title: Recommendation for a COUNCIL DECISION extending for the year 1977 the Convention between the European Economic Community and the United Nations Relief and Works Agency for Palestine Refugees (UNRWA) (submitted to the Council by the Commission)

text:
ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (78) 712
Vol. 1978/0269
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                   COM(78)712 final.
                                                   Brussels . 12 December 1978
                         Recommendation for a
                             COUNCIL DECISION
 extending for the year 1977 the Convention between the European
 Economic Community and the United Nations Relief and Works Agency
                    for Palestine Refugees ( UNRWA )
            ( submitted to the Council by the Commission )
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 C0MC78) 712 final .        V        t j.              j
 ---pagebreak--- CONTENTS
    I.    Explanatory note
          A : Introduction
          B : Operation of Convention during 1975 / 76
          C : Extension of Convention for 1977
        1 Tables
          1.  UNRWA : income and expenditure     :     1971-1977
          2.  E.E.C. contributions   1971-1977
          3.  E.E.C. contributions under Convention
          4.  Supplementary feeding program    :    expenditure 1975 / 76
          5.  UNRWA request for 1977
          6.  Requested cash contribution to 1977 supplementary feeding program
   IX .   Financiat Annex
  III ,   Proposed Council Decision            • 1 ■ :   .
              Exchange of letters continuing Convention for 1977 with certain
          amendments .
 ---pagebreak---                           EXPLANATORY       NOTE
INTRODUCTION
Purpose of communication ;
/I ) This' communication proposes to the Council the extension , for the year
     1977, of the assistance given by the Community to the United Nations
     Relief and Woi-ks Agency for Palestine Refugees CUNR-WA ), under the
     multi-^annual: Convention already concluded with the agency .
Relations betweerv UNRWA and E.E.C.
2)   E.E.C. Member States have been major contributors to UNRWA since
     the agency was set up in 1949/ 50 following the partition of Palestine ;
     They have always been as a group either the second largest ( after U.S.A. )
     or the largest contributor to its finances       ( See Table 1 ). It should
     be recalled that UNRWA depends wholly on voluntary contributions , and
     that these in most recent years have fallen short of operational expenses
3)   The Community as such has contributed to UNRWA since 1970 / 71 , principally
     by way of food aid .    This consists at present of     :
        a)     the Basic Rations Program ( monthly free distribution , to all
                    eligible refugees ) : wheat flour , butteroil and sugar ,
                    together with a a sh contribution to distribution costs ;
        b)     the Supp ler,;entary Feeding Program ( special nutrition , limited
                    to vulnerable groups ) : wheat flour , rice , sugar and
                    skimmed milk powder , together with a cash contribution
                    intended to cover the costs of running the program .
     A summary of Community contributions to UNRWA since 1971 is given
     in Table 2 .
4)   A substantial part of the above contributions is the subject of the
     three-year Convention between UNRWA and E.E.C. , the remainder being
     covered by annual exchanges of letters under normal food aid procedures .
     The Convention provides for      :
        a ) the sugar for the Basic Rations Program ( all the Program 's
                    requirements ), with a contribution to distribution costs ;
 ---pagebreak---        b ) the commodities ( listed above ) for the Supplementary Feeding Program,
                   with a contribution to the running costs .
    Details will be found in Table 3 .
5 ) The present Convention runs in principle for three years from July 1975,
    but needs to be extended periodically within those three years ; this
    proposal is for the extension for the calendar year 1977 . A previous
\-  Convention ran from July 1972 to June 1975 . It is generally recognized that
    the present arrangements have become complicated, and a proposal to
    combine all E.E.C. contributions into a single Convention is under
    consideration .
OPERATION OF CONVENTION ,   JULY 1975 - DECEMBER 1976
Basic Rations Program    :  Sugar contribution
6)  For the period July 1975 - December 1976, the E.E.C. shipped 6 000 t
    sugar for . use in the basic rations program . In normal circumstances ,
    9 000 t . would have been shipped and distributed for this eighteen month
    period ; however net requirements were reduced in view of substantial
    shipments made at the beginning of the period under the agreement for
    the previous year .
7)  Sugar rations issued to refugees totalled 8 593 t , some 95 % of the
    quantity planned .   The shortfall was largely the result of the civil
    war in Lebanon , although UNRWA reports that it was possible in both
    zones to maintain the basic rations program to a surprising degree ,
    the average number of monthly recipients in Lebanon having fallen only
    to 92 300 from the normal total of some 101 000 .       The. ration was however
    reduced from 600 gr . to 500 gr . owing to disruption of supplies .       In
    the other four areas    ( Syria , Jordan , West Bank , Saza )  distribution
    proceeded normally .
8)  The cost of inland transport and distribution is estimated at
    S 266 500, or S 31 / t on average , the amount varying considerably from
    area to area .   Towards this the E.E.C. contributed at the rate of
    18,50 UA /t , which produced# 2 3,1 2/ t , or about 75 % of estimated costs .
    An increase is sought for 1977.
 ---pagebreak---   Sypplsrcentsry Feeding Frogram
 9)   During the period under review the civil war in Lebanon seriously
 ''   affected the smooth running of the Supplementary Feeding Program .
      In Lebanon itself , the program was interrupted in many areas for
      varying periods and three supplementary feeding centres were looted
      or seriously damaged .     Other fields suffered from loss of contact with
      headquarters and from shortages of commodities usually supplied through
    ' Beirut .-               '
  t
10 )  Largely as a result of the war , there was very considerable underspending
      during the eighteen month period , both of commodities and of cash donated
      by the E.E.C. The position is summarized in Table 4, from which it .will
      be seen total expenditure amounted to only S 3 986 000 instead of a planned
      S 5 081 000, a difference of S 1 095.000 . This figure can be analysed
      as follows   :
                                                             S x 1000
                     Savings on staff                     :     364
                     Savings on corned beef purchases :         578
                     Other savings                         :    153
                                                              1 095
11 )  The savings on staff arise essentially for two reasons           :
      a ) appromixately § 214 000 from saving in wage rates , notably in cost
          of living allowance, where increases were less than expected .
          This was offset to an " extent by certain increases in the costs of
          temporary labour .
      b ) the remainder , § 150 000, from planned arid unplanned reductions
          in the number of staff employed in the supplementary feeding program .
12 )  The savings on corned beef can ulso be attributed to two causes           :
      a ) a marked fall occurred in the price of the corned beef bought in France ;
          UNRWA paid an averac ^ of S 1,18/ kg ., compared with the planned cost
          of S 2,06 based on the prices and exchange rates prevailing in
          November 1974 .   This produced a savinn of § 360 000 ;
      b ) dnly 413 t were bought during the period , instead of the 520 t that
          had been planned out could not have been consumed in view of the
          situation at the ■ ime .    This produced a saving of S ^ 18 U^0 .
13 ) The most importan . . . ^rt.'^er savings were on purchases of other foodstuffs,
       principally as a result of redded r^'jiremerts but s !- s0 of certain faUs
       in unit prices .   These savings were upon    :
                          Toiiwto paste ( bought in E.E.C. )        & 24 000
                          Pulses                                    ^    53 GOO
                          Fresh foods                               ® ■ 50 000        ,
                                                                                m 9 * •
 ---pagebreak---                                                                                Γ        '
            !..        '    /               -■                                                     ί
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                                                             I                                      1
         f
    14 )      A further favourable difference arose on the conversion into dollars
/ . '         on the EEC cash contribution of 4 212 000 UA . This was calculated
    I         on the basis of UNRWA 's estimated requirement for 1975 /76 of 8 5 081 514
              ( after negotiated reduction ) using the IMF rate of ^ 1,206349 as                       *- '■
              requested by the Budgetary Committee . Actual payment was made at the                      r
       :      rate ruling during 1976 (8 1,25 ), resulting In a difference of some'                 {
         * 8 184 000 .                                                                              ».
                                                                                "
         £.                                ...              ,,                                      j        ;
    15 )      The surplus over the eighteen month period should be viewed in the
              context of operating the supplementary feeding program since 1972 ,
              when the EEC first started its support . During the first Convention
              ( 7 /72 to 6 /75 ) expenditure was generally covered by contributions
              except for 1973 / 74 ; over the three years there was a small surplus
              of 8 390 000 on a budget of 8 7,1 million .      As regards 1977 , estimates
              made early in 1978 show expenditure of approximately 8 3,0 million ,
                                                                                ,     ■   ν ·
              which is the amount now being requested as EEC contribution
              ( CF .  Part C of this communication ).       •'    -                                       *
    16 )      The savings of 8 1 095 000 'were used for the purchase of flour
              for free distribution to refugees under the monthly rations program .
              Approximately 6 640 t were bought for this purpose , on the market of
              the Community, at an average price of 8 165 / t . This enabled the Agency          ,|
              to avoid a further reduction in monthly rations , beyond that which had
              already been imposed by the general budget deficit for the year .
    17 ) Bearing in mind UNRWA' s chronic financial problems and also the                         1
              unprecedented difficulties overcome during the period 1975 / 76,                     t '
              the Commission considers that no attempt should be made to recover 1                j ;
           , the money underspent on the program, whether by direct reimbursement            -    j '•
