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51999SC1902

Draft RECOMMENDATION NO 1/1999 OF THE JOINT COMMITTEE OF THE EUROPEAN COMMUNITY AND SWITZERLAND in respect of the simplification of certain veterinary checks on third country products of animal origin transiting the European Community to Switzerland - Draft common position of the Community  /* SEC/99/1902 final */

Draft RECOMMENDATION NO 1/1999 OF THE JOINT COMMITTEE OF THE EUROPEAN COMMUNITY AND SWITZERLAND in respect of the simplification of certain veterinary checks on third country products of animal origin transiting the European Community to Switzerland - Draft common position of the Community (presented by the Commission)EXPLANATORY MEMORANDUM1 The agreement between the European Economic Community and Switzerland on the simplification of inspections and formalities in respect of the carriage of goods entered into force on 1 July 1991 [1].[1] OJ L 116, 8.5.1990, p. 18.2 In accordance with Article 34 of Council Directive 97/78/EC laying down the principles governing the organisation of veterinary checks on products entering the Community from third countries [2], Member States must apply from 1 July 1999 the regulations and administrative provisions necessary to comply with the Directive.[2] OJ L 24, 30.1.1998, p. 9.3 Council Directive 97/78/EC formulates new rules for veterinary controls in the case of transit of consignments from one third country to another third country across the EC, in order to safeguard animal and public health.4 The new rules are laid down in Article 11 of Directive 97/78/EC in particular in paragraph 2 c, d and e, which require that transiting goods are sent under customs control from the border post of entry across the EC to a specified border post of exit where their departure from the Community must be certified by the Official Veterinarian. He must countersign the Annex B certificate accompanying the consignment and return it to the official veterinarian at the border post of entry, to confirm the exit from the Community of the consignment.5 Concerns have been expressed by the Swiss Competent Authorities that the requirement for an exit check for products transiting the EC has the potential to cause serious delays for consignments that arrive at border inspection posts situated on the borders between the European Community and Switzerland.6 In this context it is envisaged that an enhanced system of co-operation between the veterinary services of Switzerland and the EC be introduced. This co-operation will be organised for certain border inspection posts where flow of road traffic risks being paralysed without such an agreement.7 The Commission requests Council to adopt as the Community position in the joint Committee the text of the present recommendation.DraftRECOMMENDATION NO 1/1999 OF THE JOINT COMMITTEE OF THE EUROPEAN COMMUNITY AND SWITZERLANDin respect of the simplification of certain veterinary checks on third country products of animal origin transiting the European Community to SwitzerlandThe Joint Committee,Having regard to the Agreement between the European Economic Community and the Confederation of Switzerland on the simplification of inspections and formalities in respect of the carriage of goods, and in particular articles 5, 11 paragraph 1, and 17 paragraph 1,Whereas it is necessary to foresee a simplification of certain veterinary controls for products of animal origin in transit from a third country to Switzerland,RECOMMENDS to the Contracting Parties to the Agreement:that the Competent Veterinary Authorities of the two parties will co-operate in carrying out  the exit checks required on transiting consignments falling under Directive 97/78/EC according to the procedure laid down in the Annex.Done at Brussels, For the Council The PresidentANNEXApplication of the provisions of Article 11.2 e of Council Directive 97/78/EC1. The procedure described in the present annex is applicable in the following border inspection posts:- France:  Saint-Julien / Bardonnex- France:  Saint-Louis / Bâle- Germany: Weil am Rhein / Basel- Germany: Konstanz Strasse / Kreuzlingen- Germany: Bietingen / Thayngen.2. The procedure is applicable for all animal products with the exception of milk and milk products, eggs and egg products, and honey.3. At the time of the control on entry of consignments into Switzerland carried out by the Swiss veterinary authorities, they shall collect the Annex B certificates accompanying the consignments. The authorities will also in all cases verify the concordance between the Annex B certificates and the products.4. In principle the official veterinarian of the Community border inspection post will meet the Swiss official veterinarian in charge of co-ordination for any given post twice a week with a view:- to examine the Animo messages received from the border inspection posts of entry, as well as the Annex B certificates referred to in point 3 above,- to examine and discuss all problems arising from the transit operations envisaged in this Annex.


               EUROPEAN COMMISSION
            Brussels, 21.10.2015
            COM(2015) 601 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            On the establishment of National Competitiveness Boards within the Euro Area

               Recommendation for a

               COUNCIL RECOMMENDATION

               On the establishment of National Competitiveness Boards within the Euro Area

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Article 292, in conjunction with Articles 121(2) and 136 thereof,

               Having regard to the recommendation of the European Commission,

               Whereas:

               (1)While there is a need to improve the coordination and the surveillance of competitiveness developments within the Union, the recent crisis made visible that Member States whose currency is the euro ('euro area Member States') can be particularly subject to the possible build-up and sudden unwinding of macroeconomic imbalances that may spill-over into other euro area Member States. In the absence of flexible nominal exchange rates, they also need adequate adjustment mechanisms to country-specific shocks. Competitiveness dynamics are of relevance both for the accumulation and correction of macroeconomic imbalances (e.g., trade and current account deficits, stocks of domestic and external liabilities) and an effective adjustment to asymmetric shocks. Competitiveness deterioration may also be responsible for reduced potential growth, which makes high debt less easy to be paid back. Coordination of policies having a bearing on competitiveness dynamics would help to ensure that competitiveness developments are compatible with the objective of a smooth functioning of the economic and monetary union (EMU). While this Recommendation is addressed to the euro area Member States, the other Member States are also encouraged to set up similar bodies.

               (2)The European Semester, in particular the macroeconomic imbalance procedure as established in Regulation (EU) No 1176/2011 and Regulation (EU) No 1174/2011, provides a framework for integrated economic policy coordination and surveillance. In view of the need to foster progress with structural reforms in the competitiveness domain, these existing mechanisms need to be backed by stronger national ownership of reform agendas. To this purpose, raising independent policy expertise at national level and reinforcing the policy dialogue between the Union and the euro area Member States appear warranted.

               (3)The setting up of national competitiveness boards in charge of tracking performance and policies in the field of competitiveness should contribute to the enhancement of ownership of the necessary policies and reforms at national levels and to improving the knowledge basis for Union economic policy coordination in the field of competitiveness. These boards should assess competitiveness developments and policies, but also provide policy advice for reform implementation, taking into account national specificities and established practices.

               (4)The scope of intervention of competitiveness boards should span a comprehensive notion of competitiveness. Wage dynamics as well as non-wage factors and productivity drivers and dynamic considerations related to investment, innovation and the attractiveness of the economy to businesses should fall under the remit of these boards.

               (5)Competitiveness boards should be entrusted with the capacity to ensure high-quality economic analysis as the basis for their advisory role.

               (6)Competitiveness boards should be independent from the ministries or public authorities that deal with competitiveness-related issues. The competitiveness boards should also be unbiased, in the sense that they should not convey only or mainly views of specific groups of stakeholders. Such independence and unbiasedness requirements are aimed at ensuring that the advisory role of competitiveness boards adequately reflects expert judgement formulated in the general interest.

               (7)The characteristics of the competitiveness boards should be in compliance with Article 152 of the Treaty and should take into account the national practice and institutions for wage formation. In accordance with Article 28 of the Charter of Fundamental Rights of the European Union, their functioning should not affect the right of workers and employers, or their respective organisations, to negotiate and conclude collective agreements at the appropriate levels or to take collective action in accordance with Union law and national laws and practices.

