title: Commission Recommendation of 2 July 2008 on cross-border interoperability of electronic health record systems (notified under document number C(2008) 3282)

text:
               18.7.2008

               EN

               Official Journal of the European Union

               L 190/37

      COMMISSION RECOMMENDATION

   of 2 July 2008
   on cross-border interoperability of electronic health record systems
   (notified under document number C(2008) 3282)
   (2008/594/EC)
   THE COMMISSION OF THE EUROPEAN COMMUNITIES,
   Having regard to the Treaty establishing the European Community, and in particular Article 211 thereof,
   Whereas:

               (1)

               The strategic initiative i2010, which is an initiative for growth and employment, builds on information and communication technology policies, research and innovation to help achieve the goals of the Lisbon Strategy. The i2010 initiative promotes the building of European information society and encourages provision of better public services, including eHealth.

               (2)

               Resolving existing and future challenges to European healthcare systems is possible, at least partly, through deployment of proven information and communication technology-enabled solutions (eHealth). A major requirement to use benefits of eHealth is improved cooperation regarding interoperability of Member States’ eHealth systems and applications. Electronic health record systems form a fundamental part of eHealth systems.

               (3)

               Electronic health record systems have the potential to achieve greater quality and security in health information than the traditional forms of health records. Interoperability of electronic health record systems should make access easier, and enhance the quality and safety of patient care throughout the Community by providing patients and health professionals with relevant and up-to-date information while ensuring the highest standards of protection of personal data and confidentiality. Enhancing cross-border cooperation in the domain of eHealth requires cooperation between providers, purchasers and regulators of healthcare services in different Member States. At the same time any measure relating to interoperability need not necessarily lead to the harmonisation of laws and regulations of the organisation and delivery of healthcare in Member States.

               (4)

               Lack of interoperability of electronic health record systems is one of the major obstacles for realising the social and economic benefits of eHealth in the Community. Market fragmentation in eHealth is aggravated by the lack of technical and semantic interoperability. The health information and communication systems and standards currently used in Member States are often incompatible and do not facilitate access to vital information for provision of safe and good quality healthcare across different Member States.

               (5)

               The Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions ‘eHealth — making healthcare better for European citizens: An action plan for a European eHealth Area’, presented on 30 April 2004 (1), outlines the potential of eHealth systems and major challenges for its wide deployment. The Action Plan outlined in this Communication calls for joint Community and Member States action on interoperability of electronic health record systems.

               (6)

               The Declaration of the High Level eHealth Conference in 2007 acknowledged the importance of starting joint initiatives among Member States by strengthening a range of activities related to interoperability of electronic health record systems.

               (7)

               The Commission responded to the report ‘Creating an Innovative Europe’ of the independent expert group with the Communication ‘A Lead Market Initiative for Europe’ (2) that aims at the creation and marketing of innovative products and services in lead industrial and social areas, including eHealth. One of the main targets of the proposed initiatives to boost the interoperability of electronic health record systems, since the health information and communication systems and standards currently used in Member States are often incompatible and thus present a barrier to the emergence of cost-effective and innovative information technology solutions for healthcare.

               (8)

               The European Parliament, on 23 May 2007, passed a Resolution on the impact and consequences of the exclusion of health services from the Directive on services in the internal market (3). The Resolution invites the Commission to encourage Member States to actively support the introduction of eHealth and telemedicine, particularly by developing interoperable systems allowing the exchange of patient information between healthcare providers in different Member States.

               (9)

               The purpose of the Recommendation is to contribute to development of overall European eHealth interoperability by the end of 2015.

               (10)

               This Recommendation respects and observes the principles recognised by the Charter of Fundamental Rights of the European Union, in particular Article 7 on the right to respect for private and family life and Article 8 on the right of every individual to the protection of his or her personal data.

               (11)

               Health records are among the most sensitive records available containing information concerning an individual. The unauthorised disclosure of a medical condition or diagnosis could negatively impact an individual’s personal and professional life. Maintaining health records in an electronic form increases the risk that patients’ information could be accidentally exposed or easily distributed to unauthorised parties.

               (12)

               Interoperability of electronic health records involves transfer of personal data concerning a patient’s health. These data should be able to flow freely from one Member State to another, but at the same time the fundamental rights of the individual should be safeguarded. This Recommendation should therefore be without prejudice to the Community provisions on the protection of personal data consisting in particular of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (4), and Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) (5).

               (13)

               The Commission considers that Privacy Enhancing Technologies (PETs) should be developed and more widely used where personal data is processed through ICT networks in relevant fields such as eHealth (6),

         HEREBY RECOMMENDS:
   1.   This Recommendation provides a set of guidelines for developing and deploying interoperable electronic health record systems, allowing for cross-border exchange of patient data within the Community so far as necessary for a legitimate medical or healthcare purpose. Such electronic health record systems should enable healthcare providers to ensure that a patient receives care more effectively and efficiently by having timely and secure access to basic, and possibly vital, health information, if so needed and in conformity with the patient’s fundamental rights to privacy and data protection.
   2.   This Recommendation provides guidance for interoperability of electronic health record systems, including patient summaries, emergency data sets, medication records facilitating ePrescription solutions.
   3.   For the purposes of this Recommendation the following definitions are applied:

               (a)

               ‘patient’ means any natural person who receives or wishes to receive health care in a Member State;

               (b)

               ‘health professional’ means a doctor of medicine or a nurse responsible for general care or a dental practitioner or a midwife or a pharmacist within the meaning of Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications (7) or another professional exercising activities in the healthcare sector which are restricted to a regulated profession as defined in Article 3(1)(a) of Directive 2005/36/EC;

               (c)

               ‘electronic health record’ means a comprehensive medical record or similar documentation of the past and present physical and mental state of health of an individual in electronic form, and providing for ready availability of these data for medical treatment and other closely related purposes;

               (d)

               ‘electronic health record system’ means a system for recording, retrieving and manipulating information in electronic health records;

               (e)

               ‘patient’s summary, emergency data set, medication record’ mean subsets of electronic health records that contain information for a particular application and particular purpose of use, such as an unscheduled care event or ePrescription;

               (f)

               ‘ePrescription’ means a medicinal prescription, as defined by Article 1(19) of Directive 2001/83/EC of the European Parliament and of the Council (8), issued and transmitted electronically;

               (g)

               ‘interoperability of electronic health record systems’ means the ability of two or more electronic health record systems to exchange both computer interpretable data and human interpretable information and knowledge;

               (h)

               ‘cross-border interoperability’ means interoperability between neighbouring and non-neighbouring Member States and their entire territories;

               (i)

               ‘semantic interoperability’ means ensuring that the precise meaning of exchanged information is understandable by any other system or application not initially developed for this purpose.

         4.   Achieving and maintaining cross-border interoperability of electronic health record systems implies managing a continuous process of change and the adaptation of a multitude of elements and issues within and across electronic infrastructures in Member States. These electronic infrastructures are necessary to exchange information, interact cooperate in order to ensure the highest possible levels of quality and safety in healthcare provision to patients. Implementing interoperability of electronic health record systems will require a complex set of framework conditions, organisational structures and implementation procedures involving all relevant stakeholders.

               (a)

               To achieve this, Member States are invited to undertake actions at five levels, namely the overall political, the organisational, the technical, the semantic and the level of education and awareness raising.

               (b)

               Underpinning these activities will be full compliance with national as well as Community legal instruments, in particular for the protection of personal data, including confidentiality and data security. The necessary legal safeguards should be ensured, together with the embedding of data protection safeguards in the design and implementation of electronic health record systems. Furthermore, it is indispensable to develop mechanisms for education of both patients and professionals as well as for the evaluation and monitoring of activities necessary for ensuring the interoperability of electronic health record systems.