              or . by reduction in contributions for 1977 .    It is therefore proposed           I "■■■
. . ; , that the Council take note of the situation,, but take np further action.                 j "*•
                                                                                " .)
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                                                                                i
 ---pagebreak---    P.     EXTENSION OF CONVENTION FOR 197?
         Penod of extension
         18) The . request from UNRWA ( summarized in Table 5 ) concerns, the twelve
                months from January to December 1977. The previous period lasted
                eighteen months ; that was a transitional arrangement intended to
                bring each year of operating the Convention into line with the E.E.C.
                and U.N. accounting year. It has not been possible to prepare a proposal
       |        earlier because of the disruption caused by the civil war .
         Details of request
       r-~~
         19) UNRWA requests that the E.E.C. continue to contribute
                     a) the annual requirement of sugar (6 000 t ) for the basic rations
                        program, together with a payment towards internal transport and
                        distribution costs ;
                     b) commodities ( flour, rice, sugar ) required for the supplementary *
                        feeding program, together with a payment towards the cost of
                        purchasing ^ other commodities ( mostly in Europe ) and the costs
             i          of    running „ the program .
               The request can be evaluated at i 6 395 000 (4 724 000 JEUA ),
               of which § 3 180 000 is in cash, the balance representing the estimated
               market value of the commodities donated, and shipped by the f.E.C.
       Basic rations program ( sugar )
       20) The annual requirement of sugar for the basic rations program is 6 000 t,
               which it is proposed       the - Community should continue to supply on
              CIF terms as before . No donations of sugar are received from elsewhere ( 1 )
       21 ) UNRWA has also requested an increase in the contribution towards inland
              transport and distribution expenses, from § 23,125 / t (S 138 750 ) to
              S 38,667/t (S 232 000). It is proposed that the Council should agree '
              to a contribution of thirty dollars ( approximately 22,16 EUA).
              which is in line with a similar contribution already negotiated by the              ;
              Commission for normal 1977 food aid deliveries of cereals and buttercil
             for the basic rations program.                                                . . ■ j
                •  '       .  .                '     ■       .                    ,   '  •       !
                                                                ■                   ■          'f
( 1 ) It should be noted th&t the Community in fact already decided to supply
      this sugar , for a period of. three years, by Council Regulation 1034/ 76
      of 30 April 1976. 197' is the second year of the three . This provision
      in the Convention is therefore a matter of form.
 ---pagebreak---                                                                                6.
      Supplementary Feeding Program            -     commodities
      22 )    Contributions requested in kind are            :
         ,   v        -     171   t     rice ;
                      - 2 . 450   t     wheat flour ;
                 •    ~     102   t . sugar .                            •.
             These are at the same annual level as in , previous periods . The amounts
              fall within allocations already decided in favour of UNRWA under the
    i         1977 cereals food aid program ( in the case of rice and wheat flour )/
    )         and under the Council decision of 30 -April 1976 ( ir( the case of sugar ) ( 1 )
      23 )    No request was made for skimmed milk powder for 1977, although the
              supplementary feeding program has an annual need for this commodity .
             Adequate stocks exist for the time being , as a result partly of
              disruption of the school milk program during the Lebanon civil war
              and partly owing to suspension of the program in certain areas as
              an anti-cholera measure .
      Supplementary Feeding Program -              cash
                                           '                   I
      24 )    The contribution requested in cash is now 9 3 000 000, a decrease
              of S 337 000 from the amount requested earlier in 1977, following
              reviews carried out during the year .
      25 )    As in previous years , the cash contribution is intended to cover
              the following       ( cf . Table 6 )    :
                 a ) Purchase of preserved foodstuffs - corned beef , tomato paste ,
                      pulses , and burghol , the first two to be purchased inside the
                    . E.E.C.    ( Estimated cost        : § 482 000) ;
                 b ) Purchase of other foods , supplies , premises , contractual services /
           v          and staff costs ( the last being the major item ). The estimated
                      cost is 9 2 550 000, offset by a contribution of 9 32 000
                      recovered from the Jordan Government .-
      26 )    The contribution requested for 1 977 compares with 1976 expenditure
              of 9 2 838 000, an increase of 9 162 000 , ( 5,7 % ). .. The Increase is due (
              essentially to two factors           :
                 a ) a rise in staff costs of t 251 000, or 14,7 Z , UNRWA having been \
                      obliged to grant large cost-of- living increases as a result of
                      inflation in all areas of operations ; '
                 b ) increased costs of local purchases , especially fresh foods
                      ( 21 % increase ), again as a result of the inflation that was
                      particularly marked in Jordan , Syria and Lebanon .
1 ) aArrangements
         matter of form .
                         have already been made for shipment ; this provision 1s again
 ---pagebreak---                                                                                X ,
                                                                                7.
      These two items are however heavily offset by a fall in the costs of
       commodities purchased abroad, in particular corned beef purchased in
      Europe .
27) It should be emphazised that the above estimates of 1977 supplementary
      feeding program costs are still provisional , as a result of disruptions
       caused by the aftermath of the Lebanese troubles and by two moves of
      UNRWA 1 s head office ; the figures are the best available at the time
      of preparing this document .       It     Is       possible
      that the Commission may introduce modifications during discussions in
      the Council .
Budaet    charae
28)   The estimated cost of the requested contribution is 4 724 000 EUA .
      This can be broken down as follows    :
                                                               ( EUA x 1000 )
                                              Cotrimodities         Cash      Total
      - Basic rations program :                  *'
         6 000 t sugar                             tl 703           , 133     1 836
      - Supplementary feeding program :
         sugar , flour , rice                         672                     2 888
     ' Purchase of other commodities,                              2 216
         and running costs
      7 Total                                     2 375            2 349      4 724
      Further details are given in Table 5 .
29 )  The contribution is chargeable to Chapters 92 ( Food Aid ) and 94
      ( Cooperation with developing countries ) of the 1977 budget .
      No new expenditure for the Community arises since sufficient appropria
      tions already exist under the appropriate budget headings * A financial
      annex is attached .
30 )  Since the cash contribution has not yet been paid or committed, owing
      to the difficulty in establishing requirements for 1977 < See above >,•
      a carryover <r* th ? appropriation under Article 9':S hs :» frsen made •C19~6~7'8 ).
                                                                                A / 9 re
 ---pagebreak--- Action proposed
31 )  The Commission considers that the Community should continue its
 ' i. support for UNRWA , and should accept the /request for the continuation
      of the Convention for the year 1977.    The Commission therefore '
      proposes that the Council take the following decision of which
      the text is attached in Annex /:•"                                    /
          - Council decision ( EEC ) concluding an agreement / in the form
            of an exchange of letters , to extend for the year 1977
            the Convention between UNRWA and the E.E.C. dated 20 July 1976 .
 ---pagebreak---        Table -)                                                                                V     ( US Dollars * 1000)
                                             UNRWA' : INCOME AND EXPENDITURE 1971 - 1977
                                                                                r
                                           1971              1972 •       1973           1974        ' 1975          1976             1977
                                                                                ( prov .)
                                                                                .
      INCOME
                                 ι
      European Economic Communit )t
| - member states :        B     J         . 507               382          262            674             771       996              1110
!                          5,3   I           715               914          890          1109            1186       1567              1800
                                           3476              3430         4968           2963            3304       3312              3260
                                           1445              1262         1269           1343            1295       1568              1320
                                                                 65          80       !    100              81        89               100
                           Irl .    ;          60
                           I                 188               198          160                            148       200               200
                           L                    4       !        16           5              6        •    144        54                10
                                             176               180          135   •        565 .         1562       1837              1940
                           N   ,
                                           4512              4886         4960           4760            6809       6929              8500
                           UK
                                                        r
                                          11083         I-  11333       12729           11673           15300      16552           . 18240
 I Community                       j         240             2410         6891          24041           13771      14321      |      16570
 I Total EEC - 9                      i   11323             13743        19620          35714           29071      30873             34810
  ! USA                                   22981             24376        23200      !   28285           42055      38700             48700
