               EUROPEAN COMMISSION
            Brussels, 22.5.2017
            COM(2017) 519 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2017 National Reform Programme of Austriaand delivering a Council opinion on the 2017 Stability Programme of Austria

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2017 National Reform Programme of Austria

                  and delivering a Council opinion on the 2017 Stability Programme of Austria

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,

               Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies,
                  1
                and in particular Article 5(2) thereof,

               Having regard to the recommendation of the European Commission,
                  2

               Having regard to the resolutions of the European Parliament,
                  3

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

               Having regard to the opinion of the Economic and Financial Committee,

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 16 November 2016, the Commission adopted the Annual Growth Survey,
                  4
                marking the start of the 2017 European Semester of economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 9-10 March 2017. On 16 November 2016, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report,
                  5
                in which it did not identify Austria as one of the Member States for which an in-depth review would be carried out. On the same day, the Commission also adopted a recommendation for a Council Recommendation on the economic policy of the euro area. That Recommendation was endorsed by the European Council on 9-10 March 2017 and adopted by the Council on 21 March
                  6
               .

               (2)As a country whose currency is the euro and in view of the close interlinkages between the economies in the economic and monetary union, Austria should ensure the full and timely implementation of the Recommendation for the euro area which is reflected in recommendation 1 below.

               (3)The 2017 country report for Austria
                  7
                was published on 22 February 2017. It assessed Austria’s progress in addressing the country-specific recommendations adopted by the Council on 12 July 2016, the follow-up given to the recommendations adopted in previous years and Austria’s progress towards its national Europe 2020 targets.

               (4)On 21 April 2017, Austria submitted its 2017 National Reform Programme and on 2 May 2017 Austria submitted its 2017 Stability Programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (5)The relevant country-specific recommendations have been taken into account in the Member States' programmes for the European Structural and Investment Funds (ESI Funds) covering the 2014-2020 period. As foreseen in the legislation governing the ESI Funds,
                  8
                where it is necessary to support the implementation of relevant country-specific recommendations, the Commission may request a Member State to review and amend its relevant ESI Funds programmes. The Commission has provided further guidelines on the application of those rules.
                  9

               (6)Austria is currently in the preventive arm of the Stability and Growth Pact and subject to the debt rule. In its 2017 Stability Programme, the government expects that the headline deficit will improve to 1.0% of GDP in 2017 and then reach 0.3% of GDP in 2021. The medium-term budgetary objective — a structural deficit of 0.45% of GDP until 2016 and 0.5% of GDP thereafter — is foreseen to be met in 2019. According to the Stability Programme, the general government debt-to-GDP ratio is expected to gradually decline to 71.0% in 2021 from 84.6% in 2016. The macroeconomic scenario underpinning these budgetary projections is favourable, assuming buoyant growth of investment and exports in 2017 and 2018.

               (7)The Stability Programme indicates that the budgetary impact of the exceptional inflow of refugees and security-related measures is significant and provides adequate evidence of the scope and nature of these additional budgetary costs. According to the Commission, the eligible additional expenditure in 2016 amounted to 0.25% of GDP for the exceptional inflow of refugees and 0.04% of GDP concerning security-related measures. In 2017, the additional impact compared to 2016 of the security-related measures is currently estimated at 0.01% of GDP. The provisions set out in Article 5(1) and Article 6(3) of Regulation (EC) No 1466/97 cater for this additional expenditure, in that the inflow of refugees as well as the severity of the terrorist threat are unusual events, their impact on Austria's public finances is significant and sustainability would not be compromised by allowing for a temporary deviation from the adjustment path towards the medium-term budgetary objective. Therefore, the required adjustment towards the medium-term budgetary objective for 2016 has been reduced to take into account additional refugee-related and security-related costs. Regarding 2017, a final assessment, including on eligible amounts, will be made in spring 2018 on the basis of observed data as provided by the Austrian authorities.

               (8)On 12 July 2016, the Council recommended Austria to ensure that the deviation from the medium-term budgetary objective is limited to the allowance linked to the budgetary impact of the exceptional inflow of refugees,
                  10
                and to that effect achieve an annual fiscal adjustment of 0.3% of GDP in 2017 unless the medium-term budgetary objective is respected with a lower effort. Based on the Commission 2017 spring forecast, the structural balance is required to remain stable in 2017, taking into account the granted allowances. The Commission forecast points to a risk of some deviation from that requirement in 2017. In 2018, based on the Commission 2017 spring forecast, Austria should ensure that the nominal growth rate of net primary government expenditure
                  11
                does not exceed 2.2%, corresponding to an improvement in the structural balance by 0.3% of GDP.
                  12
                Under unchanged policies, Austria would be at risk of some deviation from the requirement in 2018. At the same time, Austria is forecast to comply with the debt rule in 2017 and 2018. Overall, the Council is of the opinion that Austria needs to stand ready to take further measures to ensure compliance in 2017 and 2018.

               (9)Pension and healthcare spending pose a medium risk to fiscal sustainability in the medium and long term, due to a rapidly ageing population. Austria’s public expenditure on pensions is relatively high compared to the rest of Europe and is expected to increase by 0.5 percentage points of GDP by 2060. This compares to the EU average which is expected to decrease by 0.2 percentage points of GDP over the same period. The effective retirement age, which remains low despite recent reforms, is one of the main drivers of higher pension expenditure. It is currently at 60 years and 3 months, well below the EU average of 63 years and 6 months for men and 62 years and 6 months for women (2014). Furthermore, the current statutory retirement age for women of 60 years is among the lowest in the EU, and it will only start to be harmonised with that of men in 2024. Linking the statutory retirement age to changes in life expectancy would help to ensure pension sustainability in an ageing demographic context, also by contributing to raising the effective retirement age.

               (10)For healthcare, public expenditure is expected to rise significantly in the medium and long term from already high levels, namely by 1.3 percentage points of GDP by 2060 compared to the EU average of 0.9 percentage points. The main driver of the high healthcare spending is the large hospital sector, while the less costly outpatient care is underutilised. The proportion of hospital expenditure in overall healthcare costs is one of the highest in the EU. The recent initiatives aimed at strengthening the provision of primary care therefore need to be thoroughly implemented, including by supporting new financial agreements between healthcare providers and social security funds. Furthermore, Austria’s hospital sector makes insufficient use of effective public procurement such as EU-wide tendering (0.23 % of GDP compared to 0.62 % EU average), procurement aggregation and non-price award criteria.

               (11)The 2017 financial equalisation law has helped to simplify the financial relations between the different layers of government in Austria. Nevertheless, the fiscal framework in Austria remains overly complex in terms of competencies and financial arrangements, and still suffers from misalignments between limited revenue-raising powers and broader spending responsibilities of local and federal state governments.

               (12)While the 2016 tax reform has reduced the tax wedge from 49.5 % to 46.7 %, it remains relatively high compared to the EU average of 40.6 % (figures refer to a single average income earner without children). In the absence of an indexation of tax brackets to inflation, the tax wedge will again gradually increase as an effect of the yearly fiscal drag. By contrast, more growth-friendly sources of revenue, such as recurrent property taxes, are underutilised, mainly because the tax base is outdated. Revenues from recurrent property taxes in Austria are very low, amounting to 0.2 % of GDP compared to the EU average of 1.6 % of GDP in 2014. Similarly, the implicit tax rate on energy in Austria is relatively low, pointing to unexploited potential for environmental taxes, which also include positive behavioural incentives.

