               EUROPEAN COMMISSION
            Brussels, 18.5.2016
            COM(2016) 333 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2016 national reform programme of Cyprusand delivering a Council opinion on the 2016 stability programme of Cyprus

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2016 national reform programme of Cyprus

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

               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)Cyprus was subject to a macroeconomic adjustment programme until 31 March 2016 in line with Article 1(2) of Council Implementing Decision 2013/463/EU
                  5
               . Under Article 12 of Regulation (EU) No 472/2013 of the European Parliament and of the Council
                  6
               , Cyprus was exempt from the monitoring and assessment of the European Semester for economic policy coordination for the duration of the programme. Having exited the programme, Cyprus is now fully re-integrated into the European Semester.

               (2)On 26 November 2015, the Commission adopted the Annual Growth Survey
                  7
               , 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
                  8
               , in which it indicated that the situation of Cyprus will be assessed in the context of the macroeconomic imbalances procedure after the conclusion of the macroeconomic adjustment programme. On the same day, the Commission also adopted a recommendation for a Council recommendation on the economic policy of the euro area
                  9
               . 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, Cyprus should ensure the full and timely implementation of the recommendation.

               (3)The 2016 country report for Cyprus
                  10
                was published on 7 April 2016. It assessed Cyprus’ economic and social situation and challenges following its exit from the macroeconomic adjustment programme on 31 March 2016, and Cyprus' progress towards its national Europe 2020 targets. It also included the in-depth review under Article 5 of Regulation (EU) No 1176/2011. On 7 April 2016, the Commission presented the results of the in-depth review.
                  11
                The Commission’s analysis leads it to conclude that Cyprus is experiencing excessive macroeconomic imbalances. In particular, it is essential that it tackles the large stock of imbalances in the form of private, public and external debt overhang, and the high level of non-performing loans.

               (4)On 28 April 2016, Cyprus submitted its 2016 national reform programme, and on 13 May 2016, after the deadline, its 2016 stability programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (5)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
                  12
               .

               (6)[Following the abrogation of the excessive deficit procedure, Cyprus is in the preventive arm of the Stability and Growth Pact and subject to the transitional debt rule.] Based on the Commission 2016 spring forecast, the medium-term budgetary objective is expected to be met in 2016. However, under unchanged policies, there is a risk of some deviation from the medium-term budgetary objective in 2017. Cyprus' structural balance is projected to deteriorate more than what is allowed under the transitional debt rule. Based on its assessment of the stability programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that there is a risk that Cyprus will not comply with the provisions of the Stability and Growth Pact. Therefore, further measures will be needed to ensure compliance in 2017.

               (7)Cyprus has implemented important fiscal-structural reforms under its macroeconomic adjustment programme. Certain pieces of secondary legislation have still to be adopted as regards the procedures for budget preparation, requirements for within-year budgetary adjustments and the responsibilities of commitment control officers. The public sector is still characterised by inefficiencies. In particular, the public administration is marked by one of the highest wage bills (as a percentage of GDP) in the euro area, while efficiency indicators remain average and can be traced to the lack of mobility and performance incentives. State-provided utilities (telecommunications, energy) are marked by high prices and are still relatively shielded from competition. Under the programme, Cyprus has committed itself to adopting a binding mechanism for limiting wage increases for public employees as a means of guaranteeing the long-term sustainability of public finances. While the draft law has been prepared and submitted to the House of Representatives, it is still awaiting adoption. Under the programme, a horizontal reform of the public administration, a reform plan of local governments and a new law on the governance of state-owned entities have been put forward to improve the efficiency of the public sector, but have not yet been adopted.

               (8)Private sector debt in Cyprus remains excessive. While the reformed foreclosure and insolvency frameworks constitute an important step towards balancing the rights of borrowers and creditors, there is scope for improving their efficiency and extending their use. A number of deficiencies in the functioning of these frameworks hamper putting private debt on a sustainable downward path and a faster reduction of non-performing loans. This also weighs on the capacity to offer second opportunities to entrepreneurs. A number of deficiencies also remain in the functioning of private sector debt restructuring solutions. Furthermore, the adoption of all necessary regulations and rules of Court is important for the effective implementation of the insolvency legislation. To be fully operational, the Insolvency Service needs appropriate staffing, IT infrastructure and a sufficient number of properly trained and licensed insolvency practitioners. Furthermore, reliable and swift systems for the issuance and transfer of title deeds are crucial to avoid backlogs and to provide purchasers with safeguards, ensuring the proper determining of property rights and contributing to the return of confidence in the housing market.

               (9)Cyprus also faces critical challenges as regards the functioning of the judicial system. Inefficient court procedures and limited capacity lead to significant delays in processing court cases, which hamper the functioning of the foreclosure and insolvency framework and weaken the business environment in general. In the absence of a reform of the civil procedure law, the processing and enforcement of court decisions and the reduction of backlogs remain slow.

               (10)Significant progress has been made under the programme to restructure and restore confidence in the Cypriot financial system. However, Cyprus still faces the challenge of restoring normal lending to the economy and reducing non-performing loans, which stand at around 55% of total loans to households and non-financial corporations. High corporate debt makes businesses less competitive and weighs on their capacity to invest and grow. Banks' efforts to restructure the debt of viable borrowers have not yet shown tangible results, while the provisioning of their non-performing exposure remains relatively moderate. Weaknesses in contract enforcement and the repayment discipline weigh on the capacity to tackle strategic defaults and to stem the formation of non-performing loans. Banks also have limited access to information on borrowers' income and assets, despite the creation of the credit registry.

               (11)Cyprus has come a long way in steering the economy out of recession, but investment remains low and the growth potential of the economy is subdued.  Under the programme, Cyprus adopted an action plan for growth, which was aimed at improving competition, enhancing incentives to innovation and facilitating investment by creating a more transparent and efficient environment for conducting business and easing licensing and permit procedures. The implementation of the privatisation plan and the strengthening of national regulatory authorities aim at attracting productivity-enhancing foreign investment. Start-ups and SMEs currently have very limited options for access to finance, amid tight bank credit conditions and the lack of alternative sources of financing. Access to finance is also hampered by a lack of coordination in the management of EU instruments such as the European Structural and Investment Funds, the European Fund for Strategic Investments and EU competitive programmes.