                                           1677               2322         2069           3090          16234      14847              5830
  ; Ar#D states                                                \
  | Other income                           7942              «947        17643      |   18231    • ;    26218      30299             34640
     TOTAL  INCOME                        47675         J 49388          55269          85320          113578     114719       I     123980
                                                                     33SS5SSSSSSSS tsss&ssssssasss :
   I TOTAL EXPENDITURE                    48432
                                          SSSSa.MvSaS
                                                            52126        62532          88149          111809     114775             127460
                                        .   ( 757 ),        ( 2736 )     ( 7263 )       ( 2829 )        1769                          «500 )-.
     SURPLUS / ( DEFICIT )
     Source ; Principally UNRWA report,s and estimates .
 ---pagebreak---                                              UWA :   EEC CONTRIBUTIONS 1971 - 1977
    \
                                          1971         1972       1973       1974              1975        1976        1977        TOTAL
                                                                                ( Drov .)
COMMODITIES Cmtn )
Cereals :                                4500          21945      20000        20000              25000     25000      35000      151445
In form of :
      Flour    -                     '   2980          11765      11184         13117        .  . 14241  .  17842 ..   25984    .  97113
      Rice                                              3240       2412           150      I         171        85        171        6229
                                                                i
Skimmed milk powder                                                1100          1600 .            2000       700                    5400   I
Butteroi I .                                                       2000    I     2000              3000      3000       3200       13200
Sugar                                                              6150          6062    j         6094      615.3      6102       30561
                                                                                h-        -1
                                                   I
Estîmated conxodity value <8 000 )
« β ––––––––––––––––––––––––––––––––
                                          240    J      1441       4614        12479
                                                                                !
                                                                                10334      10554     12596        52258 J
Cash contributions (S 000 )                                                               r
Basic rations                                             50        107           110     i         167       221        972        1627
Supplementary feeding               J                    919       2170          2571              3270      3546      3000       15476   I
                                                                                8881   !
Education                           |                                                                                8881  I
                                       I
Total cash                                               969 .     2277        11562               3437      3767      3972       25984
                                       j
Total conmodi t ies dnd cash              240           2410       6891        24041           13771       14321     16568        78242
                     ( $ o o o)
 ---pagebreak--- NOTE : Evaluations arejbased on UNRWA 's yearly estimates of commodity values . These are slightly lower than £€C~ figures ,
       mainly as a result of UNRWA 's practice of valuing butteroil in terms of vegetable oil replaced . There are also
       certain differences resulting from the year by year allocation of contributions . The commodity quantities are
       taken from the EEC annual food aid programmes .
 ---pagebreak---    Table 3
                                                   EEC ,   CONTRIBUTIONS   UNDER CONVENTION
i Convention year                        1972/ 73             1973 / 74           1974 / 75          1975 / 76        1977 ( proposed )
j Period of appLication                 July-June            July-June           July-June           July-Dec .
                                                                                | Jan.-Dac.           I
    Durât ion                            12 months            12 months           12 months          18 months            12 months
                                                                             '                 I
| Contributions in kind (1)                                                                                I
9       Wheat flour                       3070 t              1868 t              2353 t              3675 t            2450 t
        fHce                               240 t                122 t              150 t               256 t              171 t
                                                                                I
i       Skimised milk powder              1100 t              1600 t               300 t              2400 t
I
a
        Sugar ( supplementary feeding )     150 t                 62 t              94 t               153 t              102 t
|       Sugar (basic rations)             6000 t   (3 )
                                                       "1
                                                              6000 t              6000 t      J       6000 t
                                                                                I   6000 t           J
        Value ( estimated ) ( 2 > ,      2.534 Hua           3,273     Mua       3,362    Mua        4,530    Hua      2,375 Mua
                                    I
I       Contributions in cash                        .   I                                         =              I       ~             Π
        Basic rations sugar                                       71       !         71                111                133
S       Supplementary feeding           1,610                1,610         !     2,161               4,212             2,216
i       Feeding centres                    42                                        • *    -
                                                                                -
        Total contributions             4,257 Hua             4 . 954 Mua         5,605 Mua           2,853 Mua         4724   Mua
  ( 1 ) Commodities foric part of total EEC contributions listed in Table 2
  ( 2) Internai prices, less restitutions , plus sea transport
  ( 3) Including 4C00 t already decided before signature of Convention
 ---pagebreak---                                                                                TATîUR 4
            SUPPLEIfFJNTARY FEEING PROGRAM : July 1975 - DgeCTber 1976
         PLANNKD AND ACTUAL : CO!-^ODITT?S DISTRIBUTE AND ^XPRNDITim1?
A * COMMODITIES DISTRIBUTED               (metric tons )
                                  j       Planned         An tuai                    Va ri an no
                                  !
                                  I
    Wheat flour                           3 675           3 113                                56 ?
    Ri ce                           I        256             23 2
    Surar                                    153 ■           137                                 16
    Skimmed milk powder                   2 400           1 153                           1 247
B. EXPENDITURE '                          (US dollars 2 1000)
                                                                      Γ_
                                                                      ι
                                          Planned         Actual                   Varinnr ^
    (a ) Purchases atroad             '■
          • Corned "beef ( tJEC )        1 067              489                              578 ( 1 )
          • Tomato paste (EEO )               56             32                                 24
          • Other purchases                 248             157                                 81
                                         1 371              688   I!•
                                                                                683
                                                                   (
   ("b ) Local wrnhacc -?                  709             751    j                            4a
                                                                  ♦
                                                                  1
   ( c ) Staff 2° "t r,               j  2 911           2 547    !                          164            i
                                                                        MrtfwrLT–«r1 iiiinffwuiuwwwji auwMnwJ
         Total exper.sea               1 5 08l
                                       I                 3 98g    j                      1 ^95 f
 ---pagebreak--- (1 ) of which p 360 000 due to reduced price , $ 218 000 due "to reduced
      quantities#
( 2 ) in addition to favourable varvdance on exchange of $ I84 000, the
   , EEC cash grant of 4,212 Mua having produoed S 5 265 000.
                 /
 ---pagebreak---                            UNRWA       REQUEST        FOR   1977
COMMODITIES    (1)                                           US g   x 1000
  I*  Basic rations program
      6 000 t    sugar                                           2 305
  2.  Supplementary feeding program
         171 t   rice
      2 450 t    wheat flour                                       910
         102 t   sugar
                                                                 3 215
CASH
  1.  Basic rations program
      Inland transport and distribution costs ( 3 )                180
  2.  Supplementary feeding program
      a ) Purchases abroad        351 t    corned beef    )
                                    28 t  tomato paste )           482
                                  188 t   puises          )
                                  141 t   burghol         )
      b ) Other expenses                                         2 550
      c ) Costs recovered from Jordan                              ( 32 )
                                                                 3 180
 TOTAL                                                           6 395
 (1 ) Evaluation at estimated world prices delivered port of unload
 <2)  Assuming 1 EUA     =  § 1 , 35363   ( 11-1978 )
 (3)  Assuming     S 30 per tonne .
 ---pagebreak---     ■ t    .                                                                                ■
• »'                                            '                               ■■
  !                                             '                                                        ■         _ .
                                                •                                                                          Table     6
 *                                                                        ■
                                       REQUESTED                      CASH     CONTRIBUTION         TO  1977
                                             SUPPLEMENTARY                           FEEDING   PROGRAM
 I.                                    ––––––
                                                          Hot                 Κΐΐΐε           OVaer
               Z IIK                                     Hoal               ΡΓΟ£Γα·Χ3ί       Baticna        Adain#           Total
                                                              S                    *             S            *                  S