               (13)While the labour market performs better in Austria than in most EU countries, challenges remain. In particular, women’s labour market potential is underused, as reflected in the high gender pay gap, inter alia resulting from a high share of part-time employment. In 2015, the gender pay gap was 21.7 %, compared to the EU average of 16.3 %. The high and above-average proportion of women working part-time is largely driven by care responsibilities for children and the elderly. The number of early childcare places for children under 3 years of age was at 25.5 % in 2015, still significantly below the Barcelona target of 33 %.

               (14)Austria has already exceeded its national Europe 2020 targets for education. However, education outcomes depend considerably on the socioeconomic background as confirmed by the 2015 OECD PISA results. Furthermore, the education results of pupils with a migrant background are considerably worse than those without one. In 2015, foreign born pupils were three times more likely to leave school before completing upper secondary education than native born pupils. The integration challenge also affects Austrian born children of immigrants. Furthermore, Austria faces challenges to integrate a large number of asylum seekers and refugees into its education system.

               (15)Banking sector developments point towards a steady, albeit slow improvement. The capitalisation of Austrian banks remains below that of its EU peers and their ability to generate profits in the domestic market has been under pressure. Regarding international operations, asset quality and profitability has improved further in several markets in Central, Eastern and South-Eastern Europe, but pockets of vulnerability still remain. Meanwhile, the increase in real estate prices and the revival of mortgage lending underscores the importance of macro-prudential measures.

               (16)Investment growth in Austria returned in 2016 but investment by SMEs and in the service sector continued to show weaknesses. Austria has recognised the role that business creation and firm growth play for new investments (i.e. going beyond replacement investments) and for the corresponding job creation. Austria has therefore set itself ambitious targets to facilitate digital transformation as well as to tackle its traditionally low rate of business creation (7.4 % in compared to 10.8 % EU average) and company growth (7.3 % share of high growth firms compared to 9.2 % EU average). Some specific measures have already been announced, which combine the reduction of investment barriers with improved framework conditions for equity capital funding, entrepreneurship promotion and taxation incentives.

               (17)High regulatory barriers remain in the business services sector and regulated professions with the level of restrictions being higher than the EU average in particular for architects and engineers. In addition, for these professions, as well as for lawyers, accountants/tax advisers, patent agents, real estate agents and tourist guides, the business churn rate is significantly lower than the EU average, which seems to indicate relatively low dynamism and competition in professional services in Austria. These barriers include, inter alia (1) shareholding and company form restrictions for architects, engineers and patent attorneys, (2) multidisciplinary restrictions for architects and engineers, as well as (3) particularly wide scopes of reserved activities for architects, engineers and tourist guides. The reduction of such barriers could generate more intensive competition, resulting in more firms entering the market, and leading to benefits for consumers in terms of lower prices. Recommendations to address this issue were made in January 2017 in a Communication from the Commission, as part of a package of measures to tackle barriers in services markets.
                  13

               (18)Austria has made considerable efforts in receiving asylum seekers and in integrating refugees as well as other immigrants. Nevertheless, labour market integration of people with a migrant background, in particular women born outside the EU and job seeking refugees, remains a challenge.

               (19)In the context of the European Semester the Commission has carried out a comprehensive analysis of Austria’s economic policy and published it in the 2017 country report. It has also assessed the Stability Programme and the National Reform Programme and the follow-up given to the recommendations addressed to Austria in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Austria, but also their compliance with EU rules and guidance, given the need to strengthen the EU’s overall economic governance by providing EU-level input into future national decisions.

               (20)In the light of this assessment, the Council has examined the Stability Programme and its opinion
                  14
                is reflected in particular in recommendation 1 below,

               HEREBY RECOMMENDS that Austria take action in 2017 and 2018 to:

               1.Pursue its fiscal policy in line with the requirements of the preventive arm of the Stability and Growth Pact, which implies to achieve its medium term budgetary objective in 2018, taking into account the allowance linked to unusual events. Ensure the sustainability of the healthcare system and of the pension system. Rationalise and streamline competencies across the various layers of government and align their financing and spending responsibilities.

               2.Improve labour market outcomes of women, also through the provision of full-time care services. Improve the educational achievements of disadvantaged young people, in particular those from a migrant background. Foster investment in the services sector by reducing administrative and regulatory barriers, easing market entry and facilitating company growth.

               Done at Brussels,

                     For the Council

                     The President

                     (1)
                  OJ L 209, 2.8.1997, p. 1.

                     (2)
                  COM(2017) 519 final.

                     (3)
                  P8_ TA(2017)0038, P8_ TA(2017)0039, and P8_ TA(2017)0040.

                     (4)
                  COM(2016) 725 final.

                     (5)
                  COM(2016) 728 final.

                     (6)
                  2017/C92/01

                     (7)
                  SWD(2017) 85 final.

                     (8)
                  Article 23 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006, OJ L 347, 20.12.2013, p. 320.

                     (9)

                        COM(2014) 494 final.

                     (10)
                  Austria is allowed to deviate from its medium-term budgetary objective up to 2017 and 2018 by the additional budgetary impact related to the exceptional inflow of refugees and security-related measures incurred in 2015 and 2016 respectively, as temporary deviations are carried forward in each case for a total period of three years.

                     (11)
                  Net government expenditure is comprised of total government expenditure excluding interest expenditure, expenditure on Union programmes fully matched by Union funds revenue and non-discretionary changes in unemployment benefit expenditure. Nationally financed gross fixed capital formation is smoothed over a 4-year period. Discretionary revenue measures or revenue increases mandated by law are factored in. One-off measures on both the revenue and expenditure sides are netted out.

                     (12)
                  For Austria the adjustment requirement in 2018 takes into account the allowance linked to the unusual events granted for 2016, as temporary deviations are carried forward for a period of three years.

                     (13)
                  COM(2016) 820 final, COM(2016) 821 final, COM(2016) 822 final, COM(2016) 823 final, COM(2016) 824 final.

                     (14)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.


title: DRAFT RECOMMENDATION BY THE COUNCIL ON COMMON CRITERIA CONCERNING SUFFICIENT RESOURCES AND SOCIAL ASSISTANCE IN THE SOCIAL PROTECTION SYSTEMS