         The political level of cross-border interoperability of electronic health record systems
   5.   At the level of political feasibility and commitment to electronic health record systems interoperability, it is recommended that Member States:

               (a)

               commit politically and strategically to the implementation at local, regional and national level of electronic health record systems that are capable also of interoperating with electronic health record systems in other Member States;

               (b)

               engage in active cooperation with other Member States and relevant stakeholders to ensure the adoption and implementation of standards that make the cross-border interoperability of electronic health record systems feasible and; secure

               (c)

               implement interoperability of electronic health record systems as an integral part of regional and national eHealth strategies;

               (d)

               consider the inclusion of eHealth in national and regional strategies for territorial cohesion and development and analyse the results of already deployed electronic health record systems at the level of eHealth policy and financing possibilities. For the period 2007-2013 the support for developing eHealth interoperability through investments in eHealth and trans-national and cross-border activities is provided within the framework of cohesion policy;

               (e)

               analyse the risks, barriers or missing elements in relation to achieving cross-border interoperability of electronic health record systems, and identify the necessary preconditions and relevant incentives to solve the problems;

               (f)

               reserve adequate resources, for example by means of direct incentives, to invest in electronic health record systems;

               (g)

               recognise that investments in both technical and semantic interoperability can be beneficial in the shorter term, applying a step-by-step approach and examples of best practice, drawing on priorities and expertise of Member States;

               (h)

               consider the creation of other financial indirect incentive mechanisms to enable the adoption, acquisition and/or modernisation of interoperable electronic health record systems;

               (i)

               plan the activities directed to ensure the interoperability of electronic health record systems ahead for at least five years. Such a timescale is deemed appropriate to ensure policy consistency — which is often a precondition for increasing investment and innovation;

               (j)

               accompany implementation of electronic health record systems by strong involvement of users and other stakeholders in establishing adequate governance, management, public-private partnerships, public procurement, planning, implementation, evaluation, training, information and education;

               (k)

               raise awareness among relevant stakeholders such as local and regional authorities, health professionals, patients and industry of the benefits and need for interoperability of electronic health record systems.

         The organisational level of cross-border interoperability of electronic health record systems
   6.   It is essential to create an organisational framework and process that will enable cross-border interoperability of electronic health record systems. This should be based on a roadmap, developed by Member States, which covers a five-year period and provides details with regard to the following milestones:

               (a)

               agree on a European governance process to establish guidelines for developing, implementing and sustaining cross-border interoperability of electronic health record systems covering management for reliable identification of patients and authentication of health professionals as well as other relevant issues as described in points 7, 8, 9 and 14;

               (b)

               consider policies and incentives to increase demand for procuring eHealth services to enable interoperability of electronic health record systems;

               (c)

               analyse the factors which render the standardisation processes leading to higher levels of interoperability of electronic health record systems such a long, complex and expensive activity, and devise measures to speed up these processes.

         Technical interoperability of electronic health record systems
   7.   Compatibility of electronic health record systems at the technical level is the essential prerequisite for interoperable electronic health record systems. Member States should:

               (a)

               undertake a comprehensive survey of existing technical standards and infrastructures that may facilitate the implementation of systems supporting cross-border healthcare and the provision of healthcare services throughout the Community, especially those related to electronic health records and exchange of information;

               (b)

               analyse the use of standardised information models and standards-based profiles when developing and implementing interoperable electronic health record systems and services solutions. Consider standardised information models and standards-based profiles to be part of national or regional specific interoperability specifications. Where appropriate, these information models and profiles should make use of existing European and international standards, and be based on the approaches and achievements of relevant industrial initiatives;

               (c)

               commit to the development of any necessary additional standards, preferably open standards on a global scale, involving the relevant European and international standardisation bodies in the key areas where shortcomings have been identified;

               (d)

               analyse the achievements of the Mandate M 403: ‘Mandate to the European Standardisation Organisations CEN, Cenelec and ETSI in the field of Information and Communication Technologies, applied to the domain of eHealth’ in order to provide optimal technological foundations, infrastructure, safety and regulatory integration in Europe and within global markets.

         Semantic interoperability of electronic health record systems
   8.   Semantic interoperability is an essential factor in achieving the benefits of electronic health records to improve the quality and safety of patient care, public health, clinical research, and health service management. The Member States should:

               (a)

               establish an appropriate mechanism in cooperation with the relevant standards development organisations, the Commission and the World Health Organisation, to involve national research centres, relevant industries and stakeholders in the development of health semantics to advance in implementation efforts of interoperable electronic health record systems;

               (b)

               wherever possible, consider the suitability of international medical-clinical terminologies, nomenclatures and classifications of diseases, including those for pharmacovigilance and clinical trials; the establishment of competence centres for multilingual and multicultural adaptation of international classifications and terminologies should also be encouraged;

               (c)

               agree on standards for semantic interoperability to represent the relevant health information for a particular application through data structures (such as archetypes and templates), and subsets of terminology systems and ontologies responsive to local user needs;

               (d)

               consider the need for a sustainable reference system of concepts (ontology) as a basis for mapping multilingual lexicons that take into account the difference between professional healthcare languages, lay terminologies and traditional coding schemes;

               (e)

               support the widespread availability of methodologies and tools for incorporating the semantic content into practical applications as well as the development of relevant human capacity and skills in this domain;

               (f)

               demonstrate the benefits and/or shortcomings of current and future systems through scientifically sound evaluation and assessment.

         Certification of electronic health record systems
   9.   There is a need for a mutually recognisable conformity testing procedures that are valid throughout the Community or which serve as a basis for each Member State’s certification mechanism. Therefore Member States should:

               (a)

               apply properly the existing eHealth standards and profiles, namely those related to interoperability of electronic health record systems, in order to enhance users’ confidence in those standards;

               (b)

               put into place a joint or mutually recognised mechanism for conformity testing and certification of interoperable electronic health records and other eHealth applications, such as the techniques and methodologies offered by various industry consortia;

               (c)

               consider the industry self-certification and/or conformity testing activities as a mechanism to reduce delays in bringing interoperable eHealth solutions to the market;

               (d)

               take into account national and international practices, including those which exist outside Europe.

         Protection of personal data
   10.   Member States should ensure that the fundamental right to protection of personal data is fully and effectively protected in interoperable eHealth systems, in particular in electronic health record systems, in conformity with Community provisions on the protection of personal data, in particular Directives 95/46/EC and 2002/58/EC.
   11.   Directive 95/46/EC applies to personal data processed in application of this Recommendation. Processing of personal data contained in the electronic health records and their systems is particularly sensitive and therefore subject to the special data protection rules on the processing of sensitive data. Article 8 of Directive 95/46/EC prohibits in principle the processing of sensitive data concerning health. Limited exemptions to this prohibition principle are laid down in the Directive, in particular if processing is required for specified medical and healthcare purposes.
   12.   Member States should be aware that interoperable electronic health record systems increase the risk that personal data concerning health could be accidentally exposed or easily distributed to unauthorised parties, by enabling greater access to a compilation of the personal data concerning health, from different sources, and throughout a lifetime.
   13.   Member States should follow the guidance on electronic health record systems provided for by the Working Party set up under Article 29 of Directive 95/46/EC (9).
   14.   Member States should lay down a comprehensive legal framework for interoperable electronic health record systems. Such a legal framework should recognise and address the sensitive nature of personal data concerning health and provide for specific and suitable safeguards so as to protect the fundamental right to protection of personal data of the individual concerned.
   This legal framework should in particular:

               (a)

               analyse different personal data protection impacts of organisational alternatives for storing personal data concerning health and establish organisational structures for electronic health record systems in view of the specific risks for the rights and freedoms of data subjects, which best reflect the national, regional and local specifications and practices;

               (b)

               guarantee the patient’s self-determination by allowing for the patient’s autonomous and freely taken decision, supported by means of user-friendly technology, as to which personal data concerning health are to be stored and disclosed to whom in his or her electronic health record unless expressly required by national law. This decision shall be without prejudice to the possibility for the relevant healthcare body or doctor to store this data for treatment purposes;

               (c)

               establish that electronic health record systems are designed and selected in accordance with the aim of collecting, processing or using no personal data or as little personal data as possible. In particular, use is to be made of the possibilities for pseudonymisation or rendering persons anonymous, insofar as this is possible and the effort involved is reasonable in relation to the desired level of protection;