      JU Purees ? oft                           l
          a ) Comed bcof – fcoi
               oeal euality                             164,100                    m
                                                                                164,100
          t>) Comod fceof - protoin                                                         173,000                          173,000
               •uppltfaont rvialitr
          c ) Toaato past *                     .         25,200                   am                                          25,200
          d) Puloes                                       89,000                                                               89,0'JO
          •) Bar^hol                                       30,700                                                              30,700
                    Tot*l "A"                           309,000                              173,000                         482,000
      B, 1 . Otfrpr nurciLQQod foou
               eur>pltor. t
          a) L0c.1l purchao®3 ( in
               particular franh
                fruits and YorotaMao)                   408,000                     m            m                            <03,000
          b) Vitamino                                      12,000                                8.000                         20, OCO
                                                                                I
           2* Othor pudt)11o8             I                46,000              17,000            1,000         1.000
                                                                                I        65,000
           3 # Preratrcnl
           a) R entai®                                        8,000               5.COO                                         13,000
           b) n.iintcnonôd                                 17.000                 5,coo                                1
                                                                                22,000 ,
           o) Utllitlos and
                clo3nlng                                      8,000                3,000                                        11,000
           4 « ContrActual corvi oaa >
                Principally bakiag o*
                bro.:d              "■                      53,000                  m            m                              58,000
           5» Stnff coatot
           Ci) Eusunoratioû                       1,330,000                   380,000                      . 223,000        1,933,000
           b) Travol coata and                                                                                6.000             20.000
                clothinr                                    10 , COO               4,000
                     Total -3"                    l,357,OCO                   414.COO             9,000      230,000        2,550,00
        C. Costa roeovarod froa
            Jordan Govcmsont                              ( 32.CC0 )                                                           ( 32,000 ;
                                                                              414,000           182,000      23C.CCO        3,000,000 •
                     HT? TOTAL
                                            | 2,174,000
                                              .... . J.  1 J.   - - _ I .
 ---pagebreak---                         FINANCIAL         ANNEX
RELEVANT BUDGET HEADIN6S
1977   BUDGET
       * Item 9201    :    " Food aid in cereals - 1977 Program'
       • Item 9221    :    " Food aid ( sugar ) - 1977 Program"
       . Article 940     :    " Expenditure resulting from Convention between
                                EEC and UNRWA "
DESCRIPTION AND PURPOSE OF OPERATION
Continuation for 1977 of Convention between EEC and UNRWA granting
contributions in commodities and in cash for use in UNRWA 's feeding
programs for Palestine refugees .
LEGAL BASIS
a ) Cereals   :   Council decision of 8 February 1977 on the 1977 EEC food aid
                  program in cereals .
 b) Sugar     : Council regulation ( EEC ) 1034/ 76 of 30 April 1976 on the
                  supply of white sugar to UNRWA as food aid .
 c ) Convention : Council decision of 20 July 1976 on conclusion of the
                  Convention between the EEC and UNRWA concerning aid to
                  refugees in countries of the Near East .
 ---pagebreak--- APPROPRIATIONS
4.1 Calculation of costs
    a ) Item 9201     -   Cereals
             2 450 t f lour     ( équivalent 3 252 t cereals )
                                               EUA / t                 El'A
                                                 267               654 000
                Internal price
                Restitution                      106               259 000
                                                 161                395 000
                                                   50               123 000
                Transport
                                                 211                518 000
                 171 t rice    ( equivalent 44 1 t cereals )
                                                EUA / t                 EUA
                                                  775 :              133 000
                 Internal price          :
                                                   94                  16 000
                 Restitution
                                                  681                117 000
                                                    50                   8 000
                 Transport
                                                  731                125 000
                                                                      643 000
           - Total
       b ) *tem_9221__-__Sugar
           -   6 102 t white sugar
                                                  EUA / t                 EUA
                                                   424             2 588 000'
                  Internal price
                                                    190            1 160 000
                  Restitution
                                                    234            1 728 000
                                                     50                305 000
                   Transport
                                                    284            1 732 f:'C0
            -   Cash contribution
                Inland transport and distribution for basic rations program
                6 000 t     at      .S -zr\
                                       30 V/+t                 - :      133 000 EUA
                                                                    1 865 000 EUA
                Total
 ---pagebreak---          c ) Article 940  -  Convention
             Contribution § 3 million   ( see text )
             Conversion to EUA at assumed rate     8 1,35363 ( 11-1978 )
                                                                2 216 000 EUA
         d ) Total appropriation                                4 724 000 EUA .
    4 .c Incidence of costs
         a ) The operation does not imply additional expenses beyond those
             appropriations already in the 1977 budget .
         b ) The commodities have already been delivered     ( on the basis of
             Council decisions fixing food aid programs ) and have been charged
             to the 1977 budget appropri ations for food aid in sugar and in
             cereals . The cash contributions have not been paid ;
               a carryover of the 1977 budget appropriation was agreed on 19 June 1978
5. CONTROL OF EXPENDITURE
   Financial regulation of 21 December 1977 applicable to general budget of
   the Communities .
 ---pagebreak---                                  COUNCIL     DECISION
           * extending for the year 1977 the Convention between
              the European Economic Community and the United Nations
            . Relief and Works Agency for Palestine Refugees
                                     ( UNRWA ) .
THE  COUNCIL   OF   THE   EUROPEAN     COMMUNITIES
Having regard to the Treaty establishing the European Economic Community
and in particular Article      113 ;
Having regard to the recommendation from the Commission ;               '    -
Whereas on 20 July 1976 the Community concluded a Convention with UNRWA
concerning aid to               refugees in the countries of the Near East
during the period July 1975 to December 1976 ( 1 ) ;
Whereas under Article 10 the Convention may be extended "for subsequent
periods with or without amendment by agreement between the two parties
until 30 June 1978 ;
Whereas the Convention should , subject - to certain amendments "be extended for -the
year 1977 in order that the aid of the Community can "be granted In a comprehensive
and continuous fashion ,
(1)  0J ..L.2.03 , 29.7.1976 , p. 40
 ---pagebreak--- HAS  DECIDED     AS  FOLLOWS  :
 !
                                    Article    1
         The exchange of letters concerning the extension until 30 June 1977
of the Convention concluded on 20 July 1976 between the European Economic
Community and the United Nations Relief and Works Agency for Palestine Re
fugees ( lETT.vA) concerning aid to refugees in countries of the Hear East is
hereby approved on "behalf of the Communities .
The text of the said exchange of letters is annexed to this Decision .
                                    Article    2
         The President of the Council is authorized to designate the persons
empowered to sign the exchange of letters and to confer on them the necessary
powers to bind the Community .
                                                   Done at              ........
                                                         For the Council ,
                                                          The President
 ---pagebreak---                               EXCHANGE OF LETTERS
( a ) Letter from EEC to UNRWA
                 With reference to the Convention concluded on 20 July 1976
between the European Economic Community and the United Nations Relief and
Works Agency , for Palestine Refugees concerning aid to refugees in the'
countries of the Near East , the Community proposes that in accordance with
Article 10 the Convention be extended for the year 1977 , subject to the-
following amendments :
                  ( i ) For the year 1977 the contribution mentioned in Article 4
                        Paragraph 2 shall be thirty US Dollars per metric ton .
                ( ii ) The following text is joined to the Annex of the Convention
 ---pagebreak---  SUPPLEMENTARY   FEEDING  PROGRAM
  Second period of Convention    ( Calendar year 1977 )
' 1.  Contributions in kind
      Wheat flour                     2 450         tc
                                             metric tons
      Milled rice                       171
                                        1 71 metric tons
                                                    to
      White sugar                       102
                                        102  metric
                                             metric tons
                                                    tc
  2.  Contributions in cash
      3 000 000   U S    dollars
  3.   Foodstuffs to be purchased in the Community
      Corned beef                     approximately     350 metric tons
      Tomato paste                    approximately      28 metric tons
      The Community would be obliged if the Agency would signify whether
 it is in agreement with this proposal .
 ---pagebreak--- (b)   Reply from UNRWA to EEC
            The Agency acknowledges receipt of the Community 's letter
dated             and reading as follows    :
            ( Text of EEC letter to UNRWA )                ^
            The Agency wishes to confirm its agreement to the above .


