title: Council Recommendation of 9 July 2013 on the National Reform Programme 2013 of Bulgaria and delivering a Council opinion on the Convergence Programme of Bulgaria, 2012-2016

text:
               30.7.2013

               EN

               Official Journal of the European Union

               C 217/10

      COUNCIL RECOMMENDATION

   of 9 July 2013
   on the National Reform Programme 2013 of Bulgaria and delivering a Council opinion on the Convergence Programme of Bulgaria, 2012-2016
   2013/C 217/03
   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,
   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 jobs and growth, Europe 2020, based on enhanced coordination of economic policies, which 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 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 (3), which together form the ‘integrated guidelines’. Member States were invited to take the integrated guidelines into account in their national economic and employment policies.

               (3)

               On 29 June 2012, the Member States’ Heads of State or Government decided on a Compact for Growth and Jobs, providing a coherent framework for action at national, EU and euro area levels using all possible levers, instruments and policies. They decided on action to be taken at the level of the Member States, in particular expressing full commitment to achieving the objectives of the Europe 2020 strategy and to implementing the country-specific recommendations.

               (4)

               On 10 July 2012, the Council adopted a Recommendation (4) on Bulgaria’s National Reform Programme for 2012 and delivered its opinion on Bulgaria’s Convergence Programme for 2012-2015.

               (5)

               On 28 November 2012, the Commission adopted the Annual Growth Survey, marking the start of the 2013 European Semester for economic policy coordination. Also on 28 November 2012, the Commission, on the basis of Regulation (EU) No 1176/2011, adopted the Alert Mechanism Report, in which it identified Bulgaria as one of the Member States for which an in-depth review would be carried out.

               (6)

               The European Parliament has been duly involved in the European Semester, in accordance with Regulation (EC) No 1466/97, and, on 7 February 2013, adopted a resolution on employment and social aspects in the Annual Growth Survey 2013 and a resolution on the contribution to the Annual Growth Survey 2013.

               (7)

               On 14 March 2013, the European Council endorsed the priorities for ensuring financial stability, fiscal consolidation and action to foster growth. It underscored the need to pursue differentiated, growth-friendly fiscal consolidation, to restore normal lending conditions to the economy, to promote growth and competitiveness, to tackle unemployment and the social consequences of the crisis, and to modernise public administration.

               (8)

               On 10 April 2013, the Commission published the results of its in-depth review for Bulgaria, under Article 5 of Regulation (EU) No 1176/2011. The Commission’s analysis leads it to conclude that Bulgaria is experiencing macroeconomic imbalances, which deserve monitoring and policy action. In particular, the impact of deleveraging in the corporate sector as well as the continuous adjustment of external positions, competitiveness and labour markets deserve continued attention.

               (9)

               On 19 April 2013, Bulgaria submitted its 2013 National Reform Programme and its Convergence Programme for the period 2012-2016. In order to take account of their interlinkages, the two Programmes have been assessed at the same time.

               (10)

               Based on the assessment of the Convergence Programme pursuant to Regulation (EC) No 1466/97, the Council is of the opinion that public finances in Bulgaria have overall been sound. The medium-term objective (MTO) was reached in 2012. The macroeconomic scenario underpinning the budgetary projections in the Convergence Programme is plausible for the period 2013-2014, when annual growth is expected to reach 1,0 % in 2013 and 1,8 % in 2014. The Commission services 2013 spring forecast foresees a GDP growth of 0,9 % in 2013 and of 1,7 % in 2014. The objective of the budgetary strategy outlined in the Convergence Programme is to keep the structural budget balance close to the MTO throughout the programme period. The Convergence Programme confirms the previous MTO of -0,5 % of GDP which is more ambitious than required by the Stability and Growth Pact. Based on the (recalculated) structural budget balance, which is estimated to weaken slightly from a deficit of 0,4 % of GDP in 2012 to between 0,7-0,8 % of GDP over 2013-2016. Bulgaria falls marginally below its MTO over the Convergence Programme period. In 2013-2015, the growth rate of government expenditure, taking into account discretionary revenue measures, would respect the expenditure benchmark of the Stability and Growth Pact, yet breach it in 2016. The debt ratio is below 60 % of GDP and, according to the Convergence Programme, it is expected to peak at 20,4 % of GDP in 2014 and then to decrease over the programme period. Similarly, the Commission services 2013 spring forecast foresees the debt ratio to amount to 20,3 % of GDP in 2014.

               (11)

               Bulgaria has substantially strengthened its fiscal framework in recent years which has contributed to maintaining fiscal discipline and increasing fiscal policy credibility. The new Public Finance Law which will enter into force in 2014 retains the existing numerical fiscal rules, introduces new ones and expands the coverage to all government subsectors, further strengthens requirements at the municipal level and reforms the three-year medium-term budgetary framework. It is important that the authorities maintain the reform momentum and prepare the ground for implementation of the new Public Finance Law, in particular by establishing the envisaged independent fiscal institution and giving it a clear mandate, functional autonomy and adequate resources. There is considerable scope for improvement in tax compliance and progress in this area would allow Bulgaria to support higher growth-enhancing expenditure. While Bulgaria has taken some recognisable steps to reduce compliance costs and to improve revenue collection, the tax system remains characterised by significant tax evasion and low administrative efficiency. Administrative costs for tax collection are high, as are the costs for businesses associated with paying taxes. Despite the measures taken to improve tax compliance, the share of the shadow economy is still estimated to be high and reducing it requires sustained long-term efforts.

