               EUROPEAN COMMISSION
            Brussels, 16.11.2016
            COM(2016) 726 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the economic policy of the euro area

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the economic policy of the euro area

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Article 136 in conjunction with Article 121(2) 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,

               Having regard to the conclusions of the European Council,

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

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)Economic recovery in the euro area continues, but remains fragile. There has been significant progress in recent years: since 2015, euro area GDP has recovered its pre-crisis level in real terms and unemployment has declined to its lowest level since 2010-11. However, aggregate demand is sluggish, inflation is well below target, in spite of very accommodative monetary policy by the European Central Bank, and growth is hindered by the legacies of the crisis, such as persisting macroeconomic imbalances and a high level of indebtedness in all sectors of the economy, which require deleveraging and reduce resources available for consumption and investment. Additionally, while the growth potential of the euro area economy has been on a long-term downward trend, that trend has been further accentuated by the crisis. In spite of signs of improvement, the persistent investment gap and the high level of unemployment create the risks of further dampening growth prospects. The asymmetric nature of the rebalancing in the euro area economy has continued, with only net debtor countries correcting their imbalances, and is resulting in an increasing current account surplus. As part of the global agreement within the G20, euro area Member States are called to use all policy tools – monetary, fiscal and structural – individually and collectively – achieve strong, sustainable, balanced and inclusive growth.

               (2)Ambitious structural reforms should facilitate the smooth and efficient reallocation of human and capital resources, help to address the challenges of the ongoing technological and structural changes. Reforms that create an enabling business climate, complete the Single Market and remove barriers to investment are necessary. Those efforts are crucial for increasing productivity and employment, strengthening convergence and enhancing the growth potential and adjustment capacity of the euro area economy. Structural reform implementation, by creating efficient markets with responsive price mechanisms, would support monetary policy through facilitating its transmission to the real economy. Reforms that remove investment bottlenecks and support investment can bring a double benefit by supporting economic activity in the short term and creating capacity for long-term growth. Reforms that improve productivity are particularly important for the Member States with large deleveraging needs linked to high external debt, as faster growth helps to reduce the debt as a share of GDP. Boosting price- and non-price competitiveness would further contribute to external rebalancing in those countries. Member States with large current acccount surpluses can contribute to euro area rebalancing by introducing measures, including structural reforms, that facilitate channelling the excessive savings to domestic demand, in particular by strengthening investment. The current environment of low interest rates also offers additional opportunities in this regard, notably in countries with significant fiscal space.

               (3)Better coordination of the implementation of structural reforms, including those prescribed in the country-specific recommendations and those needed to complete the Economic and Monetary Union (EMU), can create positive spillovers in the Member States and strengthen their positive short-term effects. Eurogroup thematic discussions have proved valuable for building common understanding of reform priorities in the euro area, sharing best practices, promoting reform implementation and structural convergence. The Eurogroup should continue these discussions, strengthening them where possible, making effective use of agreed common principles and benchmarking. The National Productivity Boards, to be established in response to the Council recommendation adopted on 20 September 2016,
                  3
                can also contribute to the debate at the national level and to the design of structural reforms necessary for Member States in the context of the euro area economy.

               (4)A strong coordination of national fiscal policies, based on common rules, is essential to arrive at an appropriate aggregate fiscal stance and for the proper functioning of the monetary union. The common fiscal rules are geared towards pursuing debt sustainability at the national level, while providing room for macroeconomic stabilisation. The national and aggregate fiscal stances of the euro area have hence to balance the double objective of ensuring long-term sustainability of national public finances and short-term macroeconomic stabilisation at both country and the euro area level. At the current juncture of high uncertainty about the strength of the recovery and the level of spare capacity in the economy, when monetary policy has delivered substantial accommodation, fiscal policy at the euro area level is necessary to complement monetary policy in supporting demand, notably investment, and moving out of low inflation. The effectiveness of fiscal policy, including of spillover effects across countries, is enhanced by the context of low interest rates. There is thus a case to recommend a more positive fiscal stance for the euro area as a whole. For 2017,
                  the Commission considers that a fiscal expansion of up to 0.5% of GDP is desirable at the level of the euro area as a whole in the present circumstances
                  4
               . This is a prudent and pragmatic target, within a range of possible targets which has 0.3% as a lower bound and 0.8% as an upper bound, in order to balance both macroeconomic stabilisation and fiscal sustainability concerns. At the same time, government debt remains high and there is still a need to make public finances sustainable in the medium term in a number of Member States. For this reason, it is necessary to ensure appropriate differentiation of fiscal efforts across the Member States, taking into account fiscal space and the spillovers across euro area countries. Member States which are over-achieving their fiscal objectives should use their fiscal space to support domestic demand and quality investments, including cross-border ones, in the context of the Investment Plan for Europe. For instance, guarantees to the European Fund for Strategic Investments are a particularly effective way for Member States with fiscal space to maximise the impact on the real economy and recovery in the euro area. Member States that need further fiscal adjustments under the preventive arm of the Pact should make sure to be broadly compliant with the Stability and Growth Pact's requirements for the coming year. Under the corrective arm of the Pact, Member States need to ensure a timely correction of their excessive deficits, including by providing fiscal buffers against unforeseen circumstances. Structural reforms, in particular those that increase productivity, would support growth and improve sustainability of public finances. In addition, a decisive improvement of the composition and management of national budgets, on both the revenue and expenditure sides, by shifting resources towards tangible and intangible investment would increase the impact of budgets on demand in the short term and productivity in the longer term. Effective national fiscal frameworks are necessary to strengthen the credibility of Member States' policies and help strike the right balance between short-term macroeconomic stabilisation, debt sustainability and long-term growth.

               (5)Labour markets continue to recover gradually in the euro area, with a steady reduction of unemployment. However, the rates of long-term unemployment and youth unemployment remain high, while poverty has stabilised at a high level in several Member States. Despite some progress with reforms to improve the resilience and adjustment capacity of labour markets, significant differences persist across the euro area, which continue to challenge the smooth functioning of the euro area. Well-designed, fair and inclusive labour market, social protection and tax and benefit systems are necessary for a frictionless and constant reallocation of labour towards more productive activities, to support the (re)integration of those who are affected by transitions between jobs or are excluded from the labour market, to reduce segmentation, and promote social fairness, including by increasing the chances of quality employment. They will also result in more effective automatic stabilisation and stronger growth and employment which are important for addressing the social challenges in the euro area. Necessary reforms encompass: (i) changes in employment protection legislation aiming at reliable contractual arrangements, that provide flexibility and security for both employees and employers, promote labour market transitions, avoid a two-tier labour market and allow for labour cost adjustment when needed, an area where reform efforts have in recent years been particularly intense;
                  (ii) enhancement of skills by improving the performance and efficiency of education systems and comprehensive lifelong learning strategies, focusing on labour market needs; (iii) effective active labour market policies, to help the unemployed, including the long-term unemployed, re-enter the labour market and increase labour market participation and (iv) modern and adequate social protection systems that support those in need, including the unemployed and those outside the labour market, and provide incentives for labour market integration. Moreover, shifting taxation away from labour, in particular for low-income earners, and ensuring equitable tax systems can improve labour market outcomes. Euro area Member States that have implemented such reforms are more resilient and demonstrate better employment and social performance.