text:
 22. 6. 91                             Official Journal of the European Communities                               No C 163/3
                                                               II
                                                       (Preparatory Acts)
                                                 COMMISSION
                                            Draft recommendation by the Council
              Recommendation on common criteria concerning sufficient resources and social assistance in the
                                                   social protection systems
                                                        (91/C 163/03)
                                                      COM(91) 161 final
                                      (Submitted by the Commission on 13 May 1991)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,                            requires to link to the various forms of immediate
                                                                    assistance needed measures aiming expressly at the
                                                                    economic and social integration of the people concerned;
 Having regard to the Treaty establishing the European
 Economic Community, and in particular Article 235
 thereof,                                                           Whereas insufficient, irregular and uncertain resources
                                                                    do not allow people in this predicament to play an
                                                                    adequate part in the economic and social life of the
 Having regard to the draft recommendation submitted                society in which they live nor to successfully integrate
by the Commission,                                                  economically and socially, and a right to sufficient,
                                                                    stable and reliable resources should be recognized to
                                                                    those least favoured as part of a comprehensive set of
Having regard       to   the  opinion   of   the  European          provisions for supporting their integration;
Parliament,
                                                                   Whereas the Council and the Ministers for Social Affairs
Having regard to the opinion of the Economic and                   meeting within the Council of 29 September 1989
Social Committee,                                                   adopted a resolution on combating social exclusion ('),
                                                                   stressing that it should be considered an important part
                                                                   of the social dimension of the single market;
Whereas reinforcing social cohesion within the
Community requires the encouragement of solidarity
with regard to the least favoured and most vulnerable              Whereas the Community Charter of the Fundamental
citizens;                                                          Social Rights of Workers solemnly recognized in its
                                                                   preamble and in its Articles 10 and 25 the necessity of
                                                                   combating social exclusion and, to this end, of guaran-
Whereas social exclusion processes and risks of poverty            teeing sufficient resources and benefits;
have become more prevalent and more diversified over
the last 10 years due primarly to a combination of devel-
opments in the labour market with, in particular, growth           Whereas the Commission has included this fundamental
in long-term unemployment, and in family structures                aspect of the fight against social exclusion in its action
with, in particular, growth in social isolation;                   programme relating to the implementation of the
                                                                   Community Charter of the Fundamental Social Rights of
                                                                   Workers, and stressing the value of a Community
Whereas there is a need for general development                    initiative, in a spirit of solidarity, to assist the least
policies, which can contribute towards halting the stated          advantaged citizens of the Community and the elderly in
structural trends, to be accompanied by integration                particular, whose social situation all too often resembles
policies of a specific, systematic and coherent nature;            that of persons excluded from the labour market;
Whereas as a result, social policies efforts and outcomes
need to be pursued and these policies adapted to the
multi-dimensional nature of social exclusion, which                (') OJ No C 277, 31. 10. 1989.
 ---pagebreak---  No C 163/4                            Official Journal of the European Communities                                   22. 6. 91
Whereas the implementation of a guarantee of benefits                   fulfilled and on the understanding that, in
 and resources in the social protection systems should                  practice, the right may be granted for limited but
 take account of the diversity of the organizational and                renewable periods;
 financial structures of these systems and should be
 considered in conjunction with the strategy for the
 convergence of social protection policies laid down in
 the abovementioned action programme and promoted by                5. This form of assistance is to be a complementary
 the Social Affairs Council of 29 September 1989;                       measure of general social protection;
Whereas the European Parliament declared in favour of               6. It is to be accompanied by policies necessary for
 introducing a guaranteed minimum income as a means of                  economic and social integration of those
 integrating the poorest citizens in the Member States (');             concerned, and in particular for their automatic
                                                                        access to health protection and for their access to
                                                                        rights, services or benefits, particularly with regard
Whereas the Economic and Social Committee has also
                                                                       to housing and training;
 recommended the introduction of a minimum social
 income to act as both a safety net for the poor and a
 means for their reintegration into society ( 2 );
                                                                 C. organize the implementation of this right according
                                                                    to the following practical orientations:
Whereas the Treaty only provides for the powers laid
down in Article 235 for the attainment of objectives,
                                                                    1. — Fixing the amount of resources considered
 RECOMMENDS THAT THE MEMBER STATES:                                         sufficient to cover essential needs beyond
                                                                            subsistence levels, according to living standards
                                                                            and price levels in the Member State
A. recognize the individual basic right to a guarantee of                   concerned, for different types and sizes of
     sufficient benefits and resources as part of a compre-                 household,
     hensive and systematic drive to combat social
     exclusion, and adapt their social protection systems,             — fixing here the necessary supplementary
     as necessary, according to the following principles                    assistance required to meet specific needs; in
     and orientations;                                                      order to fix these amounts referring to appro-
                                                                            priate indicators, in particular           average
                                                                            disposable income in the Member State, stat-
                                                                            istical data on household consumption or the
B. recognize this right according to the           following
                                                                            legal minimum wage if this exists,
     general principles:
                                                                       — establishing arrangements for periodic revision
     1. It is to be an individual basic right, based on                     of these amounts, based on these indicators, in
        needs;                                                              order that needs continue to be covered.
                                                                    2. Granting to people whose resources, taken at the
     2. It is to be extended to all persons residing, in               level of the individual or the household, are lower
        accordance with the national and Community                     that the amount thus fixed increased if necessary
        provisions in these matters, within the territory of           by the appropriate supplementary assistance
        the Member State;                                              required, differential financial aid to bring them
                                                                       up to the amount.
     3. Every person who does not have access to
        resources equal to or higher than a specified
        amount is to have access to the right, subject to           3. Taking the required measures properly to avoid
        active availability for work in the case of those              that the impact of the financial support granted
        who have reached the age of civil majority and                 could be limited by the implementation of the
        whose age, health and family situations permit                 regulations in force in the areas of taxation, civil
        professional activity;                                         obligation and social security.
    4. Access is not to be subject to time limits, assuming
                                                                    4. Taking all measures required to offer the
        that the conditions governing access remain
                                                                       concerned persons appropriate social support,
                                                                       comprising measures such as, in particular,
(') O] No C 262, 10. 10. 1988.                                         reception and counselling, information and legal
O OJ No C 221, 28. 8. 1989.                                            aid.
 ---pagebreak--- 22. 6. 91                              Official Journal of the European Communities                             No C 163/5
    5. Adopting arrangements towards the taking up or            F. take appropriate measures to collect information
       furthering employment or participation in training             systematically on the effectiveness of arrangements
       courses to prepare for entering or re-entering                 for access to these measures for people in difficulty,
       employment of persons whose age and conditions                 and for conducting a methodical evaluation of their
       makes them available for work.                                 implementation and impact,
    6. Taking the required measures properly to inform
       the most deprived of this right and simplifying as
       far as possible the administrative procedures and         AND THEREFORE ASKS THE COMMISSION:
       arrangements for examining means and situations
       involved in claiming this right; organizing an
       efficient simple fast and free appeals machinery           1. to encourage and organize, in cooperation with the
       using independent third parties such as tribunals;            Member States, the systematic exchange of infor-
                                                                     mation and experiences and the continued evaluation
D. guaranteeing this form of financial support within the            of the national provisions adopted;
    framework of assistance arrangements of social
    protection; the methods to be used, the cost to be
    borne, the administration and the implementation to          2. to submit to the Council, the European Parliament
    be organized in accordance with national legislation             and the Economic and Social Committee within three
    and practice;                                                    years following the adoption of this recommendation
                                                                     and, afterwards, periodically, a report based on infor-
E. implement the measures laid down in this recommen-                mation supplied by the Member States describing the
    dation progressively, possibly divided according to              progress achieved and obstacles encountered during
    age groups, within five years following its adoption;            its implementation.