               (d)

               provide for an assessment of the information security risks and personal data protection impacts prior to the implementation of an electronic health record system, in view of the specific risks for the rights and freedoms of data subjects;

               (e)

               clarify the extent to which categories of personal data concerning health should be made available in electronic form or online. In particular, certain categories of personal data concerning health such as genetic or psychiatric data may have to be excluded from online processing altogether or at least be subject to especially strict access controls;

               (f)

               prescribe that processing of personal data in electronic health records and their systems must be required and carried out only by a health professional subject under national law or rules established by national competent bodies to the obligation of professional secrecy or by another person subject to an equivalent obligation of secrecy; ensure a reliable identification of patients and health professionals;

               (g)

               determine the conditions under which health data contained in electronic health record systems can be lawfully accessed and processed by persons other than the individual concerned, and for what predefined health purposes, including the security that should be assured while processing health data; specify these issues as policies that can be practically applied, technically implemented and enforced, inter alia, by the national data protection supervisory authorities;

               (h)

               ensure that patients are fully informed on the nature of the data and the structure of the electronic health record containing them. Patients should have alternative (conventional) means to access personal data concerning health related to him or her. In this context it is important to ensure that information provided to data subjects uses language and a layout that is easy to understand and is given in an appropriate manner to persons with special needs (e.g. children or elderly persons);

               (i)

               provide for special measures to prevent patients from being illegally induced to disclose their personal data contained in electronic health record systems;

               (j)

               make sure that any processing — especially the storage — of personal data in electronic health record systems takes place within jurisdictions applying Directive 95/46/EC or those with an adequate level of protection of personal data;.

               (k)

               lay down detailed auditing requirements for the purpose of ensuring compliance with data protection obligations, such as reliable system of electronic identification and authentication, data access logging, documentation of all processing steps, duration of maintaining the auditing information, effective back up and recovery systems, and enforce the adoption of these requirements or solutions according to best practices for information handling;

               (l)

               guarantee the confidentiality of electronic health record systems as well as provide for appropriate technical and organisational measures, including rules on incident detection and management processes, in case of a breach of security or identity mechanisms leading to the accidental or unlawful destruction, loss, alteration, unauthorised disclosure of or access to personal data transmitted, stored or otherwise processed in electronic health record systems. Incidents or violations should be identified promptly and effectively and measures or solutions should be put in place to manage such incidents, including informing and involving the individuals concerned, the national data protection supervisory authorities, and other appropriate stakeholders.

         15.   Member States should furthermore:

               (a)

               stimulate the deployment of security-enhancing products, processes and services to prevent and fight identity theft and other privacy-intrusive attacks;

               (b)

               ensure that data protection safeguards are embedded in electronic health record systems, including through the widest possible use of Privacy Enhancing Technologies (PETs) in their design and implementation.

         Monitoring and evaluation
   16.   In order to ensure monitoring and evaluation of cross-border interoperability of electronic health record systems, Member States should:

               (a)

               consider the possibilities for setting up a monitoring observatory for interoperability of electronic health record systems in the Community to monitor, benchmark and assess progress on technical and semantic interoperability for successful implementation of electronic health record systems;

               (b)

               undertake a number of assessment activities. These could include defining the quantitative and qualitative criteria for measuring the eventual benefits and risks (including economic benefits and cost-effectiveness) of interoperable electronic health record systems and assessing the benefits and risks achieved by the systems and services developed by such practical demonstrators as the Large Scale Pilot projects (Pilot Actions A) that are incorporated within the Competitiveness and Innovation Programme ICT Policy Support Programme.

         Education and awareness raising
   17.   In terms of education, training and awareness raising, Member States should:

               (a)

               increase awareness about the benefits of and need for standards in electronic health record systems and their interoperability among producers and vendors of information and communication technologies, healthcare providers, public health institutions, insurers and other stakeholders;

               (b)

               consider requirements for education and training with regard to health policy-makers and health professionals;

               (c)

               pay particular attention to education, training and dissemination of good practices in electronically recording, storing and processing clinical information as well as in gaining informed consent of the patient and lawfully sharing patient’s personal data;

               (d)

               provide parallel information and training, including awareness raising, for all individuals, in particular patients. Such an approach would make for more effective use of health information as patients move between a variety of healthcare providers, along the continuum of care, and receive whenever possible treatment, care and data in their own homes.

         18.   Member States are invited to report, on a yearly basis, to the Commission on the measures they have taken in relation to the implementation of cross-border interoperability of electronic health record systems. The first report should be presented by Member States one year following the day of publication of this Recommendation.
   19.   The Recommendation is addressed to Member States.

      Done at Brussels, 2 July 2008.

            For the Commission

         Viviane REDING

            Member of the Commission

      (1)  COM(2004) 356 final.

      (2)  COM(2007) 860 final.

      (3)  (2006/2275 (INI)).

      (4)  OJ L 281, 23.11.1995, p. 31. Directive modified by Regulation (EC) No 1882/2003 (OJ L 284, 31.10.2003, p. 1).

      (5)  OJ L 201, 31.7.2002, p. 37. Directive modified by Directive 2006/24/EC (OJ L 105, 13.4.2006, p. 54)

      (6)  COM(2007) 228 final.

      (7)  OJ L 255, 30.9.2005, p. 22. Directive as last amended by Commission Regulation (EC) No 1430/2007 (OJ L 320, 6.12.2007, p. 3).

      (8)  OJ L 311, 28.11.2001, p. 67. Directive as last amended by Directive 2008/29/EC (OJ L 81, 20.3.2008, p. 51).

      (9)  See at present Working Document 131 of 15 February 2007 on the processing of personal data relating to health in electronic health records.


Important legal notice

|

52007SC0289

Recommendation for a Council opinion in accordance with the third paragraph of Article 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated stability programme of Spain, 2006-2009  /* SEC/2007/0289 final */

