finland,
HEREBY RECOMMENDS that Finland should take action within the period 2011-2012 to:
(1)
Continue the fiscal consolidation using any
windfall revenue to reduce the deficit, while taking additional measures to
maintain the fiscal position above the medium-term objective.
(2)
Take further measures to achieve productivity gains
and cost savings in public service provision, including
structural changes, in order to respond to the challenges arising from
population ageing.
(3)
Target active labour market measures better on
the long-term unemployed and young people.
(4)
Take measures to improve the employability of
older workers and their participation in lifelong learning. Take further steps
to discourage early exit from the labour market and further link the statutory
retirement age limits to life expectancy.
(5)
Take further measures to open up further the
service sector, by redesigning the regulatory framework and removing
restrictions in order to facilitate new entry into service sector markets,
especially in the retail sector.
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) 734.
[5]               Foreseen in Article 5(3) of Council Regulation (EC)
No 1466/97.