               EUROPEAN COMMISSION
            Brussels, 18.5.2016
            COM(2016) 339 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2016 national reform programme of the Netherlandsand delivering a Council opinion on the 2016 stability programme of the Netherlands

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2016 national reform programme of the Netherlands

                  and delivering a Council opinion on the 2016 stability programme of the Netherlands

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,

               Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
                  1
               , and in particular Article 5(2) thereof,

               Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances
                  2
               , and in particular Article 6(1) thereof,

               Having regard to the recommendation of the European Commission
                  3
               ,

               Having regard to the resolutions of the European Parliament
                  4
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

               Having regard to the opinion of the Economic and Financial Committee,

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 26 November 2015, the Commission adopted the Annual Growth Survey
                  5
               , marking the start of the 2016 European Semester of economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 17-18 March 2016. On 26 November 2015, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report
                  6
               , in which it identified the Netherlands as one of the Member States for which an in-depth review would be carried out. On the same day, the Commission also adopted a recommendation for a Council recommendation on the economic policy of the euro area
                  7
               . This recommendation was endorsed by the European Council on 18-19 February 2016 and adopted by the Council on 8 March 2016. As a country whose currency is the euro and in view of the close interlinkages between the economies in the economic and monetary union, the Netherlands should ensure the full and timely implementation of the recommendation.

               (2)The 2016 country report for the Netherlands
                  8
                was published on 26 February 2016. It assessed the Netherlands' progress in addressing the country-specific recommendations adopted by the Council on 14 July 2015 and the Netherlands' progress towards its national Europe 2020 targets. It also included the in-depth review under Article 5 of Regulation (EU) No 1176/2011. On 8 March 2016, the Commissionpresentedthe results of the in-depth review.
                  9
                The Commission’s analysis leads it to conclude that the Netherlands is experiencing macroeconomic imbalances. In particular, it is essential to tackle the large and persistent current account surplus, which reflects structural features of the economy and policy setting as regards non-financial corporations. In view of its size, the Netherlands current account surplus likely exerts a moderate, but non-negligible, negative impact on the economic performance of the euro-area It is also crucial to address the very large stock of household debt.

               (3)On 28 April 2016, the Netherlands submitted its 2016 national reform programme and its 2016 stability programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (4)Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds for the 2014-2020 period. As foreseen in Article 23 of Regulation (EU) No 1303/2013, where it is necessary to support the implementation of relevant Council recommendations, the Commission may request a Member State to review and propose amendments to its Partnership Agreement and relevant programmes. The Commission has provided further details on how it would make use of this provision in guidelines on the application of the measures linking effectiveness of the European Structural and Investment Funds to sound economic governance.
                  10

               (5)The Netherlands is currently in the preventive arm of the Stability and Growth Pact and subject to the transitional debt rule. In its 2016 stability programme, the government plans a gradual improvement in its headline balance to 0.1% of GDP in 2019. At the same time, the government plans a deterioration of the recalculated
                  11
                structural balance in 2016 to -1.4 % of GDP and an improvement thereafter. The medium-term budgetary objective - a structural deficit of 0.5 % of GDP – is planned to be reached in 2019. However, based on the recalculated structural balance, the medium-term budgetary objective would already be met as from 2018. According to the stability programme, the government debt-to-GDP ratio is expected to reach 65.4 % in 2016 and then to gradually decrease to 58.9 % in 2019. The macroeconomic scenario underpinning these budgetary projections is plausible. Based on the Commission 2016 spring forecast, the Netherlands is at risk of some deviation from the requirements of the preventive arm in 2016 and over 2016 and 2017 taken together under unchanged policies. The Netherlands is forecast to comply with the transitional debt rule in 2016 and, following the end of the transition period, with the debt reduction benchmark in 2017. Based on its assessment of the stability programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that the Netherlands is expected to broadly comply with the provisions of the Stability and Growth Pact. Nevertheless, further measures will be needed to ensure compliance in both 2016 and 2017.

               (6)The recent growth in employment can be fully attributed to an increase in the number of people employed on temporary contracts and the number of self-employed. Although the Netherlands has taken measures to address the issue, a more comprehensive approach is needed. Low transition rates from temporary to permanent contracts still pose a risk of labour market segmentation. The high and increasing percentage of temporary contracts is observed in the context of great differences in employment protection provisions on temporary contracts, on the one hand, and permanent contracts, on the other. Self-employed people without employees are more often under-insured against disability, unemployment and old age, which could affect the sustainability of the social security system in the long run. Several measures were introduced that reduced the differences between permanent and temporary contracts. Favourable tax arrangements and the absence of obligations to pay certain social security contributions still provide financial incentives for self-employment.

               (7)A key challenge in addressing high household indebtedness lies in the housing market, where rigidities and distortive incentives that have built up over decades shape housing financing and sectoral savings patterns. Households' tendency to leverage up gross mortgage debt against housing wealth largely reflects long standing fiscal incentives, in particular the tax deductibility of mortgage interest. Since 2012, a series of measures has been implemented to address this partly, but these have not been stepped up in line with the recommendation. The development of a well-functioning private rental market is constrained by subsidies in the other housing subsectors. The social housing sector is one of the largest in the EU but housing is not always allocated efficiently to those really in need. More income-based rent differentiation has been introduced in the social housing sector. Housing corporations will have to separate activities of general economic interest (i.e. social housing) from other activities. Given that some distortive incentives relating rents to income in the social housing market have been addressed, it is appropriate to shift this part of the previous recommendation to monitoring of the situation. At the same time, the housing market remains significantly distorted and continues to create a debt bias for households. Further progress is needed on these issues.

               (8)In addition to housing market distortions, compulsory non-tax contributions to the second pillar of the pension system weigh on households' disposable income. The second-pillar pension system performs well in terms of quality and adequacy, but has drawbacks in terms of inter-generational fairness, transparency and resilience to economic shocks. In recent years, the sustainability of the pension system has been improved by raising the pensionable age to 67 by 2021 and linking it to life expectancy thereafter. On average, pension contributions have been lowered since the maximum tax exempted accrual rate was reduced. An appropriate intra- and inter-generational distribution of costs and risks beyond the rules adopted on indexation and financial buffers (the financial assessment framework) would help households to allocate their financial means in more growth-friendly ways. The government announced its intention to reform the second pension pillar substantially with the involvement of social partners in order to create a more transparent and actuarially fairer system.

               (9)Investment fell markedly during the economic crisis and has recovered only partially since. The weakness in economy-wide investment appears to have a strong cyclical character. It was driven by a downturn in the housing market and fiscal consolidation choices. While barriers to investment seem to be minor, low investment in the construction sector and in renewable energy appears to be linked to market uncertainty and regulatory factors. In spite of improving credit conditions, risks to new lending are heightened in the current financial environment. Government expenditure on R&D has been falling since 2014, while private R&D spending remains low. It was therefore recommended that the Netherlands shift public expenditure towards supporting investment in R&D and work on improving private R&D expenditure. Public and private expenditure on R&D is low in relation to the level of educational attainment, academic achievement and economic development.

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

               (11)In the light of this assessment, the Council has examined the stability programme, and its opinion
                  12
                is reflected in particular in recommendation 1 below.

               (12)In the light of the Commission’s in-depth review and this assessment, the Council has examined the national reform programme and the stability programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected in recommendation 3 below.

               HEREBY RECOMMENDS that the Netherlands take action in 2016 and 2017 to:

               1.Limit the deviation from the medium-term budgetary objective in 2016 and achieve an annual fiscal adjustment of 0.6 % of GDP in 2017. Prioritise public expenditure towards supporting more investment in research and development.

               2.Tackle remaining barriers to hiring staff on permanent contracts and facilitate the transition from temporary to permanent contracts. Address the high increase in self-employed without employees, including by reducing tax distortions favouring self-employment, without compromising entrepreneurship, and by promoting access of the self-employed to affordable social protection.