               (6)The establishment of the Banking Union has progressed, but it remains unfinished. The lack of a common deposit insurance scheme and of a common backstop for the Single Resolution Fund hamper the ability of the Banking Union to sever the link between banks and sovereigns. While the overall resilience of the euro area banking sector has increased since the crisis, pressure on banks has mounted due to a number of factors, such as high levels of non-performing loans, inefficient business models and overcapacity in some Member States, all resulting in low profitability and challenges to viability. That pressure impairs banks' ability to provide lending to the economy. Risks also extend to the real economy, where the level of public and non-financial private debt in some Member States remains elevated. There is a need for a continued orderly deleveraging in the private sector through working out, servicing and if necessary restructuring of viable debt, and by liquidating the stocks of non-viable debt, so that capital can be reallocated more quickly and efficiently. In this context, dealing with still elevated levels of non-performing loans and following common principles in the design of insolvency frameworks for businesses and households, including by improving insolvency proceedings and out-of-court settlement frameworks, constitute key components of a successful and growth-friendly deleveraging process.

               (7)Over the last year, some progress has been made on the initiatives presented in the Five Presidents' Report on completing Europe's EMU, such as the increased role of the euro area dimension in the European Semester, the recommendation on the National Productivity Boards and the establishment of the European Fiscal Board within the Commission. Work is also ongoing on improving transparency and reducing complexity of fiscal rules. However, agreement on other initiatives with crucial importance for EMU, such as the European Deposit Insurance Scheme proposed by the Commission in November 2015, is still missing. Moreover, there are broader challenges to address in the light of the Five Presidents' Report. The Commission has announced its intention to present in March 2017 a White Paper on the future of Europe, which will also include the future of EMU. Agreeing on an operational way forward requires a shared sense of ownership and a common sense of purpose among all euro area Member States and EU institutions, and also among non-euro area Member States, as a strong EMU will help to address the challenges facing the EU more forcefully and will have a positive impact on non-euro area Member States as well,

               HEREBY RECOMMENDS that euro area Member States take action, individually and collectively, within the Eurogroup in the period 2017-2018 to:

               1.Pursue policies that support growth in the short and the long term, and improve adjustment capacity, rebalancing and convergence. Prioritise reforms that increase productivity, improve the institutional and business environment, remove bottlenecks to investment, and support job creation. Member States with current account deficits or high external debt should raise productivity while containing unit labour costs. Member States with large current account surpluses should accelerate the implementation of measures that help to strengthen their domestic demand, in particular investment.

               2.Deliver an overall positive fiscal stance contributing to a balanced policy mix,
                  to support reforms and to strengthen the recovery through a fiscal expansion of up to 0.5% of GDP in 2017. Combine national efforts to secure long-term fiscal sustainability in respect of the Stability and Growth Pact with short-term macroeconomic stabilisation for the euro area, using all the room for manoeuvre available under the Stability and Growth Pact. Differentiate the fiscal effort by individual Member States by better taking into account their respective position with regard to the requirements under the Stability and Growth Pact, the situation of the euro area aggregate and spillovers across euro area countries: (i) for Member States which are over-achieving their fiscal objectives, use their fiscal space to support domestic demand and quality investments, including cross-border ones, as part of the Investment Plan for Europe; (ii) for Member States that need further fiscal adjustments under the preventive arm of the Pact, make sure to be broadly compliant with the requirements of the Stability and Growth Pact; (iii) for Member States under the corrective arm, ensure a timely correction of their excessive deficits, including by providing fiscal buffers against unforeseen circumstances. Improve the composition of public finances by creating more room for tangible and intangible investment and ensure the effective functioning of national fiscal frameworks.

               3.Implement reforms that promote job creation, social fairness and convergence, underpinned by an effective social dialogue. They should combine: (i) reliable labour contracts which provide flexibility and security for employees and employers;
                  (ii) quality and efficient education and training systems and comprehensive lifelong learning strategies targeted at labour market needs; (iii) effective active labour market policies to support labour market participation; (iv) modern and adequate social protection systems that support those in need and provide incentives for labour market integration. Shift taxes away from labour, particularly for low-income earners and in Member States where cost competitiveness lags behind the euro area average, and make it budgetarily neutral in countries without the fiscal room for manoeuvre.

               4.Agree on a European deposit insurance scheme on the basis of the Commission's proposal of November 2015 and start work on the common backstop for the Single Resolution Fund to make it operational before the end of the Fund's transitional period. Devise and implement an effective euro-area wide strategy to address risks to the viability of the banking sector, including as regards the high level of non-performing loans, inefficient business models and overcapacity. In Member States with large stocks of private debt, promote an orderly deleveraging.

               5. Accelerate initiatives to complete the EMU, in full respect of the EU's internal market and in an open and transparent manner. Implement the remaining actions under stage 1 of the Five Presidents' Report on completing Europe's EMU.

               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)
                  OJ C 349, 24.9.2016, p. 1.

                     (4)
                  See COM(2016) 727 final,16.11.2016.


               EUROPEAN COMMISSION
            Brussels, 18.5.2016
            COM(2016) 327 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2016 national reform programme of Estoniaand delivering a Council opinion on the 2016 stability programme of Estonia

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2016 national reform programme of Estonia
                  and delivering a Council opinion on the 2016 stability programme of Estonia

               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 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 Estonia 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
                  6
               . 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, Estonia should ensure the full and timely implementation of those recommendations.

               (2)The 2016 country report for Estonia
                  7
                was published on 26 February 2016. It assessed Estonia’s progress in addressing the country-specific recommendations adopted by the Council on 14 July 2015 and Estonia'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.
                  8
                The Commission’s analysis leads it to conclude that Estonia is not experiencing  macroeconomic imbalances.

               (3)On 28 April 2016, Estonia submitted its 2016 stability programme and on 10 March 2016 it submitted its 2016 national reform 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
                  9
               .

               (5)Estonia is currently in the preventive arm of the Stability and Growth Pact. In its 2016 stability programme, the government plans a headline deficit at around 0.5% of GDP over 2016-2018, turning to balance thereafter. In structural terms, Estonia continues to meet the medium-term budgetary objective - a structural balance - throughout the programme period. According to the stability programme, the government debt-to-GDP ratio is expected to stay at around 10% of GDP in 2017 and to decrease to about 9½ % of GDP in 2020. The macroeconomic scenario underpinning these budgetary projections is plausible for 2016 but optimistic for 2017. Based on the Commission 2016 spring forecast, the structural balance is forecast to move from a surplus of 0.6% of GDP in 2015 to a budget balance in 2016 and to a small deficit of 0.2% of GDP in 2017, which can be considered as close to the medium-term budgetary objective. Further deviations would be assessed against the requirement to maintain the structural balance at the medium-term budgetary objective. Based on its assessment of the stability programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that Estonia is expected to comply with the provisions of the Stability and Growth Pact.

               (6)Estonia has taken important steps to improve labour market participation, including by implementing the Work Ability reform. This reform, which entered into force in January 2016 and will be fully implemented from January 2017, will increase overall labour supply. It will be a challenge to help reintegrate those who have been out of the labour market for a long time. New active labour market measures are being put in place to help the beneficiaries of the Work Ability reform to enter and stay in the labour market and changes have also been made in the financial support scheme.

               (7)Estonia has taken action to improve work incentives by reducing the tax burden on labour for all income groups, including low-income earners. This may have contributed to Estonia having a lower unemployment rate and a higher employment rate for low-skilled workers than the EU average. Among the measures already adopted, an additional tax refund is planned as of 2017 for low income earners. However, this leads to high effective marginal tax rates, which risks creating a low wage trap and encouraging the payment of envelope wages. The impact of these measures will only be known after evaluation.