               (12)

               Reducing early labour market exit is a key challenge for improving the adequacy of the pension system, as well as for the supply of labour. The employment rate of older workers, in particular of older women, is below the EU average and results in inadequate pension entitlements for a large share of the beneficiaries. Whilst important reforms are already being undertaken in this area, the remaining special schemes for certain professions are among the factors contributing to lowering the effective retirement age. Continuing the progress achieved in raising the pension age, Bulgaria should also prepare and set a date for the introduction of the same statutory retirement age for men and women with full career contributions. A review of the criteria and controls for the allocation of invalidity pensions (such as the introduction of ability to work as a criterion) would be an important contribution to effectively limiting abuse.

               (13)

               Bulgaria suffers from below-average and declining employment as well as high unemployment disparities across regions and population subgroups. The crisis has had a particularly strong impact on low-skilled workers and has significantly raised youth unemployment. Long-term unemployment is higher than the EU average. A reformed Employment Agency would have the potential to play a prominent role in matching supply and demand in Bulgaria’s labour market through more effective counselling, targeted employment measures and better identifying future skills requirements. An early evaluation of the ongoing Youth Employment Initiative could help to ensure that resources are directed to those actions that generate the highest job-creation returns. It remains a challenge to ensure that the system of minimum social security contributions attains the objective of reducing the shadow economy, while not pricing out low-skilled workers. Bulgarian citizens experience the highest risk of poverty or social exclusion in the Union. The implementation of the National Strategy for Reducing Poverty and Promoting Social Inclusion 2020 should be treated as priority. There is a need to improve the accessibility and effectiveness of social transfers and to enhance the efficiency and access to social services, in particular for children and older people. The Action plan to the National Roma Integration Strategy should indicate specific measures, appropriate funding and the establishment of a monitoring mechanism for measuring the impact of actions.

               (14)

               Bulgaria is facing the challenge of improving the overall quality and efficiency of its education system. The final adoption of the School and Pre-School Education Act before the end of 2013 would provide a framework for progress on the necessary reforms, including modernising curricula and implementing improvements to teachers’ training and incentives. In higher education, reforms have made very limited progress. The existence of an important disparity between higher education outcomes and labour-market demand worsens structural unemployment and hampers the development of high-value, innovative sectors. The poor performance of higher education is linked to a lack of incentives at institutional level as well as to the standard of individual researchers and teachers. Improving the quality and coverage of the healthcare system is a long-standing challenge for Bulgaria. Increased transparency in healthcare financing would contribute to growth and competitiveness in the sector. The share of healthcare spending on ambulatory care is low, limiting access to cost-effective healthcare services. The high rate of out-of-pocket payments effectively excludes certain segments of the population from healthcare services. Bulgaria faces important challenges in the rationalisation and management of the hospital sector.

               (15)

               The competitiveness of domestic companies and the attraction of foreign investments would benefit greatly from improvements to Bulgaria’s business environment, including increased efficiency of public services. A speedier, systematic introduction of e-government offers considerable potential and could, inter alia, reduce compliance costs and the administrative burden for business. Moreover, full implementation and enforcement of corporate legislation, including late-payments and insolvency procedures, would considerably improve the framework conditions, not least for small and medium-sized enterprises (SMEs). Inadequate access to finance remains a brake on SME development. There remains considerable scope to better use Union funded SME support programmes. A well-functioning, independent judicial system is a prerequisite for sustainable economic development. Bulgaria has over recent years made progress in reforming the judicial system, in particular in modernising the legal and institutional framework. At the same time, there remains considerable potential for making full use of this framework, securing the sustainability of results and enhancing the ownership of reforms at all levels. Enhanced efforts to fight corruption would likewise constitute a positive contribution to improving the business environment.

               (16)

               Effective implementation of Union funds remains critical to necessary public investment. The 2011 reform of public-procurement legislation was a significant step towards improving the monitoring, prevention and punishment of irregularities. While new rules covering, inter alia, EU co-funded projects have entered into force, giving broader powers to the Public Procurement Agency would further enhance the effectiveness of ex ante control.

               (17)

               The capacity and independence of regulators in key economic sectors are important framework conditions for competitiveness. Bulgaria’s transport infrastructure has experienced some improvements over recent years, whilst considerable potential remains for making service provision and maintenance sufficiently efficient. Bulgaria has yet to fully implement its obligations under the Internal Energy Market. Considerable challenges remain at both wholesale and retail levels. Persistent market barriers, guaranteed profit arrangements and regulated prices, together with the absence of a wholesale market for electricity and natural gas, constitute areas of particular concern. Given its considerable dependence on a single energy route, Bulgaria is highly exposed to the risk of supply shocks. The implementation of electricity and gas interconnector projects should be speeded up to improve diversification and security of supply. Low energy efficiency remains a significant economic burden on both business and private consumers. In particular, the energy efficiency of buildings, both public and private, holds considerable potential.