	[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 7.3.2007SEC(2007) 289 finalRecommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Article 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated stability programme of Spain, 2006-2009(presented by the Commission)EXPLANATORY MEMORANDUM1. GENERAL BACKGROUNDThe 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. The 2005 reform of the Pact acknowledged its 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 Stability and Growth 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 stability programme of Spain was submitted in December 1998. In accordance with the Regulation, the Council delivered an opinion on it on 15 March 1999 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.2. BACKGROUND FOR THE ASSESSMENT OF THE UPDATED PROGRAMMEThe Commission has examined the most recent update of the stability programme of Spain, submitted on 22 December 2006, and has adopted a recommendation for a Council opinion on it (see box for the main points covered by the assessment).In order to set the scene against which the budgetary strategy in the updated stability programme is assessed, the following paragraphs summarise:1.  the economic and budgetary performance over the last ten years2.  the most recent assessment of the country’s position under the preventive arm of the Stability and Growth Pact (summary of the Council opinion on the previous update of the stability programme) and3.  the Commission’s assessment of the October 2006 national reform programme.2.1. Recent economic and budgetary performanceSpain seems to be enjoying a virtuous economic circle. Domestic demand, fuelled by private consumption and investment in construction, is at the origin of an intense job creation in housing and services, which, in turn, feeds domestic demand again, in a context of healthy public finances and negative real interest rates. However, a persistent inflation differential with the euro area, coupled with slow productivity growth, is deteriorating the external competitive position of a country whose comparative advantages are still based on low production costs rather than on products with a high technological content. Widening external deficits might jeopardise medium-term growth prospects. Furthermore, high households' indebtedness, largely explained by massive investment in dwellings, is increasing the vulnerability of a large hare of the population to a rise in interest rates. Prudent fiscal policies implemented by Spain have been appropriate against this background.2.2. The assessment in the Council opinion on the previous programmeOn 14 March 2006, the Council adopted its opinion on the previous update of the stability programme, covering the period 2005-2008. The Council was of the opinion that "overall, the budgetary position is sound and the budgetary strategy provides a good example of fiscal policies conducted in compliance with the Pact. Maintaining a strong budgetary position is important in the light of rising external imbalances". The Council invited Spain to "implement the envisaged measures to address the long-term budgetary implications of ageing populations".2.3. The Commission assessment of the October 2006 national reform programmeThe implementation report of the national reform programme of Spain, provided in the context of the renewed Lisbon strategy for growth and jobs, was submitted on 15 October 2006. Spain's national reform programme identifies as key challenges/priorities: budgetary stability; R&D strategy; a better environment for business; promoting competition; infrastructure development; a better functioning of the labour market; and better education and human capital.The Commission’s assessment of this programme (adopted as part of its December 2006 Annual Progress Report[2]) showed that Spain is making good progress in the implementation of its National Reform Programme and the commitments agreed at the 2006 Spring European Council. Further implementation of new laws and measures across the seven key policy areas are now essential in order to increase employment and productivity and progress towards full GDP per capita convergence with EU-25.Box: Main points covered by the assessment As required by Article 5(1) (for stability programmes) and Article 9(1) (for convergence programmes) of Council Regulation (EC) No 1466/97, the assessment covers the following points: whether the economic assumptions on which the programme is based are plausible; the medium-term budgetary objective (MTO) presented by the Member State and whether the adjustment path towards it is appropriate; whether measures being taken and/or proposed to respect that adjustment path are sufficient to achieve the MTO over the cycle; when assessing the adjustment path towards the MTO, whether a higher adjustment effort is made in economic good times, whereas the effort may be more limited in economic bad times, and, for euro-area and ERM II Member States, whether the Member State pursues an annual improvement of the cyclically-adjusted balance, net of one-off and other temporary measures, of 0.5% of GDP as a benchmark to meet its MTO; when defining the adjustment path to the MTO (for Member States that have not yet reached it) or allowing a temporary deviation from the MTO (for Member States that have), the implementation of major structural reforms which have direct long-term cost-saving effects (including by raising potential growth) and therefore a verifiable impact on the long-term sustainability of public finances (subject to the condition that an appropriate safety margin with respect to the 3% of GDP reference value is preserved and that the budgetary position is expected to return to the MTO within the programme period), with special attention for pension reforms introducing a multi-pillar system that includes a mandatory, fully-funded pillar; whether the economic policies of the Member State are consistent with the broad economic policy guidelines. The plausibility of the programme’s macroeconomic assumptions is assessed by reference to the Commission services’ autumn 2006 forecast, using also the commonly agreed methodology for the estimation of potential output and cyclically-adjusted balances. The assessment of consistency with the broad economic policy guidelines is made against the broad economic policy guidelines in the area of public finances as included in the integrated guidelines for the period 2005-2008. The assessment also examines: the evolution of the debt ratio and the outlook for the long-term sustainability of the public finances, which should be given “sufficient attention in the surveillance of budgetary positions” according to the Council report of 20 March 2005 on “Improving the implementation of the Stability and Growth Pact”. A Commission Communication of 12 October 2006 sets out the approach to the assessment of long-term sustainability[3]; the degree of integration with the national reform programme, submitted by Member States in the context of the Lisbon strategy for growth and jobs. In its cover note of 7 June 2005 to the European Council on the broad economic policy guidelines for the period 2005-2008, the ECOFIN Council stated that the national reform programmes should be consistent with the stability and convergence programmes; compliance with the code of conduct[4], which inter alia prescribes a common structure and set of data tables for the stability and convergence programmes. |-  Recommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Article 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated stability programme of Spain, 2006-2009THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community,Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[5], and in particular Article 5(3) thereof,Having regard to the recommendation of the Commission,After consulting the Economic and Financial Committee,HAS DELIVERED THIS OPINION:(1) On [27 March 2007] the Council examined the updated stability programme of Spain, which covers the period 2006 to 2009[6].(2) The macroeconomic scenario underlying the programme envisages that real GDP growth will decrease from 3.8% in 2006 to 3.3% on average over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. The programme’s projections for inflation also appear realistic. The projected inflation differential with the euro area, although decreasing, is still significant. While there may be some upside risks in the short term, there might also be some downside risks to this scenario associated to the imbalances of the economy, namely the increasing household indebtedness and the widening current account deficit. Furthermore, less buoyant growth in the medium term than foreseen in the programme is a distinct possibility, notably if the extended residential construction boom came to an end.(3) For 2006, the Commission services’ autumn 2006 forecast estimated the general government surplus at 1.5% of GDP, fully in line with the updated stability programme, but against a target of 0.9% of GDP set in the previous update of the stability programme. This positive outcome is the result of higher-than-expected revenues stemming from strong job creation and buoyant corporate profits, which are estimated to have boosted direct tax revenues well above nominal GDP growth.(4) The update aims at (i) maintaining macroeconomic and budgetary stability and (ii) fostering productivity by increasing infrastructure, human and technological capital. The general government surplus is envisaged to decline from 1.4% of GDP in 2006 to about 1% in 2009. The time profile of the primary surplus is similar, falling from 3% of GDP in 2006 to 2¼% in 2009. While revenues should decline by 0.2% of GDP over the programme period, primary expenditures should increase by around 0.5% of GDP, partly offset by a decline in the interest burden. The previous update projected smaller surpluses against a broadly similar macroeconomic outlook. The difference between the two updates is to be found in a much better 2006 surplus outcome than projected one year earlier, which is projected to have favourable carryover effects over the programme period.(5) 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 marginally decline from around 1¾% of GDP in 2006 to 1½% at the end of the programme period. As in the previous update of the stability programme, the medium-term objective (MTO) for the budgetary position presented in the programme is a balanced position in structural terms, which the programme plans to maintain by a large margin throughout the programme period. As the MTO is more demanding than the minimum benchmark (estimated at a deficit of around 1¼% of GDP, achieving it should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO 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 is more demanding than implied by the debt ratio and average potential output growth in the long term.(6) The risks to the budgetary projections in the programme appear broadly balanced. The macroeconomic scenario underlying the update is plausible and revenue projections seem to reflect cautious assumptions. On the expenditure side, there is a risk of some expenditure overruns (at the level of regional authorities) if past trends in education and health care are confirmed.(7) In view of this risk assessment, the budgetary stance seems sufficient to maintain the MTO throughout the programme period, as envisaged in the programme. In addition it provides a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations in every year. The fiscal policy stance implied by the programme is in line with the Stability and Growth Pact.(8) Government gross debt is estimated to have declined to 40% of GDP in 2006, well below the 60% of GDP Treaty reference value. The update projects the debt ratio to further decline by 8 percentage points over the programme period.(9) The long-term budgetary impact of ageing in Spain is well above the EU average, mainly as a result of a relatively high increase in pension expenditure as a share of GDP over the coming decades. The initial budgetary position, improved compared with 2005, contributes to easing the projected long-term budgetary impact of ageing populations, but is not sufficient to fully cover the substantial increase in expenditure due to the ageing of the population. Maintaining high primary surpluses over the medium term and implementing further measures aimed at curbing the significant increase in age-related expenditures would contribute to reducing risks to the sustainability of public finances. Overall, Spain appears to be at medium risk with regard to the sustainability of public finances.(10) The stability programme contains a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. However, it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme, although its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, both programmes envisage the gradual increase of public R&D expenditures and of infrastructure investments.(11) The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.(12) As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data[7].The overall conclusion is that the medium term budgetary position is sound and the budgetary strategy provides a good example of fiscal policies conducted in compliance with the Stability and Growth Pact. A strong budgetary position is important in the light of rising external imbalances and the existing inflation differential with the euro area.In view of the above assessment and in particular the projected increase in age-related expenditure, Spain is invited to further improve the long term sustainability of public finances with measures to contain the future impact of ageing on spending programmes.Comparison of key macro economic and budgetary projections |1 Commission services calculations on the basis of the information in the programme. |2 Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures. |3 One-off and other temporary measures taken from the programme. |4 One-off and other temporary measures taken from the Commission services’ autumn 2006 forecast. |5 Based on estimated potential growth of 3,9%, 3,8%, 3,6% and 3,6% respectively in the period 2005-2008. 6 Private consumption deflator instead of HICP. 7 According to first estimates, growth was 3.9% in 2006. The Commission services' interim forecast of 16 February 2007 projects growth of 3.7% in 2007. |Source: Stability programme (SP); Commission services’ autumn 2006 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] Communication from the Commission to the Spring European Council, “Implementing the renewed Lisbon strategy for growth and jobs - A year of delivery” - COM(2006) 816, 12.12.2006.[3] Communication from the Commission to the Council and the European Parliament, “The long-term sustainability of public finances in the EU” - COM(2006) 574, 12.10.2006 - and European Commission, Directorate-General for Economic and Financial Affairs (2006), “The long-term sustainability of public finances in the European Union”, European Economy No 4/2006.[4] “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.[5] OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm[6] The update was submitted 3 weeks beyond the 1 December deadline set in the code of conduct.[7] In particular, the data on HICP as well as on general government expenditure by function are not provided.