               (8)Implementation of the Lifelong Learning Strategy 2020, together with the Vocational Education and Training programme for 2015-2018, helped increase participation in vocational education and training, and its labour market relevance. The proportion of vocational education and training students in apprenticeships is expected to  increase but the drop out rates in vocational education and training remain a matter for concern.

               (9)There are still some shortages in early childhood education and care places for 0-3 year-olds, but the situation is improving, with additional places created each year.

               (10)Estonia has the highest gender pay gap in the EU, at 28.3 % in 2014. This creates a risk of not making full use of the potential of women. The gender pay gap is attributed, among other factors, to occupational and sectoral gender segregation in the labour market, the lack of transparency of wages in the private sector and the longer career breaks for women due to care responsibilities. The government has announced a series of measures to address the gender pay gap. The planned measures are still to be adopted and implemented, inter alia improving data collection, giving labour inspectorates the task of monitoring how employers apply the principle of equal pay, promoting wage transparency, providing fathers with incentives to take up part of the parental leave and increasing access to childcare facilities. The Welfare Plan 2016-2023 includes gender equality objectives, with measures to tackle gender segregation in the labour market and fight stereotypes. Measures are planned to ease the care burden in families and to bring carers into the labour market, with expected positive effects on women's labour market participation.

               (11)In Estonia, access to public services is not guaranteed in all municipalities  and the local provision of quality services in areas such as transport, education, long-term care for the elderly and other social services at local level remains a challenge. In March 2016, the government submitted the draft Administrative Reform Act to the parliament to pave the way for a local government reform. The reform foresees both voluntary and government-initiated mergers, with a view to offer accessible and quality services and to ensure more efficient and competent governance. The amended Social Welfare Act sets minimum requirements for nine social services but its implementation is at risk due to the weaknesses in service provision by municipalities. The proposed local government reform has not yet been adopted.

               (12)Estonia has one of the highest ratios of investment to GDP for both the private and the public sectors. However, some challenges remain for the country to improve the investment environment further. Estonia took action to implement the ‘Knowledge-based Estonia’ research, development and innovation strategy and the Entrepreneurship Growth Strategy, which together comprise its framework for smart specialisation. Insufficient synergies between these strategies can hamper private research, development and innovation investment, especially since business research and technology investment decreased to 0.6 % of GDP in 2014 and Estonia is unlikely to reach its 3% of GDP research, development and innovation target in 2020. The number of companies cooperating with research institutions is limited, resulting in a low level of patent applications. Meanwhile, in recent years, the overall structure of Estonia’s export of manufactured goods seems to have shifted towards lower-value goods. Labour and skills shortages may constitute a barrier to greater investment in high technology sectors.

               (13)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Estonia’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 Estonia in previous years. It has taken into account not only their relevance for sustainable fiscal and socio-economic policy in Estonia 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 and 2 below.

               (14)In the light of this assessment, the Council has examined the stability programme, and is of the opinion that Estonia is expected to comply with the Stability and Growth Pact.

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

               1. Ensure the provision and accessibility of high quality public services, especially social services, at local level, inter alia by adopting and implementing the proposed local government reform. Adopt and implement measures to narrow the gender pay gap, including those foreseen in the Welfare Plan.

               2. Promote private investment in research, development and innovation, including by strengthening cooperation between academia and businesses.

               Done at Brussels,

                     For the Council

                     The President

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

                     (2)
                  COM(2016) 327 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)
                  COM(2015) 692 final.

                     (7)
                  SWD(2016) 76 final.

                     (8)
                  COM(2016) 95 final.

                     (9)
                  COM(2014) 494 final.


               EUROPEAN COMMISSION
            Brussels, 13.5.2015
            COM(2015) 276 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2015 National Reform Programme of Swedenand delivering a Council opinion on the 2015 Convergence Programme of Sweden

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2015 National Reform Programme of Sweden

                  and delivering a Council opinion on the 2015 Convergence Programme of Sweden

               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 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 March 2010, the European Council agreed to the Commission’s proposal to launch a new strategy for growth and jobs, Europe 2020, based on enhanced coordination of economic policies. The strategy focuses on the key areas where action is needed to boost Europe’s potential for sustainable growth and competitiveness.

               (2)On 13 July 2010, the Council, on the basis of the Commission’s proposals, adopted a recommendation on the broad guidelines for the economic policies of the Member States and the Union (2010 to 2014) and on 21 October 2010 it adopted a decision on guidelines for the employment policies of the Member States. Together these form the ‘integrated guidelines’ which Member States were invited to take into account in their national economic and employment policies.

               (3)On 8 July 2014, the Council adopted a Recommendation on Sweden’s National Reform Programme for 2014 and delivered its opinion on Sweden’s updated Convergence Programme for 2014.

               (4)On 28 November 2014, the Commission adopted the Annual Growth Survey
                  5
               , marking the start of the 2015 European Semester of economic policy coordination. On the same day, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report
                  6
               , in which it identified Sweden as one of the Member States for which an in-depth review would be carried out.

               (5)On 18 December 2014, the European Council endorsed the priorities for boosting investment, accelerating structural reforms and pursuing responsible growth-friendly fiscal consolidation.

               (6)On 26 February 2015, the Commission published its 2015 country report for Sweden
                  7
               . This assessed Sweden’s progress in addressing the country-specific recommendations adopted on 8 July 2014. The country report also includes the results of the in-depth review under Article 5 of Regulation (EU) No 1176/2011. The Commission’s analysis leads it to conclude that Sweden is experiencing macroeconomic imbalances which require policy action and monitoring. In particular, household debt remains at very high levels and continues to expand as a result of increasing house prices, persistently low interest rates and strong tax incentives and housing supply constraints. Macroeconomic developments linked to private debt continue to merit attention.

               (7)On 23 April 2015, Sweden submitted its 2015 National Reform Programme and on 24 April 2015 its 2015 Convergence Programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (8)Sweden is currently in the preventive arm of the Stability and Growth Pact. In its 2015 Convergence Programme, the Government plans that the headline deficit gradually improves to 1.4% of GDP in 2015 and reaches balance in 2018, and that the medium-term objective - a structural deficit of 1% of GDP – continues to be met throughout the programme period. The government debt-to-GDP ratio is expected to peak in 2015 at 44.2 % and to gradually decline to 40.0% in 2018. The macroeconomic scenario underpinning these budgetary projections is plausible. However, measures to support the planned deficit targets from 2016 onwards will need to be specified. Based on the Commission’s 2015 spring forecast, the structural balance is forecast to be at the medium-term objective of -1% in 2015 and improve to -0.9% of GDP in 2016. Based on its assessment of the Convergence Programme and taking to account the Commission’s 2015 spring forecast, the Council is of the opinion that Sweden is expected to comply with the provisions of the Stability and Growth Pact.