               3.Take measures to make the second pillar of the pension system more transparent, inter-generationally fairer and more resilient to shocks. Take measures to reduce the remaining distortions in the housing market and the debt bias for households, in particular by decreasing mortgage interest tax deductibility.

               Done at Brussels,

                     For the Council

                     The President

                     (1)
                  OJ L 209, 2.8.1997, p. 1.

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

                     (3)
                  COM(2016) 339 final.

                     (4)
                  P8_TA(2016)0058, P8_TA(2016)0059, and P8_TA(2016)0060.

                     (5)
                  COM(2015) 690 final.

                     (6)
                  COM(2015) 691 final.

                     (7)
                  COM(2015) 692 final.

                     (8)
                  SWD(2016) 87 final.

                     (9)
                  COM(2016) 95 final.

                     (10)
                  COM(2014) 494 final.

                     (11)
                  The structural balance as recalculated by the Commission based on the information in the stability programme, following the commonly agreed methodology.

                     (12)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.


               EUROPEAN COMMISSION
            Brussels, 18.5.2016
            COM(2016) 332 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2016 national reform programme of Italyand delivering a Council opinion on the 2016 stability programme of Italy

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2016 national reform programme of Italy

                  and delivering a Council opinion on the 2016 stability programme of Italy

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,

               Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
                  1
               , and in particular Article 5(2) thereof,

               Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances
                  2
               , and in particular Article 6(1) thereof,

               Having regard to the recommendation of the European Commission
                  3
               ,

               Having regard to the resolutions of the European Parliament
                  4
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

               Having regard to the opinion of the Economic and Financial Committee,

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 26 November 2015, the Commission adopted the Annual Growth Survey
                  5
               , marking the start of the 2016 European Semester of economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 17-18 March 2016. On 26 November 2015, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report
                  6
               , in which it identified Italy as one of the Member States for which an in-depth review would be carried out. On the same day, the Commission also adopted a recommendation for a Council recommendation on the economic policy of the euro area
                  7
               . That recommendation was endorsed by the European Council on 18-19 February 2016 and adopted by the Council on 8 March 2016. As a country whose currency is the euro and in view of the close interlinkages between the economies in the economic and monetary union, Italy should ensure the full and timely implementation of the recommendation.

               (2)The 2016 country report for Italy
                  8
                was published on 26 February 2016. It assessed Italy’s progress in addressing the country-specific recommendations adopted by the Council on 14 July 2015 and Italy's progress towards its national Europe 2020 targets. It also included the in-depth review under Article 5 of Regulation (EU) No 1176/2011. On 8 March 2016, the Commission presented the results of the in-depth review.
                  9
                The Commission’s analysis leads it to conclude that Italy is experiencing excessive macroeconomic imbalances. In particular, the sluggish productivity growth hampers the recovery of competitiveness and makes it more difficult to reduce the high public debt ratio. The risk of adverse effects on the Italian economy and, given its size, of negative spillovers to the economic and monetary union is particularly important.

               (3)On 28 April 2016, Italy submitted its 2016 national reform programme and its 2016 stability programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (4)Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds for the 2014-2020 period. As foreseen in Article 23 of Regulation (EU) No 1303/2013, where it is necessary to support the implementation of relevant Council recommendations, the Commission may request a Member State to review and propose amendments to its Partnership Agreement and relevant programmes. The Commission has provided further details on how it would make use of this provision in guidelines on the application of the measures linking the effectiveness of the European Structural and Investment Funds to sound economic governance
                  10
               .

               (5)Italy is in the preventive arm of the Stability and Growth Pact and subject to the transitional debt rule over 2013-15. According to the stability programme, the government debt-to-GDP ratio is projected to peak in 2015 at 132.7 % and to gradually decline to 123.8 % in 2019. The Commission 2016 spring forecast expects the debt-to-GDP ratio to stabilise in 2016 and start a slight decline only as of 2017. The implementation of the substantial privatisation programme presented by the Italian authorities is a key challenge for Italy, given its expected contribution to the debt-reduction effort. While privatisations were implemented in line with the plans in 2015, the target of 0.5 % privatisation proceeds per year over 2016-2018 and of 0.3 % in 2019 seems very ambitious, also given the delays incurred by some privatisation projects. The macroeconomic scenario underpinning the budgetary projections is plausible.

               (6)On 18 May 2016, the Commission issued a Report under Article 126(3) TFEU, as Italy did not make sufficient progress towards compliance with the debt rule in 2015. The analysis included all the relevant factors and concluded that the debt criterion should be considered as complied with. The Commission will review its assessment in a new report under Article 126(3) of the Treaty based on the Commission 2016 autumn forecast, as further information on the resumption of the adjustment path towards the medium-term budgetary objective for 2017 becomes available.

               (7)In spring 2015, Italy was granted a temporary deviation of 0.4 percentage points of GDP from the required adjustment path towards the medium-term budgetary objective in 2016 to take account of major structural reforms with a positive impact on the long-term sustainability of public finances. In its 2016 Draft Budgetary Plan, Italy requested an additional deviation of 0.1 percentage points of GDP from the required adjustment path towards the medium-term budgetary objective in 2016 to take account of other structural reforms with a positive impact on the long-term sustainability of public finances. The details underpinning all these reforms have been set out in Italy's 2016 National Reform Programme, which broadly confirms the reform agenda. The areas of reform put forward in the programme as having an impact on public finance sustainability include: (i) public administration and simplification; (ii) product and service markets; (iii) the labour market; (iv) civil justice; (v) education; (vi) a tax shift; (vii) measures to reduce the stock of non-performing loans and reform insolvency procedures; and (viii) spending review as financing measure. The impact of all these reforms on real GDP is estimated by the authorities at 2.2 percentage points by 2020, which seems to be plausible. If fully and timely implemented, these reforms will have a positive impact on the sustainability of public finances. Italy can currently be assessed as qualifying for the full requested temporary deviation of 0.5 percentage points of GDP in 2016, provided that it adequately implements the agreed reforms, which will be monitored under the European Semester, and subject to the conditions outlined in recital 10.

               (8)In its 2016 Draft Budgetary Plan, Italy requested an additional deviation of 0.3 percentage points of GDP from the required adjustment path towards the medium-term budgetary objective in 2016 to take account of national investment expenditure in projects co-financed by the EU. The information provided by the 2016 stability programme seems to confirm that Italy’s deviation from the adjustment path towards the medium-term budgetary objective in 2016 is being effectively used for the purposes of increasing investments. However, there are still some doubts on the feasibility of the whole projected amount of co-financed investment in the course of 2016. Italy can currently be assessed as qualifying for a temporary deviation of 0.25 percentage points of GDP in 2016, provided that it adequately carries out the intended investments and subject to the conditions outlined in recital 10. The Commission will carry out an ex-post assessment in order to verify the actual amount of the national expenditure in co-financed investment projects and of the related allowance to which Italy is eligible under the so-called “investment clause”.