               (18)

               In the context of the European Semester, the Commission has carried out a comprehensive analysis of Bulgaria’s economic policy. It has assessed the National Reform Programme and the Convergence Programme, and has presented an in-depth review. 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 reinforce the overall economic governance of the Union by providing EU-level input into future national decisions. Its recommendations under the European Semester are reflected in recommendations (1) to (7) below.

               (19)

               In the light of this assessment, the Council has examined the Convergence Programme, and its opinion (5) is reflected in particular in recommendation (1) below.

               (20)

               In the light of the Commission’s in-depth review and this assessment, the Council has examined the National Reform Programme and the Convergence Programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected in recommendations (3), (4) and (5) below,

         HEREBY RECOMMENDS that Bulgaria take action within the period 2013-2014 to:

               1.

               Preserve a sound fiscal position by ensuring compliance with the MTO and pursue a growth-friendly fiscal policy as envisaged in the Convergence Programme. Implement a comprehensive tax strategy to strengthen all aspects of the tax law and collection procedures with a view to increase revenue, in particular by improving tax collection, tackling the shadow economy and reducing compliance costs. Establish an independent institution to monitor fiscal policy and provide analysis and advice.

               2.

               Phase out early retirement options, introduce the same statutory retirement age for men and women and implement active labour-market policies that enable older workers to stay longer in the labour market. Tighten the eligibility criteria and controls for the allocation of invalidity pensions to effectively limit abuse.

               3.

               Accelerate the national Youth Employment Initiative, for example through a Youth Guarantee (6). Further strengthen the capacity of the Employment Agency with a view to providing effective counselling to jobseekers and develop capacity for identifying and matching skill needs. Enhance active labour-market policies, in particular concerning national employment schemes. Undertake a review of the minimum thresholds for social security contributions to ensure that the system does not price the low-skilled out of the labour market. Ensure concrete delivery of the National Strategy for Reducing Poverty and Promoting Social Inclusion 2020 and the National Roma Integration Strategy. Improve the accessibility and effectiveness of social transfers and services, in particular for children and older people.

               4.

               Adopt the School Education Act and pursue the reform of higher education, in particular through better aligning outcomes to labour-market needs and strengthening cooperation between education, research and business. Improve access to inclusive education for disadvantaged children, in particular Roma. Ensure effective access to healthcare and improve the pricing of healthcare services by linking hospitals’ financing to outcomes and developing out-patient care.

               5.

               Take further steps to improve the business environment, by cutting red tape, implementing an e-government strategy and implementing the legislation on late payments. Improve the quality and independence of the judicial system and fight corruption more effectively. Improve the access to finance for SMEs and start-ups.

               6.

               Accelerate the absorption of EU funds. Ensure sound implementation of public-procurement legislation by extending ex ante control by the Public Procurement Agency to prevent irregularities.

               7.

               Strengthen the independence of national regulatory authorities and the administrative capacity in particular in the energy and transport sectors, as well as for waste and water management. Remove market barriers, quotas, territorial restrictions and regulated prices, and complete the market design by setting up a transparent wholesale market for electricity and natural gas. Accelerate electricity and gas interconnector projects and enhance the capacity to cope with disruptions. Step up efforts to improve energy efficiency.

      Done at Brussels, 9 July 2013.

            For the Council

            The President

         R. ŠADŽIUS

      (1)  OJ L 209, 2.8.1997, p. 1.

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

      (3)  Maintained for 2013 by Council Decision 2013/208/EU of 22 April 2013 on guidelines for the employment policies of the Member States (OJ L 118, 30.4.2013, p. 21).

      (4)  OJ C 219, 24.7.2012, p. 9.

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

      (6)  Established by Council Recommendation of 22 April 2013 (OJ C 120, 26.4.2013, p. 1.).


Avis juridique important

|

31978K2739

Commission Recommendation No 2739/78/ECSC of 23 November 1978 providing for the suspension of the definitive anti-dumping duty established in relation to iron or steel coils for re-rolling originating in South Korea