               (9)Unlike in many other Member States, house prices in Sweden have not suffered any major correction and have been growing strongly again since mid-2013. The in-depth review conducted by the Commission suggest that Swedish house prices appear to be above their fundamental values. This is partly due to favourable fundamentals such as higher disposable income, low interest rates and strong demographics. However, the country report has identified both demand-side and supply-side drivers of house prices. On the demand side, credit incentives have been particularly favourable. In addition, Sweden’s taxation system, which provides one of the strongest tax incentives for home ownership in the Union, tends to push up house prices. In turn, this has also fuelled the rise in household debt in Sweden, which is high and growing faster than in the rest of the EU. Even if households’ total assets are high and disposable incomes have grown over recent years, the household sector is more vulnerable than before and the high level of household indebtedness constitutes a risk for macroeconomic stability. The effects of the debt bias in personal income taxation should be tackled by gradually limiting the tax deductibility of interest payments on mortgages or by increasing recurrent property taxes. In addition, efforts are needed to increase the low pace of amortisation of mortgages with a view to reducing the growth in household indebtedness.

               (10)On the supply side, structural inefficiencies are leading to a housing shortage and contributing to house price growth. These constraints are limiting labour mobility and creating social challenges for vulnerable groups. Supply is being held back by ineffective use of the existing housing stock as well as by structural under-investment in new construction. In particular, the incentives for municipalities to actively promote investment in construction and address the housing needs of vulnerable groups should be strengthened. Competition in the construction sector needs to be encouraged and for this fully transparent public procurement procedures should be ensured. Planning and appeals processes are lengthy and complex and should be streamlined. Rigidities in the rental market, which does not seem to fulfil its role in alleviating house price pressure or to support mobility needs, are blamed mainly on the high level of rent control. They should be tackled through a gradual reform of the rent-setting system. This should allow wider divergence in rent levels — which could lead to more effective use of the existing housing stock — and greater freedom in contracts between individual tenants and landlords.

               (11)The Government is taking steps to improve school outcomes, after a marked deterioration in the last decade which contributes to relatively high youth unemployment. The Government is also taking measures to facilitate the transition from education to the labour market and to improve the labour market integration of low-educated young people and people with a migrant background. Progress in this area will need to be monitored.

               (12)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Sweden’s economic policy and published it in the 2015 country report. It has also assessed the Convergence Programme and the National Reform Programme and the follow-up given to the recommendations addressed to Sweden in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Sweden 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 recommendation 1 below.

               (13)In the light of this assessment, the Council has examined Sweden’s Convergence Programme, and is of the opinion
                  8
                that Sweden complies with the Stability and Growth Pact.

               (14)In the light of the Commission’s in-depth review and this assessment, the Council has examined the National Reform Programme and the Convergence Programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected in recommendation 1 below.

               RECOMMENDS that Sweden take action in 2015 and 2016 to:

               1.Address the rise in household debt by adjusting fiscal incentives, in particular by gradually limiting the tax deductibility of mortgage interest payments or by increasing recurrent property taxes, and by increasing the pace of mortgage amortisation. To alleviate the structural under-supply of housing, foster competition in the construction sector, streamline the planning and appeals procedures for construction and revise the rent-setting system to allow more market-oriented rent levels.

               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(2015) 276.

                     (4)
                  P8_TA(2015)0067, P8_TA(2015)0068, P8_TA(2015)0069.

                     (5)
                  COM(2014) 902.

                     (6)
                  COM(2014)904.

                     (7)
                  SWD(2015) 46 final.

                     (8)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.


title: PROPOSAL for a Council Regulation on the conclusion of the Customs Convention on the International Transit of Goods under cover of TIR Carnets (TIR Convention) of 14 November 1975 and a Regulation of the Council on the implementation of the provisions of the technical annexes and the use of the specimen TIR carnet of the Customs Convention on the International Transport of Goods under cover of TIR carnets (TIR Convention) of 14 November 1 975 (submitted to the Council by the Commission)