               (9)The 2016 stability programme indicates that the budgetary impact of the exceptional inflow of refugees as well as of exceptional security measures is significant and that these should be considered as an unusual event outside the control of the government, as defined in article 5.1 and article 6.3 of Regulation (EC) No 1466/97. According to the Commission, the additional impact is in line with the estimations provided by the stability programme and amounts to 0.03 % of GDP in 2015 and 0.04 % in 2016 for refugee-related expenditure and at 0.06 % of GDP in 2016 for security measures. In relation to this, Italy requested a temporary deviation from the adjustment path towards the medium-term budgetary objective. The provisions defined in Article 5(1) and Article 6(3) of Regulation (EC) No 1466/97 allow catering for this additional expenditure, in that the inflow of refugees as well as the severity of the terrorist threat are exceptional events, their impact on Italy’s public finances is significant and sustainability would not be compromised by allowing for a deviation from the adjustment path towards the medium-term budgetary objective. Therefore, the required adjustment towards the medium-term budgetary objective for 2015 has been reduced to take into account additional refugee-related costs. Regarding 2016, a final assessment, including on the eligible amounts, will be made in spring 2017 on the basis of observed data as provided by Italian authorities.

               (10)In its opinion on Italy’s 2016 Draft Budgetary Plan
                  11
               , the Commission indicated that, in the context of the 'overall assessment' of a possible deviation from the adjustment path towards the medium-term budgetary objective, it would take into account Italy's possible eligibility for flexibility under the SGP, paying particular attention to whether a deviation from the adjustment path would be effectively used for the purposes of increasing investments; to the existence of credible plans for the resumption of the adjustment path towards the MTO; and to progress with the structural reform agenda, taking into account the Council recommendations. The Commission assesses that Italy is eligible for a further allowance of 0.35 percentage points of GDP for 2016, taking into account the progress with the structural reform agenda, the planned investments, as well as the government commitment to ensure compliance with the adjustment path towards the MTO in 2017, which the Commission will reassess in the autumn.

               (11)Based on the Commission 2016 spring forecast, the projected structural deterioration of -0.7 % of GDP in 2016 points to a risk of some deviation from Italy’s obligations under the preventive arm of the Stability and Growth Pact, after taking into account the deviation allowed for investments and the implementation of structural reforms. In 2017, under the no-policy-change assumption, the Commission's forecast shows a zero structural effort in 2017, as a result of which there would be a risk of significant deviation from the required 0.6 % of GDP structural adjustment.

               (12)Overall, based on its assessment of the 2016 stability programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that Italy is at risk of non-compliance with the provisions of the Stability and Growth Pact. The Commission will reassess Italy’s compliance with the required adjustment towards the medium-term budgetary objective based on its 2016 autumn forecast as further information on Italy’s resumption of the adjustment path towards the MTO for 2017 becomes available, including the 2017 Draft Budgetary Plan.

               (13)Although initiatives to reform the fiscal framework are under way, only limited steps have been taken so far to secure the contribution of the spending review to fiscal consolidation. In particular, the spending review targets have been further reduced and the fact that the spending reviews are not fully integrated into the budgetary process weighs on the overall efficiency of the exercise. The finalisation of the comprehensive reform of the budgetary process in the making since 2009 is expected to address this shortcoming and to endow the budgetary process with a more performance-oriented approach. To improve public debt sustainability, it is also important to accelerate the deployment of the privatisation plan. Italy’s taxation system hinders economic efficiency and continues to face several challenges. These are linked to very low tax compliance and an overdue reform of tax expenditures, in particular with respect to the reduced value-added tax rates, and of the old system of cadastral values. These were all aspects of the enabling law for the reform of the tax system that have not been implemented, or have been implemented only partially. In addition, recent developments such as the abolition of the property tax on first residences, appear at odds with the goal of broadening the tax base and shifting the tax burden from productive factors onto property and consumption.

               (14)The reform of the public administration is an important step which, if the required legislative decrees are adopted and implemented, would allow Italy to grasp the expected benefits in terms of increased efficiency and quality in the public sector. The legislative decrees proposed by the government in January 2016 on state-owned enterprises and local public services, as well as the forthcoming decree on public employment, are of particular importance for addressing the root causes of inefficiencies. While recent measures have been taken to step up the fight against corruption, including by raising penalties and prescription terms for specific corruption offences, the long-recommended systematic revision of the statute of limitations is still on hold. Accounting fraud is also an important issue. In the justice system, lengthy court proceedings and a high number of pending civil and commercial cases remain major challenges. Closely monitoring the impact of the measures taken in recent years to address these issues will help the assessment of whether it is necessary to complement them by additional action.

               (15)Some progress has been made towards improving asset quality in the banking sector. Although the inflow of new non-performing loans has slowed down in recent months, their stock remains at a very high level and continues to put pressure on profitability and banks' resources. In addition, Italy’s insolvency system and debt collection frameworks are insufficiently conducive to a swift work-out of impaired loans. Since mid-2015, several laws were adopted to simplify and accelerate insolvency and foreclosure procedures, and a draft enabling law for an organic reform of the bancruptcy framework has been proposed. However, the effects of these reforms on the length of procedures and recovery values are still to be seen. Since the beginning of 2015, Italy has adopted several measures to tackle weaknesses in the corporate governance of its banks, particularly regarding larger cooperative banks, banks with foundations as shareholders and small mutual banks. Fully implementing these reforms would help to make the sector more resilient and ensure a more efficient allocation of credit to the real economy. Whereas low cost efficiency in the banking sector hinders profitability and internal capital generation, the low-growth low-interest rate environment constitutes an additional challenge. The new EU bank resolution framework has changed the risk profile of bonds issued by banks, of which significant amounts are held by Italian retail clients, underlining the importance of financial literacy among the general public.

               (16)In 2015, Italy deeply reformed its labour market institutions through the so-called "Jobs act" reform. Implementing the reform of active labour market policies is key to activating those further away from the labour market, in particular the long-term unemployed and young people. There is currently a range of administrative, political and resource-related challenges. In particular, this requires a strengthening of public employment services and close monitoring of service delivery. The apprenticeships system has been reformed to include adults made redundant, but implementation is still under way. Second-level bargaining is not sufficiently developed in Italy, hampering the adoption of innovative solutions at firm level that could improve productivity and make wages more responsive to labour market conditions. Action in this area needs to be taken in consultation with social partners and in accordance with national practices. Social partners have not yet reached an agreement on the reform of collective bargaining. A reform is expected by the end of 2016, according to the national reform programme. The labour participation rate of women is one of the lowest in the EU. Women are predominant in atypical and precarious jobs, constitute the majority of non-standard workers and are particularly affected by the informal economy. The tax and benefit system discourages second earners from working and the Jobs Act did not address this issue effectively. The limited availability of affordable care services also hampers participation in the labour market by women with children and elderly relatives. Poverty levels are high – more than a quarter of Italians are at risk of poverty or social exclusion – and the provision of social assistance remains weak and fragmented. Adopting and implementing the national antipoverty strategy and rationalising social spending could be first steps towards a gradual roll-out of a minimum income scheme at national level in an overall budgetary neutral way. Substantial progress has been made on the reform of education. The school reform was adopted in July 2015 and implementing decrees are to be adopted by January 2017.