               (8)The Commission should coordinate the activities of the competitiveness boards with a view to fostering the achievement of euro-area-wide objectives and taking into account inputs from the system of competitiveness boards in Union economic policy coordination.

               (9)Competitiveness boards should compile and publish their analysis and advice in an annual report. In order to ensure that euro-area and Union objectives are taken into account in the work of the boards consultations between the Commission and the boards should take place for the production of these reports and during fact-finding missions to Member States. The reports will inform the Commission analysis undertaken in the context of the European Semester and the Macroeconomic Imbalances Procedure.

               (10)In order to ease coordination at supra-national level, there should be one identifiable competitiveness board in each Member State. However, to carry out their activities properly, competitiveness boards could in turn rely on different separate existing bodies, provided that they meet the common principles exposed above.

               (11)Monitoring and enforcement of the Country-Specific Recommendations (CSRs) should remain at Union level, within the European Semester and the application of the Macroeconomic Imbalance Procedure as established in Regulation (EU) No 1176/2011.

               HAS ADOPTED THIS RECOMMENDATION:

               I. Objectives and scope

               1.The objective of this Recommendation is the setting up of national competitiveness boards to monitor performance and policies in the field of competitiveness, thereby contributing to foster sustained economic convergence, and to increase ownership of the necessary reforms at the national level.

               2.This Recommendation is addressed to the euro area Member States. The other Member States are also encouraged to set up similar bodies.

               II. Establishing competitiveness boards

               3.Each Member State should have in place a competitiveness board tasked with:

               (a)
                     Monitoring competitiveness developments in the Member State concerned, taking into account factors that can affect prices and quality content of goods and services relative to global competitors in the short term (including labour costs) as well as longer-term drivers such as productivity and innovation capacity, which are relevant not only for the relative performance of the economy but also for its growth potential and the capacity to attract investment, businesses and human capital;

               (b)
                     Informing the wage setting processes at national level by providing relevant information;

               (c)
                     Monitoring policies linked to competitiveness in the Member State concerned, including contributing to ex-post evaluation of policies; and

               (d)
                     Assessing policy challenges and formulating policy advise in the field of competitiveness. The advice of competitiveness boards should take into account the broader euro-area and Union dimension. The boards should, inter-alia, provide advice on the implementation of the Country-Specific Recommendations addressed to the concerned Member State by the Council in the context of the European Semester;

               4.Each Member State should identify one competitiveness board, which could in turn rely on different existing bodies.

               5.Competitiveness boards should carry out their activities on a continuous basis. They should publish their analysis, and advice in an annual report. They should be engaged in contacts with the Commission and competitiveness boards of other Member States with the aim of coordinating views.

               III. Characteristics of the competitiveness boards

               6.Competitiveness boards should be structurally independent or endowed with functional autonomy vis-à-vis any public authority dealing with competitiveness-related issues of the Member State (in particular ministries, administrations, public institutes, public agencies). They should be underpinned by national legal provisions ensuring a high degree of functional autonomy and accountability, including:

               (a)a statutory regime grounded in national laws, regulations or binding administrative provisions;

               (b)not taking instructions from any public authorities dealing with competitiveness-related issues or from any other public or private body;

               (c)
                     the capacity to communicate publicly in a timely manner;

               (d)procedures for nominating members on the basis of their experience and competence ;

               (e)adequate resources and appropriate access to information to carry out their mandate.

               7.Competitiveness boards should consult relevant stakeholders (e.g. national actors or groups of actors, including social partners, who participate in the economic and social dialogue of the Member States on a regular basis) but should not convey only or mainly the opinions and the interests of a particular group of stakeholders.

               8.Competitiveness boards should have the ability to carry out economic and statistical analyses with a high degree of quality, including as recognised by the academic community.

               IV. Articulation with the European Semester

               9.The Commission should facilitate coordination between national competitiveness boards and exchange views with them, in particular to ensure the consideration of euro-area and EU objectives in the work of the boards. Contacts should be envisaged ahead of the production of their annual reports and during fact-finding missions to Member States.

               10.The independent expertise provided by those boards, including through the annual reports, will be used to inform the Member States and Commission analysis in the European Semester and the macroeconomic imbalance procedure.

               V. Accountability and transparency

               11.As a rule, the analyses produced by those boards should be made public.

               VI. Final provisions

               12.The Member States are invited to implement the principles set out in this Recommendation by [date of adoption of this recommendation + 6 months].

               13.By [date of adoption of this recommendation + 12 months], the Commission is invited to prepare a progress report, on the basis of relevant information from Member States, on the implementation and the suitability of this Recommendation, including whether the adoption of binding provisions appears necessary.

               Done at Brussels,

                     For the Council

                     The President


               EUROPEAN COMMISSION
            Brussels, 22.5.2017
            COM(2017) 511 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2017 National Reform Programme of Italyand delivering a Council opinion on the 2017 Stability Programme of Italy

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2017 National Reform Programme of Italy

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

               THE COUNCIL OF THE EUROPEAN UNION,

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

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

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

               Having regard to the recommendation of the European Commission,
                  3

               Having regard to the resolutions of the European Parliament,
                  4

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

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

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 16 November 2016, the Commission adopted the Annual Growth Survey,
                  5
                marking the start of the 2017 European Semester of economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 9-10 March 2017. On 16 November 2016, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report,
                  6
                in which it identified Italy as one of the Member States for which an in-depth review would be carried out. On the same day, the Commission also adopted a recommendation for a Council Recommendation on the economic policy of the euro area. That Recommendation was endorsed by the European Council on 9-10 March 2017 and adopted by the Council on 21 March 2017.
                  7

               (2)As a Member State whose currency is the euro and in view of the close interlinkages between the economies in the economic and monetary union, Italy should ensure the full and timely implementation of the Recommendation for the euro area which is reflected in recommendations 1 to 4 below.

               (3)The 2017 country report for Italy
                  8
                was published on 22 February 2017. It assessed Italy’s progress in addressing the country-specific recommendations adopted by the Council on 12 July 2016, the follow-up given to the recommendations adopted in previous years and Italy’s progress towards its national Europe 2020 targets. It also included an in-depth review under Article 5 of Regulation (EU) No 1176/2011, the results of which were also published on 22 February 2017.
                  9
                The Commission’s analysis leads it to conclude that Italy is experiencing excessive macroeconomic imbalances. High government debt and protracted weak productivity dynamics imply risks with cross-border relevance, in a context of high non-performing loans and unemployment. The need for action to reduce the risk of adverse effects on the Italian economy and, given its size and cross-border relevance, on the economic and monetary union, is particularly important.

               (4)On 27 April 2017, Italy submitted its 2017 National Reform Programme and its 2017 Stability Programme. To take account of their interlinkages, the two programmes have been assessed at the same time. Italy’s National Reform Programme includes commitments both for the short and medium term. In the short term, the final adoption of the pending laws concerning competition and the reform of criminal process and the statute of limitations, the implementation of the anti-poverty law as well as measures related to firm-level bargaining, tax shift and privatisation are planned. In the medium term, measures concern public finances, taxation, labour market, the banking and credit system, competition, public administration and justice, and investment. The National Reform Programme also covers the challenges identified in the 2017 country report and the Recommendation for the euro area, including the need to re-launch investment and ensure the sustainability of public finances. If fully implemented within the indicated timelines, these measures would help address Italy’s macroeconomic imbalances and country-specific recommendations. Based on the assessment of Italy’s policy commitments, the Commission confirms its previous assessment that at this stage no further steps are warranted in the framework of the Macroeconomic Imbalances Procedure. The implementation of the policy reform agenda will be followed closely by means of specific monitoring.