text:
ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (76) 392
Vol. 1976/0117
 ---pagebreak--- Disclaimer
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983
concernant l'ouverture au public des archives historiques de la Communauté économique
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983,
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit
règlement.
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
concerning the opening to the public of the historical archives of the European Economic
Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243,
27.9.2003, p. 1), this file is open to the public. Where necessary, classified documents in this
file have been declassified in conformity with Article 5 of the aforementioned regulation.
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
Februar 1983 über die Freigabe der historischen Archive der Europäischen
Wirtschaftsgemeinschaft und der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983,
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. September 2003
(ABI. L 243 vom 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5
der genannten Verordnung freigegeben.
 ---pagebreak---  COMMISSION1 OF THE EUROPEAN COMMUNITIES
                                                    COM(76)392 final.
        i
                                                    Brussels , 23 July 1976 *
                                PROPOSAL
                    for a Council Regulation on the ,
                    conclusion of the Customs Convention
                     on the International Transit of Goods
                     under cover of TIR Carnets ( Tin Convention )
                     of 14 November 1975
                               and a
                     Regulation of the Council on the
                     implementation of the provisions of the
                     technical anne .es and the use of the
                     specimen      car net of the Customs Convention
                     on the Int emotional Transport of Goods under
                     cover of IT.: carne ts ( TIR Convention )
                     of 14 November 1 975
                ( submitted to the Council by the Commission )
CCM(76 ) 392 final .
 ---pagebreak---                                              .1
                                       Proposal
                          for a Council Reflation on tho
                          conclusion or "tho Customs Convontion
                          on the International Transit of Goods
                          'tnder cover of Til? Carnets ( T.I.R. Convention )
 IDXPL /JTATOKY ÎI0T2
  I. Introduction
          The Conference on the R6vision of the T.I.R. Convention wag hold in
     Geneva fron 3-l/l! ITovembor undo r the auspices of tho Economic Commission
     for Europe .
          Py a Decision of 4 -Tune 1974 the Council recognized the importance of
     this Convention for tho Cor.ini.mity and authorised the Co;,mission to conduct
     the revision ne: 'tiations on behalf of tho Community .
II . Ho suits o f tho      jvising Confercnco
          A ncnorcmdui .i on the v/ork done and the results of the negotiations
     has boon circulated by the Secret a ry-General of the Coiuicil ( document
     S/ 1723/ 75(CID 59 ) ( RiSLUX 50) of 5 December 1975 .
          The Community iron its case in respect of the special Community interest
     i.e. tho insortion in the Pinal Provisions of a Clause uhich would allow
     Customs and economic unions to beco mo Contracting Parties to the revised
     Convention .
          Otherwise tho main changes in the revised TIE Convention are the intro
     duction into the procedure for tho international transport of goods under
     cover of Tilt carnets of new facilities which aro acceptablo to both the
     Community and tho Ilember Statos .
 C0IJCLUGI01I
     The Commission thus proposes that tho Council should , on the basis of
 Article 113 » conclude tho Customs Convention on the International Transport
 of Goods undor cover of TIR Carnets ( TIR Convontion ) of 14 November 1975 *
                                       Proposal
                            for a Council Regulation - on the
                            conclusion of tho Customs Convention
                            on tho International Transit of Goods
                            under cover of TIR Carnets ( TIR Convent i on )
                                     of 14 llovcnber 1975
 THE C0U1JCIL OP TIC EUnOP^Ï CO'.i iïJIIITIIJS
 Having regard to tho Treaty establishing the "Europe an Economic Community and
 in particular Article 113 thereof .
 Having regard to the proposal         from the Commission
 'Theroas tho conclusion of the Customs Convention on tho International Transport
 of Goods under cover of TIR Carnets ( Convention TIR ) of 14 November 1975 1
 introduces nevr provisions into tho proc edure for tho international transport
 of goods by road vehicles .; whereas tho nature of the provisions is such as to
 contribute to the harmonious development of uorld trado in accordance with
  tho objoctivo of the Suropen 13c onomic Community .
               *                                               • • • • •
 ---pagebreak--- ! Jheroas it is thus appropriate thc;t the revise d TIR Convention should,
bo concluded in tho nai.io of the Cor.m unity
HAS ADOPTED THIS niJGULATIOII
                          \
                            \      Article 1
Tho Customs Convention on Ytho Intern atio#nal Transport of Goods under
cover of TIR Carnots ( TIR Convention ) ox 14 W over.iber , 1975 shall bo
concluded in the nrii "1- of tho Community .
                                   Articlo 2
The Presidont of tho Council is authorised to nominate tho persons entitled
to sign the Convention reforred/ ts o in Article 1 and to cmpov;er then as
necessary to bind tlio Community.
This Reflation sha ] I bo binding in     its ontiroty and diroctly applicable in
all Ilouber States .
                                                     For tho Council
Done at Brussels . ...... . 76                        Tho President
  ( l ) Tho date of entry into force of tho TIR Convention 1975 'fill bo
        published in tho Official Joum el o f tho European Comnunitios
 ---pagebreak---                                             Draft
                          Regulation of tho Council on the
                            iinplene ntation of the provisions of
                             Die technical annexes and the use ox
                             the specimen TIR carnet pf the Customs
                              Convention on tho International Transport
                                of Goods under cover of Till carnots
                                   ( TI.1 Convention )
J7:PT..''TATorr IIOT7]
The revising Conference of th e Customs Convention on tho International
transport of goort-j under cov or of "I 7.! carnets adopted, at the end of tho
cession held in Geneva from 3             14 " Tovenber 1975 a Resolution roc oration<lin£
the implementation a : from 1 J anuary 3-977 of the provisions of Annexes 1 ,
2 , 3 1 4 1 !3 and 7 of i-.he TIR Conv cntion and of tho              legatory JTotcs in
Anne 3; 6 relative to hose Annc-:03 and . specially, in addition , to accept the
specimen of the TL . Carnet i~. tho revised Convention , thin revised specimen
Tin carnet having the sane leg^al force .and effect as the TIT? carnet in tho
1959 Convention .
A,nne - I net'; out the specim en o f the TIR Carnet Anno : 2 the Reflations
on technical conditions applic able to road vehicles 'jhich may he accepted
for international transport under customs seal , Anne- 3 of the Procedure for
tho approval of road vehicles \'hich couply - rith the technical conditions
set out in tho Regu lation of Aiino             2 ; Anne ;: 4 ffivos a specimen of tho
Certificate of Approval of a road vehicle ., Annex 5 specification of T.I. I';,
plates and ,'nne:: 1 relate s to tho approval of containers .
There are -"several reasons ,'hich arguo in favour of a Coram; 'nit - instrument
to ensure the implementation of this ..'osolution in the c . stoms territory there ¬
of as from 1 January 1 97 7 •
In the first place since tho Comnmity negotiated strongly for tho right to
become a Contracting Party to the TIR Convention ., the other Parties to the
Convention - rould find it diffic It to understand the absence of any
Community action to ensure t^he implementation , as anticipated, of the Part
of the Convention .
Secondly , tho no -; rules consequent on an amendment of the rules in force
in all Ilomber States in an area '.:hic/h if not wholly then partially stems
from Community responsibility as tho Convention itself should bo the subject
of 0. Regulation of the Council ! uith a vixew to incorporation into Community
lav/. Thus the entry into forego of tho changes agreed for TIR should be
ensured 011 a Community basis '..'it hout Ilember States being abliged to adopt
national legal or regulatory measures .
oœiOLUSlOIT
Thus tlie Commission proposes that the Council should, on the basis of
Article 113 , adopt a Regulation of the Council on the implementation of the
provisions of tho technical nnivoues and the uso of tho specimen TIR carnet
of tho Customs Convention on the International Transport of Goods under
cover of TIP. carnet s ( TIR Convention ) of 14 ITovomber 1975
 ---pagebreak---                              Proposal for a
                       Regulation of the Council on the
                      implementation of the provisions of the
                      technical annexes and the use of the
                      specimen TIR carnet of the Customs Convention
                      on the International Transport of Goods under
                      cover of TIR camets ( TIR Convention ) of
                                  14 November 1975
THE COUNCIL OP THE EUROPEAN COMMUNITIES
Having regard to the Treaty establishing the European Economic Coraunity,
and in particular Article 113 th ereof .
Having regard to the proposa 1 from the Commission
Whereas it is in the interest of     international trade that the simplification
and facilitation measures provided under the revised TIR Convention 1975
( Geneva 1975 ) should enter into force as soon as possible ; whereas this is
particularly     so in respect of the technical annexes and th^e specimen TIR
Carrot of this Convention
HAS ADOPTED THIS REGULATION :
                                    Article 1
1 . Aq from 1 January 1977 Annexes 1 , 2 , 3 , 4 , 5 and 7 of the T.I.R. Convention
    1975 shall apply in the European Economic Community.
    The provisions of the Explanatory Notes in Ann.ex 6 of the said Convention
    relative to those Annexes shall also apply as from the same date .
2 . Likewise as from 1 January 1977 the new specimen TIR Carnet in Annex I
    of the revised TIR Convention shall have the same legal force and effeot
    in the European- Economic Community as the TIR Cornet of the 1959
    Convention .
                                    Article 2
       ft
      Road vehicles and containers appro/ ved under the conditions of the
TIR Convention ^195§Zshall b® accepted during the period of validity of
certificates of ajvsroval end , subject to renewal ,for the international trans
port of goods undsr customs seal , p^-rovidcd such vehicles and containers
continue to coirply with th<5 c^o^nditions undnr which they were originally
approved.
                                    Article 3
          <                                           ν
      The Commission shall inform the Executive Secretary of the Economio
Cocoission for Europe of the provisions adopted in Articles 1 and 2 above .
      This Regulation shrill be binding in its entirety and directly applicable
in all Member , States .
Done at Brussels                                          For the Council
                                                           The President


               EUROPEAN COMMISSION
            Brussels, 22.5.2017
            COM(2017) 501 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2017 National Reform Programme of Belgiumand delivering a Council opinion on the 2017 Stability Programme of Belgium

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2017 National Reform Programme of Belgium

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

               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 Belgium 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 2017.
                  6

               (2)As a Member State whose currency is the euro and in view of the close interlinkages between the economies in the economic and monetary union, Belgium should ensure the full and timely implementation of the Recommendation of the euro area which is reflected in recommendations 1 to 2 below.

               (3)The 2017 country report for Belgium
                  7
                was published on 22 February 2017. It assessed Belgium’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 Belgium’s progress towards its national Europe 2020 targets.

               (4)On 28 April 2017, Belgium submitted its 2017 National Reform Programme and 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)Belgium 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 plans a gradual improvement of the headline balance from a deficit of 2.6% of GDP in 2016 to -0.1% of GDP in 2020. The medium-term budgetary objective, set at a balanced budgetary position in structural terms, is planned to be reached by 2019. However, the recalculated
                  10
                structural balance still points to a deficit of 0.3% in 2019. After having peaked at almost 107% of GDP in 2014 and decreasing to around 106% of GDP in 2015 and 2016, the general government debt-to-GDP ratio is expected to decline to 99% by 2020 according to the Stability Programme. The macroeconomic scenario underpinning these budgetary projections is plausible. At the same time, the measures needed to support the planned deficit targets from 2018 onwards have not been specified, which contributes to the projected deterioration of the structural balance in 2018 at unchanged policy according to the Commission forecast.