Official Journal L 330 , 25/11/1978 P. 0013 - 0013

****( 1 ) OJ NO L 114 , 5 . 5 . 1977 , P . 6 .  ( 2 ) OJ NO L 352 , 31 . 12 . 1977 , P . 13 .  ( 3 ) OJ NO L 106 , 20 . 4 . 1978 , P . 21 .    COMMISSION RECOMMENDATION NO 2739/78/ECSC   OF 23 NOVEMBER 1978   PROVIDING FOR THE SUSPENSION OF THE DEFINITIVE ANTI-DUMPING DUTY ESTABLISHED IN RELATION TO IRON OR STEEL COILS FOR RE-ROLLING ORIGINATING IN SOUTH KOREA   THE COMMISSION OF THE EUROPEAN   COMMUNITIES ,   HAVING REGARD TO THE TREATY ESTABLISHING THE EUROPEAN COAL AND STEEL COMMUNITY , AND IN PARTICULAR ARTICLE 74 THEREOF ,   HAVING REGARD TO COMMISSION RECOMMENDATION 77/329/ECSC OF 15 APRIL 1977 ON PROTECTION AGAINST DUMPING OR THE GRANTING OF BOUNTIES OR SUBSIDIES BY COUNTRIES WHICH ARE NOT MEMBERS OF THE EUROPEAN COAL AND STEEL COMMUNITY ( 1 ), AS AMENDED BY RECOMMENDATION NO 3004/77/ECSC ( 2 ), AND IN PARTICULAR ARTICLES 15 AND 19 THEREOF ,   HAVING HEARD THE OPINIONS EXPRESSED WITHIN THE ADVISORY COMMITTEE PROVIDED FOR BY RECOMMENDATION 77/329/ECSC ,   WHEREAS THE COMMISSION HAS ESTABLISHED , BY RECOMMENDATION NO 790/78/ECSC ( 3 ), A DEFINITIVE ANTIDUMPING DUTY IN RELATION TO IMPORTS OF IRON OR STEEL COILS FOR RE-ROLLING ORIGINATING IN SOUTH KOREA ;   WHEREAS SINCE THAT TIME CERTAIN ARRANGEMENTS HAVE BEEN MADE BETWEEN THE COMMUNITY AND SOUTH KOREA WITH RESPECT TO TRADE IN STEEL PRODUCTS ;   WHEREAS THESE ARRANGEMENTS , WHICH THE COMMISSION DEEMS REASONABLE , ALLOW THE FURTHER APPLICATION OF DEFINITIVE ANTI-DUMPING DUTIES TO BE SUSPENDED ,   HAS ADOPTED THIS RECOMMENDATION :   ARTICLE 1   THE APPLICATION OF THE DEFINITIVE ANTI-DUMPING DUTY ESTABLISHED BY COMMISSION RECOMMENDATION NO 790/78/ECSC , IN RELATION TO IMPORTS OF IRON OR STEEL COILS FOR RE-ROLLING ORIGINATING IN SOUTH KOREA , IS SUSPENDED FOR IMPORTS MADE AFTER 18 SEPTEMBER 1978 .   NO OTHER ANTI-DUMPING DUTY OR OTHER SIMILAR MEASURES WILL BE APPLIED TO IMPORTS OF STEEL PRODUCTS FALLING UNDER THE ECSC TREATY AND ORIGINATING IN SOUTH KOREA UNLESS A COUNTER-RECOMMENDATION IS MADE BY THE COMMISSION .   ARTICLE 2   IN DEROGATION FROM ARTICLE 2 OF RECOMMENDATION NO 790/78/ECSC , THE AMOUNTS SECURED BY WAY OF PROVISIONAL DUTY SHALL NOT BE DEFINITIVELY COLLECTED BUT SHALL BE REFUNDED UPON REQUEST OF THE IMPORTER CONCERNED , AS REGARDS :  ( A ) DELIVERIES MADE UNDER CONTRACTS CONCLUDED BEFORE 20 DECEMBER 1977 , WHICH CONTAIN NO PRICE REVISION CLAUSE PERMITTING AN ADAPTATION OF THE CONTRACT PRICES TO THE BASIC PRICES APPLIED IN THE COMMUNITY ;  ( B ) DELIVERIES MADE UNDER THE CONTRACTS REFERRED TO UNDER  ( A ) ABOVE AND DESTINED FOR SHIPBUILDING YARDS WITHIN THE COMMUNITY .   ARTICLE 3   THIS RECOMMENDATION IS ADDRESSED TO THE MEMBER STATES . IT SHALL ENTER INTO FORCE IN RESPECT OF EACH MEMBER STATE FROM THE DATE OF ITS PUBLICATION IN THE OFFICIAL JOURNAL OF THE EUROPEAN COMMUNITIES .   DONE AT BRUSSELS , 23 NOVEMBER 1978 .   FOR THE COMMISSION   WILHELM HAFERKAMP   VICE-PRESIDENT


title: Commission recommendation No 933/78/ECSC of 2 May 1978 extending the provisional anti-dumping measures established in relation to imports of steel products originating in Poland

text:
 4 . 5 . 78                           Official Journal of the European Communities                          No L 120/ 25
                              COMMISSION RECOMMENDATION No 933/ 78 / ECSC
                                                        of 2 May 1978
               extending the provisional anti-dumping measures established in relation to
                                   imports of steel products originating in Poland
 THE COMMISSION OF THE EUROPEAN                                  imports of steel products originating in Poland are
 COMMUNITIES,                                                    hereby extended for a period not exceeding one
                                                                 month .
 Having regard to the Treaty establishing the European
 Coal and Steel Community, and in particular Article
 74 thereof,
                                                                                Article 2
 Having regard to Commission recommendation
 77/329/ ECSC of 15 April 1977 on protection against
 dumping or the granting of bounties or subsidies by             Without prejudice to the provisions of Article 1 above,
 countries which are not members of the European                 the amount secured by way of provisional anti
 Coal and Steel Community ('), as amended by recom              dumping duties shall be released to the extent that the
 mendation No 3004/77/ ECSC (2), and in particular               importer establishes to the satisfaction of the compe
 Articles 16 and 19 thereof,                                     tent national authorities that it is due to a diminution
 Having heard the opinions expressed within the Advi            in value resulting from the quality of the goods being
 sory Committee provided for by recommendation                   inferior to the lowest quality described in the last
 77/ 329 / ECSC,                                                 publication of basic prices by the Commission .
 Whereas the Commission has established by recom
 mendation No 262/78/ ECSC (3), provisional anti
 dumping duties in relation to imports of steel                                          Article 3
 products originating in Poland ;
                                                                 This recommendation is addressed to the Member
 Whereas the examination of this matter has not yet
                                                                 States .
 been completed and exporters and importers known
 to be concerned have requested that the duty be
 extended for a period not exceeding one month ;                 It shall enter into force in respect of each Member
 Whereas, therefore, it is appropriate to extend the             State from the date of its publication in the Official
 provisional measures ;                                          Journal of the European Communities.
Whereas, however, due consideration should be given
 to any diminution of value of the products imported,
claimed by the importers and established to the satis
 faction of the competent national authorities,                  Done at Brussels, 2 May 1978 .
 HAS ADOPTED THIS RECOMMENDATION :
                                                                                For the Commission
                          Article 1
                                                                                Wilhclm HAFERKAMP
The provisional anti-dumping measures established by
recommendation        No   262/78 / ECSC    in  relation  to                                   Vice-President
(') OJ No L 1 14, 5 . 5. 1977, p. 6 .
(2) OJ No L 352, 31 . 12. 1977, p. 13.
(3) OJ No L 39, 9 . 2. 1978 , p. 13 .