               (12)The labour market started recovering in 2015, but unemployment remains high. In particular, youth and long-term unemployment are a source of concern. Some measures have been taken in the areas of active labour market policies and public employment services. However, the latter still lack the capacity to meet demand, to deliver quality job-search assistance and counselling and to reach out to the non-registered unemployed. Plans to strengthen the administrative capacity of the public employment services, including specialisation of and an increase in the number of counsellors directly serving customers' needs, have been delayed. The effectiveness of active labour market policies is limited by the lack of effective monitoring of the quality of current programmes.

               (13)Participation of young people in vocational education and training remains low and is characterised by a lack of employer engagement in the education of students. However, measures are currently being implemented, in line with the strategy on vocational education and training.

               (14)Cyprus lacks universal healthcare coverage and its healthcare system fails to provide adequate and effective access to care. With low public funding for healthcare, unmet needs – due to cost as well as out-of-pocket payments – are significantly higher than in other EU countries. There is scope for improving efficiency in the use of resources. More autonomy for public hospitals and the creation of a national health system are among the measures that have been considered relevant, but not yet adopted, to improve the adequacy and cost-effectiveness of the Cypriot health system.

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

               (16)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.

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

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

               1.Following the correction of the excessive deficit, respect the medium-term budgetary objective in 2016 and in 2017. By the end of 2016, adopt a binding mechanism containing the growth rate of the compensation of public employees. By the end of 2016, adopt the horizontal reform of the public administration and the law on the governance of state-owned entities, and implement the reform of local governments. By the end of 2016, adopt the secondary legislation to complete the new budgetary framework.

               2.By June 2017, eliminate impediments to the full implementation of the insolvency and foreclosure frameworks and ensure adequate resources for the Insolvency Service. Ensure reliable and swift systems for the issuance of title deeds and the transfer of immovable property rights. Increase the efficiency and capacity of the court system. Reform the civil procedure law.

               3.By the end of 2016, take measures to ensure a decline in non-performing loans and accurate valuations of collateral for provisioning purposes. Increase the range of information available for creditors to make the credit registry fully operational.

               4.Remove impediments to investment, notably by implementing the action plan for growth, pursuing the privatisation plan and strengthening the national regulatory authorities. Take measures to increase access to finance for small and medium-sized enterprises.

               5.Enhance the capacity of the public employment services and their provision to the long-term unemployed; improve outreach to the non-registered unemployed. Adopt legislation for a hospital reform and advance with the planned implementation of universal health care coverage.

               Done at Brussels,

                     For the Council

                     The President

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

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

                     (3)
                  COM(2016) 333 final.

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

                     (5)
                  Council Implementing Decision 2013/463/EU of 13 September 2013 on approving the macroeconomic adjustment programme for Cyprus and repealing Decision 2013/236/EU (OJ L 250, 20.9.2013, p. 40).

                     (6)
                  Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability (OJ L 140, 27.5.2013, p. 1).

                     (7)
                  COM(2015) 690 final.

                     (8)
                  COM(2015) 691 final.

                     (9)
                  COM(2015) 692 final.

                     (10)
                  SWD(2016) 120 final.

                     (11)
                  COM(2016) 95 final.

                     (12)
                  COM(2014) 494 final.

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


               EUROPEAN COMMISSION
            Brussels, 18.5.2016
            COM(2016) 330 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2016 national reform programme of Franceand delivering a Council opinion on the 2016 stability programme of France

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2016 national reform programme of France

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

               THE COUNCIL OF THE EUROPEAN UNION,

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

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

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

               Having regard to the recommendation of the European Commission
                  3
               ,

               Having regard to the resolutions of the European Parliament
                  4
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

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

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

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

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

               (3)On 29 April 2016, France submitted its 2016 national reform programme and its 2016 stability programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

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

               (5)France is currently in the corrective arm of the Stability and Growth Pact. In its 2016 stability programme, the government plans to correct the excessive deficit by 2017, in line with the Council recommendation of 10 March 2015. The headline deficit is planned to decline further to 1.2% of GDP in 2019. The medium-term budgetary objective – a structural deficit of 0.4% of GDP – is planned to be achieved by 2018. According to the stability programme, the government debt-to-GDP ratio is expected to peak at 96.5 % of GDP in 2017 before declining to 93.3 % of GDP in 2019. The macroeconomic scenario underpinning the budgetary projections is broadly plausible. However, the measures needed to support the planned deficit targets from 2017 onwards have not been sufficiently specified.  Based on the Commission 2016 spring forecast, the headline deficit is projected to reach 3.4% of GDP in 2016, in line with the deficit recommended by the Council. For 2017, under unchanged policies, the headline deficit is projected to reach 3.2% of GDP, putting at risk compliance with the deadline to correct the excessive deficit. The recommended fiscal effort is not projected to be delivered in 2016 and 2017 as the consolidation strategy pursued by France relies primarily on improving cyclical conditions and a continuation of the low interest rate environment, which are outside the control of the authorities, thereby entailing compliance risks. Based on its assessment of the stability programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that there is a risk that France will not comply with the provisions of the Stability and Growth Pact. Therefore, further measures will be needed to ensure a durable correction of the excessive deficit by 2017.

               (6)The level of public expenditure in France is one of the highest in the EU and it has continued to increase since 2010. France has announced a plan to reduce public spending by EUR 50 billion between 2015 and 2017 at all levels of general government, but this may be insufficient to achieve a significant reduction in public expenditure. Detailing the measures underpinning the spending reductions, while making sure that the savings measures take into account the close-to-zero inflation, would help to increase the efficiency of this plan.

               (7)Challenges remain to reduce further the expenditure ratio as planned, since the process of identifying large areas of potential savings has not been effective and the spending reviews have had modest outcomes so far. In the housing sector, France spends almost twice as much as its European peers without noticeable better outcomes in the housing market. The combined effect of the implementation of the planned reduction in grants to local authorities from the central government and a stronger control of local government expenditure, in particular by containing the rise in administrative costs of local authorities, could preserve their investment capacity. The spending reviews could be an appropriate tool to identify such savings. Moreover, the recent reform of local administration has the potential to increase the efficiency of the system over the medium to long term.