               EUROPEAN COMMISSION
            Brussels, 22.5.2018
            COM(2018) 311 final
            Recommendation for a
            COUNCIL DECISION
            authorising the opening of negotiations with a view to apportioning the Union's WTO concessions on Tariff Rate Quotas annexed to the General Agreement on Tariffs and Trade 1994 in view of the withdrawal of the United Kingdom from the Union

               EXPLANATORY MEMORANDUM

               1.CONTEXT OF THE PROPOSAL

               •Reasons for and objectives of the proposal

               On 29 March 2017, the Government of the United Kingdom (UK) notified the European Council of the UK’s intention to withdraw from the European Union (EU) of which it is currently a Member State.

               The UK's withdrawal from the EU has implications beyond the bilateral relationship between the EU and the UK, in particular with regard to their World Trade Organization (WTO) commitments. Both the EU and the UK are original Members of the WTO. When the European Community accepted the WTO Agreement and the Multilateral Trade Agreements in 1994, the schedule of concessions and commitments that was annexed to the General Agreement on Tariffs and Trade 1994 (GATT  1994) for the European Communities (the EU's WTO schedule) was thereby simultaneously annexed for the UK. The EU’s schedule therefore contains commitments applicable also to the UK in its capacity as a WTO Member.

               As far as the EU is concerned, its scheduled commitments for goods will remain applicable to its territory, but the EU's existing quantitative commitments, notably the Tariff Rate Quotas (TRQs), will require certain adjustments to reflect the UK's withdrawal from the EU. As the EU's WTO schedule will no longer be applicable to the UK, the EU's existing WTO bound TRQs (agricultural, fish and industrial) need to be apportioned between the UK and the EU to become effective on the date the EU's WTO schedule no longer applies to the UK.

               In line with the provisions of Article XXVIII of GATT 1994 for modifying concessions the EU will need to conduct negotiations on the apportionment of the TRQs with concerned WTO Members which have been identified as having relevant market access rights under the individual TRQs (having so-called principal or substantial supplying interest or holding an initial negotiating right). The EU will also consult with the WTO Members having consultation rights.

