title: 2004/383/EC:Commission Recommendation of 27 April 2004 on the use of financial derivative instruments for undertakings for collective investment in transferable securities (UCITS)(Text with EEA relevance)(notified under document number C(2004) 1541/1)

text:
30.4.2004         EN                  Official Journal of the European Union                       L 144/33
                               COMMISSION RECOMMENDATION
                                               of 27 April 2004
 on the use of financial derivative instruments for undertakings for collective investment
                                  in transferable securities (UCITS)
                         (notified under document number C(2004) 1541/1)
                                      (Text with EEA relevance)
                                                 (2004/383/EC)
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Community, and in particular Article
211, second indent, thereof,
Whereas
(1)     One of the aims of the amendments to Council Directive 85/611/EEC of 20 December
        1985 on the coordination of laws, regulations and administrative provisions relating to
        undertakings for collective investment in transferable securities (UCITS)1, introduced
        by Directive 2001/108/EC, was to widen the scope of financial instruments in which a
        UCITS can invest and to enable UCITS to make use of modern investment techniques.
        This extension of permissible investments does not only include money market
        instruments, bank deposits, units of UCITS and other collective investments
        undertakings: UCITS are now also permitted to employ financial derivative
        instruments as part of their general investment policy, and not only for the purposes of
        hedging positions.
(2)     Another aim of those amendments was to ensure investor protection. Directive
        85/611/EEC, as amended, therefore establishes an extensive system of risk-limitation:
        In order to ensure that the risks related to the new classes of financial instruments, in
        particularly regarding derivatives, are duly and accurately monitored, measured and
        managed, management companies or investment companies are required to apply
        sound risk measurement processes under the supervision of the competent authorities.
        In particular, these risk measurement processes should enable them to monitor,
        measure and manage at any time the risks of the positions and their contribution to the
        overall risk-profile of the portfolio. Management or investment companies have also to
        employ processes for the accurate and independent assessment of the value of over-
        the-counter (OTC)-derivative instruments. These requirements of Directive
1
  OJ L 375, 31.12.1985, p. 3; Directive as last amended by Directive 2001/108/EC of the European Parliament
        and of the Council( OJ L 41, 13.2.2002, p. 35).
 ---pagebreak--- L 144/34           EN              Official Journal of the European Union                   30.4.2004
         85/611/EEC call for the establishment of an adequate framework for the risk-
         measurement and -management of a UCITS by Member States. In order to facilitate
         the development of such a framework and to ensure a harmonised approach, it is
         desirable to recommend some common basic principles for risk-measurement.
(3)      Agreement was reached in the UCITS Contact Committee on the benefits of
         formulating basic principles, which should be taken into account by Member States.
         Those principles should help Member States to ensure an equivalent and effective
         protection of investors throughout the Community and level the playing field for
         UCITS operators and products regulated under different jurisdictions.
(4)      With regard to the limit to global exposure relating to derivatives set out in the first
         subparagraph of Article 21(3) of Directive 85/611/EEC and the maximum limit to
         borrowing transactions laid down in Article 36(2) of that Directive, it should be made
         clear which maximum exposure in total may be incurred by a UCITS.
(5)      The total exposure of a UCITS needs to be assessed on the basis of both default risk of
         the UCITS and leverage produced by the use of financial derivative instruments. It
         should therefore be ensured that the market risk of a UCITS is adequately measured. It
         is therefore necessary to recommend possible approaches of market risk measurement,
         by clarifying the conditions for the use of the following types of methodologies: the
         commitment approach; the Value-at-risk approach (VaR-approach) and stress tests.
(6)      For the same reasons it is useful to recommend some elements for the method of
         assessing the leverage of a UCITS portfolio produced by the use of financial
         derivative instruments.
(7)      Pursuant to the second subparagraph of Article 21(3) of Directive 85/611/EEC, the
         exposure of a UCITS must be calculated taking into account not only the current value
         of the underlying assets, but also the counterparty risk, future market movements and
         the time available to liquidate the positions. As regards counterparty risk related to
         OTC-derivatives, specific requirements are laid down in the second subparagraph of
         Article 22(1) of that Directive. In view of these requirements it is desirable to clarify
         the method of calculating the counterparty risk associated with financial derivative
         instruments and the way in which it relates to the methods and criteria provided for in
         Directive 2000/12/EC of the European Parliament and of the Council of 20 March
         2000 relating to the taking up and pursuit of the business of credit institutions2.
(8)      Pursuant to the third subparagraph of Article 21(3) of Directive 85/611/EEC, the
         exposure to the underlying of the financial derivative instrument has to be included
         into the calculation of the issuer concentration limits laid down in Article 22 of that
         Directive. According to that same provision, Member States may allow that, when a
         UCITS invests in index-based derivatives, these investments do not have to be
         combined to the issuer concentration limits laid down in Article 22. It is therefore
         appropriate to recommend standards for the application of issuer concentration limits
         with regard to financial derivative instruments.
2
  OJ L 126, 26.5.2000, p.1
 ---pagebreak--- 30.4.2004        EN               Official Journal of the European Union                   L 144/35
(9)     Uncovered sales are all transactions in which the UCITS is exposed to the risk of
        having to buy securities at a higher price than the price at which the securities are
        delivered and thus making a loss and the risk of not being able to deliver the
        underlying financial instrument for settlement at the time of the maturity of the
        transaction. These risks are always relevant for those operations in which the UCITS is
        forced to buy securities in the market to meet its obligations. In those cases the UCITS
        is exposed to the risk that it cannot meet all or a part of its commitments under the
        terms of a financial derivatives operation. Article 42 of Directive 85/611/EEC
        therefore generally prohibits the execution of uncovered sales in order to avoid heavy
        losses for UCITS. However, in the context of an operation with financial derivative
        instruments having the financial profile of an uncovered sale, the risks typically
        associated with uncovered sales may not always have the same relevance. It is
        therefore appropriate to clarify the concept of uncovered sales with regard to financial
        derivative instruments and to recommend criteria applicable to the cover of a
        derivatives transaction in order to facilitate compliance with Article 42.
(10)    This Recommendation is a first step towards a uniform understanding of risk
        measurement methodologies in the UCITS area. However, risk-measurement
        methodologies are submitted to a permanent progress. Further steps may therefore be
        necessary taking into account further developments such as the Basle Capital Accord
        (Basel II) and the future corresponding Community Directive on capital requirements
        for banks and investment firms.
(11)    This Recommendation provides some basic elements which should be taken into
        consideration by Member States for their implementation of Directive 85/611/EEC as
        amended by Directive 2001/108/EC. It should be noted that this Recommendation is
        not intended to provide exhaustive guidelines on the use of financial derivative
        instruments for UCITS but to outline some principles which can be considered as an
        essential basis of a common risk-measurement approach for UCITS,
HEREBY RECOMMENDS:
In the framework of implementing Directive 85/611/EEC Member States should apply the
following:
1. Risk-measurement systems adapted to the relevant risk-profile of the UCITS
