title: RECOMMENDATION FOR A COUNCIL REGULATION concluding an Agreement between the European Economic Community and the Republic of India on trade in coir products (submitted to the Council by the Commission)

text:
ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (76) 309
Vol. 1976/0094
 ---pagebreak--- Disclaimer
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983
concernant l'ouverture au public des archives historiques de la Communauté économique
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983,
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
concerning the opening to the public of the historical archives of the European Economic
Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243,
27.9.2003, p. 1), this file is open to the public. Where necessary, classified documents in this
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In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
Februar 1983 über die Freigabe der historischen Archive der Europäischen
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erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                                             ■
                                  x                                      :
          /                                                                I
                                         COM(76)309 final     -            -i
              *                          Brussels . 24 June 1976
                                                     . ,      '   :( ! '
                   RECOMMENDATION FOR A COUNCIL REGULATION
            concluding an Agreement between the European Economic
            Community and the Republic of India on trade in coir
                           t  i   products
                                              I           <
               ( submitted to the Council by the Commission )
 C0M(76 ) 309 final
 ---pagebreak---                            EXPLANATORY MEMORANDUM
1    Ity decision of 16 February 1976 the Council authorized the Commission to
open negotiations with India for the purpose of concluding an agreement on
trade in coir products#
2*   In accordance with that decision and in consultation with the Article 113
Committee the Commission conducted negotiations with India on 30 and 31 March
and on 6 April 1976#
3 . Following these negotiations a draft agreement was drawn up , comprising
the following main points1 :
     confirmation that the almost total freedom from import restrictions
     existing in the Community will be maintained ( quantitative restrictions
     still exist in one of the Member States );
     continuation of a programme to suspend progressively the CCT duty ,
     which the Community is implementing in the context of its offer
     regarding generalized tariff preferences for the product concerned
     ( the current 60$ reduction will be extended to 80$ on 1 July 1976
     and to 100$ on 1 January 1978 » while the full exemption from this
     duty already applying in the United Kingdom and Denmark will be
     maintained );
     assurances from India regarding the supply on non-discriminatory
     terms of the raw materials needed by the Community coir products
     industry ;
     definition of the Joint Cooperation Committee 's tasks , especially
     as regards the investigation of possibilities and the formulation
     of suggestions for cooperation on research and development on the
     production and uses of coir products .
After finding that the text of the draft agreement was in line with the
conclusions of the negotiations , the heads of the delegations initialled
it on 7 April 1976#
4 * The Commission considers that the draft agreement in question represents
a conclusion acceptable to the Community * It recommends to the Council
that it should conclude this agreement by adopting the regulation a draft
of which is annexed *
  An earlier agreement between the Community and India ( see 0J L 82 , 24 March 1974 )
  on the same products expired on 31 December 1 975 *
 ---pagebreak---                    RECOMMENDATION FOR A COUNCIL REFLATION
            concluding an Agreement "between the European Economic
        Community and the Republic of India on trade in coir products
THE COUNCIL OF THE EUROPEAN COMMISSION,
Having regard to the Treaty establishing the European Economic Community , •
and in particular Article 113 thereof ,
Having regard to the recommendation from the Commission ,
Whereas the Agreement on trade in coir products negotiated between the
European Economic Community and the Republic of India should be concluded ,
HAS ADOPTED THIS REGULATION :
                                 Article 1
The Agreement between the  European Economic Community and the Republic of
India on trade in coir products , the text of which is annexed hereto , is
hereby concluded on behalf of the Community .
                                 Article 2
The President of the Council shall give notification to the other Contracting
Party that the procedures required for the entry into force of the Agreement
have been completed on the part of the Community .
                               Article 3
This Regulation shall enter into force on the third day following its
publication in the Official Journal of the European Communities .
Done at Brussels .                                     For the Council
                                                       The President
 ---pagebreak---                            AGREEMENT
between the European Economic Community and the Republic of India on
                      trade in coir products
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
of the one part , and
THE GOVERNMENT OF THE REPUBLIC OF INDIA ,
of the other part ,
DESIROUS of ensuring an increasing use of coir products and the orderly
development of trade in these products between the European Economic
Community , hereinafter referred to as " the Community ", and the Republic
of India ,
NOTING the Joint Declaration of Intent on the development of trade
relations with Ceylon , India , Malaysia , Pakistan and Singapore , annexed
to the Final Act of the Treaty of Accession of the Kingdom of Denmark ,
Ireland , the Kingdom of Norway and the United Kingdom of Great Britain
and Nothern Ireland to the European Economic Community and the European
Atomic Energy Community ,
HAVING REGARD to the Commercial Cooperation Agreement between the
European Economio Community and India ,
CONSCIOUS of the provisions of the General Agreement on Tariffs and
Trade ,
HAVE DECIDED, in a spirit of mutual cooperation , to conclude this
Agreement t
 ---pagebreak---                                            - 2 -
                                         Article 1
             This Agreement shall apply to manufactured coir products , origina