               These negotiations will need to be conducted in a tight timeframe. It is anticipated that the UK will withdraw from the EU on 30 March 2019. This being said, a Withdrawal Agreement is currently being negotiated and the negotiators of the EU and of the UK have agreed on the text for transitional arrangements whereby, upon the entry into force of the Withdrawal Agreement Union law, including the international agreements to which the Union is party such as the GATT 1994, should apply to the UK from the date of withdrawal until 31 December 2020.

               It cannot be excluded that Article XXVIII agreements with the relevant WTO Members may not have been concluded within the available time limit, at least not for all the TRQs concerned.

               To this end, in parallel to the present recommendation, the Commission is proposing a basic legislative act (following the Ordinary Legislative Procedure) to ensure that in the absence of such Article XXVIII agreements the EU can proceed with the apportionment of the TRQs unilaterally in line with Article XXVIII and that the Commission is given the necessary empowerments to consequently amend the relevant EU provisions on the opening and implementation of the relevant TRQs.

               The objective of this recommendation is therefore to authorise the opening of negotiations by the Commission pursuant to Article XXVIII of the GATT 1994 to modify the relevant concessions (notably WTO bound TRQs) in the European Union's WTO schedule, so as to apportion them between the Union and the United Kingdom.

               In addition, the United Kingdom needs to launch the procedures in the WTO for setting out its own schedule of concessions and commitments already before the date on which it ceases to be a Member State of the Union. Therefore, it is necessary to authorise the United Kingdom to undertake the necessary procedures for this purpose with a view to agreeing with other WTO Members on its portion of the TRQs currently included in the European Union’s WTO schedule.

               •Consistency with existing policy provisions in the policy area

               Not applicable.

               •Consistency with other Union policies

               Not applicable.

               2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

               •Legal basis

               Article 207 and Article 218(3) and (4) of the Treaty on the Functioning of the European Union (TFEU).

               •Subsidiarity (for non-exclusive competence)

               The common commercial policy is listed among the areas of exclusive competence of the Union in Article 3 of the Treaty on the Functioning of the European Union (TFEU). According to Article 5(3) of the TFEU the subsidiarity principle does not apply to areas of exclusive Union competence.

               •Proportionality

               The present Recommendation proposes to the Council to authorise the Commission to open negotiations under Article XXVIII of the GATT 1994 with a view to modifying the EU's WTO concessions on bound Tariff Rate Quotas. According to WTO rules, this procedure has to be followed in order to change the concessions set out in the schedule of a Member of the WTO. In view of this, the proposed measure is proportionate to the objectives set out above.

               •Choice of the instrument

               The available instrument to achieve the objective is an international agreement. An authorisation to open negotiations for an international agreement is therefore required.

               3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

               •Ex-post evaluations/fitness checks of existing legislation

               Not applicable.

               •Stakeholder consultations

               Not applicable.

               •Collection and use of expertise

               Not applicable.

               •Impact assessment

               Not applicable.

               •Regulatory fitness and simplification

               Not applicable.

               •Fundamental rights

               Not applicable.

               4.BUDGETARY IMPLICATIONS

               Not applicable.

               5.OTHER ELEMENTS

               •Implementation plans and monitoring, evaluation and reporting arrangements

               Not applicable.

               •Explanatory documents (for directives)

               Not applicable.

               •Detailed explanation of the specific provisions of the proposal

               Not applicable.

               Recommendation for a

               COUNCIL DECISION

               authorising the opening of negotiations with a view to apportioning the Union's WTO concessions on Tariff Rate Quotas annexed to the General Agreement on Tariffs and Trade 1994 in view of the withdrawal of the United Kingdom from the Union

               THE COUNCIL OF THE EUROPEAN UNION,

                  Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 218(3) and (4) thereof,

               Having regard to the Recommendation from the European Commission,

               Whereas:

               (1)The existing quantitative commitments in the area of goods made by the European Union in the World Trade Organization (WTO) will require certain adjustments to reflect the withdrawal of the United Kingdom of Great Britain and Northern Ireland (United Kingdom) from the Union. In particular, the existing tariff rate quotas for certain agricultural, fish and industrial products included in the Union’s Schedule of concessions and commitments annexed to the General Agreement on Tariffs and Trade 1994 (GATT 1994) need to be apportioned between the United Kingdom and the Union following the United Kingdom's withdrawal from the Union.

               (2)The Commission should therefore be authorised to open negotiations under Article XXVIII of the GATT 1994 with those WTO Members that have negotiating rights with a view to modifying those tariff rate quotas.

               (3)The United Kingdom needs to launch the procedures in the WTO for setting out its own schedule of concessions and commitments already before the date on which it ceases to be a Member of the Union.

               (4)It is therefore necessary to authorise the United Kingdom to undertake the necessary procedures with a view to setting out its own schedule of concessions and commitments annexed to the GATT 1994, including negotiations with other WTO members on the portions of the tariff rate quotas to be included therein.

               HAS ADOPTED THIS DECISION:

               Article 1

                  The Commission is hereby authorised to open negotiations, on behalf of the Union, with the WTO Members that have negotiating rights with a view to modifying the tariff rate quotas currently included in the Union’s schedule of concessions of and commitments annexed to the GATT 1994.

               Article 2

                  The negotiating directives addressed to the Commission are set out in the Annex.

               Article 3

                  The negotiations shall be conducted by the Commission in consultation with the [name of the special committee to be inserted by the Council].

               Article 4

                  The United Kingdom is hereby authorised to undertake the necessary procedures with a view to setting out its own schedule of concessions and commitments annexed to the GATT 1994 as well as any quantitative limits therein, including negotiations with other WTO Members on its portion of the tariff rate quotas currently included in the Union’s schedule of concessions and commitments annexed to the GATT 1994.

               Article 5

                  This Decision is addressed to the Commission and to the United Kingdom.

               Done at Brussels,

                     For the Council

                     The President

    ---documentbreak---

               EUROPEAN COMMISSION
            Brussels,22.5.2018
            COM(2018) 311 final
            ANNEX
            to the
            Recommendation for a COUNCIL DECISION
            authorising the opening of negotiations with a view to apportioning the Union's WTO concessions on Tariff Rate Quotas in view of the withdrawal of the United Kingdom from the Union

               ANNEX

               (1) The Commission shall endeavour to negotiate an agreement with the WTO Members that have negotiating rights and consult with the WTO Members having consultation rights pursuant to Article XXVIII of the GATT 1994, with a view to modifying the Union's WTO concessions on tariff rate quotas set out in the Union's schedule of concessions and commitments annexed to the GATT 1994.

               (2) The Commission shall conduct the negotiations with the view to modifying the Union's concessions, in particular by apportioning the existing tariff rate quotas between the United Kingdom and the Union following the United Kingdom's withdrawal from the Union.

               (3)The Commission shall follow the procedure for the modifications of the Union's schedule in accordance with relevant WTO provisions, in particular Article XXVIII of the GATT 1994
                  1
                and the Understanding on the Interpretation of Article XXVIII of the GATT 1994
                  2
               .