In applying Article 21(1) of Directive 85/611/EEC, Member States are recommended to
ensure that management or investment companies employ risk measurement systems which
are adapted to the relevant risk-profile of a UCITS in order to make sure that they accurately
measure all material risks related to the UCITS under the supervision of the competent
authorities.
2. A harmonised interpretation of limitations to the UCITS’ risk- exposure
2.1 Limitation to a UCITS’ global exposure on derivatives and overall risk exposure
Member States are recommended to ensure that the global exposure relating to financial
derivative instruments may not exceed 100% of the UCITS’ net asset value (NAV), and hence
that the UCITS’ overall risk exposure may not exceed 200% of the NAV on a permanent
basis.
 ---pagebreak--- L 144/36         EN               Official Journal of the European Union               30.4.2004
2.2 Limitation to possible temporary borrowing
Member States are recommended to ensure that the UCITS’ overall risk exposure may not be
increased by more than 10% by means of temporary borrowing, so that the UCITS’ overall
risk exposure may not exceed 210% of the NAV under any circumstances.
2.3 Joint application of points 3 and 4
For the application of the 100% global exposure limit relating to derivatives, Member States
are recommended to ensure that both points 3 and 4 are respected.
3. Appropriately calibrated standards to measure market risk
3.1 Adaptation of risk-measurement methodologies to the risk-profile of a UCITS
In conformity with the overarching principle mentioned under point 1 and established in
Article 21(1) of Directive 85/611/EEC, Member States are recommended to allow a
differentiated methodological approach for the respective categories of “non-sophisticated
UCITS”, which have overall less and simpler derivative positions by using e.g. a few plain
vanilla options, and “sophisticated UCITS”. The distinction between, and exact definition of,
these categories requires further work in accordance with point 3.4. Pending completion of
such work, Member States should move towards a more calibrated approach for measuring
market risk in accordance with points 3.2 and 3.3.
3.2 Non-sophisticated UCITS
3.2.1 Use of the commitment approach
Member States are recommended to request their competent authorities to ensure that, in the
case of non-sophisticated UCITS, they are satisfied that market risk is adequately assessed by
using the commitment approach, whereby the derivative positions of a UCITS are converted
into the equivalent position in the underlying assets embedded in those derivatives. For the
application of the commitment approach, Member States’ competent authorities should also
take into account criteria such as the UCITS’ overall exposure deriving from the employment
of financial derivative instruments, the nature, aim, number and frequency of the contracts
entered into by the UCITS and the management techniques adopted.
3.2.2 Technical precisions
In the case of options, Member States are recommended to allow the application of the delta
approach, which is derived from the sensitivity of the change in the option's price to marginal
changes in the price of the underlying financial instruments. The conversion of forwards,
futures and swaps positions should depend on the precise nature of the underlying contracts.
In the case of simple contracts, the marked-to-market value of the contracts will usually be
relevant.
3.2.3 Invitation to consider further additional safeguards
Member States are required to consider whether additional safeguards are requested in the
context of the use of the commitment approach, such as an appropriate cap to the global
exposure relating to financial derivative instruments below 100% of NAV for non-
sophisticated UCITS.
 ---pagebreak--- 30.4.2004        EN              Official Journal of the European Union                 L 144/37
3.3 Sophisticated UCITS
3.3.1 Standard use of Value-at-Risk (VaR) approach with stress tests
In the case of “sophisticated UCITS”, Member States are recommended to require
management or investment companies to apply regularly VaR approaches. In the VaR-
approaches, the maximum potential loss that a UCITS portfolio could suffer within a certain
time horizon and a certain degree of confidence is estimated. Member States are
recommended to require management or investment companies also to apply stress tests in
order to help manage risks related to possible abnormal market movements. Stress tests
measure how extreme financial or economic events affect the value of the portfolio at a
specific point of time.
3.3.2 Invitation to develop common reference standards as a further step
For the application of VaR-approaches, Member States are recommended to require the use of
appropriate standards in conformity with point 3.1. For this purpose, Member States should
consider, as a possible reference the following parameters: a 99% confidence interval, a
holding period of one month and “recent” volatilities, i.e. no more than one year from the
calculation date without prejudice to further testing by the competent authorities. Once
common standards have been developed by further work undertaken by Member States in
accordance with point 3.4, Member States should allow management or investment
companies to deviate from these standards only on a case-by-case basis, subject to the
appropriate examination of the competent authorities in accordance with what is provided for
in point 3.3.3.
3.3.3 Internal risk-measurement models
Member States are recommended to accept only those internal risk-measurement models
proposed by a management or investment company which are subject to appropriate
safeguards, including those set out in this recommendation. The models concerned should be
subject to appropriate examination by the competent national authorities. Member States are
also recommended to disclose a list of models recognised by the competent national
authorities, and make them publicly available by appropriate means.
3.4 Recommendation to carry out further work
Considering that these risk-measurement methodologies need further refinement, Member
States are recommended to encourage their competent authorities to undertake further work
with a view to elaborating more advanced and elaborated methods of risk-measurement and
thus develop a convergent Community-wide approach. This concerns in particular:
" a) the criteria to identify sophisticated and non-sophisticated UCITS;
" b) the conversion of financial derivative instruments into equivalent underlying assets
        and the netting of positions underlying the financial derivative instruments in case of
        the application of the commitment approach;
" c) best practices in the area of VaR and stress tests;
" d) the standards which internal models must meet in order to be used by UCITS.
4. Appropriately calibrated standards to assess leverage
 ---pagebreak--- L 144/38         EN                Official Journal of the European Union               30.4.2004
4.1 Use of the commitment approach
In the absence of the advanced methodologies mentioned under point 4.2, Member States are
recommended to request the use of the commitment approach to assess a UCITS’ leverage, in
combination with the VaR-approaches and the stress-tests required for the purpose of
measuring market risk exposure of sophisticated UCITS under point 3.3.
Member States are also recommended to allow management or investment companies which
use the commitment approach according to point 3.2 to also employ the commitment
approach for the assessment of leverage.
4.2 Invitation to allow the use of further advanced methodologies
In the case of sophisticated UCITS under point 3.3, provided that the supervisory authorities
are fully convinced that a given management or investment company has already developed
and tested an appropriate method of assessing leverage by the means of VaR-approaches and
stress tests and provided that this method is duly documented by the management or
investment company, Member States should consider recognising it for the assessment of
leverage. For this purpose, Member States are specifically recommended to consider
approaches relying on a standard of comparison such as the VaR/stress test value of an
appropriate reference portfolio which complies with the investment policy of a UCITS or the
VaR/stress test value of an adequate benchmark.
4.3 Recommendation to carry out further work
Member States are recommended to take into account that the methods for assessing the
leverage of a UCITS need further refinement, in particular with respect to the maximum
VaR/stress-test value corresponding to a total exposure of 200% of a UCITS’ NAV.
Therefore they should encourage their competent national authorities to undertake further
work to develop more advanced and sophisticated methods of assessing leverage aiming at the
development of a convergent Community-wide approach.
5. Applying appropriate standards and recognised risk-mitigation techniques to limit
counterparty risk
5.1 Criteria for the limitation of counterparty risk exposure to OTC derivatives
Member States are recommended to ensure that all the derivatives transactions which are
deemed to be free of counterparty risk are performed on an exchange where the clearinghouse
meets the following conditions: it is backed by an appropriate performance guarantee, and is