title: Recommendation for a Council opinion in accordance with the third paragraph of Article 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 on the updated convergence programme of Poland, 2006-2009

text:
Important legal notice

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52007SC0141

Recommendation for a Council opinion in accordance with the third paragraph of Article 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Poland, 2006-2009  /* SEC/2007/0141 final */

	[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 7.2.2007SEC(2007) 141 finalRecommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Article 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Poland, 2006-2009(presented by the Commission)EXPLANATORY MEMORANDUM1. GENERAL BACKGROUNDThe Stability and Growth Pact, which entered into force on 1 July 1998, is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation. The 2005 reform of the Pact acknowledged its usefulness in anchoring fiscal discipline but sought to strengthen its effectiveness and economic underpinnings as well as to safeguard the sustainability of the public finances in the long run.Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[1], which is part of the Stability and Growth Pact, stipulates that Member States have to submit, to the Council and the Commission, stability or convergence programmes and annual updates thereof (Member States that have already adopted the single currency submit (updated) stability programmes and Member States that have not yet adopted it submit (updated) convergence programmes). The first convergence programme of Poland was submitted in May 2004. In accordance with the Regulation, the Council delivered an opinion on it on 5 July 2004 on the basis of a recommendation from the Commission and after having consulted the Economic and Financial Committee. In accordance with the same procedure, updated stability and convergence programmes are assessed by the Commission and examined by the Committee mentioned above, while the Council may examine them.2. BACKGROUND FOR THE ASSESSMENT OF THE UPDATED PROGRAMMEThe Commission has examined the most recent update of the convergence programme of Poland, submitted on 30 November 2006, and has adopted a recommendation for a Council opinion on it (see box for the main points covered by the assessment).In order to set the scene against which the budgetary strategy in the updated convergence programme is assessed, the following paragraphs summarise:1.  the economic and budgetary performance over the last ten years2.  Poland’s position under the corrective arm of the Stability and Growth Pact (excessive deficit procedure)3.  the most recent assessment of Poland’s position under the preventive arm of the Stability and Growth Pact (summary of the Council opinion on the previous update of the convergence programme) and4.  the Commission’s assessment of the October 2006 national reform programme.2.1. Recent economic and budgetary performancePoland is a catching-up country with high economic growth, which is closing the gap with the EU-25 in terms of living standards. Despite labour shortages in some sectors, unemployment is high, while participation is low by EU standards, especially of women. Behind the fast rise in exports, there are foreign direct investments benefiting mainly from relatively low labour costs so far, although the technology content has also been upgraded. Poland has traditionally recorded significant deficits above 3% of GDP. The public expenditure pattern is a cause for concern because high social expenditure is likely to have a negative impact on the labour market performance through wrong incentives. As far as long-run sustainability is concerned, Poland is a low-risk country. However, preserving this status will require sticking to the key features of the pension reform such as uniformity of rules for all social groups.2.2. The excessive deficit procedure for PolandOn 5 July 2004 the Council adopted a decision stating that Poland had an excessive deficit in accordance with Article 104(6). At the same time, the Council addressed a recommendation under Article 104(7) specifying that the excessive deficit had to be corrected by 2007, with the following annual targets for the general government deficit: 5.7% of GDP in 2004, 4.2% of GDP in 2005, 3.3% in 2006 and 1.5% of GDP in 2007. These targets do not include the budgetary costs of the 1999 pension reform, which at the time were estimated at 1.5% of GDP each year. In particular, Poland availed (and still avails) itself of the transition period (expiring in spring 2007) for implementing the Eurostat decision of 2 March 2004 on the sectoral classification of funded pension schemes[2].On 28 November 2006, the Council adopted a decision in accordance with Article 104(8) stating that the “action taken by Poland in response to the Council Recommendation of 5 July 2004 under Article 104(7) of the Treaty is proving to be inadequate to correct the excessive deficit within the deadline fixed by the Recommendation”. This was based also on the Commission services’ autumn 2006 forecast, which showed that, including the revised pension reform costs (to around 2% of GDP annually), the 2007 deficit was expected to reach 4% of GDP.According to the excessive deficit procedure, the next step for Member States that have not adopted the single currency, such as Poland, is a new Council recommendation under Article 104(7). The Commission is adopting the recommendation for this Council recommendation, which also takes into account the new update of the Polish convergence programme, together with the attached recommendation for a Council opinion on the new programme.2.3. The assessment in the Council opinion on the previous programmeOn 14 March 2006, the Council adopted its opinion on the previous update of the convergence programme, covering the period 2005-2008. The