               (5)The relevant country-specific recommendations have been taken into account in the Member States’ programmes for the European Structural and Investment Funds (ESI Funds) covering the 2014-2020 period. As foreseen in the legislation governing the ESI Funds,
                  10
                where it is necessary to support the implementation of relevant country-specific recommendations, the Commission may request a Member State to review and amend its relevant ESI Funds programmes. The Commission has provided further guidelines on the application of those rules.
                  11

               (6)Italy is currently in the preventive arm of the Stability and Growth Pact and subject to the debt rule. In its 2017 Stability Programme, the government plans an improvement in the headline deficit from 2.4% of GDP in 2016 to 2.1% in 2017, 1.2% in 2018, and a broadly balanced budgetary position by 2019. The medium-term budgetary objective, set at a balanced budgetary position in structural terms, is planned to be reached by 2019 and maintained in 2020, whereas the recalculated
                  12
                structural balance points to a small structural deficit (0.3% of GDP) in both years. After having further increased in 2016 (to 132.6% of GDP, from 132.1% in 2015), the general government debt-to-GDP ratio is projected in the Stability Programme to broadly stabilise in 2017 and to then decline as of 2018, reaching 125.7% in 2020. The uncertainty on the composition and implementation of the medium-term budgetary strategy of the Stability Programme entails downside risks for both the growth projections and the achievement of the budgetary targets. In particular, the Commission 2017 spring forecast expects almost the same real GDP growth for 2018 as the 2017 Stability Programme, in spite of a significantly higher deficit. In fact, the Commission forecast does not incorporate a VAT hike (0.9% of GDP) legislated as "safeguard clause" to achieve the budgetary targets in 2018, also because the 2017 Stability Programme confirms the intention of not activating it without providing details about alternative compensating measures. Furthermore, the 2017 Stability Programme indicates the intention to find additional room for reducing the tax burden.

               (7)The 2017 Stability Programme indicates that the overall budgetary impact of the exceptional inflow of refugees and security-related measures in 2016 and 2017 is significant and provides adequate evidence of the scope and nature of these additional budgetary costs. According to the Commission, the eligible additional expenditure in 2016 amounted to 0.06% of GDP for the exceptional inflow of refugees and to 0.06% of GDP for security-related measures. For 2017, the eligible expenditure related to exceptional inflow of refugees is preliminarily estimated at 0.16% of GDP.
                  13
                 Moreover, the Italian authorities invoked the unusual event clause in 2017 for exceptional seismic activity. The eligible expenditure related to exceptional seismic activity is preliminarily estimated at 0.18% of GDP in 2017.
                  14
                 The provisions set out in Article 5(1) and Article 6(3) of Regulation (EC) No 1466/97 cater for this additional expenditure, in that the inflow of refugees, the severity of the terrorist threat and the exceptional seismic activity are unusual events, their impact on Italy's public finances is significant, and sustainability would not be compromised by allowing for a temporary deviation from the adjustment path towards the medium-term budgetary objective. Therefore, the required adjustment towards the medium-term budgetary objective for 2016 has been reduced by 0.12% of GDP to take into account additional refugee-related and security-related costs. Regarding 2017, a final assessment, including on the eligible amounts, will be made in spring 2018 on the basis of observed data as provided by the Italian authorities.

               (8)For 2016, Italy was granted a temporary deviation of 0.5% of GDP from the required adjustment path towards the medium-term budgetary objective to take account of major structural reforms with a positive impact on the long-term sustainability of public finances and a further 0.25% of GDP to take account of national investment expenditure in projects co-financed by the EU. As regards the investment clause, one of the eligibility criteria is the increase in public investment. Outturn data for 2016 showed a decline in public investment in 2016 compared to 2015 (by EUR 1.6 billion). However, the Council acknowledges that there are specific factors which constrained public investment last year. One factor was uncertainty associated with the transition to the new code of public procurement and concessions, which was revised in line with the 2016 country-specific recommendations. Moreover, and even more importantly, in 2016 there was a sharp fall in investment financed through EU funds as a result of the start of the new programming period, while nationally financed investment marginally increased (by EUR 1.1 billion). Therefore, as nationally financed investment rose in 2016 and the expenditure related to the investment clause did not substitute for it, a temporary deviation of 0.21% of GDP can be granted to Italy in relation to the investment clause, corresponding to national expenditure eligible for co-financing as reported in the 2017 Stability Programme. Once the overall additional flexibility of 0.83% of GDP under the unusual event, structural reform and investment clauses is taken into account, the Commission 2017 spring forecast points to some deviation from the recommended adjustment path towards the medium-term objective in 2016.

               (9)On 12 July 2016, the Council recommended Italy to achieve an annual fiscal adjustment of 0.6 % or more of GDP towards the medium-term budgetary objective in 2017. Based on the Commission 2017 spring forecast, there is a risk of a significant deviation from the recommended adjustment path towards the medium-term objective in 2017 and for 2016 and 2017 taken together. That conclusion would however change to a risk of some deviation, if the temporary allowance for the unusual event clause related to the exceptional inflow of refugees and to the preventive investment plan for the protection of the national territory against seismic risks (preliminarily estimated at 0.34% of GDP, overall) is deducted from the requirement in 2017.

               (10)In 2018, in the light of its fiscal situation and notably of its debt level, Italy is expected to further adjust towards its medium-term budgetary objective of a balanced budgetary position in structural terms. According to the commonly agreed adjustment matrix under the Stability and Growth Pact, that adjustment translates into a requirement of a nominal rate of reduction of net primary government expenditure by at least 0.2 % in 2018. It would correspond to an annual structural adjustment of at least 0.6 % of GDP. Under unchanged policies, there is a risk of a significant deviation from the requirement in 2018. Italy is prima facie not forecast to comply with the debt rule in 2017 and 2018. Overall, the Council is of the opinion that Italy needs to stand ready to take further measures to ensure compliance in 2017 and that further measures will be needed in 2018 to comply with the provisions of the Stability and Growth Pact. However, as foreseen in Regulation (EC) No 1466/97, the assessment of the budgetary plans and outcomes should take account of the Member State’s budgetary balance in the light of the cyclical conditions. As recalled in the Commission Communication accompanying these country-specific recommendations, the assessment of the 2018 Draft Budgetary Plan and subsequent assessment of 2018 budget outcomes will need to take due account of the goal to achieve a fiscal stance that contributes to both strengthening  the ongoing recovery and ensuring the sustainability of Italy’s public finances. In that context, the Commission intends to make use of the applicable margin of appreciation in the light of the cyclical situation of Italy.