               (8)Sizeable short-term savings cannot be achieved without significantly curbing the increase in social security spending, which represents more than half of the general government expenditure. The pension system could continue to face deficits over the short to medium term, especially under adverse macroeconomic conditions. Moreover, the previous pension reforms are only expected to curtail the current high level of public pension expenditure ratio after 2025. France has set ambitious targets for 2016 and 2017 to limit the growth of health expenditure. These targets could be complemented by further efforts to identify efficiency gains in the medium to long term.

               (9)Policy measures to reduce labour costs and improve firms' profit margins have been undertaken through the EUR 20 billion tax credit for competitiveness and employment and the EUR 10 billion in additional cuts in employers' social contributions planned under the responsibility and solidarity pact. The design of these measures, which account for 1.5% of GDP and contribute to reducing the gap between France and the euro area average in terms of labour cost, may hamper their effectiveness. The results of the planned evaluations of these cost reduction measures will help any decision on the future design of these schemes, to ensure that these measures meet their objectives in terms of efficiency. The effect on wage formation and employment is of particular interest for these evaluations.

               (10)In the current context of high unemployment, there are risks that the cost of labour at the minimum wage hampers employment of low qualified people. While the minimum wage is high compared with the median wage, the cost of labour at the minimum wage has been reduced by social contribution exemptions. Increases in the minimum wage induce wage increases for all categories of workers and create upward wage compression. Because of the minimum wage indexation mechanism, there are feedback loops between increases in average wages and changes in the minimum wage, which delay the necessary wage adjustment in response to a weak economic situation.

               (11)Recent reforms have created only limited flexibility for employers to depart from branch-wide agreements. This concerns all aspects of employment conditions, including wages, working time, employment and working conditions and limits the possibilities for companies to adjust the workforce according to their needs. At present, branches may prevent companies from determining, on a case by case basis and after negotiations with social partners, the conditions under which working time could depart from branch-wide agreements. The take-up of derogations from branch agreements and general legal provisions on employment conditions, via firm-level agreements, could be facilitated, in consultation with social partners.

               (12)In 2015, the unemployment rate increased to 10.4%. Unemployment is higher among young people, non-EU nationals and less qualified workers. The structure of the labour market is increasingly polarised, with highly educated workers hired on open-ended contracts and a constant proportion of low-skilled jobs becoming more and more precarious. The proportion of fixed-term contracts of less than one month in total hires rose to close to 70% in 2015. The legal framework governing labour contracts, in particular as regards the legislation on dismissal for open-ended contracts, may contribute to the high segmentation of the labour market. The long-running deterioration in the labour market has put a strain on the sustainability of the unemployment benefit system. In February 2016, the deficit was projected to be at EUR 4.5 billion in 2015, EUR 4.2 billion in 2016 and EUR 3.5 billion in 2017. This would further increase the system's debt from EUR 25.8 billion in 2015 to EUR 30.0 billion in 2016 and EUR 33.6 billion in 2017. The benefit calculation favours a succession of short-term full-time jobs over long-term part-time jobs and creates incentives for employers to offer short-term employment to be complemented by in-work benefits. Moreover, the design of the unemployment benefit system, notably as regards eligibility conditions and degressivity of benefits, may weaken incentives to return to work.

               (13)The transition from school to work remains challenging and the least qualified young people are the most affected. Recourse to apprenticeship is decreasing among low qualified categories in a context of differentiated regional strategies and a limited capacity of the system to adapt to new economic needs. The offer of training for the unemployed, less qualified workers and SME employees remains insufficient, despite the ongoing vocational training reforms, including on governance, incentives and counselling and the new targeted unemployed training plan. The unsatisfactory cooperation between the various actors involved in continuous vocational training prevents an efficient allocation of resources. The upcoming personal activity account may help to rebalance access.

               (14)The French business environment continues to be middle ranking, in particular as regards the burden of government regulation, where France ranks poorly in international comparisons. The simplification programme is being pursued as planned but progress with implementation is uneven, especially as regards measures targeting companies, and there remain challenges in a number of areas.

               (15)The French economy has a disproportionately high proportion of smaller businesses compared to other Member States and this limits their productivity level. Recent initiatives to soften the impact of size-related requirements are not expected significantly to affect firms' growth, given their limited scope or temporary nature. As a consequence, threshold effects will continue to limit the growth of French firms.

               (16)Competition in services has improved in some sectors, but barriers remain in place in others, notably in business services, as a significant proportion of these services were unaffected by the recent reforms, and network industries. A number of barriers to entry and regulations, as well as tariffs, constrain economic activity in regulated professions and weigh on the productivity of other sectors that use these services. Further problems stem from the restrictive application of authorisation requirements.

               (17)France continues to lag behind EU innovation leaders, in spite of the generosity of public support in this area. There has been an inflation and instability of public schemes to support innovation over the past 15 years, which raises concerns as regards the overall coordination, consistency and efficiency of these schemes. This affects SMEs in particular.

               (18)In 2014, the tax-to-GDP ratio stood at 45.9%, one of the highest in the EU. The overall tax burden continues to increase and its composition is not conducive to economic growth as it weighs significantly on production factors but relatively little on consumption. Taxes on corporations started decreasing modestly in 2014 and France has begun to close the gap with the EU average in terms of environmental taxation, but revenues from VAT remain low both as a share of GDP and as a percentage of total taxation due to low rates, the widespread application of reduced rates and a high number of exemptions. Beyond the ongoing phase-out of the solidarity surcharge on companies, concrete steps to reach the announced objective of reducing the corporate income statutory rate to 28 % in 2020 have not yet materialised.

               (19)The tax system is very complex. A high number of inefficient taxes yielding little or no revenue remains and personal income taxation is particularly complex, which comes at a significant administrative cost. In spite of the introduction in the 2014-2019 public finance programming law of the requirement regularly to assess and monitor tax expenditures, the projected reduction in tax expenditures for 2016 is modest after several years of increase.

               (20)Overall, the barriers to private investment are moderate, with the high regulatory burden and high corporate tax rates being the main obstacles. The investment environment would be improved by enhancing the business environment, reducing taxes on production and simplifying the tax system. All measures taken to improve the cost and non-cost competitiveness of French firms have the potential to increase investment levels and to incentivise firms to invest in physical and human capital, with a view to improving productivity. The long-term growth potential is also limited by subdued investment in innovation activities.