Council noted that “the convergence programme envisages some progress, but not the effective correction of the excessive deficit in 2007, as required by the Council recommendation of 5 July 2004, and that the Commission intends to recommend further steps under the excessive deficit procedure as required by the Stability and Growth Pact”. The Council invited Poland to “(i) strengthen the adjustment in 2006 in particular, by allocating any higher-than-budgeted revenues or lower-than-budgeted expenditure to deficit reduction; (ii) safeguard the results of the pension reform; (iii) enhance the institutional framework of public finances by complementing the nominal anchor with other measures, for example a medium-term expenditure rule”.2.4. The Commission assessment of the October 2006 national reform programmeThe implementation report of the National Reform Programme of Poland, provided in the context of the renewed Lisbon strategy for growth and jobs, was submitted on 31 October 2006. Poland's national reform programme identifies as key challenges/priorities: consolidation and better management of public finances; developing entrepreneurship and innovation; infrastructure development; ensuring a competitive environment in network sectors; creating and sustaining jobs and reducing unemployment; and improving the adaptability of workers and enterprises by investing in human capital.The Commission’s assessment of this programme (adopted as part of its December 2006 annual Progress Report[3]) showed that Poland is making limited progress in the implementation of its National Reform Programme. There are signs that Poland is beginning to move ahead strongly in the micro-economic area, even though implementation of many measures is still in the early stages. Implementation of the macro-economic and employment reforms is so far insufficient.Against the background of strengths and weaknesses identified, Poland was recommended to take action in the areas of: fiscal consolidation; competition; R&D and innovation; public employment services; tax burden on labour and benefit systems; and education and training.Box: Main points covered by the assessment As required by Article 5(1) (for stability programmes) and Article 9(1) (for convergence programmes) of Council Regulation (EC) No 1466/97, the assessment covers the following points: whether the economic assumptions on which the programme is based are plausible; the medium-term budgetary objective (MTO) presented by the Member State and whether the adjustment path towards it is appropriate; whether measures being taken and/or proposed to respect that adjustment path are sufficient to achieve the MTO over the cycle; when assessing the adjustment path towards the MTO, whether a higher adjustment effort is made in economic good times, whereas the effort may be more limited in economic bad times, and, for euro-area and ERM II Member States, whether the Member State pursues an annual improvement of the cyclically-adjusted balance, net of one-off and other temporary measures, of 0.5% of GDP as a benchmark to meet its MTO; when defining the adjustment path to the MTO (for Member States that have not yet reached it) or allowing a temporary deviation from the MTO (for Member States that have), the implementation of major structural reforms which have direct long-term cost-saving effects (including by raising potential growth) and therefore a verifiable impact on the long-term sustainability of public finances (subject to the condition that an appropriate safety margin with respect to the 3% of GDP reference value is preserved and that the budgetary position is expected to return to the MTO within the programme period), with special attention for pension reforms introducing a multi-pillar system that includes a mandatory, fully-funded pillar; whether the economic policies of the Member State are consistent with the broad economic policy guidelines. The plausibility of the programme’s macroeconomic assumptions is assessed by reference to the Commission services’ autumn 2006 forecast, using also the commonly agreed methodology for the estimation of potential output and cyclically-adjusted balances. The assessment of consistency with the broad economic policy guidelines is made against the broad economic policy guidelines in the area of public finances as included in the integrated guidelines for the period 2005-2008. The assessment also examines: the evolution of the debt ratio and the outlook for the long-term sustainability of the public finances, which should be given “sufficient attention in the surveillance of budgetary positions” according to the Council report of 20 March 2005 on “Improving the implementation of the Stability and Growth Pact”. A Commission Communication of 12 October 2006 sets out the approach to the assessment of long-term sustainability[4]; the degree of integration with the national reform programme, submitted by Member States in the context of the Lisbon strategy for growth and jobs. In its cover note of 7 June 2005 to the European Council on the broad economic policy guidelines for the period 2005-2008, the ECOFIN Council stated that the national reform programmes should be consistent with the stability and convergence programmes; compliance with the code of conduct[5], which inter alia prescribes a common structure and set of data tables for the stability and convergence programmes. |-  Recommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Article 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Poland, 2006-2009THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community,Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[6], and in particular Article 9(3) thereof,Having regard to the recommendation of the Commission,After consulting the Economic and Financial Committee,HAS DELIVERED THIS OPINION:5.  