               (11)Due to Italy’s prima facie non-compliance with the debt rule in 2015, on 22 February 2017 the Commission issued a report under Article 126(3) of the TFEU, which concluded that "Unless the additional structural measures, worth at least 0.2% of GDP, that the government committed to adopt at the latest in April 2017 are credibly enacted by that time in order to reduce the gap to broad compliance with the preventive arm in 2017 (and thus in 2016), the current analysis suggests that the debt criterion as defined in the Treaty and in Regulation (EC) No 1467/1997 should be considered as currently not complied with. However, a decision on whether to recommend opening an excessive deficit procedure would only be taken on the basis of the Commission 2017 spring forecast, taking into account outturn data for 2016 and the implementation of the fiscal commitments made by the Italian authorities in February 2017." In April 2017, the Italian government adopted the requested additional consolidation measures. Therefore, no further steps are deemed to be necessary for compliance with the debt criterion in 2015 at this stage. The Commission will reassess Italy’s compliance with the debt criterion in autumn 2017, based on notified data for 2016 and the Commission 2017 autumn forecast, which will incorporate new information on budgetary implementation in 2017 and actual budgetary plans for 2018.

               (12)Italy’s high public debt ratio is set to stabilise, but not decrease, due to the worsening of the structural primary balance and current macroeconomic conditions. At more than 130 % of GDP, this implies that significant resources are earmarked to cover debt servicing costs, to the detriment of more growth-enhancing items including education, innovation and infrastructure.

               (13)Italy’s tax system is not supportive of economic growth and efficiency on several grounds. Despite a recent modest reduction, the tax burden on factors of production remains among the highest in the EU. There is scope to shift further towards taxes less detrimental to growth, in a budgetary neutral way. The first residence tax was repealed in 2015, which was a step back in the process of achieving a more efficient tax structure. In spite of national legislation requiring it on an annual basis, the long-awaited revision of tax expenditures, in particular with respect to the reduced value added tax rates, was further postponed. A reform of outdated cadastral values in line with current market values is still pending. Low tax compliance and the complex tax code increase the burden on compliant firms and households. Recent measures, such as mandatory electronic invoicing and the ʽsplit payment’ for purchases by government bodies, go in the right direction. However, electronic invoicing is not compulsory for private sector transactions and limits on using cash have recently been raised, so that the use of electronic payments remains well below the EU average, to the detriment of tax compliance.

               (14)As regards the budgetary process, a comprehensive reform was passed in 2016. The Commission will continue to monitor implementation of the reform, which would make the spending review a more integral part of the budgeting process.

               (15)Italy’s framework conditions, public administration and business environment are still affected by a number of structural inefficiencies. These inefficiencies continue to slow down implementation of reforms, deter investment, create uncertainty and open opportunities for rent-seeking. The reforms of the civil justice system adopted over the past years to increase the efficiency of the justice system, improve case management and ensure procedural discipline, are only very slowly starting to show results. The length of civil justice proceedings remains a major challenge. Although decreasing slightly at lower instances, both the disposition time and the backlog for civil and commercial lawsuits continue to be among the highest in the EU at all instances. A pending reform of civil proceedings provides for a further tightening of admissibility criteria for appeals, streamlined civil procedures at all instances and disincentives against vexatious litigation.

               (16)Several indicators confirm that corruption is still a major problem in Italy, despite the reforms adopted so far. The long-overdue reform of the statute of limitations to step up the fight against corruption has been pending since 2014. In its current form, the statute of limitations leads to a high proportion of cases getting time-barred after first-instance conviction. Moreover, the national anti-corruption authority has limited financial and human resources to exercise its powers, and the prevention framework remains fragmented.

               (17)A comprehensive enabling law reforming the public administration was adopted in 2015. It has the potential to improve the efficiency and effectiveness of the public administration. However, following the November 2016 Constitutional Court ruling that declared the procedure followed for the adoption of some implementing legislative decrees unconstitutional, the implementation of key parts of the reform is still pending. In particular, the ruling concerns three key areas of the reform: local public services, public employment, and publicly-owned enterprises. New legislative initiatives are needed to reform the local public services and public employment at management level, as the deadline for their decrees expired in November 2016. Regarding publicly-owned enterprises, the decree adopted before the ruling needs to be amended. The reform aims to reduce the number of publicly-owned enterprises, improve their efficiency, and ensure that they operate under the same rules as privately-owned entities. The implementation of the planned privatisations would also contribute to the rationalisation of publicly-owned enterprises.

               (18)Framework conditions for competition also remain unfavourable. In particular, the 2015 annual competition law has not yet been adopted. Significant barriers to competition persist in certain sectors, such as regulated professions, concessions, public procurement and the system of authorisations as well as local public services, including transport. In particular, progress in fostering an efficient, transparent and competition-driven functioning of the public transport market, notably for railways under government concessions, is still very limited. According to a new indicator developed by the Commission, the level of restrictiveness is higher in Italy than the EU-weighted average for most of the professions analysed. As part of a package of measures to tackle barriers in services markets,
                  15
                in January 2017 specific guidance by profession to address this issue was made in a Communication from the Commission on reform recommendations for regulation in professional services.

               (19)The banking sector’s large stock of non-performing loans remains a drag on bank profits and their ability to generate capital internally. This weighs on credit supply, in particular to small firms. The policy initiatives taken so far have not yet resulted in a significant reduction in non-performing loans. Supervisory guidance on non-performing loan management at national level remains underdeveloped. Medium-sized and small banks continue to be more vulnerable than large credit institutions. The Commission will therefore monitor the implementation of the corporate governance reform of the largest popolari banks and small mutual banks, which is key to the consolidation of the banking system. The insolvency and collateral enforcement framework continues to be insufficiently supportive of swift non-performing loan work-out and restructuring, especially in relation to small and micro-firms. A draft enabling law aiming at overhauling and streamlining insolvency and enforcement tools, currently under discussion in Parliament, could help to overcome the existing inefficiencies and contribute to the development of a secondary market for distressed debt in Italy.

               (20)Despite the gradual improvement of the labour market, supported by reforms, long-term and youth unemployment remain high (6.7% and 38% respectively in 2016) and more than 1.2 million young people are not in education, employment or training. While the implementation of Youth Guarantee has progressed a lot, some challenges remain to ensure a more effective and a full-scale implementation. The number and quality of offers remain low and regional differences in the delivery are high. The reform of the active labour market policies, including its governance system, is still at an early stage and employment services remain weak, with wide regional disparities. Adult learning is not sufficiently developed, which may negatively weigh on labour market outcomes of low-skilled people.

               (21)The participation of women in the labour market and their labour force potential remains largely underutilised. The female employment rate is one of the lowest in the EU. Some features of the tax-benefit system continue to discourage second earners from participating in the labour force while access to affordable care services (for children and the elderly) remains limited, with wide regional disparities. Paternity leave is among the lowest in the EU.

               (22)Second-level bargaining is not broadly used. This hampers the efficient allocation of resources and the responsiveness of wages to local economic conditions. This is also due to the existing framework rules and practices for collective bargaining, which entail uncertainty in industrial relations and leave limited scope for local-level bargaining. Tax rebates on productivity-related pay increases have not proved effective in extending the use of second-level bargaining significantly.

               (23)The rate of people at risk of poverty or social exclusion is well above the EU average, especially for children and people with a migrant background. There are also substantial regional disparities. Some progress has been made regarding the national anti-poverty strategy. The recently adopted Inclusion Income scheme is a positive step towards establishing a single comprehensive scheme against poverty. Its effectiveness will depend on its proper implementation with the mobilisation of adequate resources (including through the streamlining of various social allocations), appropriate targeting through means-testing and priority allocation to families with children and effective procedures on the ground, both in delivering income support and in providing well integrated services. At this stage, it is unclear whether the financial resources will be sufficient to address Italy’s poverty challenge. Catering for additional resources while respecting the budgetary targets, reducing the fragmentation of the social assistance system, rationalising social spending, and addressing its current bias towards pensions, remain key challenges.