               (21)In the context of the European Semester, the Commission has carried out a comprehensive analysis of France’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 France in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in France but also their compliance with EU rules and guidance, given the need to reinforce the EU's overall economic governance by providing EU-level input into future national decisions. Its recommendations under the European Semester are reflected in recommendations (1) to (5) below.

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

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

               HEREBY RECOMMENDS that France take action within the period 2016-2017 to:

               1.Ensure a durable correction of the excessive deficit by 2017 by taking the required structural measures and by using all windfall gains for deficit and debt reduction. Specify the expenditure cuts planned for the coming years and step up efforts to increase the amount of savings generated by the spending reviews, including on local government spending, by the end of 2016. Reinforce independent public policy evaluations in order to identify efficiency gains across all sub-sectors of general government.

               2.Ensure that the labour cost reductions are sustained and that minimum wage developments are consistent with job creation and competitiveness. Reform the labour law to provide more incentives for employers to hire on open-ended contracts.

               3.Improve the links between the education sector and the labour market, in particular by reforming apprenticeship and vocational training, with emphasis on the low-skilled. By the end of 2016, take action to reform the unemployment benefit system in order to bring the system back to budgetary sustainability and to provide more incentives to return to work.

               4.Remove barriers to activity in the services sector, in particular in business services and regulated professions. Take steps to simplify and improve the efficiency of innovation policy schemes. By the end of 2016, further reform the size-related criteria in regulations that impede companies' growth and continue to simplify companies' administrative, fiscal and accounting rules by pursuing the simplification programme.

               5.Take action to reduce the taxes on production and the corporate income statutory rate while broadening the tax base on consumption, in particular as regards VAT. Remove inefficient tax expenditures, remove taxes that are yielding little or no revenue and adopt the withholding personal income tax reform by the end of 2016.

               Done at Brussels,

                     For the Council

                     The President

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

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

                     (3)
                  COM (2016) 330 final.

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

                     (5)
                  COM(2015) 690 final.

                     (6)
                  COM(2015) 691 final.

                     (7)
                  COM(2015) 692 final.

                     (8)
                  SWD(2016) 79 final.

                     (9)
                  COM(2016) 95 final.

                     (10)
                  COM(2014) 494 final.

                     (11)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97


               EUROPEAN COMMISSION
            Brussels, 18.5.2016
            COM(2016) 323 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2016 national reform programme of Bulgariaand delivering a Council opinion on the 2016 convergence programme of Bulgaria

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2016 national reform programme of Bulgaria

                  and delivering a Council opinion on the 2016 convergence programme of Bulgaria

               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 November 2015, the Commission adopted the Annual Growth Survey
                  5
               , marking the start of the 2016 European Semester of economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 17-18 March 2016. On 26 November 2015, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report
                  6
               , in which it identified Bulgaria as one of the Member States for which an in-depth review would be carried out.

               (2)The 2016 country report for Bulgaria
                  7
                was published on 26 February 2016. It assessed Bulgaria’s progress in addressing the country-specific recommendations adopted by the Council on 14 July 2015 and Bulgaria'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 adopted a Communication
                  8
                presenting the results of the in-depth review. The Commission’s analysis leads it to conclude that Bulgaria is experiencing excessive macroeconomic imbalances. In particular, the economy is characterised by remaining fragilities in the financial sector and high corporate indebtedness in a context of high unemployment.

               (3)On 15 April 2016, Bulgaria submitted its 2016 national reform programme and its 2016 convergence programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (4)Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds for the 2014-2020 period. As foreseen in Article 23 of Regulation (EU) No 1303/2013, where it is necessary to support the implementation of relevant Council recommendations, the Commission may request a Member State to review and propose amendments to its Partnership Agreement and relevant programmes. The Commission has provided further details on how it would make use of this provision in guidelines on the application of the measures linking effectiveness of the European Structural and Investment Funds to sound economic governance
                  9
               .

               (5)Bulgaria is currently in the preventive arm of the Stability and Growth Pact. In its 2016 convergence programme, the government plans a gradual improvement of the headline balance to -1.9% of GDP in 2016 and -0.2% of GDP in 2019. The medium-term budgetary objective — a structural deficit of 1 % of GDP — is planned to be achieved as of 2017. According to the convergence programme, the government debt-to-GDP ratio is expected to peak at 31.8% in 2018 and to decline to 30.8% in 2019. The macroeconomic scenario underpinning these budgetary projections is slightly favourable. The measures needed to support the planned deficit targets starting with 2017 onwards have not been sufficiently specified. Based on the Commission 2016 spring forecast, there is a risk of some deviation from the adjustment path towards the medium-term budgetary objective in 2016 as well as in 2017, under unchanged policies. Based on its assessment of the convergence programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that Bulgaria is expected to broadly comply with the provisions of the Stability and Growth Pact. Nevertheless, further measures will be needed to ensure compliance in both 2016 and 2017.

               (6)Bulgaria made some progress in addressing last year's recommendation to make its healthcare spending more efficient, particularly by producing a national health map that will enable medical expenditure to be planned in accordance with territorial criteria and the needs of the population. The Bulgarian health system faces major challenges, including limited access, low funding and poor health outcomes.  In spite of recent efforts to improve tax collection, the shadow economy remains a significant challenge affecting public revenues. Undeclared work, including under-reported remuneration and evasion of social security contributions, distorts the labour market and reduces fiscal revenue.

               (7)Cases of imprudent business practices across the financial sector, coupled with inefficient supervision, have created an environment for imbalances to accumulate. The completion, in a transparent way and according to best international practices, of the recently launched reviews of the banking, insurance and pension fund sectors and taking the necessary follow-up actions will strengthen confidence in the financial sector. Moreover, continued efforts to improve financial supervision, in both the banking and non-banking sectors, will play an important role in strengthening the financial system and positioning it to support the nascent macroeconomic recovery.

               (8)The labour market has experienced a modest recovery but remaining weaknesses continue to hinder growth and limit the adjustment capacity of the economy. Labour market adjustment is hampered by the structural nature of long-term unemployment, a shrinking and ageing labour force, low labour market participation and skills mismatches. While unemployment is gradually improving, there are still important challenges, for example as regards the long-term unemployed and young people not in employment, education or training. Active labour market policies could play a stronger role in helping these groups to access the labour market. The activation of people on social benefits is hindered by the fragmentation of, and limited cooperation between, different agencies delivering benefits and labour market integration services. Dedicated centres for employment and social assistance, which combine the services of the Employment Agency and the Social Assistance Agency, have been developed in a pilot project but no decision has been taken yet to roll out the project on a larger scale after it ends in December 2016.