               (7)On 22 May 2017, the Commission issued a report under Article 126(3) of the TFEU, as Belgium did not make sufficient progress towards compliance with the debt reduction benchmark in 2016. The report concluded, following an assessment of all the relevant factors, that the debt criterion should be considered as currently complied with. At the same time, additional fiscal measures are to be taken in 2017 to ensure broad compliance with the adjustment path towards the MTO in 2016 and 2017 together.

               (8)The 2017 Stability Programme indicates that the budgetary impact of the exceptional inflow of refugees and security-related measures in 2016 and 2017 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 0.08% of GDP for the exceptional inflow of refugees and to 0.05% of GDP for 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 Belgium'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 the eligible amounts, will be made in spring 2018 on the basis of observed data as provided by the Belgian authorities.

               (9)On 12 July 2016, the Council recommended Belgium to achieve an annual fiscal adjustment of at least 0.6% of GDP towards the medium-term budgetary objective in 2017. Based on the Commission 2017 spring forecast, there is a risk of some deviation from that requirement in 2017. However, there is still a risk of a significant deviation from the recommended adjustment path towards the MTO over 2016 and 2017 taken together. This conclusion would not change in case the budgetary impact of the exceptional inflow of refugees and of security measures were deducted from the requirement.

               (10)In 2018, in light of its fiscal situation and notably of its debt level, Belgium is expected to further adjust towards its medium-term budgetary objective of a balanced budgetary position in structural terms. According to the commonly agreed adjustment matrix under the Stability and Growth Pact, that adjustment translates into a requirement of a nominal growth rate of net primary government expenditure
                  11
                 which does not exceed 1.6% in 2018. It would correspond to an annual structural adjustment of at least 0.6% % of GDP. Under unchanged policies, there is a risk of a significant deviation from that requirement in 2018. Belgium is prima facie not forecast to comply with the debt rule in 2017 and 2018. Overall, the Council is of the opinion that further measures will be needed as of 2017 to comply with the provisions of the Stability and Growth Pact. However, as foreseen in Regulation (EC) No 1466/97, the assessment of the budgetary plans and outcomes should take account of the Member State’s budgetary balance in light of the cyclical conditions. As recalled in the Commission Communication accompanying these country-specific recommendations, the assessment of the 2018 Draft Budgetary Plan and subsequent assessment of 2018 budget outcomes will need to take due account of the goal to achieve a fiscal stance that contributes to both strengthening  the ongoing recovery and ensuring the sustainability of Belgium’s public finances. In that context, the Commission intends to make use of the applicable margin of appreciation in light of the cyclical situation of Belgium.

               (11)Effective budget coordination is essential in a federal Member State like Belgium, where a large part of the spending power has been devolved to sub-national governments. In an attempt to improve internal coordination and to transpose the Treaty on Stability, Coordination and Governance in the EMU (the ‘Fiscal Compact’), the federal government and the regional and community governments concluded a cooperation agreement in 2013, with the aim to define overall and individual multiannual fiscal paths, to be monitored by the High Council of Finance. However, this process has not succeeded in reaching a formal agreement on fiscal trajectories, nor has it established sufficient safeguards regarding the monitoring role of the High Council of Finance. This lack of coordination on the sharing of effort undermines the viability of the country’s overall trajectory towards its medium-term objective as laid down in the Stability Programme.

               (12)Despite its potential to stimulate growth in the long run, public investment is very low by European standards, particularly in relation to total public spending. Not only is the public capital stock low, the quality of public infrastructure has also been eroded. Given the very tight budgetary constraints for all levels of government, preserving enough room for investment hinges on restructuring the composition of overall public spending by improving the efficiency of public services and policies and curbing the rapid increase for certain expenditure items.

               (13)Belgium has made substantial progress in reforming its wage-setting system. The revision of the 1996 law regulating wage bargaining aims at safeguarding the cost competitiveness gains realised as a result of the recent wage moderation efforts. The more conservative baseline projections and the built-in prior adjustments in the calculation of the wage norm mean the reformed framework goes a long way in improving Belgium’s cost competitiveness relative to key trading partners within the euro area. In addition, the reform provides more guarantees that government measures to reduce non-wage labour costs will effectively benefit cost competitiveness, and expands the role of the government in preventing detrimental cost competitiveness trends as a result of excessive inflation. The collective bargaining framework provides for close monitoring of wage and productivity trends and other cost and non-cost competitiveness determinants by the social partner organisations represented in the Central Council for the Economy. As the practice of linking wage developments to inflation is still widespread in many sectors, and in the context of the widening inflation gap between Belgium and its neighbours, changes in unit labour costs will continue to be closely monitored under the European Semester.

               (14)Some progress has been made on the functioning of the labour market. A higher retirement age and further limits on pre-retirement encourage older people to stay in or return to work. Gradual decreases in the tax wedge have helped to boost employment rates. Job creation has been robust, fuelled by economic growth and improved cost competitiveness. This also reflects labour tax cuts and wage moderation that have improved the labour cost competitiveness of Belgian companies. Nevertheless, a number of structural shortcomings remain. Transition rates from unemployment or inactivity to employment are low, and the overall employment rate is still weighed down by the poor performance of specific groups. These include the low-skilled, the young, older workers and people with a migrant background such as non-EU born workers but also second generation migrants. The employment outcomes for people with a migrant background, even adjusting for other individual characteristics, are among the worst in the EU. In particular, the employment gap for the non-EU born is the highest in the EU: their employment rate for the age group 20-64 was 49.1 % in 2016, compared to 70.2 % for native-born people, and was even lower for non-EU born women (39.1 %). In 2015, the risk of poverty and social exclusion was 50.7 % for non-EU born residents, compared to 17 % for the native-born. These sizeable employment differentials between specific population groups continue to result in a chronic under-utilisation of labour. Although ongoing regional reforms of employment incentive schemes aim to rationalise and tailor the system, the cost-effectiveness of the policy choices made should be monitored on a regular basis. Some design features of the target group policies may have windfall and displacement effects. Coordination and communication between and within the different policy levels is also key for the effectiveness of targeted policies. Taxes, including social contributions on lower wages and the withdrawal of social benefits upon entering the labour market or increasing hours worked, may create inactivity and low wage traps.

               (15)Some progress has been made in educational and training reforms aiming to improve equity, key competences and the quality of education. However, despite good average performance by international comparison, the share of top performers among the 15-year-old students declined while the percentage of low achievers increased. In addition, educational inequalities linked to socioeconomic background are above the EU and OECD averages. The gap in performance based on migrant background is also large and the second generation performs only slightly better than the first, even taking socioeconomic background into account. Addressing educational inequality will thus require a broad policy response going beyond the educational system. The strong growth of the school population, in particular among pupils with a migrant background (their proportion rose from 15.1 % in 2012 to 17.7 % in 2015), will exacerbate the equity challenge. Moreover, Belgium faces a shortage of qualified teachers. The main reasons are the difficulty of attracting the most suitable students and candidates to the profession; the high exit rate of starting teachers; and the unavailability of a proportion of teachers for teaching. Also, at 3 years currently, the course length for initial teacher training is relatively short in Belgium. Education and training reforms are key to improving the labour market participation of low-skilled young people and to supporting the transition to a knowledge-intensive economy.