               (24)In the context of the European Semester the Commission has carried out a comprehensive analysis of Italy’s economic policy and published it in the 2017 country report. It has also assessed the Stability Programme and the National Reform Programme and the follow-up given to the recommendations addressed to Italy in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Italy, but also their compliance with EU rules and guidance, given the need to strengthen the EU’s overall economic governance by providing EU-level input into future national decisions.

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

               (26)In the light of the Commission’s in-depth review and this assessment, the Council has examined the National Reform Programme and the Stability Programme. Its recommendations made under Article 6 of Regulation (EU) No 1176/2011 are reflected in recommendations 1 to 4 below,

               HEREBY RECOMMENDS that Italy take action in 2017 and 2018 to:

               1.Pursue its fiscal policy in line with the requirements of the preventive arm of the Stability and Growth Pact, which translates into a substantial fiscal effort for 2018. When taking policy action, consideration should be given to achieving a fiscal stance that contributes to both strengthening the ongoing recovery and ensuring the sustainability of Italy’s public finances. Shift the tax burden from the factors of production onto taxes less detrimental to growth in a budgetary neutral way by taking decisive action to reduce the number and scope of tax expenditures, reforming the outdated cadastral system and reintroducing the first residence tax for high-income households. Broaden the compulsory use of electronic invoicing and payments.

               2.Reduce the trial length in civil justice through effective case management and rules ensuring procedural discipline. Step up the fight against corruption, in particular by revising the statute of limitations. Complete reforms of public employment and improve the efficiency of publicly-owned enterprises. Promptly adopt and implement the pending law on competition and address the remaining restrictions to competition.

               3.Accelerate the reduction in the stock of non-performing loans and step up incentives for balance-sheet clean-up and restructuring, in particular in the segment of banks under national supervision. Adopt a comprehensive overhaul of the regulatory framework for insolvency and collateral enforcement.

               4.With the involvement of social partners, strengthen the collective bargaining framework to allow collective agreements to better take into account local conditions. Ensure effective active labour market policies. Facilitate the take-up of work for second earners. Rationalise social spending and improve its composition.

               Done at Brussels,

                     For the Council

                     The President

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

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

                     (3)
                  COM(2017) 511 final.

                     (4)
                  P8_ TA(2017)0038, P8_ TA(2017)0039, and P8_ TA(2017)0040.

                     (5)
                  COM(2016) 725 final.

                     (6)
                  COM(2016) 728 final.

                     (7)
                  OJ C92/01, 24.3.2017, p. 1.

                     (8)
                  SWD(2017) 77 final.

                     (9)
                  COM(2017) 90 final.

                     (10)
                  Article 23 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006, OJ L 347, 20.12.2013, p. 320.

                     (11)
                  COM(2014) 494 final.

                     (12)
                  Cyclically-adjusted balance net of one-off and temporary measures, recalculated by the Commission using the commonly agreed methodology.

                     (13)
                  This amount is based on the 0.25% of GDP overall budgetary cost estimated in the 2017 stability programme from which the temporary deviations of 0.03% of GDP and of 0.06% already granted in 2015 and 2016, respectively, are deducted. In its opinion on the 2017 Draft Budgetary Plan of Italy the Commission announced that it would stand ready to consider an additional deviation due to the persistent exceptional inflow of refugees in Italy also in light of the European Council of October 2016 which recognised "the significant contribution, also of financial nature, made by frontline Member States in recent years".

                     (14)
                  In its opinion on the 2017 Draft Budgetary Plan for Italy, the Commission considered that expenditure earmarked for emergency management and the preventive investment plan for the protection of the national territory against seismic risks could be considered of integrated nature. For the following years only positive incremental changes in resources earmarked for this purpose would be considered eligible for further possible temporary deviations.

                     (15)
                  COM(2016) 820 final, COM(2016) 821 final, COM(2016) 822 final, COM(2016) 823 final, COM(2016) 824 final.

                     (16)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.


               EUROPEAN COMMISSION
            Brussels, 13.5.2015
            COM(2015) 268 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2015 National Reform Programme of the Netherlandsand delivering a Council opinion on the 2015 Stability Programme of the Netherlands

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2015 National Reform Programme of the Netherlands

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

               THE COUNCIL OF THE EUROPEAN UNION,

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

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

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

               Having regard to the recommendation of the European Commission
                  3
               ,

               Having regard to the resolutions of the European Parliament
                  4
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

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

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 26 March 2010, the European Council agreed to the Commission’s proposal to launch a new strategy for growth and jobs, Europe 2020, based on enhanced coordination of economic policies. The strategy focuses on the key areas where action is needed to boost Europe’s potential for sustainable growth and competitiveness.

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

               (1)On 8 July 2014, the Council adopted a Recommendation on the Netherlands’ National Reform Programme for 2014 and delivered its opinion on the Netherlands’ updated Stability Programme for 2014. On 28 November 2014, in line with Regulation (EU) No 473/2013
                  5
               , the Commission presented its opinion on the Netherlands’ draft budgetary plan for 2015
                  6
               .

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

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

               (4)On 26 February 2015, the Commission published its 2015 country report for the Netherlands
                  9
               . This assessed the Netherlands’ progress in addressing the country-specific recommendations adopted on 8 July 2014. The country report also includes the results of the in-depth review under Article 5 of Regulation (EU) No 1176/2011. The Commission’s analysis leads it to conclude that the Netherlands is experiencing macroeconomic imbalances which require policy action and monitoring. Risks stemming from the high level of private debt persist and merit attention, even if recent measures support a recovery in the housing market and will help to curb mortgage growth. While the high current account surplus partly reflects structural features of the economy, the structure of the pension and tax systems may potentially be a source of inefficient allocation of capital.

               (5)On 30 April 2015, the Netherlands submitted its 2015 National Reform Programme and its 2015 Stability Programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (6)The Netherlands is currently in the preventive arm of the Stability and Growth Pact and subject to the transitional debt rule. In its 2015 Stability Programme, the government plans a gradual improvement of the headline deficit to 1.8 % of GDP in 2015 and further to 0.7% of GDP in 2018. The government plans to meet the medium-term objective – a structural deficit of 0.5% of GDP – throughout the programme period. According to the Stability Programme, the government debt-to-GDP ratio is expected to peak at 68.8% in 2015 and to gradually decline to 66.1% in 2018. The macroeconomic scenario underpinning these budgetary projections is plausible. The Commission's 2015 spring forecast expects the structural balance to meet the medium-term objective and to reach -0.3% of GDP in 2015 and -0.4% of GDP in 2016. Based on its assessment of the Stability Programme and taking into account the Commission's 2015 spring forecast, the Council is of the opinion that the Netherlands is expected to comply with the provisions of the Stability and Growth Pact. At 0.84% of GDP in 2013, public expenditure on research and development is low in view of the educational attainment, academic achievement and the level of economic development of the Netherlands. Government expenditure in this area is on a declining trend since 2014, while private R&D spending remains low. Shifting public expenditure towards innovation and research, in particular fundamental research, and implementing framework policies to unlock private investment in R&D would help enhance the long-term growth potential of the Dutch economy.