               (9)Although Bulgaria’s minimum wage is still the lowest in the EU, it has increased substantially since 2011 and the lack of objective criteria for minimum wage setting creates uncertainty. Despite work of the government and social partners in this area, Bulgaria still has no clear guidelines or transparent criteria for minimum wage setting that take into account its impact on job creation, social conditions and competitiveness.

               (10)Very high 'at-risk-of-poverty or social exclusion' and inequality levels remain in Bulgaria. Progress in addressing poverty and social exclusion is hindered by continuing challenges over integrating Roma into the labour force, facilitating school-to-work transitions, and improving the coverage and effectiveness of social, health and labour market policies. The general minimum income scheme provides very limited levels of support and outreach to the population. The allowance level is below the poverty line and  has not been increased in line with average and minimum wage developments of recent years. Estimates on coverage indicate that a large part of the intended beneficiaries do not receive benefits. A better outreach to the target groups, while maintaining fiscal responsibility, would help to alleviate poverty.

               (11)The education system has limited capacity to include vulnerable groups and equip learners with relevant skills. Vulnerable groups such as Roma and pupils from poor families continue to face significant obstacles in accessing and completing education. The level of enrolment among Roma at all levels of education is significantly lower than for non-Roma. The early school leaving rate continues to increase and is particularly high in rural areas and less developed regions. Removing barriers to the participation in early childhood education of disadvantaged children is essential to increase educational outcomes and prevent dropouts. A new Pre-school and School Education Act adopted by the parliament in September 2015 is an important step towards a comprehensive reform of the school system. The implementation of this legislation, together with targeted measures to overcome non-legislative barriers to the full participation of disadvantaged groups in education, should contribute to improving the Bulgarian economy's growth potential and social cohesiveness in the long term. Enrolment and graduation rates in tertiary education are on the rise and the employment rate of recent graduates is recovering slowly, although it remains significantly below the EU average.

               (12)Risks stemming from high corporate debt and barriers to deleveraging remain significant. The existing insolvency framework provides little scope for an effective debt workout process and does little to address the high level of corporate indebtedness. Reforms to facilitate corporate insolvency procedures could improve deleveraging and lead the way to new lending and investment.

               (13)The public procurement system in Bulgaria continues to suffer from structural weaknesses, including systematic irregularities in procurement procedures, lack of administrative capacity and deficient control mechanisms, combined with systematic court appeals that often delay works on the ground. The transition to full e-procurement has made only limited progress. The shortcomings of the Bulgarian public procurement system have led to interruption of payments and financial corrections in EU funding programmes and also affect the wider business environment.

               (14)Unstable policies and lack of trust in key public institutions, such as the judiciary, constitute significant deterrents to investment in the Bulgarian economy. The slow implementation of public administration reforms and reforms in specific sectors such as research, innovation and energy hamper progress in improving the investment climate. Although Bulgaria has adopted a strategic framework to reform and modernise its public administration, progress is slow and implementation often postponed. New legislation is not subject to systematic impact assessment, although there have been some efforts to change this. Frequent changes to the legal framework create uncertainty and affect the businesses environment. Corruption remains a significant concern and the national authorities' response to this problem continues to be hampered by weak and fragmented institutions. Under the Cooperation and Verification Mechanism, Bulgaria receives recommendations on judicial reform and the fight against corruption and organised crime. While these areas are of crucial importance for the overall business environment, they are therefore not covered in the country-specific recommendations for Bulgaria.

               (15)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Bulgaria’s economic policy and published it in the 2016 country report. It has also assessed the convergence programme and the national reform programme and the follow-up given to the recommendations addressed to Bulgaria in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Bulgaria but also their compliance with EU rules and guidance, given the need to strengthen the EU's overall economic governance by providing EU-level input into future national decisions. The recommendations under the European Semester are reflected in recommendations 1 to 4 below.

               (16)In the light of this assessment, the Council has examined the convergence programme, and its opinion
                  10
                is reflected in particular in recommendation 1 below.

               (17)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 recommendations 1 to 4 below.

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

               1.Achieve an annual fiscal adjustment of 0.5% of GDP towards the medium-term budgetary objective in 2016 and in 2017. Further improve tax collection and take measures to reduce the extent of the informal economy, including undeclared work.

               2.By the end of 2016, finalise the asset quality review and stress test of the banks. By the end of 2016, complete the balance-sheet review and stress test of the insurance companies and the review of private pension funds' assets. Take the necessary follow-up actions in all three sectors and continue to improve banking and non-banking supervision.

               3.Reinforce and integrate social services and active labour market policies, in particular for the long-term unemployed and young people not in employment, education or training. Increase the provision of quality education for disadvantaged groups, including Roma. Improve the efficiency of the health system by improving access and funding, and health outcomes. In consultation with social partners establish guidelines and criteria for setting the minimum wage. Increase the coverage and adequacy of the minimum income scheme.

               4.
                     Reform the insolvency framework to accelerate recovery and resolution procedures and improve their effectiveness and transparency. Increase the capacity of the courts regarding insolvency procedures. Strengthen the capacity of the Public Procurement Agency and contracting authorities and improve the design and control of public tendering procedures. Speed up the introduction of e-procurement.

               Done at Brussels,

                     For the Council

                     The President

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

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

                     (3)
                  COM(2016) 323 final.

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

                     (5)
                  COM(2015) 690 final.

                     (6)
                  COM(2015) 691 final.

                     (7)
                  SWD(2016) 72 final.

                     (8)
                  COM(2016) 95 final.

                     (9)
                  COM(2014) 494 final.

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


               EUROPEAN COMMISSION
            Brussels, 13.5.2015
            COM(2015) 274 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2015 National Reform Programme of Slovakiaand delivering a Council opinion on the 2015 Stability Programme of Slovakia

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2015 National Reform Programme of Slovakia

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

               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 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. These together 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 Slovakia’s National Reform Programme for 2014 and delivered its opinion on Slovakia’s updated Stability Programme for 2014. On 28 November 2014, in line with Regulation (EU) No 473/2013
                  4
               , the Commission presented its opinion on Slovakia’s draft budgetary plan for 2015
                  5
               .