characterised by a daily mark-to-market valuation of the derivative positions and an at least
daily margining.
5.2 Recommendation to use maximum potential loss
Member States are recommended to require the exposure per counterparty on an OTC-
derivative transaction to be measured on the maximum potential loss incurred by the UCITS
if the counterparty defaults and not on the basis of the notional value of the OTC contract.
5.3 Invitation to use the standards laid down in Directive 2000/12/EC as a first reference
 ---pagebreak--- 30.4.2004          EN            Official Journal of the European Union                   L 144/39
In compliance with the fixed quantitative prudential limits already imposed by Directive
2001/108/EC, Member States are recommended to require the assessment of counterparty risk
with regard to OTC-derivatives in accordance with the marking-to-market method laid down
in Directive 2000/12/EC of the European Parliament and of the Council3, notwithstanding the
need of appropriate pricing models when the market price is not available. Member States
should also require the use of the full credit equivalent approach laid down in Directive
2000/12/EC, including an add-on methodology to reflect the potential future exposure.
5.4 Recognition of collateral for the purpose of assessing a UCITS’ counterparty risk
exposure
5.4.1 General criteria
Member States are recommended to allow for the recognition of collateral in order to reduce a
UCITS’ counterparty risk provided that, in accordance with the prudential rules laid down in
Directive 2000/12/EC and taking into account further developments, the collateral:
" a) is marked-to-market on a daily basis and exceeds the value of the amount at risk;
" b) is exposed only to negligible risks (e.g. government bonds of first credit rating or
         cash) and is liquid;
" c) is held by a third part custodian not related to the provider or is legally secured from
   the consequences of a failure of a related party;
" d) can be fully enforced by the UCITS at any time.
5.4.2 Risk concentration limits
In accordance with the general principle of risk-spreading, Member States are recommended
to ensure that the exposure to counterparty risk on a given entity, respectively group, after
taking into account any collateral received from that entity, or group, may not be higher than
the 20% limit laid down in Directive 85/611/EEC, both at individual level, under the second
sub-paragraph of Article 22(2) and at group level, under Article 22(5) of that Directive.
5.5 Recognition of netting
Member States are recommended to allow UCITS to net their OTC-derivative positions vis-à-
vis the same counterparty, provided that the netting procedures comply with the conditions
laid down in Directive 2000/12/EC and that they are based on legally binding agreements.
6. Using adequate methodologies when applying limitations to issuer risk
6.1 Adaptation of the risk-measurement methodologies to the derivatives typology
Considering that the fourth subparagraph of Article 21(3) of Directive 85/611/EEC provides
that, in order to include financial derivative instruments into the issuer concentration limits
foreseen by Article 22, they should be converted into equivalent underlying positions,
Member States are recommended to require the use of methodologies adequate to the type of
instrument considered. For example, Member States may allow the use of the delta approach
for options. In cases where this approach is not relevant or technically impossible, due to the
complexity of the concerned financial derivative instrument, Member States may then allow
3
  OJ L 126, 26.5.2000, p.1
 ---pagebreak--- L 144/40         EN               Official Journal of the European Union                30.4.2004
the use of an approach based on the maximum potential loss linked to that derivative as a
maximum threshold assessment of the solvency risk.
6.2 Case of index-based derivatives
Member States are advised, in the use of their discretionary powers for the application of the
option foreseen by the third subparagraph of Article 21(3) of Directive 85/611/EEC, to take
into account whether the underlying index of a financial derivative instrument meets the
requirements of Article 22a of that Directive. For the application of Article 21(2) and the third
subparagraph of Article 21(3) of that Directive, Member States are recommended to consider
that, a management or investment company should generally be prevented from using
financial derivative instruments based on a self-composed index with the intent to circumvent
the issuer concentration limits of Article 22. Member States are also recommended to
consider that a management or investment company should be prevented from using financial
derivative instruments based on indices which do not comply with the concentration limits set
by Article 22a of Directive 85/611/EEC.
6.3 Risk-concentration limits
Member States are recommended to require management companies or investment companies
to cumulate counterparty risk with issuer risk versus the same entity or group for the
application of the 20% NAV-limit pursuant to the second subparagraph of Article 22(2)and
Article 22(5) of Directive 85/611/EEC.
7. Applying relevant cover rules to transactions with both listed, and OTC, financial
derivative instruments
7.1 Appropriate cover in the absence of cash-settlement
When the financial derivative instrument provides for, either automatically or at the
counterpart’s choice, physical delivery of the underlying financial instrument on maturity or
exercise, and provided that physical delivery is common practice on the considered
instrument, Member States are recommended to require UCITS to hold this underlying
financial instrument as cover in their investment portfolios.
7.2 Exceptional substitution with an alternative underlying cover in the absence of cash
settlement
In cases where the risks of the underlying financial instrument of a derivative can be
appropriately represented by another underlying financial instrument and the underlying
financial instrument is highly liquid, Member States should consider allowing UCITS to hold
exceptionally other liquid assets as cover provided that they can be used at any time to
purchase the underlying financial instrument to be delivered and that the additional market
risk which is associated with that type of transaction is adequately measured.
7.3 Substitution with an alternative underlying cover in the case of cash-settlement
Where the financial derivative instrument is cash-settled automatically or at the UCITS
discretion, Member States should consider allowing the UCITS not to hold the specific
underlying instrument as cover. In this case, Member States are recommended to consider the
following categories as acceptable cover:
 ---pagebreak--- 30.4.2004        EN                Official Journal of the European Union                   L 144/41
–         a)    Cash;
–         b)    Liquid debt instruments (e.g. government bonds of first credit rating) with
                appropriate safeguards (in particular, haircuts);
–         c)    Other highly liquid assets which are recognised by the competent authorities
                considering their correlation with the underlying of the financial derivative
                instruments, subject to appropriate safeguards (e.g. haircuts where relevant).
In the context of the application of Article 42 of Directive 85/611/EEC, Member States should
consider as “liquid” those instruments which can be converted into cash in no more than
seven business days at a price closely corresponding to the current valuation of the financial
instrument on its own market. Member States are recommended to ensure that the respective
cash amount be at the UCITS’ disposal at the maturity/expiry or exercise date of the financial
derivative instrument.
7.4 Calculation of the level of cover
Member States are recommended to require the level of cover to be calculated in line with the
commitment approach.
7.5 Nature of the underlying financial instrument
Member States are recommended to require that the underlying financial instrument of
financial derivative instruments, whether they provide for cash-settlement or physical
delivery, as well as the financial instruments held for cover have to be compliant with the
Directive and the individual investment policy of the UCITS.
7.6 Recommendation to undertake further common work
As regards cover of transactions with financial derivative instruments, Member States are
recommended to encourage their competent authorities to identify a common typology of
transactions with financial derivative instruments in which the risk profile of an uncovered
sale may be identified.
8. The Member States are requested to inform the Commission, insofar as possible, by 30
September 2004 of any measures they have taken further to this Recommendation and to
inform it of the first results of its implementation, in as far as they are able, no later than 28
February 2005.
9. This Recommendation is addressed to the Member States.
Done at Brussels, 27 April 2004.
                                                   For the Commission
                                                   Frederik BOLKESTEIN
                                                   Member of the Commission