               (7)A key challenge lies in the housing market, where rigidities and distortive incentives that have built up over decades shape house financing and sectoral savings patterns. Households’ tendency to leverage up gross mortgage debt against housing wealth largely reflects long-standing fiscal incentives, in particular the full tax deductibility of mortgage interest. Since 2012, a series of measures have been implemented to partly address these incentives. Some of these involve adjustments to the fiscal treatment of housing finance. The gradual move to limit mortgage interest tax deductibility and increase the incentive to amortise is warranted. However, this measure is being phased in too slowly to significantly influence amortising behaviour and a sizeable tax incentive to invest in unproductive assets will persist. The loan to-value ratio of 100 %, to be reached in 2018, is still high. The rental market is constrained by regulation and the existence of a very large social housing sector that also has to cope with long waiting lists. The introduction of more income-based rent differentiation in the social housing sector is a step in the right direction, but its impact is limited. Under a new law, housing corporations will have to separate activities of general economic interest (i.e. social housing) from other activities. It remains to be seen whether this leads to the intended redirection of social housing towards people in need and ensures that social housing is available to disadvantaged people unable to obtain housing at market conditions.

               (8)The long-term sustainability of the pension system has been improved. In addition to gradually increasing the first-pillar statutory retirement age from 65 in 2012 to 67 in 2023 and linking it to life expectancy thereafter, the Netherlands has adopted comprehensive reforms of the privately funded pillar of the pension system and in the long-term care system. The financial supervision of pension funds has been improved and the system made more resilient to financial shocks. This has been complemented by successful reforms encouraging older workers to work longer. Long-term care reforms have shifted responsibilities to municipalities, bringing a reduction in overall expenditure and a focus on efficiency gains. The quality and accessibility of long-term care needs to be monitored.

               (9)Remaining challenges include an appropriate intra- and inter-generational distribution of costs and risks beyond the adopted rules on indexation and financial buffers (financial assessment framework), in particular by lowering contributions by younger people. Improving the actuarial fairness of the contributions to the second pension pillar would help households to allocate their financial means in more growth-friendly ways.

               (10)The comprehensive reform of employment protection legislation enacted in 2014 aims at increasing labour market participation and mobility. Fiscal disincentives to work have been reduced. Legislation adopted by the Parliament will set a quota for employers to hire people with disabilities. The impact of these measures can only be fully assessed once implemented. Further measures are needed to improve the integration of people on the margins of the labour market, including those with a migrant background.

               (11)Taking into account compulsory non-tax payments, the tax wedge in the Netherlands is significantly higher than the EU average and there is scope to shift taxation to factors less detrimental to growth. The envisaged tax reform would contribute to increasing labour market participation. Once adopted, its impact needs to be closely monitored.

               (12)In the context of the European Semester, the Commission has carried out a comprehensive analysis of the Netherlands’ economic policy and published it in the 2015 country report. It has also assessed the Stability Programme and the National Reform Programme and the follow-up given to the recommendations addressed to the Netherlands in previous years. It has taken into account not only their relevance for sustainable fiscal and socio-economic policy in the Netherlands but also their compliance with EU rules and guidance, given the need to strengthen the overall economic governance of the European Union by providing EU-level input into future national decisions. The recommendations under the European Semester are reflected in recommendations 1 to 3 below.

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

               (14)In the light of the Commission’s in-depth review and this assessment, the Council has examined the National Reform Programme and the Stability Programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected in recommendation 1 to 3 below.

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

               HEREBY RECOMMENDS that the Netherlands take action in 2015 and 2016 to:

               1.Shift public expenditure towards supporting investment in R&D and work on framework conditions for improving private R&D expenditure in order to counter the declining trend in public R&D expenditure and increase the potential for economic growth.

               2.Accelerate the decrease in mortgage interest tax deductibility so that tax incentives to invest in unproductive assets are reduced. Provide for a more market-oriented pricing mechanism in the rental market and further relate rents to household income in the social housing sector.

               3.Reduce the level of contributions to the second pillar of the pension system for those in the early years of working life.

               Done at Brussels,

                     For the Council

                     The President

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

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

                     (3)
                  COM(2015) 268.

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

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

                     (6)
                  C(2014) 8810.

                     (7)
                  COM(2014) 902.

                     (8)
                  COM(2014) 904.

                     (9)
                  SWD(2015) 38.

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


               EUROPEAN COMMISSION
            Brussels, 18.5.2016
            COM(2016) 342 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2016 national reform programme of Portugaland delivering a Council opinion on the 2016 stability programme of Portugal

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2016 national reform programme of Portugal

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

               THE COUNCIL OF THE EUROPEAN UNION,

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

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

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

               Having regard to the recommendation of the European Commission
                  3
               ,

               Having regard to the resolutions of the European Parliament
                  4
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

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

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

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

               (2)The 2016 country report for Portugal
                  8
                was published on 26 February 2016. It assessed Portugal’s progress in addressing the country-specific recommendations adopted by the Council on 14 July 2015 and Portugal’s progress towards its national Europe 2020 targets. It also included the in-depth review under Article 5 of Regulation (EU) No 1176/2011. On 8 March 2016, the Commissionpresented the results of the in-depth review.
                  9
                The Commission’s analysis leads it to conclude that Portugal is experiencing excessive macroeconomic imbalances. In particular, the large stocks of net external liabilities, private and public debt and a high share of non-performing loans constitute vulnerabilities in a context of elevated unemployment. Policy gaps persist regarding product and services markets, corporate debt restructuring, fiscal issues and selected areas of the labour market.

               (3)On 29 April 2016, Portugal submitted its 2016 national reform programme and its 2016 stability programme. To take account of their interlinkages, the two programmes have been assessed at the same time. Portugal's National Reform Programme shows sufficient ambition to tackle the excessive imbalances, outlines relevant measures to foster competitiveness and reduction of private debt and refers to the challenges in the 2016 Country Report and the euro area recommendations focusing on the need to re-launch investment and ensure the sustainability of public finances. If fully and swiftly implemented, these measures would help address Portugal's macroeconomic imbalances. Based on the assessment of Portugal's policy commitments, there is no need at this stage for a stepping-up of the macro-economic imbalances procedure.

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

               (5)Portugal is currently in the corrective arm of the Stability and Growth Pact. It did not correct the excessive deficit by the 2015 deadline and did not deliver the fiscal effort recommended by the Council. In its 2016 stability programme, the government plans to correct the excessive deficit and reach a headline deficit of 2.2% of GDP in 2016. Once a durable correction of the excessive deficit has been achieved, Portugal will become subject to the preventive arm and to the transitional debt rule.. The (recalculated
                  11
               ) structural balance is set to improve only by around 0.35% of GDP per year, below the required 0.6% of GDP, between 2016 and 2020, and the medium-term budgetary objective – a structural surplus of 0.25 % of GDP – is not expected to be achieved within the time horizon of the programme. According to the stability programme, the government debt-to-GDP ratio is expected to fall to 124.8% in 2016 and to continue declining to 110.3% in 2020. The macroeconomic scenario underpinning these budgetary projections is rather optimistic. Moreover, the measures needed to support the planned deficit targets from 2017 onwards have not been sufficiently specified. Based on the Commission 2016 spring forecast, the general government deficit is projected to reach 2.7% of GDP in 2016, below the Treaty reference value of 3% of GDP, and 2.3% of GDP in 2017. As the structural deficit is projected to slightly increase in 2016 and 2017, the fiscal effort is not in line with the requirements of the Stability and Growth Pact. Moreover, Portugal is not forecast to comply with the transitional debt rule in 2017. Based on its assessment of the stability programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that there is a risk that Portugal will not comply with the provisions of the Stability and Growth Pact. Therefore further measures will be needed to ensure compliance in 2016 and 2017.