title: Recommendation for a Council opinion in accordance with the third paragraph of Article 9 (for CP) of Council Regulation (EC) No 1466/97 of 7 July 1997 on the updated convergence programme of Denmark, 2006-2010

text:
Important legal notice

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52007SC0071

Recommendation for a Council opinion in accordance with the third paragraph of Article 9 (for CP) of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Denmark, 2006-2010  /* SEC/2007/0071 final */

	[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 23.1.2007SEC(2007) 71 finalRecommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Article 9 (for CP) of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Denmark, 2006-2010(presented by the Commission)EXPLANATORY MEMORANDUM1. GENERAL BACKGROUNDThe 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. The 2005 reform of the Pact acknowledged its 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 Stability and Growth 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 Denmark was submitted in October 1998. In accordance with the Regulation, the Council delivered an opinion on it on 1 December 1998 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.2. BACKGROUND FOR THE ASSESSMENT OF THE UPDATED PROGRAMMEThe Commission has examined the most recent update of the convergence programme of Denmark, submitted on 30 November 2006, and has adopted a recommendation for a Council opinion on it (see box for the main points covered by the assessment).In order to set the scene against which the budgetary strategy in the new convergence programme is assessed, the following paragraphs summarise:1.  the economic and budgetary performance over the last ten years2.  the most recent assessment of the country’s position under the preventive arm of the Stability and Growth Pact (summary of the Council opinion on the previous update of the convergence programme); and3.  the Commission’s assessment of the October 2006 national reform programme.2.1. Recent economic and budgetary performanceOver the last decade, the Danish economy has performed relatively well overall. Real GDP growth and inflation have developed broadly in line with the euro area. At the same time, the functioning of the labour market has improved and become very flexible, which has contributed to a gradual reduction of unemployment and to an increase in employment. Unemployment is at an historically low level and the employment rate is the highest in the EU. Moreover, Denmark has benefited from well-managed reforms and sound fiscal policies, which has led to successive general government surpluses and a rapid reduction of government debt. The strong public finances can be attributed to successful economic reforms and a medium-term fiscal strategy aimed at fiscal sustainability and expenditure discipline. An important element of this strategy is the tax-freeze which promotes expenditure discipline and is expected to reduce the tax burden over time. Denmark appears to be at low risk as regards long-term sustainability of public finances. The medium-term fiscal strategy, which focuses on creating budget surpluses and reducing government debt, has been successful in preparing the public finances for the effects of an ageing population. The Welfare Agreement reached in June 2006, which is foreseen to increase labour supply in the long-term, has further contributed to improving the ability of Denmark to face these effects.2.2. The assessment in the Council opinion on the previous programmeOn 24 January 2006, the Council adopted its opinion on the previous update of the convergence programme, covering the period 2005-2010. The Council was of the opinion that "overall, the budgetary position is sound and the budgetary strategy provides a good example of fiscal policies in compliance with the Stability and Growth Pact”.2.3. The Commission assessment of the October 2006 national reform programmeThe Implementation Report of the National Reform Programme of Denmark, provided in the context of the renewed Lisbon strategy for growth and jobs, was submitted on 16 October 2006. Denmark's National Reform Programme identifies as key challenges/priorities: ensuring fiscal sustainability, improving competition in certain sectors; enhancing public sector efficiency; developing the knowledge society; securing environmental sustainability and energy; encouraging entrepreneurship; and increasing the labour supply.The Commission’s assessment of this programme (adopted as part of its December 2006 Annual Progress Report[2]) showed that Denmark is making very good progress in the implementation of its National Reform Programme. Denmark has with the June 2006 Welfare Agreement further strengthened its reform strategy in terms both of macro-economic and employment policy and has made very good progress in reaching a national consensus on reforms. Denmark has also made progress on micro-economic policies, including in the area of competition.Against the background of progress made, Denmark was encouraged to also focus on the areas of labour supply over the medium term; competition; energy interconnection supply; emission reduction policies; and education.Box: Main points covered by the assessment As required by Article 5(1) (for stability programmes) and Article 9(1) (for convergence programmes) of Council Regulation (EC) No 1466/97, the assessment covers the following points: whether the economic assumptions on which the programme is based are plausible; the medium-term budgetary objective (MTO) presented by the Member State and whether the adjustment path towards it is appropriate; whether measures being taken and/or proposed to respect that adjustment path are sufficient to achieve the MTO over the cycle; when assessing the adjustment path towards the MTO, whether a higher adjustment effort is made in economic good times, whereas the effort may be more limited in economic bad times, and, for euro-area and ERM II Member States, whether the Member State pursues an annual improvement of the cyclically-adjusted balance, net of one-off and other temporary measures, of 0.5% of GDP as a benchmark to meet its MTO; when defining the adjustment path to the MTO (for Member States that have not yet reached it) or allowing a temporary deviation from the MTO (for Member States that have), the implementation of major structural reforms which have direct long-term cost-saving effects (including by raising potential growth) and therefore a verifiable impact on the long-term sustainability of public finances (subject to the condition that an appropriate safety margin with respect to the 3% of GDP reference value is preserved and that the budgetary position is expected to return to the MTO within the programme period), with special attention for pension reforms introducing a multi-pillar system that includes a mandatory, fully-funded pillar; whether the economic policies of the Member State are consistent with the broad economic policy guidelines. The plausibility of the programme’s macroeconomic assumptions is assessed by reference to the Commission services’ autumn 2006 forecast, using also the commonly agreed methodology for the estimation of potential output and cyclically-adjusted balances. The assessment of consistency with the broad economic policy guidelines is made against the broad economic policy guidelines in the area of public finances as included in the integrated guidelines for the period 2005-2008. The assessment also examines: the evolution of the debt ratio and the outlook for the long-term sustainability of the public finances, which should be given “sufficient attention in the surveillance of budgetary positions” according to the Council report of 20 March 2005 on “Improving the implementation of the Stability and Growth Pact”. A Commission Communication of 12 October 2006 sets out the approach to the assessment of long-term sustainability[3]; the degree of integration with the national reform programme, submitted by Member States in the context of the Lisbon strategy for growth and jobs. In its cover note of 7 June 2005 to the European Council on the broad economic policy guidelines for the period 2005-2008, the ECOFIN Council stated that the national reform programmes should be consistent with the stability and convergence programmes; compliance with the code of conduct[4], which inter alia prescribes a common structure and set of data tables for the stability and convergence programmes. |-  Recommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Article 9 (for CP) of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Denmark, 2006-2010THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community,Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[5], and in particular Article 9(3) thereof,Having regard to the recommendation of the Commission,After consulting the Economic and Financial Committee,HAS DELIVERED THIS OPINION:4.  On [27 February 2007] the Council examined the updated convergence programme of Denmark, which covers the period 2006 to 2010.5.  The macroeconomic scenario underlying the programme envisages that real GDP growth will slow from 2.7% in 2006 to 1.0% on average over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on markedly cautious growth assumptions, in particular for the period 2008-2010 due to the technical assumption in the update of the closing of a (positive) output gap in 2010. The programme’s projections for inflation appear realistic.6.  For 2006, the general government surplus is estimated at 3.2% of GDP in the Commission services’ autumn 2006 forecast, against a target of 2.1% of GDP set in the previous update of the convergence programme. This reflects higher-than-expected growth as well as continued high energy prices given the importance of revenues linked to Denmark's oil and gas production.7.  The budgetary strategy aims at maintaining structural surpluses (i.e. cyclically-adjusted surpluses net of one-off and other temporary measures) of between ½% and 1½% of GDP on average over the programme period, implying a marked reduction in the general government debt ratio in order to ensure fiscal sustainability in the long term. The strategy is based on expenditure restraint (annual growth of real public consumption spending limited to approximately 1% on average for the period 2007 to 2010, up from 0.5% in the previous update) and on the maintenance of the tax freeze introduced in 2001 and of the requirement that local government budgets be balanced. The update foresees the surplus to narrow slightly from 3.1% of GDP in 2006 to 2.8% in 2007, and to decline further to 1.2% in 2010 (from 4.7% in 2006 to 1.8% in 2010 in primary terms). The decline as from 2008 reflects the markedly cautious assumptions about GDP growth. Compared with the previous update, the general government balance is higher in 2006 to 2008 but lower towards the end of the programme period.8.  The structural balance calculated according to the commonly agreed methodology is projected to be around 2% of GDP or better throughout the programme period, with a slight deterioration in 2007 and a somewhat stronger improvement in 2008. The medium-term objective (MTO) for the budgetary position presented in the programme is a structural balance of between ½% and 1½% of GDP, which the programme plans to maintain by a large margin throughout the programme period. The MTO is unchanged from the previous update once account is taken of the exclusion in the new programme of the second pillar pension scheme (included in Denmark's previous programmes) in line with the Eurostat decision of 2 March 2004[6]. As the MTO is more demanding than the minimum benchmark (estimated at a deficit of around ½% of GDP), achieving it should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO 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 is significantly more demanding than implied by the debt ratio and average potential output growth in the long term.9.  The budgetary outcomes could be better than projected in the programme, in particular for the years 2008 to 2010. This is essentially because of the programme's markedly cautious macroeconomic scenario, which outweighs the risk that real public consumption expenditure growth could be higher than targeted.10.  In view of this risk assessment, the budgetary stance in the programme seems sufficient to maintain the MTO throughout the programme period, as envisaged in the programme. In addition, it provides a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations in each year. The fiscal policy stance implied by the programme is fully in line with the Stability and Growth Pact.11.  Government gross debt is estimated to have declined below 30% of GDP in 2006, well below the 60% of GDP Treaty reference value. The programme projects the gross debt ratio to decline by around a further 11 percentage points over the programme period.12.  The long-term budgetary impact of ageing in Denmark is higher than on average in the EU; influenced notably by a relatively high increase in pension expenditure as a share of GDP over the coming decades. However, the comprehensive reform package adopted in June 2006, the "Agreement on Future Prosperity, Welfare and Investments in the Future" or simply Welfare Agreement, aims at delaying retirement and should contribute to curb the long-term expenditure trends and thus improve public finance sustainability. Moreover, the initial budgetary position with a large structural surplus contributes significantly to ease the long-term budgetary impact of ageing. Maintaining high primary surpluses over the medium-term will contribute to reducing risks to the sustainability of public finances. Taking into account these developments, Denmark appears to be at low risk with regard to the sustainability of public finances.13.  The convergence programme contains a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections explicitly take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the convergence programme seem consistent with those foreseen in the national reform programme. In particular, both programmes envisage the implementation of reforms aimed at increasing labour supply in the long term, in particular the agreement to raise statutory pension ages and thus promote longer effective working lives.14.  The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.15.  As regards the data requirements specified in the code of conduct for stability for stability and convergence programmes, the programme provides all required data and most optional data[7].The overall conclusion is that the medium-term budgetary position is sound and the budgetary strategy provides a good example of fiscal policies conducted in compliance with the Stability and Growth Pact.Comparison of key macroeconomic and budgetary projections 1[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] Communication from the Commission to the Spring European Council, “Implementing the renewed Lisbon strategy for growth and jobs - A year of delivery” - COM(2006) 816, 12.12.2006.[3] Communication from the Commission to the Council and the European Parliament, “The long-term sustainability of public finances in the EU” - COM(2006) 574, 12.10.2006 - and European Commission, Directorate-General for Economic and Financial Affairs (2006), “The long-term sustainability of public finances in the European Union”, European Economy No 4/2006.[4] “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.[5] OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm[6] See Eurostat News Releases No 30/2004 of 2 March 2004 and No 117/2004 of 23 September 2004.[7] In particular, specifications of the stock-flow adjustment are missing among the optional data.