               (4)The Commission shall report to the Council on the outcome of the negotiations and, where appropriate, on any significant developments that may arise during the negotiations.

                     (1)

                        the text of the agreement can be found at this website:https://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm

                     (2)

                        the text of the agreement can be found at this website:https://www.wto.org/english/docs_e/legal_e/12-28_e.htm


               EUROPEAN COMMISSION
            Brussels, 23.5.2018
            COM(2018) 427 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2018 National Reform Programme of the United Kingdomand delivering a Council opinion on the 2018 Convergence Programme of the United Kingdom

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2018 National Reform Programme of the United Kingdom

                  and delivering a Council opinion on the 2018 Convergence Programme of the United Kingdom

               THE COUNCIL OF THE EUROPEAN UNION,

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

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

               Having regard to the recommendation of the European Commission
                  2
               ,

               Having regard to the resolutions of the European Parliament
                  3
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

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

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 22 November 2017, the Commission adopted the Annual Growth Survey, marking the start of the 2018 European Semester of economic policy coordination. It took due account of the European Pillar of Social Rights, proclaimed by the European Parliament, the Council and the Commission on 17 November 2017. The priorities of the Annual Growth Survey were endorsed by the European Council on 22 March 2018. On 22 November 2017, on the basis of Regulation (EU) No 1176/2011, the Commission also adopted the Alert Mechanism Report, in which it did not identify the United Kingdom as one of the Member States for which an in-depth review would be carried out.

               (2)The 2018 country report for the United Kingdom
                  4
                was published on 7 March 2018. It assessed the United Kingdom’s progress in addressing the country-specific recommendations adopted by the Council on 11 July 2017, the follow-up given to the recommendations adopted in previous years and the United Kingdom's progress towards its national Europe 2020 targets.

               (3)On 29 March 2017, the United Kingdom notified the European Council of its intention to leave the European Union. Unless a ratified withdrawal agreement establishes another date or the European Council, in accordance with Article 50(3) of the Treaty on European Union and in agreement with the United Kingdom, unanimously decides that the Treaties cease to apply at a later date, all Union primary and secondary law will cease to apply to the United Kingdom from 30 March 2019, 00:00h (CET). The United Kingdom will then become a third country. Negotiations are on-going in order to ensure an orderly withdrawal, including the possibility to have a transition period until the end of 2020 during which Union law will continue to apply to and in the United Kingdom. In this context, the Commission has not presented or elaborated on any scenario based on possible arrangements between the European Union and the United Kingdom beyond Brexit as these matters are still under negotiation.

               (4)On 30 April 2018, the United Kingdom submitted its 2018 National Reform Programme and its 2018 Convergence 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 of the European Parliament and of the Council
                  5
               , 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 that provision in guidelines on the application of the measures linking the effectiveness of the European Structural and Investment Funds to sound economic governance
                  6
               .

               (6)The United Kingdom is currently in the preventive arm of the Stability and Growth Pact and subject to the transitional debt rule. In its 2017-2018 Convergence Programme, the government expects the headline deficit to fall from 2.2 % of GDP in 2017-2018 to 1.8 % of GDP in 2018-2019 and to 1.7 % of GDP in 2019-2020. The Convergence Programme does not include a medium-term budgetary objective. According to the Convergence Programme, the general government debt-to-GDP ratio is expected to broadly stabilise around 85.5 % from 2017-2018 to 2019-2020 before falling to 84.8 % of GDP in 2021-2022. The macroeconomic scenario underpinning those budgetary projections is plausible. While the measures needed to support the planned deficit targets are overall well specified, growing pressures on government expenditure in a number of areas pose a risk to the achievement of the planned deficit reduction.

               (7)On 11 July 2017, the Council recommended the United Kingdom to ensure that the nominal growth rate of net primary government expenditure
                  7
                does not exceed 1.8 % in 2018-2019, corresponding to an annual structural adjustment of 0.6 % of GDP. At the same time, the Council stated that consideration should be given to achieving a fiscal stance that contributes to both strengthening the ongoing recovery and ensuring the sustainability of the United Kingdom's public finances. Based on the Commission 2018 spring forecast, there is a risk of some deviation from the requirements of the preventive arm in 2018-2019.

               (8)In 2019-2020, in view of the United Kingdom's general government debt ratio above 60 % of GDP and projected output gap of 0.4 %, the nominal growth rate of net primary government expenditure should not exceed 1.6 %, in line with the structural adjustment of 0.6 % of GDP stemming from the matrix of requirements under the Stability and Growth Pact. Under unchanged policies, the United Kingdom is forecast to comply with the requirement in 2019-2020. The United Kingdom is prima facie projected to comply with the transitional debt rule in 2018-2019 and in 2019-2020 as a result of the allowed annual deviation of 0.25 %. Overall, the Council is of the opinion that the United Kingdom needs to stand ready to take further measures as of 2018-2019 to comply with the provisions of the Stability and Growth Pact.

               (9)Annual net housing supply continues to increase amid a range of government initiatives to stimulate the housing market and a cyclical recovery. However, it remains far below estimates of demand and the United Kingdom continues to face a major challenge in delivering sufficient housing. This is linked to very strict and complex regulation of the land market. Shortages of housing and high housing costs are particular issues in areas of high and growing demand, such as in and around urban centres. The government recognises the problem and has set ambitious objectives to increase supply in the coming years. At the same time, the government has reaffirmed its commitment to limiting development around urban centres. Home ownership has fallen significantly for younger people, contributing to intergenerational inequality. Labour productivity is low and stagnant. Large parts of the economy perform comparatively poorly on the main drivers of productivity — skills, investment and efficient business processes. The United Kingdom's road, rail and aviation networks also have significant and growing capacity pressures.

               (10)Although headline labour market figures continue to be positive across most metrics, there are ongoing concerns about the quality of some employment. This is related to issues with skills development, atypical forms of work, earnings, productivity, labour market participation and working-age poverty. There have been significant policy announcements and developments on all of these issues. Coherence in these related policies is paramount. On skills, much of the focus thus far has been on apprenticeships and reforms to technical education. A focus on quality for both could provide a sustainable multiplier effect for the society as well as the economy. The United Kingdom is among those Member States that already meet over two-thirds of the draft criteria in the European Framework for Quality and Effective Apprenticeships, and therefore setting and monitoring quality targets, e.g. via graduate tracking, is feasible. Resources commensurate with those earmarked for apprenticeships and the new T-Levels for school leavers are needed for lifelong learning options, particularly for those trapped in entry-level employment.

               (11)Social protection and inclusion issues also need attention going forward. Childcare reforms are being rolled out, but more provision may be needed, particularly for children under three. The impact of some welfare reforms and cutbacks are yet to be fully felt, particularly for in-work families.

               (12)In the context of the 2018 European Semester, the Commission has carried out a comprehensive analysis of the United Kingdom's economic policy and published it in the 2018 country report. It has also assessed the 2018 Convergence Programme and the 2018 National Reform Programme and the follow-up given to the recommendations addressed to the United Kingdom in previous years. The Commission has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in the United Kingdom, but also the extent to which they comply with Union rules and guidance, given the need to strengthen the European Union’s overall economic governance by providing Union-level input for future national decisions.