               (4)On 28 November 2014, the Commission adopted the Annual Growth Survey
                  6
               , 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
                  7
               , in which it did not identify Slovakia 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 Slovakia
                  8
               . This assessed Slovakia’s progress in addressing the country-specific recommendations adopted on 8 July 2014.

               (7)On 29 April 2015, Slovakia submitted its 2015 National Reform Programme and its 2015 Stability Programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (8)Slovakia is currently in the preventive arm of the Stability and Growth Pact. In its 2015 Stability Programme, the government plans to gradually improve the headline deficit to 2.5% of GDP in 2015 and further to 0.5% of GDP in 2018. According to the Stability Programme, the medium-term objective – a structural deficit of 0.5% of GDP – would be reached as of 2017. The government debt-to-GDP ratio is expected to decline marginally in 2015 to 53.4% and to continue declining to 50.3% in 2018. The macroeconomic scenario underpinning these budgetary projections is plausible. However, measures to support the planned deficit targets from 2016 onwards have not been sufficiently specified. Based on the Commission's 2015 spring forecast, the net expenditure growth is below the benchmark in both 2015 and 2016, therefore meeting the requirements of the Stability and Growth Pact. 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 Slovakia is expected to comply with the provisions of the Stability and Growth Pact.

               (9)The labour market showed signs of recovery in 2014, but unemployment remains high. Disincentives in the social security system have been reduced and some progress has been made towards reducing youth unemployment, but long-term unemployment remains a major challenge and employment among Roma and the low-skilled is low. Although some initial steps have been taken to improve public employment services, they have limited capacity to provide personalised services, in particular to those furthest from the labour market. The employment rate for women remains well below the EU average, reflecting the insufficient provision of good quality and affordable childcare services and the relatively long duration of parental leave.

               (10)Slovakia made some progress in relation to work-based learning, with a new Act on vocational education and training to enter into force in 2015. Limited progress has, however, been made in improving teaching conditions, in encouraging the creation of more career-oriented bachelor programmes, and in increasing the proportion of Roma children attending early childhood education and care facilities. No measures have been taken to ensure a wider participation of Roma in vocational training and higher education. Only limited progress has been made in addressing the gaps in the Slovak research and innovation system, the main needs being namely to improve the quality and relevance of the science base and to promote cooperation between academia, research and business.

               (11)The poor quality of Slovakia’s business environment reduces the attractiveness of the country for both foreign and domestic investment. The inadequate efficiency and quality of the public administration and of the justice system are particularly detrimental to the business environment. The civil service suffers from high staff turnover and inefficient management of human resources. Efforts to tackle corruption have, to date, been limited. More particularly, the need to strengthen the analytical and audit capacity of the tax administration has not been addressed. Public procurement suffers from engrained deficiencies, which affect the allocation of public resources.

               (12)While the recent changes to the taxation system have contributed to an improvement in public finances, the costs associated with an ageing population will weigh on Slovakia’s currently relatively sound debt position in the future. The long-term sustainability of public finances depends on the government’s ability to increase the cost-effectiveness of the healthcare sector. The overall level of efficiency of the Slovak health system is weak, and it performs poorly when compared with the rest of the EU. The government adopted a new strategy for health for 2014-2020, in order to try to address the shortcomings of the national healthcare system. The strategy is being implemented, but most measures are not yet in force. There also continue to be inefficiencies in tax collection and administration.

               (13)The weak performance of investment in recent years may dent Slovakia’s long-term growth prospects. The decline in private investment between 2008 and 2013 was particularly strong, with non-financial corporations accounting for around 90 % of the fall in total investment due to the decrease in FDI inflows. In 2013, investment in capital goods was still around 13 % lower in real terms than it had been in 2008. Yet although public investment contracted much less, the decline still has significant consequences, in view of the large-scale transport infrastructure projects which are essential in order to be able to benefit from the growth potential of Slovakia’s central and eastern regions. Both the administrative and regulatory barriers related to investment planning, and the lack of transparency and long duration of the procedures for obtaining building and land-use permits hold back public investment. EU funds represent a very high proportion of total public investment in Slovakia, compared to the levels seen in other Member States in its region. Furthermore, the absorption of EU funds is hindered by weak governance of planning procedures, poor project design and selection, and failure to comply with the requirements relating to the environmental impact assessment. The use of tailor made specifications in public procurement limits competition, and results in high final prices. Improved oversight and greater expertise within the public entities involved in procurement could help to overcome these problems. The inadequate efficiency and quality of the public administration and of the justice system are particularly detrimental to the business environment, and issues such as the reform of the civil procedure and uneven distribution of workload in courts have not yet been addressed.

               (14)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Slovakia’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 Slovakia in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Slovakia 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. Its recommendations under the European Semester are reflected in recommendations 1 to 4 below.

               (15)In the light of this assessment, the Council has examined Slovakia’s Stability Programme, and is of the opinion
                  9
                that Slovakia complies with the Stability and Growth Pact.

               (16)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. Slovakia should also ensure the full and timely implementation of these recommendations,

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

               1. Improve the cost-effectiveness of the healthcare sector, including by improving the management of hospital care and strengthening primary healthcare. Take measures to increase tax collection.

               2.Take additional measures to address long term unemployment by introducing activation measures, second chance education and high-quality training tailored to individuals’ needs. Improve the incentives for women to remain in or return to employment by improving the provision of childcare facilities.

               3.Improve teacher training and the attractiveness of teaching as a profession to stem the decline in educational outcomes. Increase the participation of Roma children in mainstream education and in high-quality early childhood education.

               4.To boost investment in infrastructure, improve and streamline the administrative procedures for obtaining land-use and construction permits. Increase competition in public tenders and improve supervisory mechanisms in public procurement.

               Done at Brussels,

                     For the Council

                     The President

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

                     (2)
                  COM(2015) 274.

                     (3)
                  P8_TA(2015)0067, P8_TA(2015)0068, P8_TA(2015)0069.

                     (4)
                  OJ L 140, 27.5.2013, p. 11.

                     (5)
                  C(2014) 8814 final.

                     (6)
                  COM(2014) 902.

                     (7)
                  COM(2014) 904.

                     (8)
                  SWD(2015) 44 final/2.