Important legal notice

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52005SC0642

Recommendation for a Council Decision abrogating the decision of 2 June 2004 on the existence of an excessive deficit in the Netherlands  /* SEC/2005/0642 final */

	[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 18.5.2005SEC(2005) 642 finalRecommendation for aCOUNCIL DECISIONabrogating the decision of 2 June 2004 on the existence of an excessive deficit in the Netherlands(presented by the Commission)EXPLANATORY MEMORANDUM1. INTRODUCTIONOn 31 March 2004, the Commission received official confirmation from the Dutch authorities that the general government deficit in 2003 had reached 3.2% of GDP[1], therefore exceeding the reference value of the Treaty. Based on this evidence, the Commission initiated the Excessive Deficit Procedure (EDP) for the Netherlands on 28 April 2004, with the adoption of the report foreseen in Article 104(3) of the Treaty. Having taken into account all relevant factors embodied in this report and the opinion of the Economic and Financial Committee in accordance with Article 104(4), the Commission adopted an Opinion (in accordance with Article 104(5)) on 19 May 2004 stating that an excessive deficit existed in the Netherlands. On 2 June 2004, the Council adopted a Decision[2] to that effect, in accordance with Article 104(6).At the same time, the Council adopted a Recommendation addressed to the Netherlands, in conformity with Article 104(7) of the Treaty, with a view to bringing the situation of an excessive government deficit to an end. Specifically, the Council recommended that “the Dutch authorities should put an end by 2005 at the latest to the present excessive deficit situation in accordance with Article 3(4) of Council Regulation (EC) No 1467/97.” The Council established the deadline of 2 October 2004 for the Dutch government to “take action regarding corrective measures in 2005, mainly of a structural nature, amounting to at least half a percentage point of GDP”.In making recommendations for the correction of the excessive deficit, the Council stressed that “budgetary consolidation measures should secure a lasting improvement in the general government balance, while being geared towards enhancing the quality of the public finances and reinforcing the growth potential of the economy.” Moreover, it urged the Dutch authorities to ensure that “budgetary consolidation towards a position close to balance or in surplus is sustained, in particular through a reduction in the cyclically-adjusted deficit by at least 0.5 percentage point of GDP per year, even after the excessive deficit has been corrected.”On 6 October 2004 the Commission concluded[3] that the Dutch government had taken effective action by the deadline of 2 October 2004, of which the Council took note on 21 October[4].2. CORRECTION OF THE EXCESSIVE DEFICIT IN 2004On 16 April 2004, shortly after it had become apparent that the 3% of GDP reference value had been exceeded in 2003 against the background of a prolonged economic downturn, the Dutch government introduced a package of additional savings measures for 2004, equivalent to 0.5% of GDP, with the aim of correcting the excessive deficit already in 2004. This package came on top of the savings that had been introduced in the 2004 budget[5]. Roughly half of the package consisted of measures of a structural nature, in particular higher premia for health insurance, lower health expenditure, and the phasing out of subsidies on the employment of low-skilled workers. The other half consisted of one-off measures that had a deficit-reducing impact only in 2004. The most important one-off measures related to shifts in the time profile of development aid expenditure, the recording of central bank profits, and lower-than-foreseen expenditure on infrastructure investment.The March 2005 EDP notification (which was submitted on 28 February 2005 and validated by Eurostat on 18 March 2005), estimated the general government deficit in 2004 at 2.5% of GDP (table 1). On 31 March 2005, the 2004 deficit was revised to 2.3% of GDP in the regular reporting of revised accounts for general government to Eurostat, taking into account more complete information on the finances of local government.This outcome compares with an expected deficit of 3.0% for 2004 of GDP in the 2005 budget and the November 2004 update of the stability programme, and with a projection of 2.9% of GDP in the Commission services’ Autumn 2004 forecast. The better-than-expected outcome compared to the estimate in the 2005 budget is partly due to the fact that towards the end of 2004 tax revenue in most major tax categories was more buoyant than expected earlier. High oil prices and associated higher government revenues from the sale of natural gas further boosted receipts. Moreover, expenditure growth was lower than projected, mainly due to the slower growth in unemployment benefits, lower-than-projected infrastructure investment and lower net contributions to the EU. According to the Commission services spring 2005 forecast, the cyclically adjusted deficit fell from 2.0% of GDP in 2003 to 1.2% of GDP in 2004.In 2004, the gross government debt-to-GDP ratio increased to 55.2% of GDP[6], from 54.3% of GDP in 2003, mainly due to the weak economic situation and the existence of an appreciable nominal deficit. The debt ratio thus remained below the 60% of GDP reference value of the Treaty.Table 1: Budgetary developments 2002-2004 (as % of GDP) |Outturn | 2002 | 2003 | 2004 |General government balance | -1.9 | -3.2 | -2.3 |- Total revenue | 45.9 | 45.8 | 45.5 |Of which: current taxes | 12.0 | 11.2 | 11.0 |social contributions | 14.9 | 15.5 | 15.1 |- Total expenditure | 47.8 | 49.0 | 48.0 |Of which: collective consumption | 11.3 | 11.4 | 11.4 |social transfers | 13.3 | 14.0 | 14.0 |interest expenditure | 3.1 | 2.9 | 2.9 |gross fixed capital formation | 3.6 | 3.6 | 3.5 |Primary balance | 1.1 | -0.3 | 0.4 |Pm Tax burden | 40.1 | 40.0 | 39.9 |Government debt | 52.6 | 54.3 | 55.7 |Pm Cyclically-adjusted balance1 | -2.3 | -2.0 | -1.2 |Pm Cyclically-adjusted primary balance1 | 0.8 | 0.9 | 1.7 |Pm Real GDP1 (annual percentage change) | 0.6 | -0.9 | 1.3 |Interest expenditure, total expenditure and balances include swaps in line with the definitions used in the excessive deficit procedure. 1 Commission services’ Spring 2005 economic forecast. Source: Commission services. |3. BUDGETARY PROSPECTS FOR 2005 AND 2006The budget for 2005 was presented to Parliament on 21 September 2004 and adopted with some relatively minor modifications shortly afterwards. It contains further deficit-reducing measures in 2005, comprising cuts in health care expenditure, increases in income tax rates, reduced access to unemployment benefits, and higher disability premia. The measures announced in the 2005 budget (which include the structural part of the measures in the 16 April 2004 package) add up to an adjustment of half a percentage point of GDP for 2005. Overall, the corrective measures appear to be for the largest part of a structural nature.According to the Commission services’ Spring 2005 forecast, the general government deficit for 2005 is projected at 2.0% of GDP (table 2). This compares with the official target set in the latest (March 2005) EDP notification of 2.1%[7]. Real GDP growth would slightly decelerate to 1.0% in 2005, from 1.4% in 2004. However, the forecast quarterly profiles show a gradual recovery in the course of the year, leading to a pick up in tax receipts, mainly on account of higher profits of corporations and self-employed persons. In addition, receipts from the sales of natural gas are expected to boost revenue also in 2005. On the expenditure side, the expenditure ratio is expected to fall slightly in 2005. Subdued government expenditure growth reflects the impact of savings measures, and the zero increase in the contractual wage rates of civil servants and in social security payments.For 2006, the Commission services’ Spring 2005 forecast projects real GDP growth to increase to 2.0% in 2006, leading to an acceleration of revenue in line with the expected economic upturn. However, based on current policy assumptions, the headline deficit would only improve relatively modestly, to 1.6% of GDP from 2.0% of GDP in 2005 as further savings on social security, subsidies and public sector wages would be accompanied by increased expenditure on transport, security, the knowledge-based economy, and compensations to limit the impact of the health insurance reform on household income.The cyclically adjusted deficit is expected to improve markedly in 2005, reaching 0.4% of GDP, reflecting the ongoing budgetary consolidation. This would mean an improvement by 0.8% of GDP for the second consecutive year, which is larger than the minimum 0.5% of GDP adjustment in the years following the correction of the excessive deficit urged by the Council. It also implies that the Netherlands would achieve already in 2005 a budgetary position close to balance, in cyclically adjusted terms. Under present policies, the Commission services’ Spring forecast expects the cyclically-adjusted balance to continue improving by attaining equilibrium in 2006. The large difference between the headline and the cyclically adjusted deficit reflects the prolonged economic downturn and the gradual expected recovery. Real GDP growth fell below the rate of potential growth in 2001 and is expected to reach potential again only in 2006. Hence, the negative output gap would widen from an estimated 1.9% of GDP to in 2003 to some 2.5% of GDP in 2005 and 2006.According to the March 2005 EDP notification, the general government