title: Council Recommendation of 8 March 2005 concerning the discharge to be given to the Commission in respect of the implementation of the operations of the European Development Fund (Eighth EDF) for the financial year 2003

text:
               23.3.2005

               EN

               Official Journal of the European Union

               L 77/12

         COUNCIL RECOMMENDATION
   of 8 March 2005
   concerning the discharge to be given to the Commission in respect of the implementation of the operations of the European Development Fund (Eighth EDF) for the financial year 2003
   (2005/254/EC)
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty establishing the European Community,
   Having regard to the Fourth ACP-EEC Convention, signed at Lomé on 15 December 1989, as amended by the Agreement signed at Mauritius on 4 November 1995,
   Having regard to the Internal Agreement on the financing and administration of Community aid under the Second Financial Protocol to the Fourth ACP-EC Convention (1) setting up, amongst others, the Eighth European Development Fund (Eighth EDF), and in particular Article 33(3) of that Agreement,
   Having regard to the Financial Regulation of 16 June 1998 applicable to development finance cooperation under the Fourth ACP-EC Convention (2), and in particular Articles 66 to 74 thereof,
   Having examined the revenue and expenditure account and the balance sheet relating to the operations of the Eighth EDF as at 31 December 2003, and the Court of Auditors’ Report concerning the financial year 2003 together with the Commission’s replies (3),
   Whereas:

               (1)

               Pursuant to Article 33(3) of the said Internal Agreement, the discharge for the financial management of the Eighth EDF is to be given to the Commission by the European Parliament on the recommendation of the Council.

               (2)

               The overall implementation by the Commission of the operations of the Eighth EDF during the financial year 2003 has been satisfactory,

         HEREBY RECOMMENDS
   that the European Parliament give the Commission a discharge in respect of the implementation of the operations of the Eighth EDF for the financial year 2003.

      Done at Brussels, 8 March 2005.

            For the Council

            The President

         J.-C. JUNCKER

      (1)  OJ L 156, 29.5.1998, p. 108.

      (2)  OJ L 191, 7.7.1998, p. 53.

      (3)  OJ C 293, 30.11.2004, p. 315.


Important legal notice

|

E2000C0068

Recommendation of the EFTA Surveillance Authorithy No 68/00/COL of 24 March 2000 on a coordinated programme for the official control of foodstuffs for 2000