                     (9)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.


title: PROJECT OF RECOMMENDATION OF THE COUNCIL OF ASSOCIATION laying down the methods of administrative cooperation in the customs field for the purpose of implement ing the Agreement between the European Economic Community and Cyprus (submitted to the Council by the Commission)

text:
ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (73) 1088
Vol. 1973/0197
 ---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--- COMMISSION OF THE EUR.OEBAN. COMMONTIIES
                                                               COM(73)1088 final
                                                               Brussels , 2 July 1973
                                     PROJECT OF
                    RECOMMENDATION OF THE COUNCIL OF ASSOCIATION
              laying down the methods of administrative cooperation
             in the customs field for "the purpose of implementing the
                Agreement "between the European Economic Community
                                  and Cyprus
                    ( submitted to the Council by the Commission)
  C0L;(73 ) 1083 final
 ---pagebreak---                              EXPLANATORY NOTE
Article 17 of the Protocol concerning the definition of the concept
of " originating products " and methods of administrative co-operation ,
which formed an integral part of the Agreement setting up an Association ,
provides that the Council of Association EEC-Cyprus shall draw up
any recommandations necessary for the application of the Protocol
especially the provisions relating to the methods of administrative
co-operation so that such methods may be applied in due course in
the Member States and in Cyprus .
The Customs experts of the Member States delivered a favorable Opinion
on the proposals in this draft recomrrandation of the Council of
Association CEE-Cyprus , which is intended to define closely a system
of administrative co-operation between the Contracting Parties to the
Agreement to ensure that the customs provisions of the Agreement are
efficiently applied .
 ---pagebreak---                                      PROJECT OF
                   KECOlUIErtDATIOlI OP ?EE COUUCIL OF ASSOCI/iTIOII
            laying down the methods of administrative cooperation.
           in the customs field for the purpose of implementing the
              Agreement between the European . Economic Community
                                     and Cyprus
THE COUNCIL OF ASSOCIATION ,
HAVING REGARD to the Agreement between the European . Economic Community
and the Republic of Cyprus signed in Brussels on 19 December 1972 ;
HAVING REGARD to the Protocol concerning, the definition of the
concept of " originating products " and methods of administrative
cooperation , and in particular Article 17 ( 2 ) thereof ;
WHEREAS it is necessary , for the proper functioning of the Agreement ,
                 Y      :}
to organize close administrative cooperation between the Contracting
Parties to the Agreement in order to ensure correct and uniform
application of the customs provisions contained therein , in particular
those of the Protocol concerning the definition of the concept of
" originating products " and methods of administrative cooperation
(hereinafter called "the Protocol ");
 ---pagebreak--- HAS RECOMMENDED THE EUROPEAN ECONOMIC COMMUNITY AND THE REPUBLIC OF
CYPRUS
to take the measures necessary for application of the following
provisions :
A.  RULES GOVERNING THE ISSUS OF AN A.CY.l MOVEMENT CERTIFICATE
         R°le of the exporter
         1 . It shall be for the exporter or his authorized representative ,
             under the former 's responsibility , to apply for' the issue
             of a movement certificate .
             This application shall be made out on an A.CY.l . form of which
             specimen is to be found in Annex V to the Protocol . The form ra
             be completed in accordance with the provisions of the Proto
             col .
         2 . The exporter or his representative shall submit with his
             application any appropriate supporting document provxng
               /
             that the goods to be exported are eligible for the issue
             of a movement certificate .
    II . Role of the customs authori ties
         1 . It shall be the responsibility of the customs authorities of
             the exporting country to ensure that the A.CY.l form is duly
             completed . In particular , they shall check whether the space |
             reserved for the description of the goods has been completed
             in such a manner as to exclude any possibility of fraudulent
             additions . To this end , the description of the goods must be
             indicated without leaving any blank lines . Where the space
             is not completely filled , a horizontal line must be drawn
             below the last line of the description , the empty space
       ^     being crossed through .
 ---pagebreak---                                        - 3 -
        2 . Since the movement certificate constitutes the documentary-
             evidence for the application of the preferential tariff and quota
             arrangements laid down in the Agreement , it shall be the
             responsibility of the customs authorities of the exporting
             country to take any steps necessary to verify the origin of
             the goods and to check the other statements on the certificate .
III . Exports from a Member State of the European Economic Community ,
        or from Cyprus
        1 . The A. CJ. 1 movement certificate shall be issued by the customs
             authorities of a Member State of the European Economic Community
             if the goods to be exported can be considered products originating
             in the Community within the meaning of Article 1 ( 1 ) of the
             Protocol .
        2 . The A.CY.l . movement certificate shall be issued by the customs
             authorities of Cyprus if the goods to be exported can be considered
             products originating in Cyprus within the meaning of Article 1 ( 2 )
             of the Protocol .
        3 . For the purpose of verifying whether the conditions stated in
             paragraphs 1 and 2 of Section III above have, been met , the
             customs authorities shall have the right to call for any docu-
           • mentary evidence or to carry out any check which th6y consider
     • . ; appropriate .
        k . The customs authorities of the Member State or of Cyprus shall
             refuse to issue an A.CY.l movement certificate if the export
             documents submitted to those authorities reveal that the goods
             to which they relate are not being sent to Cyprus or ta the
             Community .
 ---pagebreak---                                  - k -
 IV . Indication of the date of issue of the certificate
       The date of issue of the movement certificate must be indicated
     , in the part of the certificate reserved for the customs authoritie
  V. Provisions of specimen impressions of the types of stamp , used
       The customs authorties of the Member States and Cyprus shall
       provide each other , through the Commission of the European
       Communities , with specimen impressions of the types of stamp . used
       in their customs offices for the issue of . movement certificates .
 VI . Replacement of A.CY.l movement certificates by certificates of
       the same kind
       1 . It shall always be 'possible to replace one or more movement
           certificates by one or more certificates , provided that this
           is done at the customs office where the goods are located .
       2 . Where the new movement certificate relates to products which
           were originally imported from a Member State or from Cyprus
           and are re-exported in the same state , it must indicate the
           country in which the original movement certificate was issued .
VII . Rétrospective issue of movement certificates
       1 . Where a certificate is issued within the meaning of Article 8(2,
           of the Protocol after the goods to which it relates have
           actually been exported , the exporter must , in the application
           referred to in Article 7 of the said Protocol :
                                                               •/ • • •
 ---pagebreak---                                                                            /
                                     - 5 -