               (17)Limited progress has been made towards fostering competition in services. The 2015 annual competition law is currently still under discussion in the parliament. A number of provisions, for instance on legal professions, have been weakened during the parliamentary process. A number of areas are still over-protected or regulated, notably the regulated professions, the health sector, local public transport and taxis, ports and airports. The retail sector is hampered by a number of inefficiencies caused by the strictness of market regulation. The public process of granting rights on public domain for economic activities does not promote competition, in particular due to the awarding of permit schemes without competitive and transparent procedures. Market-opening measures need to be supported by a business-friendly environment. Some progress has been made on simplification under the 2015-2017 simplification agenda, which allows for easier and more streamlined cooperation between central and regional governments. However, the Italian business environment is still not sufficiently conducive to growth and investment and suffers from a fragmented and stratified system of laws and regulations emanating from different levels of government. The administrative and regulatory burden still weighs on economic operators. Strengths in terms of starting a company or insolvency resolution are offset by weaknesses in terms of dealing with construction permits, contract enforcement, tax payment or getting credit. The implementation of the national public procurement strategy adopted in early 2016 could also help to tackle some systemic and widespread weaknesses.

               (18)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Italy’s economic policy and published it in the 2016 country report. It has also assessed the stability programme and the national reform programme and the follow-up given to the recommendations addressed to Italy in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Italy but also their compliance with EU rules and guidance, given the need to strengthen the EU’s overall economic governance by providing EU-level input into future national decisions. The recommendations under the European Semester are reflected in recommendations 1 to 5 below.

               (19)In the light of this assessment, the Council has examined the stability programme and its opinion
                  12
                is reflected in particular in recommendation 1 below.

               (20)In the light of the Commission’s in-depth review and this assessment, the Council has examined the national reform programme and the stability programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected in recommendations 1 to 5 below,

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

               1.In 2016, limit the temporary deviation from the required 0.5% of GDP adjustment towards the medium-term budgetary objective to the amount of 0.75% of GDP allowed for investments and the implementation of structural reforms, subject to the condition of resuming the adjustment path towards the medium-term budgetary objective in 2017. Achieve an annual fiscal adjustment of at least 0.6% of GDP towards the medium-term budgetary objective in 2017. Accelerate the implementation of the privatisation programme and use the windfall gains to accelerate the reduction of the general government debt ratio. Shift the tax burden from productive factors onto consumption and property. Reduce the number and scope of tax expenditures and complete the reform of the cadastral system by mid-2017. Take measures to improve tax compliance, including through electronic invoicing and payments.

               2.Implement the reform of the public administration by adopting and implementing all necessary legislative decrees, in particular those reforming local public enterprises, local public services and the management of human resources. Step up the fight against corruption by revising the statute of limitations by the end of 2016. Reduce the length of civil justice proceedings by enforcing reforms and through effective case-management.

               3.Accelerate the reduction in the stock of non-performing loans, including by further improving the framework for insolvency and debt collection. Swiftly complete the implementation of ongoing corporate governance reforms in the banking sector.

               4.Implement the reform of active labour market policies, in particular by strengthening the effectiveness of employment services. Facilitate the take-up of work for second earners. Adopt and implement the national antipoverty strategy and review and rationalise social spending.

               5.Swiftly adopt and implement the pending law on competition. Take further action to increase competition in regulated professions, the transport, health and retail sectors and the system of concessions.

               Done at Brussels,

                     For the Council

                     The President

                     (1)
                  OJ L 209, 2.8.1997, p. 1.

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

                     (3)
                  COM(2016) 332 final.

                     (4)
                  P8_TA(2016)0058, P8_TA(2016)0059, and P8_TA(2016)0060.

                     (5)
                  COM(2015) 690 final.

                     (6)
                  COM(2015) 691 final.

                     (7)
                  COM(2015) 692 final.

                     (8)
                  SWD(2016) 81 final.

                     (9)
                  COM(2016) 95 final.

                     (10)
                  COM(2014) 494 final.

                     (11)
                  C(2015) 8105 final.

                     (12)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.


title: DRAFT COUNCIL RECOMMENDATION ON BANNING SMOKING IN PUBLIC PLACES

text:
 8. 2. 89                              Official Journal of the European Communities                             N o C 32/9
                           Draft Council recommendation on banning smoking in public places
                                                     COM(88) 674 final
                                     (Submitted by the Commission on 9 January 1989)
                                                        (89/C 32/16)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,                         Whereas, to ensure respect of the right to health of
                                                                 non-smokers, it is essential to ban smoking in public
Having regard to the Treaty establishing the European            places in certain establishments and forms of transport;
Economic Community, and in particular Article 235
thereof,                                                         Whereas, however, in view of the extent of tobacco
                                                                 addiction affecting part of the population, it is appro-
Having regard to the draft recommendation from the               priate to make provision to permit smoking in part of
Commission,                                                      these establishments and forms of transport;
Having regard      to  the   opinion    of   the  European       Whereas it is necessary to extend to the citizens of all
Parliament,                                                      the Member States of the European Community the
                                                                 protection they are given in some Member States against
Having regard to the opinion of the Economic and                 the damage caused by involuntary smoking,
Social Committee,
Whereas the European Council held in Milan on 28 and             RECOMMENDS TO THE MEMBER STATES:
29 June 1985 stressed the importance of launching a
European action programme against cancer;                        to take the following measures by legislation according
                                                                 to national practice and conditions:
Whereas the Council and the representatives of the
                                                                 1. Ban smoking in public places which are part of a
Governments of the Member States meeting within the
                                                                    public or private establishment intended for one of the
Council in their resolution of 7 July 1986 (*) set for this
                                                                    uses listed in Annex 1 to this Directive.
programme the objective of contributing to an
improvement in the health and quality of life of citizens           However, in these establishments, clearly defined
within the Community by reducing the number of                      areas must be reserved for smokers.
illnesses due to cancer and under this heading gave first           The Member States are free to add to the estab-
priority to measures against smoking;                               lishments listed in the Annex.
Whereas there is an increased risk of lung cancer for            2. In case of conflict between the right of the
non-smokers involuntarily exposed to the smoke of                   non-smoker to health and the right of the smoker to
tobacco products and, consequently, it is appropriate to            smoke, the right of the non-smoker prevails in these
protect the right to health of non-smokers against invol-           establishments and at all work-places.
untary smoking;
                                                                 3. Ban smoking in all public transport.
                                                                 4. Inform the Commission every two years about the
(l) OJ No C 184, 23. 7. 1986, p. 19.                                implementation of this recommendation.
 ---pagebreak--- ^oCo^BiO                           C^fhci^l]ourn^lofth^Furo^e^nC^ornrnunin^                               ^ ^ ^
         t. Establishments where services are provided to the public,whetherforacharge or free of charge.
         2. Establishments where sick or elderly persons are received or treated.
         ^. Establishments where health care is given for prevention or cure.
         4. Establishments where children or young people of school age are received, housed or treated.
         ^. Establishments where education and vocational training is given.
         D. Establishments where entertainment takes place.
         B. Establishments where exhibitions are held.
         ^. Establishments where sports are practised.
         ^. U^nderground and railway stations, ports and airports.


               EUROPEAN COMMISSION
            Brussels, 18.5.2016
            COM(2016) 348 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2016 national reform programme of the United Kingdomand delivering a Council opinion on the 2016 convergence programme of the United Kingdom

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2016 national reform programme of the United Kingdom

                  and delivering a Council opinion on the 2016 convergence programme of the United Kingdom

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,

               Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
                  1
               , and in particular Article 9(2) thereof,

               Having regard to the recommendation of the European Commission
                  2
               ,

               Having regard to the resolutions of the European Parliament
                  3
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

               Having regard to the opinion of the Economic and Financial Committee,

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 26 November 2015, the Commission adopted the Annual Growth Survey
                  4
               , marking the start of the 2016 European Semester of economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 17-18 March 2016. On 26 November 2015, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report
                  5
               , in which it identified the United Kingdom as one of the Member States for which an in-depth review would be carried out.