Official Journal L 274 , 26/10/2000 P. 0042 - 0050

Recommendation of the EFTA Surveillance AuthorithyNo 68/00/COLof 24 March 2000on a coordinated programme for the official control of foodstuffs for 2000THE EFTA SURVEILLANCE AUTHORITY,Having regard to the EEA Agreement, and in particular Article 109 and Protocol 1 thereto,Having regard to the Surveillance and Court Agreement, and in particular Article 5(2)(b) and Protocol 1 thereto,Having regard to the Act referred to in point 50 of Chapter XII of Annex II to the EEA Agreement on the official control of foodstuffs (Council Directive 89/397/EEC of 14 June 1989 on the official control of foodstuffs)(1), and in particular Article 14(3) thereof,After consulting the EFTA Foodstuffs Committee assisting the EFTA Surveillance Authority,Whereas it is necessary with a view to the sound operation of the European Economic Area, to arrange for coordinated food inspection programmes within the EEA;Whereas such programmes emphasise compliance with the foodstuffs legislation in force under the EEA Agreement, the protection of public health, consumer interests and fair trade practices;Whereas Article 3 of the Act referred to in point 54n of Chapter XII of Annex II to the EEA Agreement (Council Directive 93/99/EC of 29 October 1993 on the subject of additional measures concerning the official control of foodstuffs)(2) requires the laboratories referred to in Article 7 of Directive 89/397 to comply with the criteria in the European standard EN45000 series; whereas only such laboratories may be considered suitable to carry out analyses within the coordinated programme of official controls;Whereas the results from simultaneous implementation of national programmes and coordinated programmes can provide information and experience on which to base future control activities;Whereas Liechtenstein shall comply with the provisions of the acts referred to in Chapter XII of Annex II to the EEA Agreement by 1 January 2000, whereas therefore Liechtenstein is included in this recommendation for 2000;Whereas the European Commission, in its recommendation of 22 February 2000 concerning a coordinated programme for the official control of foodstuffs for 2000, has recommended the Member Staates of the European Union to apply a corresponding programme,HAS ADOPTED THIS RECOMMENDATION:1. It is recommended that during 2000 Iceland, Liechtenstein and Norway should carry out controls and, where indicated, take samples and analyse such samples in laboratories, carry out audits and/or inspections, to monitor compliance with the following EEA Acts and measures:(a) Article 3(2) of the Act referred to in point 54j Chapter XII of Annex II to the EEA Agreement (Council Directive 93/43/EEC of 14 June 1993 on the hygiene of foodstuffs)(3) concerning the application of the principles of HACCP in certain types of food businesses,(b) paragraph 2 of Chapter IV of the Annex to Directive 93/43 concerning bulk transport of foodstuffs,(c) the Act referred to in point 53 in Chapter XII of Annex II to the EEA Agreement (Council Directive 90/496/EEC of 24 September 1990 on nutrition labelling for foodstuffs)(4) concerning nutritional claims on fruit-flavoured milk drinks, yoghurts and soft drinks.2. Although sampling and/or inspection rates have not been set, Iceland, Liechtenstein and Norway should ensure that these are sufficient to provide an overview of the subject under consideration in each State. Suggestions will be made for methods of analysis.3. Iceland, Liechtenstein and Norway should provide information as requested, following the format of the record sheets provided in the Annex, to help enhance the comparability of results.4. Foodstuffs submitted for analysis under this programme should be submitted to laboratories complying with the provisions of Article 3 of Directive 93/99.5. HACCP in certain food businesses5.1. Scope of the programmeArticle 3(2) of Directive 93/43 requires food business operators covered by the Directive to apply certain principles of the hazard analysis and critical control point (HACCP) system to their businesses in addition to the general hygiene requirements contained in the Annex to the Directive. Since the coming into force of the Directive in December 1995 food business operators have been required to have in place systems for analysis and control of food safety hazards, which may be based, where they exist, on voluntary industry guides to good hygiene practice. Article 5 of Directive 93/43 requires Iceland, Liechtenstein and Norway to encourage the development of sectoral voluntary guides to good hygiene practice which elaborate, for the sector concerned, the general hygiene principles of the Annex to the Directive and the requirements relating to the application of the principles of HACCP in Article 3(2).Article 3(2) of Directive 93/43 applies to all food busineses covered by the Directive regardless of size or type of business. As the range of businesses which must comply with this provision is broad, for the sake of comparability of results only, certain types and sizes of food businesses have been selected. This selection does not in any way indicate that other businesses have more or less responsibility under this provision.5.2. MethodThe competent authorities of Iceland, Liechtenstein and Norway, in the normal course of their duties, shall visit the food business operations covered by Directive 93/43 in the following categories:(a) mass/industrial categoring establishments,(b) retail butchers selling directly to consumers.The results of the control shall be recorded on the report forms in the Annex.6. Transport of bulk foodstuffs6.1. Scope of the programmeChapter IV of the Annex to Directive 93/43 specifically requires bulk foodstuffs in liquid, granulate or powdered form to be transported in receptacles and/or containers/tankers reserved for the transport of foodstuffs. For two classes of foodstuffs derogations to this provision have been adopted by the Commission and become a part of the EEA Agreement, namely in relation to the transport by sea of edible oils and fats, and raw sugar. This element of the coordinated programme is designed to check whether foodstuffs which are not covered by the derogations made under Article 4 of Directive 93/43 comply with the requirements relating to transport.6.2. MethodThe results of the following controls should be recorded on the report forms in the Annex:- on the premises of manufacturers of bulk foodstuffs of non-animal origin (oil, flour, starch, etc.), controls should be carried out to check the condition, repair and cleanliness of the receptacles, in line with the general provisions of Chapter IV of the Annex to Directive 93/43 and a record kept. Controls should be carried out to establish whether the manufacturer has satisfactory procedures in place to ensure that the receptacles or vessels used for the transport of the foodstuffs are reserved for foodstuffs only,- controls should be undertaken on the premises of carriers, in order to check the types of goods carried, by examining transport documents and by direct observation.7. Nutrition labelling7.1. Scope of the programmeDirective 90/496 lays down specific labelling requirements for nutrients present in a food when labelling or presentation of the food comprises a nutritional claim. Foodstuffs for special nutritional uses within the scope of the Act referred to in point 51 in Chapter XII of Annex II to the EEA Agreement (Council Directive 89/398/EEC of 3 May 1989 on the approximation of the laws of the Member States relating to foodstuffs intended for particular nutritional uses)(5) are excluded.7.2. MethodFoods in two categories, fruit and vegetable juices, and fruit-flavoured milk drinks and yoghurts, which claim certain nutritional qualities on their labels, should be sampled to examine whether the nutritional claim is authorised and whether the wording conforms with the provisions of Directive 90/496. Furthermore, the sample should be analysed in order to establish whether the values in the nutritional claim are accurate or within accepted tolerances. The results should be recorded on the report forms in the Annex.Done at Brussels, 24 March 2000.For the EFTA Surveillance AuthorityHannes HafsteinCollege Member(1) Hereinafter referred to as "Directive 89/397".(2) Hereinafter referred to as "Directive 93/99".(3) Hereinafter referred to as "Directive 93/43".(4) Hereinafter referred to as "Directive 90/496".(5) Hereinafter referred to as "Directive 89/398".ANNEX>PIC FILE= "L_2000274EN.004502.EPS">>PIC FILE= "L_2000274EN.004601.EPS">>PIC FILE= "L_2000274EN.004701.EPS">>PIC FILE= "L_2000274EN.004702.EPS">>PIC FILE= "L_2000274EN.004801.EPS">>PIC FILE= "L_2000274EN.004901.EPS">


title: Council Recommendation of 10 March 2014 on a Quality Framework for Traineeships

text:
               27.3.2014

               EN

               Official Journal of the European Union

               C 88/1

      COUNCIL RECOMMENDATION

   of 10 March 2014
   on a Quality Framework for Traineeships
   2014/C 88/01
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Article 292, in conjunction with Articles 153 and 166, thereof,
   Having regard to the proposal from the European Commission,
   Whereas:

               (1)

               Young people have been hit particularly hard during the crisis. Youth unemployment rates have reached historical peaks in the past years in several Member States, without any sign of decrease in the short term. Fostering the employability and productivity of young people is key to bringing them onto the labour market.

               (2)

               A smooth transition from education to employment is crucial for enhancing the chances of young people on the labour market. Improving young people's education and facilitating their transition to employment are necessary for achieving the Europe 2020 headline target of aiming to reach a 75 % employment rate of women and men aged 20-64 by 2020. Guideline 8 on the employment policies of the Member States calls on the Member States to enact schemes to help young people and in particular those not in employment, education or training find initial employment, job experience, or further education and training opportunities, including apprenticeships, and to intervene rapidly when young people become unemployed (1).

               (3)

               Over the past two decades, traineeships have become an important entry point into the labour market.