debt would increase to 57.4% of GDP in 2005, a figure very close to the debt ratio of 57.6% of GDP projected in the Commission services’ Spring 2005 forecast. In this year it is affected by the purchase of gas transport infrastructure, an operation of 0.6% of GDP. Under current policy assumptions, the debt ratio will increase slightly further in 2006, to 57.9% of GDP, according to the Commission services’ Spring forecast. However, the debt ratio would remain below the 60% of GDP reference value.Table 2: Projections for general government finances (as % of GDP) |2004 | 2005 | 2006 |SP | Comm. | SP | Comm. (1) |General government balance | -2.5 | -2.6 | -2.1 | -2.1 | -1.6 |- Total revenue | 45.5 | 44.9 | 45.8 | 44.6 | 47.6 |Of which: current taxes | 11.0 | 24.8 | 11.1 | 24.7 | 11.2 |social contributions | 15.1 | 13.9 | 15.0 | 13.9 | 16.9 |- Total expenditure | 48.0 | 47.5 | 47.9 | 46.7 | 49.3 |Of which: - collective consumption | 11.4 | 17.5 | 11.4 | 17.2 | 11.4 |- interest expenditure | 2.9 | 2.9 | 2.9 | 2.8 | 2.8 |- gross fixed capital formation | 3.5 | 3.1 | 3.5 | 3.1 | 3.4 |Primary balance | 0.4 | 0.3 | 0.8 | 0.7 | 1.2 |Government debt | 55.7 | 58.1 | 57.6 | 58.6 | 57.9 |Pm Cyclically-adjusted balance | -1.2 | -1.2 | -0.4 | -1.3 | 0.0 |Pm Cyclically-adjusted primary balance | 1.7 | 0.3 | 2.5 | 0.7 | 2.9 |Pm Real GDP (annual percentage change) | 1.3 | 0.75 | 1.0 | 1.5 | 2.0 |Sources: March 2005 EDP notification for 2004, the November 2004 update of the stability programme (SP), national accounts 2004 and the Commission services’ Spring 2005 forecast (Comm.). Cyclically adjusted balance for the SP calculated by Commission services on the basis of inputs given in the programme (difference with Comm. reflects different macro-economic scenarios). Note that after the March 2005 EDP reporting, Statistics Netherlands published and reported to Eurostat a revised (lower) deficit for 2004, of 2.3% of GDP (see table 1). (1) Assuming currently known policies. |4. CONCLUSIONSThe Dutch authorities have complied with the Council recommendation of 2 June 2004 issued under Article 104(7). Specifically, they have complied with the recommendation to put an end to the excessive deficit situation, in accordance with Article 3(4) of Regulation (EC) No 1467/97, which in the present case meant 2005 at the latest. In fact, they already reduced the deficit to 2.3% of GDP, well below the 3% threshold, in 2004. According to the Commission services’ Spring 2005 forecast, under present policies the deficit is expected to decrease to 2.0% of GDP in 2005 in response to the further fiscal tightening contained in the 2005 budget and to fall further to 1.6% of GDP in 2006, indicating that the measures taken entail a durable correction of the budget deficit. The cyclically-adjusted balance improved markedly in 2004, by 0.8% of GDP, to a deficit of 1.2% of GDP. It is expected to fall by a further 0.8% of GDP and reach a position close to balance in 2005, which would be maintained in 2006. Finally, according to the March 2005 EDP notification, the debt ratio reached 55.2% of GDP in 2004, up from 54.3% of GDP in 2003; according to the Spring 2005 forecast, it is projected to remain below the 60% of GDP reference value in 2005 and 2006.Hence, from an overall assessment it follows that the Dutch authorities completed already in 2004 the correction of the excessive deficit situation in 2004 under the terms of the Council Recommendation of 2 June 2004. Therefore, the Commission recommends the Council to abrogate the decision on the existence of an excessive deficit in the Netherlands.Recommendation for aCOUNCIL DECISIONabrogating the decision of 2 June 2004 on the existence of an excessive deficit in the NetherlandsTHE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community, and in particular Article 104(12) thereof,Having regard to the recommendation from the Commission,(1) By Council Decision 2005/136/EC of 2 June 2004[8] following a recommendation from the Commission in accordance with Article 104(6) of the Treaty, it was decided that an excessive deficit existed in the Netherlands.(2) In accordance with Article 104(7) of the Treaty, the Council made a Recommendation addressed to the Netherlands with a view to bringing the excessive deficit situation to an end[9]. This Recommendation, in conjunction with Article 3(4) of Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure[10], established a deadline of 2005 at the latest for the correction of the excessive deficit.(3) In accordance with Article 104(12) of the Treaty, a Council Decision on the existence of an excessive deficit is to be abrogated when the excessive deficit in the Member State concerned has, in the view of the Council, been corrected.(4) The definitions of “government” and “deficit” are laid down in the Protocol on the excessive deficit procedure by reference to the European System of Integrated Economic Accounts (ESA), second edition. The data for the excessive deficit procedure are provided by the Commission.(5) Based on the data provided by the Commission after reporting by the Netherlands before 1 March 2005 in accordance with Council Regulation (EC) No 3605/93 of 22 November 1993 on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the European Community[11], as amended by Council Regulation (EC) No 475/2000[12], on the subsequent reporting of revised general government accounts to Eurostat on 31 March 2005, and on the Commission services’ Spring 2005 forecast, the following conclusions are warranted:-  the general government deficit is estimated at 2.3% of GDP in 2004, compared with 3.2% in 2003. The outcome for 2004 is in compliance with the Council recommendation issued under Article 104(7), particularly as regards the reduction of the government deficit below the reference value of 3% of GDP by 2005 at the latest. Fiscal adjustment was pursued in 2004 in the form of substantial savings measures, partly contained in the 2004 budget and partly decided in additional consolidation package on 16 April 2004. Moreover, stronger-than-expected tax receipts and additional revenues from the sale of natural gas in response to high oil prices helped reduce the deficit;-  the budgetary measures taken are geared towards securing a lasting improvement in the general government balance. For 2005, the Commission services’ Spring 2005 forecast projects a further decline in the general government deficit to 2.0% of GDP, largely in response to savings measures, mostly of a structural nature, adding up to 0.5% of GDP. This is in line with the official target of a deficit of 2.1% of GDP. For 2006, the Commission services’ Spring 2005 forecast projects, based on currently known policies, a further fall in the deficit to 1.6% of GDP, pointing to the durable correction of the budget deficit;-  the budgetary consolidation will be sustained through a reduction in the cyclically adjusted deficit which is expected to reach close to balance after the excessive deficit has been corrected. In 2004, the cyclically adjusted deficit fell markedly to 1.2% of GDP, compared to 2.0% of GDP in 2003. The Commission services’ Spring 2005 forecast projects the cyclically adjusted deficit to further decrease in 2005 by another 0.8% of GDP, to 0.4% of GDP, which is close to balance, and to fall to 0.0% of GDP in 2006;-  according to the March 2005 EDP notification, the government debt ratio was kept below the 60% of GDP reference value in 2004. The Commission services’ Spring 2004 forecast projects it to remain below this threshold in 2005 and 2006.(6) Decision 2005/136/EC should therefore be abrogated.HAS ADOPTED THIS DECISION:Article 1From an overall assessment it follows that the correction of the excessive deficit situation in the Netherlands was completed in 2004, under the terms of the recommendation addressed to the Netherlands on 2 June 2004 in accordance with Article 104(7) of the Treaty.Article 2Decision 2005/136/EC is hereby abrogated.Article 3This Decision is addressed to the Kingdom of the Netherlands.Done at Brussels,For the CouncilThe President [1] This was an upward revision from the 2.98% of GDP deficit notified on 1 March 2004. It was mainly due to a higher-than-expected deficit for local government, for which no preliminary data for the full year 2003 had been available earlier.[2] Council Decision 2005/136/EC published on 18.2.2005 in the OJ L 47, p. 26.[3] http://europa.eu.int/comm/economy_finance/about/activities/sgp/edp/comm_inf_note_en.pdf[4] Council of the European Union, press release 13017/04 (Presse 284) of 21.10.2004.[5] The 2004 budget had targeted a deficit of 2.3% of GDP, but that was on the basis of projections of the summer of 2003, which afterwards rapidly became outdated as the assumptions on economic growth were too high, and budgetary outturns that became available after the 2004 budget were worse than expected.[6] This is a downward adjustment in the updated national accounts data of 31 March 2005 compared to the debt ratio of 55.7% of GDP notified on 28 February 2005.[7] The slightly lower starting point for the 2004 deficit than that entailed in the Commission services’ Spring forecast may lead to a favourable base effect in 2005. However, on current information it is not clear how much of the improvement in the finances of local government in 2004 will be structural, with a positive impact also on later years.[8] Council Decision of 2 June 2004 (OJ L 47, 18.2.2005, p. 26).[9] Council Recommendation of 2 June 2004.[10] OJ L 209, 2.8.1997, p. 6.[11] OJ L 332, 31.12.1993, p. 7. Regulation as last amended by Commission Regulation (EC) No 351/2002 (OJ L 55, 26.2.2002, p. 23).[12] OJ L 58, 3.3.2000, p. 1.