On [27 February 2007] the Council examined the updated convergence programme of Poland, which covers the period 2006 to 2009.6.  The macroeconomic scenario underlying the programme envisages real GDP growth to have reached 5.4% in 2006 and to broadly stabilise (around 5¼% on average) over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on growth assumptions which are plausible in 2007 and favourable thereafter as the labour market may not improve as rapidly as foreseen in the programme in particular. The programme’s projections for inflation appear realistic, tilted to be on the low side towards the end of the programme horizon, notably because of rising wage pressures from the tightening labour market.7.  In the January 2006 convergence programme, the target for the general government balance in 2006 was set at -2.6% of GDP, the Commission services’ autumn forecast points at -2.2% of GDP, while the November 2006 update of the convergence programme estimates the 2006 outturn at -1.9% of GDP. The better-than-expected outturn mainly results from an incomplete execution of expenditure plans (especially social transfers and public investment), while revenue increase resulted mainly from stronger-than-expected growth. The above-mentioned deficit figures exclude the pension reform cost, estimated at around 2% of GDP in 2006, in line with the transition period for implementing the Eurostat decision of 2 March 2004 on the classification of funded pension schemes[7], which expires in spring 2007. The main goal of the budgetary strategy in the November 2006 update is to correct the excessive deficit by 2007 by qualifying for the provision of the reformed Pact which allows a part of the pension reform cost to be deducted. For the following years, the programme plans a gradual reduction of the deficit so that the 3% of GDP reference value is reached in 2009.8.  The deficit is planned to narrow by 0.4 percentage point of GDP annually (0.3 percentage point if the pension reform costs are included), from 1.9% of GDP in 2006 to 0.6% of GDP in 2009. The primary surplus is planned to improve from 0.5% of GDP in 2006 to 1.7% of GDP in 2009. Including the impact of the above-mentioned Eurostat decision, the deficit in the updated programme would improve from 3.9% of GDP in 2006 to 2.9% in 2009. The adjustment is planned to be revenue-based in 2007 (revenue ratio increase by 0.6 percentage point of GDP with a near-constant expenditure ratio) and strongly expenditure-based in 2008-2009 so as to more than offset a large decline in the revenue ratio (average annual expenditure ratio reduction by 1.6 percentage point, especially consumption and social transfers, with the revenue ratio declining by 1.2 percentage point on average mainly reflecting a cut in social contributions and various changes to the tax system, which are not always fully specified). Compared with the previous programme, the deficit targets have been revised downwards in view of much stronger growth and the better-than-expected outcome in 2006.9.  The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is planned to improve from around -2% of GDP in 2006 to -¾% of GDP in 2009 at the end of the programme period (pension reform costs not included). As in the previous update of the convergence programme, the medium-term objective (MTO) for the budgetary position presented in the programme is a structural deficit of 1% of GDP, which the programme does not aim to achieve within the programme period. As the MTO is more demanding than the minimum benchmark (estimated at a deficit of around 1½% of GDP), achieving it should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO adequately reflects the debt ratio and average potential output growth in the long term.10.  The budgetary outcomes could be worse than targeted in the programme. The risks mainly stem from the favourable macroeconomic scenario for the period 2008-2009, significant uncertainties about the effective implementation of planned reforms as well as from the lack of information on the measures supporting the envisaged expenditure restraint, which appear to be in an early conceptual phase. Consequently, the action taken so far does not appear adequate and the planned measures should be strengthened to achieve that result.11.  In view of this risk assessment, the budgetary stance in the programme seems inconsistent with a correction of the excessive deficit by 2007 as recommended by the Council. In addition, the budgetary targets do not provide a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations throughout the programme period. In the years following the correction of the excessive deficit, the pace of the structural adjustment towards the MTO implied by the programme should be strengthened taking advantage of good economic times and should be backed up by measures.12.  Government gross debt is estimated to have reached 42.0% of GDP in 2006, well below the 60% of GDP Treaty reference value. The programme projects the debt ratio to decline by 1.4 percentage point over the programme period. Including the impact of the above-mentioned Eurostat decision, the government gross debt would rise from 48.9% in 2006 to 50.2% in 2009.13.  The long-term budgetary impact of ageing in Poland is the lowest in the EU, with age-related expenditure projected to fall, partly as a result of the considerable expenditure-reducing impact of the reform of the pension system – assuming that the pension reforms are fully implemented. The initial budgetary position, although slightly improved compared to 2005, still constitutes a risk to sustainable public finances before the long-term budgetary impact of an ageing population is considered and further budgetary consolidation would contribute to contain risks to the sustainability of public finances. Overall, Poland appears to be at low risk with regard to the sustainability of public finances.14.  