               (4)

               Socio-economic costs arise if traineeships, particularly repeated ones, replace regular employment, notably entry-level positions usually offered to trainees. Moreover, low-quality traineeships, especially those with little learning content, do not lead to significant productivity gains nor do they entail positive signalling effects. Social costs can also arise in connection with unpaid traineeships that may limit the career opportunities of those from disadvantaged backgrounds.

               (5)

               There is evidence that links exist between the quality of the traineeship and the employment outcome. The value of traineeships in easing the transition to employment depends on their quality in terms of learning content and working conditions. Quality traineeships bring direct productivity benefits, improve labour market matching and promote mobility, notably by decreasing search and matching costs both for enterprises and for trainees.

               (6)

               The Council Recommendation on establishing a Youth Guarantee (2) invites Member States to ensure that all young people up to the age of 25 years receive a good-quality offer of employment, continued education, an apprenticeship or a traineeship within four months of becoming unemployed or leaving formal education.

               (7)

               Various studies and surveys have found that quality problems affect a significant share of traineeships, most particularly those where no educational or training institution is directly responsible for the learning content and the working conditions of the traineeship.

               (8)

               Evidence shows that a significant number of trainees are simply asked to do menial tasks. A quality traineeship must also offer a solid and meaningful learning content. This means, inter alia, the identification of the specific skills to be acquired, supervision and mentoring of the trainee, and monitoring of his/her progress.

               (9)

               Problems have also been identified as regards working conditions, e.g. long working hours, lack of social security coverage, the presence of health and safety or occupational risks, little or no remuneration and/or compensation, a lack of clarity on the applicable legal regimes, and the excessively prolonged duration of the traineeship.

               (10)

               Traineeships are currently unregulated in some Member States and sectors and, where regulation exists, it is very diverse and provides different quality elements or different implementing practices. In the absence of a regulatory framework or instrument, or because there is a lack of transparency regarding working conditions for traineeships and their learning content, many traineeship providers are able to use trainees as cheap or even unpaid labour.

               (11)

               A Quality Framework for Traineeships will support the improvement of working conditions and the learning content of traineeships. The main element of the Quality Framework for Traineeships is the written traineeship agreement that indicates the educational objectives, adequate working conditions, rights and obligations, and a reasonable duration for traineeships.

               (12)

               Lack of information is one of the causes of low quality traineeships and is a much more widespread problem for traineeships than it is for regular employment. Increased transparency requirements for notices or announcements advertising traineeship positions would help to improve working conditions and stimulate cross-border mobility.

               (13)

               The social partners play a key role in the design, implementation and monitoring of training policies and programmes. Cooperation between the social partners, providers of lifelong career guidance services and relevant authorities could aim at providing trainees with targeted information on available career opportunities and skills needs on labour markets, as well as on trainees' rights and responsibilities. In addition, the social partners can play a role in facilitating the implementation of the Quality Framework for Traineeships, notably by drawing up and making available simple and concise model traineeship agreements, particularly for use by micro enterprises and tailored for their specific purposes. In their Framework of Actions on Youth Employment of July 2013, the European social partners took note of the Commission’s intention to propose a Council Recommendation in this field and announced their support for Member States’ actions aiming to improve the quality of traineeships.

               (14)

               One of the challenges is to increase the cross-border mobility of trainees in the Union so as to help foster a genuine European labour market. The existing diversity in regulations constitutes an obstacle to the development of cross-border trainee mobility. Moreover, in some cases, administrative and legal obstacles to cross-border mobility of trainees have been found to affect several of the receiving Member States. In this context, information on the right to cross-border mobility of trainees, in particular the rights included in Directive 2004/38/EC (3), is important. By providing principles and guidelines to serve as a reference, the Quality Framework for Traineeships will also facilitate access to transnational traineeships.

               (15)

               The development of a Quality Framework for Traineeships will increase transparency. Furthermore, it could support an extension of EURES to paid traineeships, thus facilitating mobility.

               (16)

               The Member States' programmes promoting and offering traineeships can be financially supported by the European Funds. In addition, the Youth Employment Initiative will support traineeships in the context of the Youth Guarantee, targeting young people from the Union's regions worst affected by youth unemployment and co-financed by the European Social Fund (ESF) 2014-2020. The ESF as well as the Youth Employment Initiative can be used to increase the number and the quality of Member States' traineeship schemes. This involves a possible contribution to the cost of the traineeships including, under certain conditions, a part of the allowance. In addition, they can also support the costs of other forms of training that trainees may pursue outside their traineeship, e.g. language courses.

               (17)

               The Commission has launched a specific ESF Technical Assistance Support Programme to help Member States establish traineeship schemes with ESF support. This Support Programme provides strategic, operational and policy advice to national and regional authorities that are considering the establishment of new traineeship schemes, or the modernization of existing schemes.

               (18)

               The Council, in its Resolution on the Structured Dialogue on Youth Employment of May 2011, stated that a quality framework for internships is desirable in order to guarantee the educational value of such experience.

               (19)

               Council conclusions from 17 June 2011 on ‘Promoting youth employment to achieve the Europe 2020 objectives’ invited the Commission to provide guidance on conditions for high quality traineeships by means of a quality framework for traineeships.

               (20)

               In 14 June 2012 in its Resolution ‘Towards a job-rich recovery’ the European Parliament invited the Commission to present as soon as possible a proposal for a Council Recommendation on a Quality Framework for Traineeships, and to define minimum standards supporting the provision and take-up of high-quality traineeships.

               (21)

               The 28-29 June 2012 European Council invited the Commission to examine the possibility of extending the EURES portal to traineeships.

               (22)

               The European Council conclusions of 13-14 December 2012 invited the Commission to rapidly finalise the quality framework for traineeships.

               (23)

               In the Youth Employment Package of 6-7 December 2012, the Commission launched a social partner consultation on a Quality Framework for Traineeships. In their replies, EU social partners informed the Commission that they did not intend to launch negotiations towards an autonomous agreement under Article 154 TFEU.

               (24)

               The 27-28 June 2013 European Council reconfirmed that the Quality Framework for Traineeships should be put into place in early 2014.

               (25)

               The Quality Framework is an important reference point for determining what constitutes a good quality offer of traineeships under the Council Recommendation on Establishing a Youth Guarantee.

               (26)

               According to the Annual Growth Survey 2014 it is essential to facilitate the transition from school to work, notably by increasing the availability of good quality traineeships or apprenticeships.