               (16)The non-cost dimension of competitiveness still requires improvements. Higher productivity gains and broader investment in knowledge-based capital, notably for adopting digital technologies, are essential in this respect. Although the public research system is of high quality, stronger performance in innovation would require more knowledge diffusion across less productive sectors. All federated entities acknowledge this need, and in recent years have adopted different strategies and measures to promote innovation. However, to foster such developments, more could be done to improve the framework conditions for innovation. Moreover, there seems to be scope for improving the efficiency and effectiveness of public support for research and innovation in Belgium, in particular in evaluating possible crowding-out effects and further simplifying the overall system.

               (17)Limited progress has been made to remove operational and establishment restrictions on retail. Following the reform, which transferred competences on retail establishment to the regions, new regional laws have been put in place simplifying the administrative procedure for authorisation. However, there is a wide margin for interpretation of certain provisions, which risks leading to unjustified market entry barriers. Consumer prices continue to be higher than in neighbouring Member States, beyond the level which could be explained by higher labour costs. A comprehensive strategy to tackle these issues would be necessary to ensure that consumers can benefit from a competitive market and lower prices.

               (18)High regulation in the network industries and some professional services is restricting competition in Belgium, in particular for real estate agents, architects and accountants. Barriers include shareholding and company form restrictions for architects, in addition to the other requirements; the incompatibility rules prohibiting the simultaneous exercise of any other economic activity for all types of accountancy professions; limitations on real estate agents’ access to the profession; and shareholding and voting rights restrictions. Reducing such barriers could generate more intensive competition, resulting in more firms entering the market and benefits for consumers in terms of lower prices. The European Commission presented a package of measures to tackle barriers in services markets in January 2017.
                  12
                This package includes various reform recommendations addressed to Belgium to tackle these challenges.

               (19)The transport network represents one of the most pressing investment gaps. There is a growing problem of peak-hour traffic congestion, which undermines the country’s attractiveness for foreign investors and has major economic and environmental costs. Belgium is also expected to fall short of its 2020 greenhouse gas emission reduction target and suffers from serious air pollution problems. The most urgent challenges are upgrading basic rail and road transport infrastructure and eliminating missing links between the main economic hubs. At the same time, it is important to tackle peak-hour congestion by improving public transport services, optimising traffic management and eliminating market distortions and adverse tax incentives, such as favourable treatment for company cars. Another challenge relates to the adequacy of domestic power generation and the security of supply in general. Unplanned outages of several nuclear installations had raised concerns about the way to balance electricity demand and supply, while the repeatedly revised timetable for phasing out the nuclear park continues to create a climate that is not conducive to taking long-term investment decisions. Although short-term supply risks have been abated, notably by the increase of the strategic reserve, and some progress was made in increasing the interconnections, longer-term investment needs are still considerable. In addition to further increases in interconnections, smart grids are needed to develop demand-side management. Given the considerable lead time for projects in the energy sector and the high need for replacement capacity over the next decade, swift action will be required, in particular in the form of a suitable legal framework that also promotes the development of flexible capacities (i.e. generation, storage and demand-side management).

               (20)Belgium has made some progress in reforming the tax system, in particular by shifting taxes from labour to other tax bases, which will gradually reduce the tax wedge on labour. Taxes on labour, including social contributions, are being reduced in several steps between 2016 and 2020. The effects of the ongoing tax reform are beginning to materialise. Nevertheless, the tax system remains complex, with tax bases eroded by specific exemptions, deductions and reduced rates. Some of these involve revenue losses, economic distortions and a heavy administrative burden. The tax shift does not seem to be neutral from a budgetary point of view since labour tax cuts have only been partially compensated by increases in other taxes, mainly consumption taxes. There is still considerable scope for improving the design of the tax system by further broadening tax bases, allowing for both lower statutory rates and fewer distortions. There is also considerable potential for a ‘green’ tax shift stemming from, among other things, the favourable tax treatment of company cars and fuel cards which impedes further progress in tackling congestion, air pollution and greenhouse gas emissions. The government envisages changes to the company car system, but the environmental benefit of this reform is likely to be limited.

               (21)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Belgium’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 Belgium in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Belgium, 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.

               (22)In the light of this assessment, the Council has examined the Stability Programme and its opinion
                  13
                is reflected in particular in recommendation 1 below,

               HEREBY RECOMMENDS that Belgium 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 translates into a substantial fiscal effort for 2018. When taking policy action, consideration should be given to achieving a fiscal stance that contributes to both strengthening the ongoing recovery and ensuring the sustainability of Belgium’s public finances. Agree on an enforceable distribution of fiscal targets among government levels and ensure independent fiscal monitoring. Remove distortive tax expenditures. Improve the composition of public spending in order to create room for infrastructure investment, including on transport infrastructure.

               2.Ensure that the most disadvantaged groups, including people with migrant background, have equal access to quality education, vocational training, and the labour market.

               3.Foster investment in knowledge-based capital, notably with measures to increase digital technologies adoption, and innovation diffusion. Increase competition in professional services markets and retail, and enhance market mechanisms in network industries.

               Done at Brussels,

                     For the Council

                     The President

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

                     (2)
                  COM(2017) 501 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)
                  OJ C92/01, 24.3.2017, p. 1.

                     (7)
                  SWD(2017) 67 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)
                  Cyclically-adjusted balance net of one-off and temporary measures, recalculated by the Commission using the commonly agreed methodology.

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

                     (13)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.


               EUROPEAN COMMISSION
            Brussels, 13.5.2015
            COM(2015) 256 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2015 National Reform Programme of Germanyand delivering a Council opinion on the 2015 Stability Programme of Germany

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2015 National Reform Programme of Germany

                  and delivering a Council opinion on the 2015 Stability Programme of Germany

               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 March 2010, the European Council agreed to the Commission’s proposal to launch a new strategy for growth and jobs, Europe 2020, based on enhanced coordination of economic policies. The strategy focuses on the key areas where action is needed to boost Europe’s potential for sustainable growth and competitiveness.

               (2)On 13 July 2010, the Council, on the basis of the Commission’s proposals, adopted a recommendation on the broad guidelines for the economic policies of the Member States and the Union (2010 to 2014) and on 21 October 2010 it adopted a decision on guidelines for the employment policies of the Member States. Together these form the ‘integrated guidelines’ which Member States were invited to take into account in their national economic and employment policies.

               (3)On 8 July 2014, the Council adopted a Recommendation on Germany’s national reform programme for 2014 and delivered its opinion on Germany’s updated stability programme for 2014. On 28 November 2014, in line with Regulation (EU) No 473/2013
                  5
               , the Commission presented its opinion on Germany’s draft budgetary plan for 2015
                  6
               .

               (4)On 28 November 2014, the Commission adopted the Annual Growth Survey
                  7
               , marking the start of the 2015 European Semester of economic policy coordination. On the same day, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report
                  8
               , in which it identified Germany as one of the Member States for which an in-depth review would be carried out.

               (5)On 18 December 2014, the European Council endorsed the priorities for boosting investment, accelerating structural reforms and pursuing responsible growth-friendly fiscal consolidation.