               (2)The 2016 country report for the United Kingdom
                  6
                was published on 26 February 2016. It assessed the United Kingdom's progress in addressing the country-specific recommendations adopted by the Council on 14 July 2015 and the United Kingdom's progress towards its national Europe 2020 targets. It also included the in-depth review under Article 5 of Regulation (EU) No 1176/2011. On 8 March 2016, the Commission presented  the results of the in-depth review.
                  7
                The Commission’s analysis leads it to conclude that the United Kingdom is not experiencing macroeconomic imbalances. High household sector debt, elevated house price levels and the large current account deficits may constitute vulnerabilities. At the same time, household balance sheets are strong in aggregate and the resilience of the banking sector continues to improve. In the short term, the robustness of the household sector and wider economy to handle risks such as an interest rate shock or a shock to employment seems to have increased. However, several government initiatives have yet to exert a material impact on the imbalance between housing supply and demand. Risks associated with the large current account deficit are mitigated by a favourable institutional framework and low foreign currency liabilities. The rise in the deficit has been driven by the upward movement in the deficit on primary income and it is expected to decline as adverse cyclical conditions unwind.

               (3)On 24 March 2016, the United Kingdom submitted its 2016 national reform programme and its 2016 convergence programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (4)Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds for the 2014-2020 period. As foreseen in Article 23 of Regulation (EU) No 1303/2013, where it is necessary to support the implementation of relevant Council recommendations, the Commission may request a Member State to review and propose amendments to its Partnership Agreement and relevant programmes. The Commission has provided further details on how it would make use of this provision in guidelines on the application of the measures linking effectiveness of the European Structural and Investment Funds to sound economic governance.
                  8

               (5)The United Kingdom is currently in the corrective arm of the Stability and Growth Pact. Provided that a durable correction of the excessive deficit is achieved in 2016-17, the United Kingdom will be subject to the preventive arm and the transitional debt rule as from 2017-18. In its 2015-16 convergence programme, the government expects the headline deficit to be below 3% of GDP in 2016-17 and plans for it to decline further to 2.0% of GDP by 2017-18. The recalculated
                  9
                structural deficit points to a structural improvement of 0.6 pp of GDP in 2015-16; 0.9 pp of GDP in 2016-17, and 0.7 pp of GDP in 2017-18. The convergence programme does not include a medium-term budgetary objective. According to the convergence programme, the government debt-to-GDP ratio is expected to increase from 88.0% in 2015-16 to a peak of 88.3% of GDP in 2016-17, before declining to 87.1% in 2017-18. The macroeconomic scenario underpinning the budgetary projections is plausible. Measures to support the planned deficit targets in 2016-17 and 2017-18 are sufficiently specified. However, the impact of some measures in 2017-18, whose budgetary impact is estimated at around 0.2% of GDP, is more uncertain. Based on the Commission 2016 spring forecast, in 2015-16 the United Kingdom is expected to have achieved the recommended headline deficit of 4.1% of GDP and to have delivered the recommended fiscal effort. The United Kingdom is forecast to correct its excessive deficit by the 2016-17 deadline as recommended by the Council, though missing the recommended headline deficit target of 2.7% of GDP. A marginally lower than recommended fiscal effort is projected to be delivered on a cumulative basis over the excessive deficit prodecure period. In 2017-18, the United Kingdom is expected to comply with the recommended adjustment towards the minimum medium-term budgetary objective under unchanged policies. The United Kingdom is also forecast to comply with the transitional debt rule in 2017-18. Based on its assessment of the convergence programme, and taking into account the Commission 2016 spring forecast, the Council is of the opinion that the United Kingdom is expected to broadly comply with the provisions of the Stability and Growth Pact.

               (6)Productivity in the United Kingdom has stagnated since 2008. This may be attributable to various factors such as low capital investment, skills shortages, skill mismatches and a shift in the composition of the economy towards business sectors with lower productivity. The challenges related to insufficient housing, especially in geographical areas of high economic growth also have to be considered in this context. The government's July 2015 policy document, 'Fixing the foundations- creating a prosperous nation' lays out a wide-ranging response. In view of certain barriers to investment that still exist and the low level of public and private investment in the United Kingdom, the government's policy actions to boost skill levels, innovation and infrastructure investment are timely although effective implementation will be important. One of the main investment challenges is to deliver adequate network infrastructure. The National Infrastructure Plan, which was updated in March 2016, sets out details of the progress of infrastructure projects within a coherent and consistent framework. The plan is reliant on securing an increase in private finance for much of the investment. Delivery and monitoring are crucial and transparency and accountability are key. Despite the government's various initiatives, housing demand continues to outstrip supply and this is reflected in high and rising house prices. The shortage of housing is most acute in the rapidly-growing regions of London and the South-East. The use of land is guided by principles set out in the national planning policy framework and effective implementation of the reformed planning system could facilitate increased housing construction.

               (7)The United Kingdom's labour market remains dynamic. In 2015, the employment rate (age group 20-64) reached 76.9% while the unemployment rate continued its downward trend, reaching 5.3%. Youth unemployment and rates of young people not in employment, education or training have also further decreased. Nonetheless, there remains scope for improvement in the prospects for inactive, underemployed and low skilled workers. Better labour market progression prospects and clearer routes to upskilling would assist those who find themselves confined to low-wage and/or low-hours of work. It would also address the skills shortages that are apparent in some parts of the economy, such as construction. Successful deployment of the resources arising from the apprenticeship levy will require careful attention. Proposals to improve supply in childcare will require timely implementation as the availability and affordability of childcare remain a challenge.

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

               (9)In the light of this assessment, the Council has examined the convergence programme, and its opinion
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                is reflected in particular in recommendation 1 below.

               HEREBY RECOMMENDS that the United Kingdom take action in 2016 and 2017 to:

               1.Endeavour to correct the excessive deficit in a durable manner by 2016-17. Following the correction of the excessive deficit, achieve a fiscal adjustment of 0.6% of GDP in 2017-18 towards the minimum medium-term budgetary objective.

               2.Address shortfalls in network infrastructure investment, including by delivering the priorities of the National Infrastructure Plan. Take further steps to boost housing supply, including by implementing the reforms of the national planning policy framework.

               3.Address skills mismatches and provide for skills progression, including by strengthening the quality of apprenticeships. Further improve the availability of affordable, high-quality, full-time childcare.

               Done at Brussels,

                     For the Council

                     The President

                     (1)
                  OJ L 209, 2.8.1997, p. 1.

                     (2)
                  COM(2016) 348 final.

                     (3)
                  P8_TA(2016)0058, P8_TA(2016)0059, and P8_TA(2016)0060.

                     (4)
                  COM(2015) 690 final.

                     (5)
                  COM(2015) 691 final.

                     (6)
                  SWD(2016) 96 final.

                     (7)
                  COM(2016) 95 final.

                     (8)
                  COM(2014) 494 final.

                     (9)
                  The structural balance as recalculated by the Commission based on the information in the convergence programme, following the commonly agreed methodology.

                     (10)
                  Under Article 9(2) of Council Regulation (EC) No 1466/97.