               (27)

               For the purposes of this Recommendation, traineeships are understood as a limited period of work practice, whether paid or not, which includes a learning and training component, undertaken in order to gain practical and professional experience with a view to improving employability and facilitating transition to regular employment.

               (28)

               This Recommendation does not cover work experience placements that are part of curricula of formal education or vocational education and training. Traineeships the content of which is regulated under national law and whose completion is a mandatory requirement to access a specific profession (e.g. medicine, architecture, etc.) are not covered by this Recommendation.

               (29)

               Considering the nature and objective of this Recommendation, it should not be interpreted as hindering Member States from maintaining or establishing more favourable provisions for trainees than the ones recommended.

         HEREBY RECOMMENDS THAT MEMBER STATES:

               1.

               Improve the quality of traineeships, in particular as regards learning and training content and working conditions, with the aim of easing the transition from education, unemployment or inactivity to work by putting in practice the following principles for a Quality Framework for Traineeships:

      Conclusion of a written traineeship agreement

               2.

               Require that traineeships are based on a written agreement concluded at the beginning of the traineeship between the trainee and the traineeship provider;

               3.

               Require that traineeship agreements indicate the educational objectives, the working conditions, whether an allowance or compensation is provided to the trainee by the traineeship provider, and the rights and obligations of the parties under applicable EU and national law, as well as the duration of the traineeship, as referred to in recommendations 4-12;

      Learning and training objectives

               4.

               Promote best practices as regards learning and training objectives in order to help trainees acquire practical experience and relevant skills; the tasks assigned to the trainee should enable these objectives to be attained;

               5.

               Encourage traineeship providers to designate a supervisor for trainees guiding the trainee through the assigned tasks, monitoring and assessing his/her progress;

      Working conditions applicable to trainees

               6.

               Ensure that the rights and working conditions of trainees under applicable EU and national law, including limits to maximum weekly working time, minimum daily and weekly rest periods and, where applicable, minimum holiday entitlements, are respected;

               7.

               Encourage traineeship providers to clarify whether they provide coverage in terms of health and accident insurance as well as sick leave;

               8.

               Require that the traineeship agreement clarifies whether an allowance or compensation is applicable, and if applicable, its amount;

      Rights and obligations

               9.

               Encourage the concerned parties to ensure that the traineeship agreement lays down the rights and obligations of the trainee and the traineeship provider, including, where relevant, the traineeship provider's policies on confidentiality and the ownership of intellectual property rights;

      Reasonable duration

               10.

               Ensure a reasonable duration of traineeships that, in principle, does not exceed six months, except in cases where a longer duration is justified, taking into account national practices;

               11.

               Clarify the circumstances and conditions under which a traineeship may be extended or renewed after the initial traineeship agreement expired;

               12.

               Encourage the practice of specifying in the traineeship agreement that either the trainee or the traineeship provider may terminate it by written communication, providing advance notice of an appropriate duration in view of the length of the traineeship and relevant national practice;

      Proper recognition of traineeships

               13.

               Promote the recognition and validation of the knowledge, skills and competences acquired during traineeships and encourage traineeship providers to attest them, on the basis of an assessment, through a certificate;

      Transparency requirements

               14.

               Encourage traineeship providers to include in their vacancy notices and advertisements information on the terms and conditions of the traineeship, in particular on whether an allowance and/or compensation and health and accident insurance are applicable; encourage traineeship providers to give information on recruitment policies, including the share of trainees recruited in recent years;

               15.

               Encourage employment services and other providers of career guidance, if providing information on traineeships, to apply transparency requirements;

      Cross-border traineeships

               16.

               Facilitate the cross-border mobility of trainees in the European Union inter alia, by clarifying the national legal framework for traineeships and establishing clear rules on hosting trainees from, and the sending of trainees to, other Member States and by reducing administrative formalities;

               17.

               Examine the possibility to make use of the extended EURES network and to exchange information on paid traineeships through the EURES portal;

      Use of European Structural and Investment Funds

               18.

               Make use of the European Structural and Investment Funds, namely the European Social Fund and the European Regional Development Fund, in the programming period 2014-2020, and the Youth Employment Initiative, where applicable, for increasing the number and quality of traineeships, including through effective partnerships with all relevant stakeholders;

      Applying the Quality Framework for Traineeships

               19.

               Take appropriate measures to apply the Quality Framework for Traineeships as soon as possible;

               20.

               Provide information to the Commission by the end of 2015 on the measures taken in accordance with this Recommendation;

               21.

               Promote the active involvement of social partners in applying the Quality Framework for Traineeships;

               22.

               Promote the active involvement of employment services, educational institutions and training providers in applying the Quality Framework for Traineeships;

         NOTES THAT THE COMMISSION INTENDS TO:

               23.

               Foster close cooperation with the Member States, the social partners and other stakeholders with a view to swiftly applying this Recommendation;

               24.

               Monitor, in cooperation with the Member States and in particular through EMCO, the progress in applying the Quality Framework for Traineeships pursuant to this Recommendation and analyse the impact of the policies in place;

               25.

               Report on the progress in applying this Recommendation on the basis of information provided by Member States;

               26.

               Work with Member States, the social partners, employment services, youth and trainee organisations and other stakeholders to promote this Recommendation;

               27.

               Encourage and support Member States, including through promoting the exchange of best practices among them, to make use of the European Social Fund and the European Regional Development Fund or other European Funds for the 2014-2020 programming period to increase the number and quality of traineeships;

               28.

               Examine, together with the Member States, the possibility to include paid traineeships in EURES, and set up a dedicated webpage on national legal frameworks for traineeships.

      Done at Brussels, 10 March 2014.

            For the Council

            The President

         I. VROUTSIS

      (1)  Council Decision on Guidelines for the Employment policies of the Member States, 2010/707/EU of 21 October 2010 (OJ L 308, 24.11.2010, p. 46).

      (2)  OJ C 120, 26.4.2013, p. 1.

      (3)  Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC (OJ L 158, 30.4.2004, p. 77).