ting in and coning from India , as defined in Article 2 .
                                         Article 2
             The Community shall , autonomously and as part of its offer
relating to the granting of generalised tariff preference , apply to manu
 factured coir products originating in and coming from India , the duties
of the Common Customs Tariff suspended in accordance with the rates and
timetable indicated below :
 ,.1 . IV. ! ! "I I I
        CCT                                                        Kate of reduction
                                  Description
    heading                                                        to be apulied
        No
                                                                   1.7.76    1.1.78
    58.02             Other carpets , carpeting , rugs , mats
                                 and matting , and " Kelem ",
                      " Schumacks " and "Karamanie " rugs
                      and the like ( made up or not ) :
                      A. Carpets , carpeting , rugs , mats
                           and matting :
                      ex . I. Coir mats and matting , and            80 %       100 %
                              tufted carpets , carpeting and
                              rugs
                                         Article 3
             The Community shall not subject imports of the products referred to in
Article 2 , originating in and coming from India , to new quantitative
restrictions . The Contracting Parties agree to take all necessary            '
steps to . enable the opportunities to import under exf sting quantitative
restrictions to be fully used .
                                                                          /.
 ---pagebreak---                                 - 3 -
                              Article '+
      The Republic of India and the Community shall exchange all
necessary information relating to trade in coir products between the
Contracting Parties .
                              Article 5
      The implementation of this Agreement shall not disrupt the normal
pattern of trade between India and the Community for the products
concerned .
      If one of the Parties informs       the other that abnormal difficulties
have arisen in connection with the use of normal pattern of trade , then the
Contracting Parties shall consult each other on measures necessary to re
medy the situation .
                              Article 6
      Subject to the policies of the Government of the Republic of India
relating to, the regulation of its exports according to its production
situation and the external demand for the said products , the
Republic of India undertakes to take all necessary steps to ensure that the
needs of the Community market and industries are met in a non- discri
minatory manner *
                              Article 7
      A Joint Cooperation Committee shall be set up and entrusted with
the following tasks :
      - to   examine any problem which may arises as a result    of
        the implementation of this Agreement , including the question of
        appropriate solutions to problems arising out of current quantita
        tive restrictions s
 ---pagebreak---                            - 4 -
– to investigate possibilities of , and formulate suggestions for , coope
   ration in regard to t
         – existing production methods ,
         – research into and development of , new techniques of preparing
           and processing coir and manufacturing coir goods
   in order to expand the end uses of coir*
– to develop contacts between representatives of the trade and industry
   in coir of both India and the Community and facilitate the setting up
   of joint projects and programmes mutually agreed upon by both Parties .
2*      The Joint Cooperation Committee shall consist of representatives
of the Republic of India and of the Community*
3*      The Joint Cooperation Committee shall be convened upon the request
of either Contracting Party and in any case at least once a year*
                                   Article 8
       This Agreement shall enter into force on the first day of the month
following the date on which the Contracting Parties have notified each other
of the completion of the procedures necessary for this purpose * Subject to any
such amendments as may be mutually agreed during its period of validity , the
Agreement shall be valid until 31 December 1979 *
                                   Article 9
The Annexes constitute an integral part of this Agreement *
                                   Article 10
       This Agreement has -been drawn up in two oopies , in the Danish, Dutch ,
English, French, German , Italian and Hindi languages , each text being
authentic *
Done at a ***************
 ---pagebreak---                  DECLARATION OF_THE _ COMMUN ITï
        The European Economic Community notes that the Government of
 the Republic of India levies a tax , at a rate of 15% ad valorem , on
 its exports of coir yarn .    It considers that this tax , the incidence
of which has been calculated at 6% of the sale price of coir products ,
 constitutes a disadvantage for the coir industry of its Member States .
       Taking account of the programme for the progressive suspension
of duties under the Common Customs Tariff applied by the Community as
part of its offer relating to the granting of generalized tariff
preferences , set out in Article 2 of the Agreement , the Community
reserves the right both to evaluate the practical effects of this tax
on the coir industry of the Member States and , in any case before the
start of the last phase of suspension of duties under the Common Customs
Tariff , to seek an examination of the situation on the Community market
for coir products by the Joint Cooperation Committee , set up under
Article 7 of th «* Agreement .
 ---pagebreak---                        JOINT DECLARATION
1,          The Contracting Parties .undertakes to make a special effort
to fulfill the tasks set out in Article ^ of the Agreement . To this
end they will endeavour to    provide   annual round-table discussions
between the industrial t commercial and research interests on "bath
sides , and they undertake to examine the possibility of supporting
any programmes or projects recommended as a result of such
discussions which are likely to be of mutual benefit to these interests .
2»          The Contracting Parties will keep under review the develop
 ment   of fiscal policies and their impact on the possibilities for
the increased use of coir products , the orderly development of .
trade and possibilities of cooperation , having due regard to the
needs and development   programmes of the Republic of India in the
coir sector and to the prospects of the coir industries in the
Member States of the Community*