The convergence programme contains a qualitative assessment of the overall impact of the reforms listed in the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides some information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the convergence programme seem consistent with those foreseen in the national reform programme. In particular, both programmes envisage some harmonisation of the farmers’ social security system with the general national system, the gradual harmonisation of the disability benefits with the reformed pension system and the implementation of the basket of guaranteed medical services.15.  The budgetary strategy in the programme is partly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. In particular, action taken to correct the excessive deficit does not appear adequate.16.  As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data[8].The overall conclusion is that the programme envisages the correction of the excessive deficit by 2007 but the action taken so far does not appear adequate and the planned measures appear insufficient to achieve that result. While in subsequent years the programme envisages to make appropriate progress towards the MTO in a context of strong growth prospects, there are important risks to the achievement of the budgetary targets and the durability of the adjustment.In view of the above assessment, and taking into account a new recommendation addressed to Poland to correct the excessive deficit is adopted by the Council on [27 February 2007] under Article 104(7) of the Treaty, Poland is invited to:(i) strengthen the adjustment to ensure the correction of the excessive deficit by 2007 in line with the new recommendation under Article 104(7);(ii) taking advantage of the good economic times, strengthen the pace of adjustment towards the MTO after the planned correction of the excessive deficit, by specifying and implementing the additional measures, especially on the expenditure side, that are necessary to achieve the envisaged adjustment.Comparison of key macroeconomic and budgetary projections 12005 | 2006 | 2007 | 2008 | 2009 |Real GDP (% change) | CP Nov 2006 | 3.5 | 5.4 | 5.1 | 5.1 | 5.6 |COM Nov 2006 | 3.2 | 5.2 | 4.7 | 4.8 | n.a. |CP Jan 2006 | 3.3 | 4.3 | 4.6 | 5.0 | n.a. |HICP inflation (%) | CP Nov 2006 | 2.2 | 1.4 | 2.1 | 2.5 | 2.5 |COM Nov 2006 | 2.2 | 1.4 | 2.5 | 2.8 | n.a. |CP Jan 2006 | 2.2 | 1.5 | 2.2 | 2.5 | n.a. |Output gap (% of potential GDP) | CP Nov 20062 | -0.4 | 0.5 | 0.5 | 0.3 | 0.4 |COM Nov 20066 | -0.3 | 0.4 | 0.3 | 0.1 | n.a. |CP Jan 20062 | 0.1 | 0.3 | 0.3 | 0.6 | n.a. |General government balance (% of GDP) | CP Nov 2006 | -2.5 | -1.9 | -1.4 | -1.0 | -0.6 |COM Nov 2006 | -2.5 | -2.2 | -2.0 | -1.8 | n.a. |CP Jan 2006 | -2.9 | -2.6 | -2.2 | -1.9 | n.a. |Primary balance (% of GDP) | CP Nov 2006 | 0.1 | 0.5 | 1.0 | 1.4 | 1.7 |COM Nov 2006 | 0.1 | 0.2 | 0.4 | 0.6 | n.a. |CP Jan 2006 | -0.3 | -0.2 | 0.3 | 0.6 | n.a. |Cyclically-adjusted balance (% of GDP) | CP Nov 20062 | -2.4 | -2.1 | -1.6 | -1.1 | -0.7 |COM Nov 2006 | -2.3 | -2.3 | -2.1 | -1.8 | n.a. |CP Jan 20062 | -2.9 | -2.7 | -2.3 | -2.1 | n.a. |Structural balance3 (% of GDP) | CP Nov 20064 | -2.4 | -2.1 | -1.6 | -1.1 | -0.7 |COM Nov 20065 | -2.3 | -2.3 | -2.1 | -1.8 | n.a. |CP Jan 2006 | -2.1 | -2.7 | -2.4 | -2.1 | n.a. |Government gross debt (% of GDP) | CP Nov 2006 | 41.9 | 42.0 | 42.1 | 41.4 | 40.6 |COM Nov 2006 | 42.0 | 42.4 | 43.1 | 42.7 | n.a. |CP Jan 2006 | 42.5 | 45.0 | 45.3 | 45.4 | n.a. |Notes: 1 The budgetary projections exclude the impact of the Eurostat decision of 2 March 2004 on the classification of funded pension schemes, which needs to be implemented by the time of the spring 2007 notification. Including this impact, the general government balance according to the updated programme would be -4.3% of GDP in 2005, -3.9% in 2006, -3.4% in 2007, -3.1% in 2008 and -2.9% in 2009, while government gross debt would be 47.3% of GDP in 2005, 48.9% in 2006, 50.0% in 2007, 50.3% in 2008 and 50.2% in 2009. 2 Commission services calculations on the basis of the information in the programme. 3 Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures. 4 There are no one-off and other temporary measures in the programme. 5 There are no one-off and other temporary measures in the Commission services’ autumn 2006 forecast. 6 Based on estimated potential growth of 4.1%, 4.4%, 4.8% and 5.0% respectively in the period 2005-2008. Source: Convergence programme (CP); Commission services’ autumn 2006 economic forecasts (COM); Commission services’ calculations |[1] OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). All the documents referred to in this text can be found at the following website:http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm[2] See Eurostat News Releases No 30/2004 of 2 March 2004 and No 117/2004 of 23 September 2004.[3] Communication from the Commission to the Spring European Council, “Implementing the renewed Lisbon strategy for growth and jobs - A year of delivery” - COM(2006) 816, 12.12.2006.[4] Communication from the Commission to the Council and the European Parliament, “The long-term sustainability of public finances in the EU” - COM(2006) 574, 12.10.2006 - and European Commission, Directorate-General for Economic and Financial Affairs (2006), “The long-term sustainability of public finances in the European Union”, European Economy No 4/2006.[5] “Specifications on the implementation of the Stability and Growth Pact and guidelines on the format and content of stability and convergence programmes”, endorsed by the ECOFIN Council of 11 October 2005.[6] OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm[7] See Eurostat News Releases No 30/2004 of 2 March 2004 and No 117/2004 of 23 September 2004.[8] In particular, the data on employment in hours worked and labour productivity measured as GDP per hours worked have not been provided. Contributions to the potential growth are also missing.