               (6)Pursuant to Article 10(1) of Regulation (EC) N° 1467/97, the Commission will regularly monitor the implementation of action taken by Portugal in response to the last recommendation made by the Council under Article 126(7) TFEU: the Commission will therefore recommend to the Council the appropriate steps to be taken in the framework of the excessive deficit procedure.

               (7)Timely and stringent implementation of the reformed budget framework law, the commitment control law and further improvements in revenue collection and expenditure control may significantly contribute to achieving the required fiscal adjustment. Portugal faces the double challenge of achieving the long-term fiscal sustainability of the healthcare system while at the same time maintaining the level of access to healthcare by improving efficiency in the system. Although Portugal currently has one of the lowest shares of public expenditure in total health spending in the EU, the projected increase in public healthcare expenditure by 2.5 % of GDP by 2060 is the highest. In view of addressing the long-term sustainability challenges in the health sector, comprehensive measures aimed at promoting disease prevention and public health policies as well as ensuring primary healthcare provision at an early and less costly stage have not yet been taken. In the short term, accurate budget planning and implementation in hospitals to ensure clearance of arrears remains an important challenge. While the long-term sustainability of the pension system was addressed in the recent reforms, its short to medium sustainability challenges remain unaddressed. The public pension system is characterised by a high reliance on budget transfers and intergenerational inequalities. Execution delays and policy gaps are still hampering the fiscal sustainability of state-owned enterprises, in particular in the transport sector. Strengthening efficiency enhancing measures in their restructuring plans remains crucial to achieve fiscal savings.

               (8)Considerable efforts have been made to curb tax evasion by further improving the efficiency of the tax administration. Measures are being taken to combat tax fraud, to improve information-sharing with financial institutions, and to strengthen the anti-money-laundering framework. Despite the progress made, there is still scope for strengthening tax compliance. Reforming the tax administration to make it more efficient would also help encourage investment.

               (9)Overall wage developments have been moderate, consistent with high unemployment and the need to promote external rebalancing, and in line with productivity growth over the medium term. Collective bargaining at sectoral level has been supportive of this trend, though the characteristics of the collective bargaining system still limit the scope of firm-level adjustment. In a context of low inflation and high unemployment, the minimum wage was increased in January 2016 from EUR 505 to EUR 530 per month and is planned to be further gradually increased to EUR 600 per month in 2019 (paid 14 times per year). Portugal is in the middle of the EU ranking for minimum wages as a percentage of average wages, but among the countries with the highest minimum wage as a percentage of the median wage. This suggests that wage distribution in Portugal is very biased towards lower wages, and that further increases in the minimum wage might rapidly expand the proportion of workers covered, which in 2016 has reached almost a quarter of all employees. While this could help reduce the intensity of in-work poverty, it also results in an increased compression of the wage structure, putting upward pressure on overall wages. If not matched by productivity increases, this risks harming the employment and competitiveness outlook, especially for labour-intensive industries. It also risks reducing the incentive to invest in skills.

               (10)The Portuguese labour market continued to recover in 2014 and 2015 and substantial efforts have been made to reform activation policies, modernise the public employment service and increase the outreach towards non-registered young people, though some implementation challenges persist. In view of the recent deterioration of the social situation, especially as regards the increasing level of child poverty, important measures have also been taken to reinforce social assistance, namely in the areas of the minimum income scheme, child benefits and low pensions. The impact of these measures in reducing the intensity of poverty needs to be assessed. Nevertheless, absorbing the large pool of long-term unemployed remains a challenge, negatively affecting economic growth and the social situation. There is room for further activation of the long-term unemployed, through targeted labour market policies and enhanced coordination among employment and social services. Although the recovery brought about many new jobs on permanent contracts, segmentation in the labour market remains significant. The proportion of fixed-term employees remains one of the highest in Europe, and the rate of transition from temporary to permanent contracts is low.

               (11)High private-sector indebtedness remains a major area of vulnerability for the Portuguese economy and financing conditions for small and medium-sized businesses remain difficult. Some progress has been made on reducing the corporate debt overhang and allowing the private sector to deleverage, but Portugal’s private sector is still one of the most highly indebted in the EU. This is a major impediment to investment and potential output growth. Non-financial corporations are adjusting their balance sheets, but to a lesser extent than households. High and rising levels of non-performing loans in the business sector are weighing on the balance sheets of both the non-financial and the financial sector and are a major obstacle to investment. Action has been taken at various levels to address corporate indebtedness, but results have been slow to come. The debt bias of corporate taxation remains high. In the past few years, the government has tried to tackle this problem by introducing thin capitalisation rules and an allowance for corporate equity. However, in 2015, the difference in the cost of capital (before and after taxation) between debt and equity-funded investments remained one of the highest in the EU. Access to credit remains costly and difficult for businesses, in particular small and medium-sized enterprises and start-ups. Alternative sources of funding, such as private equity, venture capital, crowdfunding and business angels, remain marginal and seriously under-developed.

               (12)Despite progress, regulatory barriers and weak institutional capacity are still hampering business growth, competitiveness and investment. The efficiency of Portugal’s justice system remains low, particularly in dealing with tax litigation. Public procurement is largely transparent in Portugal. However, according to data of the dedicated online platform "BASE", contracting authorities in Portugal often use the direct award procedure, which over the 2013-2015 period constituted on average 87.3% of all public contracts, representing 47% of total amounts contracted. Transparency remains a challenge for concession contracts and public-private partnerships, particularly at local and regional level. The Ministry of Finance’s taskforce for public-private partnerships (UTAP) oversees some public-private partnerships managed by the central administration, but concessions, regional and local public-private partnerships are not subject to its monitoring. The port sector reforms still suffer from delays in implementation and obstacles to the entry of new players. Registering a business has become easier, but licensing remains cumbersome and complex and unpredictable administrative procedures are detrimental to investor confidence. Challenges still exist concerning procedures for access to the construction market, obtaining a construction permit and on effective implementation of streamlined environmental licensing rules. Regulatory barriers in some business services sectors prevent resources from being allocated efficiently, particularly regarding legal services. The by-laws governing professional bodies, in particular those concerning their statutes and internal rules, are restrictive and may hinder both natural and legal persons from gaining access to the relevant professions. This affects particularly legal professions, where, among other things, restrictions on advertising and multidisciplinary activities are prevalent.

               (13)Portugal is underperforming in science-business cooperation and in the commercialisation of knowledge. The barriers to cooperation between universities and the business sector are high, due to both regulatory and bureaucratic obstacles and the lack of incentives for cooperation in the academic system. This is detrimental to the employability of graduates and to innovation. The launch of the new short-cycle higher technical courses (TeSPs) has provided new opportunities for cooperation between the polytechnics and regional economic actors, but university programmes remain outside the modernisation process.

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

               (15)In the light of this assessment, the Council has examined the stability programme, and its opinion
                  12
                is reflected in particular in recommendation 1 below.