title: Council Recommendation of 14 July 2015 on the 2015 National Reform Programme of Sweden and delivering a Council opinion on the 2015 Convergence Programme of Sweden

text:
               18.8.2015

               EN

               Official Journal of the European Union

               C 272/18

         COUNCIL RECOMMENDATION
   of 14 July 2015
   on the 2015 National Reform Programme of Sweden and delivering a Council opinion on the 2015 Convergence Programme of Sweden
   (2015/C 272/05)
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,
   Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (1), and in particular Article 9(2) thereof,
   Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances (2), and in particular Article 6(1) thereof,
   Having regard to the recommendation of the European Commission,
   Having regard to the resolutions of the European Parliament,
   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 14 July 2015, 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 and, on 21 October 2010, it adopted a decision on guidelines for the employment policies of the Member States (3). 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 (4) on Sweden's National Reform Programme for 2014 and delivered its opinion on Sweden's updated Convergence Programme for 2014.

               (4)

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

               (5)

               On 18 December 2014, the European Council endorsed the priorities for fostering investment, intensifying structural reforms and pursuing responsible growth-friendly fiscal consolidation.

               (6)

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

               (7)

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

               (8)

               Sweden is currently in the preventive arm of the Stability and Growth Pact. In its 2015 Convergence Programme, the Government plans that the headline deficit gradually will improve to 1,4 % of GDP in 2015 and reach balance in 2018, and that the medium-term objective — a structural deficit of 1 % of GDP — will continue to be met throughout the programme period. The government debt-to-GDP ratio is expected to peak in 2015 at 44,2 % and to gradually decline to 40,0 % in 2018. The macroeconomic scenario underpinning these budgetary projections is plausible. However, measures to support the planned deficit targets from 2016 onwards will need to be specified. Based on the Commission's 2015 spring forecast, the structural balance is forecast to be at the medium-term objective of – 1 % in 2015 and improve to – 0,9 % of GDP in 2016. Based on its assessment of the Convergence Programme and taking into account the Commission's 2015 spring forecast, the Council is of the opinion that Sweden is expected to comply with the provisions of the Stability and Growth Pact.

               (9)

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

               (10)

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

               (11)

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

               (12)

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

               (13)

               In the light of this assessment, the Council has examined the Convergence Programme, and is of the opinion (5) that Sweden complies with the Stability and Growth Pact.

               (14)

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

         RECOMMENDS that Sweden take action in 2015 and 2016 to:

               1.

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

      Done at Brussels, 14 July 2015.

            For the Council

            The President

         P. GRAMEGNA

      (1)  OJ L 209, 2.8.1997, p. 1.

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

      (3)  Maintained by Council Decision 2014/322/EU of 6 May 2014 on guidelines for the employment policies of the Member States for 2014 (OJ L 165, 4.6.2014, p. 49).

      (4)  Council Recommendation of 8 July 2014 on the National Reform Programme 2014 of Sweden and delivering a Council opinion on the Convergence Programme of Sweden, 2014 (OJ C 247, 29.7.2014, p. 132).

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


				|

		52012PC0738

			Recommendation for a COUNCIL DECISION amending Decision 2011/734/EU addressed to Greece with a view to reinforcing and deepening fiscal surveillance and giving notice to Greece to take measures for the deficit reduction judged necessary to remedy the situation of excessive deficit /* COM/2012/0738 final */