             ( i ) indicate the place and date of exportation of the goods
                   to which the certificate relates ;
           ( ii ) certify that no certificate was issued at the time
                   of exportation of the goods in question , and state
                   the reasons .
       2 . The customs authorities may issue a movement certificate retro
           spectively only after verifying that the information supplied
           in the exporter 's application agrees with that in the corresponding
           file .
           Certificates issued retrospectively must be endorsed with one
           of the following phrases : "NACHTRAEGLICH AUSGESTELLT" , "DELIVRE
           A POSTERIORI", "RILASCIATO A POSTERIORI ", "AEGEGSVEN A
           POSTERIORI ", ISSUED RETROSPECTIVELY", " UDSTEDT EFTERF0LGENDE" .
VIII . Issue o_f duplicates
       In the event of the theft , loss or destruction of a movement
       certificate , the exporter may apply to the customs authorities
       which issued it for a duplicate made out on the basis of the
       export document in their possession . The duplicate issued in
       this way must be endorsed with one of the following words :
       "DUPLIKAT" , " DUPLICATA", "DUPLICATO ", "DUPLICAAT" , "DUPLICATE".
       The duplicate , which must bear the date of issue of the original
       movement certificate , shall take effect as from that date .
                                                                •/ • • •
                                 I
 ---pagebreak---                                       - β -
B•  CONDITIONS APPL ICABLE TO THE USE OF A.CY.l MOVEMENT CER TIFICATES
    I. Direct transport of goods
         Goods transported without passing through territories other
         than those of the Contracting Parties shall be considered as
         transported direct .
         The following shall , however , not be considered--aa^an_-intexr'aptioji
         of direct transport :
         ( a ) calling at ports situated in territories other than those
                of the Contracting Parties ;
         ( b ) trans-shipments in such ports attributable to force majeure
                or events at sea ;
         ( c ) passing through territories other than those of the Contracting
                Parties or trans-shipment in such territories provided that
                carriage or trans-shipment through such territories is
                covered by a single transport document made out in a Member
                State or in Cyprus .
   II . Acc eptance of movement c ertifi c ates after expiry of the time limit
         f or.. the ir, submission
         Movement certificates submitted to the customs authorities of
         the importing country after expiry of the time limit for their
         submission stipulated in Article 9 of the Protocol may be accepted
       ' for the purpose of supplying the preferential arrangements ,
         provided the failure to observe this time limit results from
         force majeure or exceptional circumstances .
                                                              • /• • •
 ---pagebreak---         In addition to such cases j the customs authorities of the
        importing country may accept such certificates provided the
        goods were presented to them before expiry of the said time
        limit . .
  III . Acceptance of movement certificates i n which the part i culars
        do not correspond to the i mp orte d goods
        The discovery of slight discrepancies between the particulars
        entered on the movement certificate and those entered on the
        documents produced to the customs office for the purpose of
        carrying out the formalities for importing the goods shall
        not ipso facto render the certificate null and void , if it is
        duly established that the certificate relates to the goods
        presented .
FREE ZONES
    !.• The MemberiStates and Cyprus shall take all necessary steps to
        ensure that goods traded under the cover of a movement certificate
        and which in the' course of transport use a free zone situated in
        their territory are not replaced by other goods and that they
        do not undergo handling other than normal operations designed
        to maintain them in good condition .
   II . Where products- originating in the Community or Cyprus and imported
        into a free zone under the cover of a movement certificate undergo
        treatment or processing , the customs authorities concerned must
        issue a new certificate at the exporter 's request if the treat
        ment or processing undergone is in conformity with the provisions
        of the Protocol .
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D-   POSTAL PACKETS ( INCLUDING PARCEL POST)
      I. It shall be for the exporter or his representative , on the
          exporter 's responsibility , to complete and sign the two parts
          of an A.CY.2 form , of which a specimen is annexed to the
          Protocol .
          If the goods contained in the packet have already been checked
          in the exporting country by reference to the definition of the
          concept of " originating products ", the exporter may refer to this
          check in the space reserved for "Remarks " in the A.CY.2 form .
     II . On the green label C 1 or customs declaration C 2 / CP 3 > the
          exporter shall enter the number "A.CY.2 ", followed by its serial
          number . He shall also enter both those numbers on the invoice
          relating to the goods " contained in the packet .
E ° SUBSEQUENT VERIFICATION OF A .CY.l MOVEMENT CERTIFICATES AND
    A.CY.2 FORMS          '      '                          "
     I.   Subsequent verification of movement certificates and of A.CY.2
          forms shall be carried out at random , and also whenever the
          customs authorities of the importing State have reasonable doubt
          as to the authenticity of the document or the accuracy of the
          information regarding the true origin of the goods in question .
 ---pagebreak---                                                                            I
                                 - 9 -
  II . For the purpose of implementing the provisions of paragraph I ,
         the customs authorities of the importing State shall return .       I
         the movement certificate or part 1 of the A.CY.2 form , or a
         photocopy thereof , to the customs authorities of the exporting     ;
         State giving t where applicable , the formal or substantive
         reasons for an inquiry . To part 1 of the A.CY.2 form they
        ehall attach the invoice , if it has been submitted , or & copy
         thereof , and they shall forward any information that has been
         obtained suggesting that the particulars given on the said          I
         certificate or the said form are inaccurate .
         If the customs authorities of the importing State decide to
        suspend application of the provisions, of the Agreement while awaiti
         the results of the verification , they shall offer to release
         the goods to the importer subject to such safeguards as may
        be considered necessary .
III . The customs authorities of the importing State shall be informed j
        of the results of the verification within three months . These
        results must be such as to make it possible to determine              |
        whether the disputed movement certificate or A.CY.2 form applies
        the goods actually exported , and whether these goods are , in
        fact , eligible for the application of the preferential arrange
        ments .                  1
 IV.    Where such disputes cannot be settled between the customs            1
        authorities of the importing State and those of the exporting
        State or where they raise a question as to the interpretation
        of the Protocol , they shall be submitted to the Customs
      . Committee .
                       1
                                                             m • m /m • c
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For the purpose of the subsequent verification of certificates,'
the customs authorities of the exporting country must keep the
export documents , or copies of certificates used in place
thereof , for not less thrui two years .
                             Done at Brussels, 2 July 1973
                             For the Council of Association
                             Chairman