Avis juridique important

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32000Y0304(01)

Recommendation of the European Central Bank of 10 February 2000 on the external auditors of the national central banks (ECB/2000/2)

Official Journal C 062 , 04/03/2000 P. 0021 - 0021

RECOMMENDATION OF THE EUROPEAN CENTRAL BANKof 10 February 2000on the external auditors of the national central banks(ECB/2000/2)(2000/C 62/07)THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK,Having regard to the Statute of the European system of central banks and of the European Central Bank and in particular to Article 27.1 thereof,Whereas:(1) The accounts of the European Central Bank (ECB) and of the national central banks (NCBs) shall be audited by independent external auditors recommended by the Governing Council of the ECB and approved by the Council of the European Union.(2) The external auditors recommended in ECB Recommendation ECB/1998/5(1) reflect the current appointments made by each participating NCB and do not pre-empt the right of the ECB to recommend other external auditors of the NCBs whenever this is required by a change of circumstances,RECOMMENDS:- KPMG Deutsche Treuhand-Gesellschaft AG and Ernst &  Young Deutsche Allgemeine Treuhand AG as the external auditors of the Deutsche Bundesbank for the annual accounts starting from the financial year 2000,- that the Council of the European Union amend its Decision 1999/70/EC(2) concerning the external auditors of the national central banks accordingy.This Recommendation shall be published in the Official Journal of the European Communities.This Recommendation is addressed to the Council of the European Union.Done at Frankfurt am Main, 10 February 2000.The President of the ECBWillem F. DUISENBERG(1) OJ C 411, 31.12.1998, p. 11.(2) OJ L 22, 29.1.1999, p. 69.