               (6)On 26 February 2015, the Commission published its 2015 country report for Germany
                  9
               . This assessed Germany’s progress in addressing the country-specific recommendations adopted on 8 July 2014. The country report also includes the results of the in-depth review under Article 5 of Regulation (EU) No 1176/2011. The Commission’s analysis leads it to conclude that Germany is experiencing macroeconomic imbalances which require decisive policy action and monitoring. Risks have increased in light of the persistence of insufficient private and public investment, which represents a drag on growth and contributes to the very high current account surplus which continues to require close attention. The need for action to reduce the risk of adverse effects on the German economy and, given its size, on the economic and monetary union more widely, is particularly great.

               (7)On 28 April 2015, Germany submitted its 2015 National Reform Programme and on 16 April 2015 its 2015 Stability Programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (8)Germany is currently in the preventive arm of the Stability and Growth Pact and subject to the debt rule. In its 2015 Stability Programme, the Government plans to maintain a budgetary surplus. The medium-term objective – a structural deficit of 0.5% of GDP – continues to be met throughout the programme period. The government debt-to-GDP ratio is expected to gradually decline to 61.5% in 2019. The macroeconomic scenario underpinning these budgetary projections, which has not been endorsed by an independent body, uses cautious growth assumptions. Based on the Commission’s 2015 spring forecast, the structural balance is projected to remain above the medium-term objective. Gross debt is forecast to remain on a firm downward path beyond the requirement of the debt rule. This creates the fiscal space to boost investment. Based on its assessment of the Stability Programme and taking into account the Commission’s 2015 spring forecast, the Council is of the opinion that Germany is expected to comply with the provisions of the Stability and Growth Pact.

               (9)The federal government has increased expenditure on education and research, but the share of public spending on education as a proportion of GDP is still below the EU average and total expenditure on education and research may fall short of the national target of 10 % of GDP by 2015. Germany intends to increase public investment until 2018, including additional amounts of EUR 10 billion for infrastructure and EUR 5 billion to support investment by financially weak municipalities. However, these positive steps appear insufficient to address the overall investment backlog. Taking advantage of its fiscal space would enable Germany to invest in the economy’s future growth potential and to address the public investment backlog, which is particularly evident in infrastructure and at municipal level. Germany has made no progress in improving the efficiency of the tax system. Overall, the scope for shifting taxes to more growth-friendly revenue sources appears underused. The revenues from recurrent property taxes remain comparatively low (0.5 % of GDP in 2012 vs. 1.5 % in the EU-28) and the valuation of property is outdated, dating back to market values of 1963/64 in the western Länder and 1935 in the eastern Länder. Although a reform of the municipal real estate tax (Grundsteuer) was part of the coalition agreement and announced in the 2014 and 2015 National Reform Programmes, no concrete action has been taken so far. Instead of focussing more on less distortive recurrent property taxes, the trend towards increasing real estate transfer taxes has continued. The local trade tax (Gewerbesteuer) has not been reviewed. Inefficiencies arise due to the inclusion of non-profit elements in the tax base. The administrative burden of taxation for companies and the cost of tax collection remain comparatively high in Germany, while electronic filing is less used in personal and corporate income tax than on average in the EU. The ongoing review of fiscal relations between the federation, Länder and municipalities provides the opportunity to strengthen the framework for sustainable fiscal policies, including ensuring adequate public investment at all levels of government. The review is also an opportunity to improve the allocation of revenue and expenditure competences as well as the efficiency of the horizontal fiscal equalisation system and of tax administration.

               (10)No measures have been specified to increase incentives for later retirement, which appear indispensable in view of the projected strong decline in Germany’s working-age population and a possible shortage of skilled workers in the medium term. The tax wedge for workers earning between 50 % and 67 % of the average wage has remained largely unchanged since 2001 and remains among the highest in the EU. The recent reforms to social insurance systems are likely to involve a further rise in contribution rates and increase the tax wedge further. This would have potentially negative effects on labour market participation and disposable income. The impact of fiscal drag is currently mitigated by low inflation. However, with dynamic wage growth and somewhat higher inflation rates in the coming years, fiscal drag could lead to significant non-discretionary tax increases. These could, in turn, also affect disposable income. Limited progress has been made in improving the educational achievement of disadvantaged people. Young people with a migrant background are twice as likely to leave school early. Fiscal disincentives are likely to be an important factor in discouraging second earners from taking up a job or working longer hours. This contributes to the low proportion of women working full-time and one of the lowest number of hours worked on average by women in the EU. The exemption of mini-jobs from personal income tax and in many cases from all employee social contributions also discourages workers from moving into jobs with earnings above the mini-job threshold of EUR 450 per month.

               (11)Policy action to stimulate competition in the services sectors, especially in professional services, has been limited. Labour productivity growth rates in professional services in Germany have been negative or close to zero for more than a decade. Germany is also among the EU Member States where regulation is least conducive to competition in the professional services sector. The restrictions include professional qualifications requirements, legal form and shareholding requirements. On the latter, limited changes are under way in some Länder, but there is still no broad review of such restrictions. Germany is participating in the mutual evaluation exercise provided for in the Directive amending the Professional Qualifications Directive but has not yet taken any measures as a result of this review. The competitive situation in the German railway markets has not significantly improved since last year. In particular, in the long-distance rail passenger segment, the difficult competitive environment is discouraging for new entrants. Track access charges for long-distance passenger transport are among the highest in the EU. The market share of new entrants in the long-distance rail passenger market remains below 1 % and is falling.

               (12)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Germany’s economic policy and published it in the 2015 country report. It has also assessed the Stability Programme and the National Reform Programme and the follow-up given to the recommendations addressed to Germany in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Germany 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.

               (13)In the light of this assessment, the Council has examined Germany’s Stability Programme, and is of the opinion
                  10
                that Germany complies with the Stability and Growth Pact.

               (14)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 3 below.

               (15)In the context of the European Semester the Commission has also carried out an analysis of the economic policy of the euro area as a whole. On the basis of this analysis, the Council has issued specific recommendations for the Member States whose currency is the euro. Germany should also ensure the full and timely implementation of these recommendations,

               HEREBY RECOMMENDS that Germany take action in 2015 and 2016 to:

               1.Further increase public investment in infrastructure, education and research, including by using the available fiscal space. To foster private investment, take measures to improve the efficiency of the tax system, in particular by reviewing the local trade tax and corporate taxation and by modernising the tax administration. Use the ongoing review to improve the design of fiscal relations between the federation, Länder and municipalities, particularly with a view to ensuring adequate public investment at all levels of government.

               2.Increase incentives for later retirement. Take measures to reduce high labour taxes and social security contributions, especially for low-wage earners, and address the impact of fiscal drag. Revise the fiscal treatment of mini-jobs to facilitate the transition to other forms of employment.

               3.Take more ambitious measures to stimulate competition in the services sector, in particular in professional services, by eliminating unjustified restrictions such as legal form and shareholding requirements and fixed tariffs. To this end, conclude the ongoing domestic review of these barriers and take follow-up measures. Remove the remaining barriers to competition in the railway markets, notably in long-distance rail passenger transport.

               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(2015) 256

                     (4)
                  P8_TA(2015)0067, P8_TA(2015)0068, P8_TA(2015)0069.

                     (5)
                  OJ L 140, 27.5.2013, p. 11.

                     (6)
                  C(2014) 8801 final.

                     (7)
                  COM(2014) 902.

                     (8)
                  COM(2014) 904 final.

                     (9)
                  SWD(2015) 25 final.

                     (10)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.