Avis juridique important

|

52004SC0828

Recommendation for a Council recommendation to Poland with a view to bringing an end to the situation of an excessive government deficit  /* SEC/2004/0828 final */

Recommendation for a COUNCIL RECOMMENDATION TO POLAND with a view to bringing an end to the situation of an excessive government deficit(presented by the Commission)EXPLANATORY MEMORANDUMOn 7 April 2004, the Commission published its Spring 2004 forecasts [1]. According to these forecasts, which took into consideration data reported by Poland in March 2004, the general government deficit in Poland increased from 3.6% of GDP in 2002 [2] to 4.1% of GDP in 2003, thus exceeding the 3% of GDP Treaty reference value.[1]  The Commission Spring 2004 forecast is available at the following website: http://europa.eu.int/comm/economy_finance/publications/european_economy/2004/ee204en.pdf.[2]  According to the convergence programme, submitted by the Polish authorities on 17 May, the deficit for 2002 was revised to 4.0% of GDP.Based on this prima facie evidence, the Commission initiated the excessive deficit procedure for Poland on 12 May 2004, with the adoption of the report foreseen in Article 104(3) of the Treaty [3]. On 17 May 2004, the Commission received the convergence programme of Poland, which confirmed a deficit figure of 4.1% of GDP for 2003.[3]  The full text of this report is available at the following website: http://europa.eu.int/comm/economy_finance/about/activities/sgp/procedures_en.htm.The application of the excessive deficit procedure (EDP) is governed by Article 104 of the Treaty and by Council Regulation (EC) No 1467/97 "on speeding up and clarifying the implementation of the excessive deficit procedure", which is part of the Stability and Growth Pact [4]. Countries that joined the EU on 1 May 2004 are Member States with a derogation and are to avoid excessive deficits, but sanctions according to Article 104 (9) and (11) cannot be imposed on them. The Commission report according to Article 104(3) of the Treaty concluded that the excess of the Polish deficit in 2003 over the 3% of GDP Treaty reference value did not result from an unusual event outside the control of the Polish authorities, nor was it the result of a severe economic downturn in the sense of the Stability and Growth Pact, as real GDP growth reached 3.7% in 2003. Concerning developments in 2004, the report concluded that the general government deficit is likely to increase and remain above 3% of GDP. In particular, the Commission Spring 2004 forecasts are for a general government deficit of 6.0% of GDP in 2004, which is above the 5.7% of GDP projected by the Polish authorities in the convergence programme.[4]  OJ L 209, 2.8.1997.Based on the Commission Spring 2004 forecasts, the Commission report also concluded that the debt-to-GDP ratio, which had reached 45.4% of GDP in 2003, will continue to remain below the 60% reference value of the Treaty in 2004. In particular, the Commission Spring 2004 forecasts project the debt ratio to reach 49.1% of GDP in 2004, which corresponds to the 49% of GDP projected by the Polish authorities in the convergence programme. The deficit and the debt figures will have to be adjusted upward if the open pension funds are excluded from the general government sector following the EUROSTAT decision on the classification of the funded pension schemes.Article 104(4) of the Treaty states that "the Committee provided for in Article 114 (i.e. the Economic and Financial Committee) has to formulate an opinion on the report of the Commission". The Committee issued its opinion on 24 May 2004, subscribing to the assessment made by the Commission in its report. In particular, the Committee concluded that the budgetary situation in Poland indicated the existence of an excessive deficit under the first of the two criteria foreseen by Article 104(2) for the identification of such deficits. Consideration of other relevant factors, in particular the medium-term budgetary position and the public investment ratio, did not change the assessment based on the criteria themselves. The Committee also considered as likely that the general government deficit would continue to exceed the Treaty reference value in 2004, and that general government gross debt would remain below the Treaty reference value of 60% of GDP in 2004.The Commission, having examined the relevant factors taken into account in its report and having regard to the opinion of the Committee, is of the opinion that an excessive deficit exists in Poland. This opinion, adopted by the Commission on 24 June 2004, has been addressed to the Council, according to Article 104(5) of the Treaty. The Commission has recommended that the Council shall decide accordingly, in conformity with Article 104(6). In addition, the Commission is herewith submitting to the Council a recommendation for a Council recommendation to be addressed to Poland with a view to bringing the situation of an excessive deficit to an end, according to Article 104(7) of the Treaty. The monitoring of the implementation of action taken by Poland may demand that the Council makes further recommendations according to Article 104(7), given the non-applicability of Article 104(9) to Member States with a derogation.Recommendation for a COUNCIL RECOMMENDATION TO POLAND with a view to bringing an end to the situation of an excessive government deficitTHE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community, and in particular Article 104(7) thereof;Having regard to the recommendation from the Commission;Whereas:(1) According to Article 104 of the Treaty, Member States are to avoid excessive government deficits;(2) The Stability and Growth Pact 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;(3) The Council has decided on [5 July] 2004, in accordance with Article 104(6), that an excessive deficit exists in Poland;(4) Having decided on the existence of an excessive deficit in Poland, the Council, in accordance with Article 104(7) of the Treaty and Article 3 of Council Regulation (EC) No 1467/97, is required to make at the same time recommendations to the Member State concerned with a view to bringing that situation to an end within a given period;(5) According to Article 3(4) of Council Regulation (EC) No 1467/97, this recommendation should specify that effective action is to be taken by the Member State concerned within four months at most and that the correction of the excessive deficit should be completed in the year following its identification unless there are special circumstances. Such special circumstances are present in the case of Poland namely because the general government deficit upon EU accession was significantly above the reference value and because of the ongoing structural shift in the economy;(6) The existence of special circumstances authorises the Council to allow the correction of the excessive deficit in a medium-term framework. It is appropriate to consider the convergence programme submitted by Poland in May 2004, and its subsequent updates, and the Council Opinions thereof as providing the adjustment path for the correction of the excessive deficit. The convergence programme of May 2004 plans to complete the correction of the excessive deficit by 2007, with the following annual targets for the general government deficit: 5.7% of GDP in 2004, 4.2% of GDP in 2005, 3.3% in 2006 and 1.5% of GDP in 2007. The programme builds its projections for 2005 and beyond on the so-called Hausner plan. The adjustment path is based on a macro-economic scenario which, according to the Council Opinion of [5 July] 2004 on the convergence programme, reflects rather favourable growth assumptions in the outer years of the programme;(7) In the view of the Council, 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.HEREBY RECOMMENDS:- the Polish authorities to put an end to the present excessive deficit situation as rapidly as possible;- the Polish authorities to take action in a medium-term framework in order to bring the deficit below 3% of GDP in 2007 in a credible and sustainable manner, in accordance with the path for deficit reduction specified in the Council Opinion on the convergence programme;- the Polish authorities to implement with vigour the measures envisaged in the May 2004 convergence programme, in particular those contained in the so-called Hausner plan;- the Polish authorities to take effective action by [5 November 2004] regarding the measures envisaged to achieve the 2005 deficit target.In addition, the Council invites the Polish authorities:- to allocate possible extra revenues to decrease the general government deficit;- to ensure the rise in the debt ratio is brought to a halt.This recommendation is addressed to the Republic of Poland.Done at Brussels, [5 July] 2004.For the CouncilThe President[...]