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

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

               1.Ensure a durable correction of the excessive deficit by 2016, reducing the general government deficit to 2.3% of GDP in 2016, by taking the necessary structural measures and by using all windfall gains for deficit and debt reduction. This is consistent with an improvement in the structural balance of 0.25% of GDP in 2016. Thereafter, achieve an annual fiscal adjustment of at least 0.6% of GDP in 2017. Conduct, by February 2017, a comprehensive expenditure review at all levels of public administration and strengthen expenditure control, cost effectiveness and adequate budgeting. Ensure the long-term sustainability of the health sector, without compromising access to primary healthcare. Reduce the reliance of the pension system on budgetary transfers. By the end of 2016, refocus ongoing restructuring plans of state-owned enterprises.

               2.In consultation with social partners, ensure that minimum wages are consistent with the objectives of promoting employment and competitiveness across industries.

               3.Ensure the effective activation of the long term unemployed and improve the coordination between employment and social services. Strengthen incentives for firms to hire through permanent contracts.

               4.Take measures, by October 2016, to facilitate the cleaning up of the balance sheets of credit institutions and address the high level of non-performing loans. Reduce the debt bias in corporate taxation and improve the access to finance for start-ups and small and medium-sized enterprises via the capital market.

               5.Increase transparency and efficiency in public procurement as regards public-private partnerships and concessions. By the end of 2016, improve and accelerate administrative and licensing procedures, accelerate tax litigations and reduce regulatory barriers, especially in business services. Incentivise cooperation between universities and the business sector.

               Done at Brussels,

                     For the Council

                     The President

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

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

                     (3)
                  COM(2016) 342 final.

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

                     (5)
                  COM(2015) 690 final.

                     (6)
                  COM(2015) 691 final.

                     (7)
                  COM(2015) 692 final.

                     (8)
                  SWD(2016) 90 final.

                     (9)
                  COM(2016) 95 final.

                     (10)
                  COM(2014) 494 final.

                     (11)
                   The structural balance as recalculated by the Commission based on the information in the stability programme, following the commonly agreed methodology.

                     (12)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.


               EUROPEAN COMMISSION
            Brussels, 13.5.2015
            COM(2015) 255 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2015 National Reform Programme of Denmarkand delivering a Council opinion on the 2015 Convergence Programme of Denmark

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2015 National Reform Programme of Denmark

                  and delivering a Council opinion on the 2015 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 26 March 2010, the European Council agreed to the Commission’s proposal to launch a new strategy for growth and jobs, Europe 2020, based on enhanced coordination of economic policies. The strategy focuses on the key areas where action is needed to boost Europe’s potential for sustainable growth and competitiveness.

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

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

               (4)On 28 November 2014, the Commission adopted the Annual Growth Survey
                  4
               , marking the start of the 2015 European Semester of economic policy coordination. On the same day, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report
                  5
               , in which it did not identify Denmark as one of the Member States for which an in-depth review would be carried out.

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

               (6)On 26 February 2015, the Commission published its 2015 country report for Denmark
                  6
               . This assessed Denmark’s progress in addressing the country-specific recommendations adopted on 8 July 2014.

               (7)On 27 March 2015, Denmark submitted its 2015 National Reform Programme and its 2015 Convergence Programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (8)Denmark is currently in the preventive arm of the Stability and Growth Pact. In its 2015 Convergence Programme, the government plans a widening of the headline deficit from 1.6% of GDP in 2015 – when it was supported by considerable windfall gains – to 2.6% of GDP in 2016. Thereafter, the government plans to reduce the deficit so as to reach a balanced budget in 2020. According to the Convergence Programme, the government plans to meet the medium-term objective – a structural deficit of 0.5% of GDP – from 2016 onwards. According to the Convergence Programme, the government debt-to-GDP ratio is expected to decline gradually from 39.8% in 2015 to 36.7% in 2020. The macroeconomic scenario underpinning these budgetary projections is plausible. Based on the Commission’s 2015 spring forecast, the structural balance is expected to comply with the medium-term objective in 2015. However, based on this forecast there is a risk of some deviation from the medium-term objective in 2016, with an excess of 0.3% of GDP of net expenditure growth over the benchmark. While this deviation is expected to be temporary as growth in net expenditure in 2016 is influenced by the phasing out of one-off measures related to taxation of pension savings, further measures may be necessary for 2016. Based on its assessment of the Convergence Programme and taking into account the Commission’s 2015 spring forecast, the Council is of the opinion that Denmark is expected to broadly comply with the provisions of the Stability and Growth Pact.

               (9)An adequately skilled long-term labour supply is a precondition for sustainable growth in Denmark. With the 2014 active labour market policy reform, Denmark has made progress on improving the employability of people at the margins of the labour market. The reform is at an early stage of implementation and its results need to be monitored. Additional measures for those most excluded from the labour market are still needed, in line with the Carsten-Koch II expert group recommendations. Low educational attainment, limited labour market experience, youth and migrant background appear to be key factors in this respect. In general, the labour market potential of people from migrant backgrounds remains underutilised. Despite the high expenditure on education in Denmark, educational outcomes are only average, in particular for pupils from migrant backgrounds. The reform of the primary and lower secondary school and the vocational education and training systems aims to address this challenge. Full implementation of these reforms is needed in order to improve educational outcomes.

               (10)Improved competitiveness is essential to strengthen economic recovery in Denmark. Productivity growth, which is vital in this regard, has generally been weak over the past two decades and has been affected by barriers to entry and regulatory burden in services sectors oriented to the domestic market. The Productivity Commission has identified the construction and retail sectors as areas in which productivity could be improved. Retail establishment regulations are very strict and no action has been taken to ease them. The construction sector is characterised by demanding building regulations and a large number of certification schemes. The Danish Government presented a strategy on construction in November 2014. This sets out good intentions, such as the simplification of rules, the streamlining of technical elements of building applications, the introduction of international standards, the harmonisation of national standards, and the reduction of time taken to issue building permits. However, the strategy has yet to be entirely translated into concrete measures. There are still overlapping authorisation and certification schemes, which in some cases also apply to the temporary provision of cross-border services. Furthermore, authorisations and certifications issued in other Member States are not always taken into account when service providers want to establish their business in Denmark.

               (11)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Denmark’s economic policy and published it in the 2015 country report. It has also assessed the Convergence Programme and the National Reform Programme and the follow-up given to the recommendations addressed to 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 EU rules and guidance, given the need to strengthen the overall economic governance of the European Union by providing EU-level input into future national decisions. The recommendations under the European Semester are reflected in recommendations 1 to 2 below.

               (12)In the light of this assessment, the Council has examined Denmark’s Convergence Programme and its opinion
                  7
                is reflected in particular in recommendation 1 below,

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

               1.Avoid deviating from the medium-term objective in 2016.

               2.Enhance productivity, in particular in the services sectors oriented towards the domestic market, including retail and construction. Ease the restrictions on retail establishments and take further measures to remove remaining barriers posed by authorisation and certification schemes in the construction sector.

               Done at Brussels,

                     For the Council

                     The President

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

                     (2)
                  COM(2015) 255.

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

                     (4)
                  COM(2014) 902.

                     (5)
                  COM(2014) 904 final.

                     (6)
                  SWD (2015) 24 final.

                     (7)
                  Under Article 9(2) of Council Regulation (EC) No 1466/97.