               (13)In the light of this assessment, the Council has examined the 2018 Convergence Programme and its opinion is reflected in particular in recommendation 1 below.

               HEREBY RECOMMENDS that the United Kingdom take action in 2018 and 2019 to:

               1.Ensure that the nominal growth rate of net primary government expenditure does not exceed 1.6 % in 2019-2020, corresponding to an annual structural adjustment of    0.6 % of GDP.

               2.Boost housing supply, particularly in areas of highest demand, including through additional reforms to the planning system.

               3.Address skills and progression needs by setting outcome targets for the quality and the effectiveness of apprenticeships and by investing more in upskilling those already in the labour force.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        OJ L 209, 2.8.1997, p. 1.

                     (2)

                        COM(2018) 427 final.

                     (3)

                        P8_TA(2018)0077 and P8_TA(2018)0078.

                     (4)

                        SWD(2018) 226 final.

                     (5)

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

                     (6)

                        COM(2014) 494 final.

                     (7)

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


               EUROPEAN COMMISSION
            Brussels, 23.5.2018
            COM(2018) 404 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2018 National Reform Programme of Denmarkand delivering a Council opinion on the 2018 Convergence Programme of Denmark

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2018 National Reform Programme of Denmark

                  and delivering a Council opinion on the 2018 Convergence Programme of Denmark

               THE COUNCIL OF THE EUROPEAN UNION,

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

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

               Having regard to the recommendation of the European Commission
                  2
               ,

               Having regard to the resolutions of the European Parliament
                  3
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

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

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 22 November 2017, the Commission adopted the Annual Growth Survey, marking the start of the 2018 European Semester of economic policy coordination. It took due account of the European Pillar of Social Rights, proclaimed by the European Parliament, the Council and the Commission on 17 November 2017. The priorities of the Annual Growth Survey were endorsed by the European Council on 22 March 2018. On 22 November 2017, on the basis of Regulation (EU) No 1176/2011, the Commission also adopted the Alert Mechanism Report, in which it did not identify Denmark as one of the Member States for which an in-depth review would be carried out.

               (2)The 2018 country report for Denmark
                  4
                was published on 7 March 2018. It assessed Denmark’s progress in addressing the country-specific recommendations adopted by the Council on 11 July 2017, the follow-up given to the recommendations adopted in previous years and Denmark's progress towards its national Europe 2020 targets.

               (3)On 24 April 2018, Denmark submitted its 2018 National Reform Programme and its 2018 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 of the European Parliament and of the Council
                  5
               , 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 that provision in guidelines on the application of the measures linking the effectiveness of the European Structural and Investment Funds to sound economic governance
                  6
               .

               (5)Denmark is currently in the preventive arm of the Stability and Growth Pact. In its 2018 Convergence Programme, the government plans to achieve a headline deficit of 0.7 % of GDP in 2018 and to continue to meet the medium-term budgetary objective — a structural deficit of 0.5 % of GDP — throughout the programme period until 2025. According to the 2018 Convergence Programme, the general government debt-to-GDP ratio is expected to fall to 35.6 % in 2018 and to continue declining to 34.2% in 2020, before rising to just under 40 % by 2025. The macroeconomic scenario underpinning those budgetary projections is plausible over the programme period. Based on the Commission 2018 spring forecast, the structural balance is forecast to reach a surplus of 0.3 % of GDP in 2018 and 0.9 % of GDP in 2019, somewhat above the target of the 2018 Convergence Programme and above the medium-term budgetary objective. Overall, the Council is of the opinion that Denmark is projected to comply with the provisions of the Stability and Growth Pact in 2018 and 2019.

               (6)Ensuring labour supply in times of demographic changes and addressing the emerging shortages of labour in certain sectors is a condition for sustainable growth in Denmark. Reforms to increase participation and completion rates in vocational education and training and measures to better develop digital skills levels are likely to increase the supply of skilled workers. Furthermore, measures to better include marginalised and disadvantaged groups on the labour market would be beneficial in this respect. This applies to young people with low educational attainment, people with reduced work capacity and disabilities and people with a migrant background. The recent job-integration measures started off slowly but appear to be improving the situation for newly arrived refugees. The integration of children with a migrant background in the education system remains a key challenge, resulting in a lower education performance on average compared to other children.

               (7)High productivity growth is fundamental to support economic growth, maintain the relatively high level of welfare in Denmark and ensure the country's competitiveness. Although Denmark’s productivity level is high compared to other EU Member States, productivity growth has been declining for a long time and there is a broad range of possible impediments to productivity growth (also identified by the Danish Productivity Board and Competition Authority). Domestically oriented services in particular have been characterised by sluggish productivity  where the government only took limited measures in 2017 to increase competition and where some parts, like mortgage banks, are not exposed to foreign competition. Weak competition in several domestically oriented services sectors (e.g. in retail, finance, distribution of utilities and network industries, transport and wholesale pharmaceuticals) is still weighing on productivity, investments and job creation.

               (8)Following several years of substantial increases in housing prices, overvaluation risks are emerging, particularly in the main urban areas. The European Systemic Risk Board issued a warning to eight EU countries, including Denmark, pointing to medium-term vulnerabilities in the residential real estate sector due to increasing housing prices combined with high household debt. Households continued to reduce their debt in 2017, but debt remains among the highest in the EU (as a % of GDP) and above what is warranted by economic fundamentals and prudential thresholds, according to Commission estimates. Moreover, the proportion of mortgages with very high loan-to-income levels has been increasing strongly since 2013, particularly in and around Copenhagen. The Danish authorities have adopted several new macro prudential measures to further restrict risky loan taking (effective from 2018 and 2020) and introduced a property tax reform (effective from 2021) to address regional imbalances in housing prices. Nevertheless, the combination of very high loan-to-income ratios, high debt with high interest rate sensitivity and potentially overvalued housing prices is increasing the risk of a price correction that could hurt the real economy and the banking sector.

               (9)In the context of the 2018 European Semester, the Commission has carried out a comprehensive analysis of Denmark’s economic policy and published it in the 2018 country report. It has also assessed the 2018 Convergence Programme and the 2018 National Reform Programme and the follow-up given to the recommendations addressed to Denmark in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Denmark but also their compliance with Union rules and guidance, given the need to strengthen the Union’s overall economic governance by providing Union-level input into future national decisions.

               (10)In the light of this assessment, the Council has examined the 2018 Convergence Programme and is of the opinion that Denmark is expected to comply with the Stability and Growth Pact.

               HEREBY RECOMMENDS that Denmark take action in 2018 and 2019 to:

               1.Increase competition in domestically oriented services sectors, for instance in the distribution of utilities, network industries and in the financial sector.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        OJ L 209, 2.8.1997, p. 1.

                     (2)

                        COM(2018) 404 final.

                     (3)

                        P8_TA(2018)0077 and P8_TA(2018)0078.

                     (4)

                        SWD(2018) 203 final.

                     (5)

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

                     (6)

                        COM(2014) 494 final.