			   	EXPLANATORY MEMORANDUM
Measures concerning the coordination and
surveillance of the budgetary discipline of Greece and the setting out of economic
policy guidelines for Greece are defined in Council Decision 2011/734/EU on the
basis of Articles 126(9) and 136 TFEU. Greece has been recommended to take
measures to correct the situation of excessive deficit by 2014 at the latest,
ensuring an improvement in the structural balance of at least 10 percentage
points of GDP over the period 2009-14.
Compliance with the decision is relevant
not only in the context of the excessive deficit procedure, but also in the
context of the financing to Greece by the euro-area Member States, through the Greek
Loan Facility and the European Financial Stability Facility (EFSF).
The 2012 general government deficit is
expected to have reached €13.4 billion respecting the €14.8 billion deficit
ceiling prescribed in the Council Decision. The general government deficit is
expected to be have reached 6.9% of GDP, well within the 7.3% of GDP government
deficit ceiling for 2012. The primary deficit target for that year is set to be
missed by about 0.5% of GDP. The overall outcome reflects lower interest
payments than planned, following the debt exchange in March 2012.
For 2013, Greece adopted on 11 November a budget
ensuring the continuation of the fiscal consolidation, through measures aimed
at ensuring savings of about 5% of GDP. It also adopted on 7 November a Medium
Term Fiscal Strategy including measures which ensure a further reduction in the
deficit in subsequent years. Greece has taken effective action in compliance
with Council decision 2011/734/EU. Greece has ensured an improvement in the
structural balance in 2009-2012 which is already larger than the at least 10
percentage points of GDP over the period 2009-14 recommended by the Council.
Greece is estimated to have improved its structural deficit by 13.9 percentage
points of GDP from a 14.7% deficit in 2009 to an estimated 1.5% deficit in
2012.
Economic activity is currently projected to
be much weaker than expected when Decision 2012/734/EU was adopted in March
2012. The Greek economy is in its fifth consecutive year of recession.
According to the Commission services' 2012 Autumn Forecast, real GDP is projected
to contract by 6.0% in 2012 and by 4.2% in 2013 - against 4.7% and 0.0%
respectively in the previous Council Decision -, followed by growth of only
0.6% in 2014. In contrast, the Council Decision of March 2012 was based on
growth resuming already by 2013. The marked worsening of the economic outlook
reflects the political uncertainties in Greece during the double elections, a
weakening of external demand, and the effects of delays in programme
implementation and disbursement on public and private financing.
This marked worsening of the economic scenario
implies a corresponding deterioration of the outlook for public finances given
unchanged policies, and makes it difficult to complete the correction of the
excessive deficit by 2014, as requested by the Council in its decision
2011/734/EU. Given the adverse economic conditions, an extension of the
adjustment period is warranted. In particular, the deadline which was set in
the Council Decision for the correction of the excessive deficit in Greece
needs to be extended by 2 years to 2016. The fiscal targets towards the
correction of the excessive deficit should be defined on the basis of the general
government primary balance in nominal terms. For 2012 the primary deficit
should be EUR 2,925 million (1.5% of GDP), for 2013 the primary balance should
be EUR 0 (0% of GDP), for 2014 EUR 2,775 million (1.5% of GDP), for 2015 EUR
5,700 million (3.0% of GDP) and for 2016 EUR 9,000 million (4.5% of GDP)
Taking into account these developments,
which reinforce the necessity for the government to deliver an ambitious
package of reforms, the policy conditionality in the Memorandum of
Understanding of the economic adjustment programme of Greece needs to be
updated. The conditionality concerns not only the fiscal consolidation
measures, but also those measures needed to enhance the growth-friendly nature
and to minimise any negative social impact.
Taking into account agreed initiatives by
euro area Member states to improve the sustainability of debt and certain
debt-reducing measures considered by Greece, as well as a narrowing of the
budget deficit and stronger nominal GDP growth resulting from structural policy
measures, the debt-to-GDP ratio is expected to peak in 2013. The debt-to-GDP
ratio would start declining from 2014 onwards to reach under 160% of GDP in
2016. This should improve the sustainability of the debt trajectory, without
altering the fiscal path for the primary surplus.
The Commission has adopted a Recommendation
for a Council Decision amending decision 2011/734/EU and has transmitted it to
the Council.
Recommendation for a
COUNCIL DECISION
amending Decision 2011/734/EU addressed to
Greece with a view to reinforcing and deepening fiscal surveillance and giving
notice to Greece to take measures for the deficit reduction judged necessary to
remedy the situation of excessive deficit
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 126(9) and Article
136 thereof,
Having regard to the recommendation from
the European Commission,
Whereas:
(1)       Article 136(1)(a) of the
Treaty on the Functioning of the European Union (TFEU) foresees the possibility
of adopting measures specific to the Member States whose currency is the euro
with a view to strengthening the coordination and surveillance of their
budgetary discipline.
(2)       Article 126 of the TFEU establishes
that Member States are to avoid excessive government deficits and sets out the
excessive deficit procedure to that effect. The Stability and Growth Pact,
which in its corrective arm implements the excessive deficit procedure,
provides the framework supporting government policies for a prompt return to
sound budgetary positions taking account of the economic situation.
(3)       On 27 April 2009, the
Council decided, in accordance with Article 104(6) of the Treaty establishing
the European Community (TEC) that an excessive deficit existed in Greece.
(4)       On 10 May 2010, the
Council adopted Decision 2010/320/EU[1]
addressed to Greece under Article 126(9) and Article 136 TFEU with a view to reinforcing
and deepening the fiscal surveillance and giving notice to take measures for
the deficit reduction judged necessary to remedy the situation of excessive
deficit at the latest by the deadline of 2014. The Council established 2014 as
the deadline for correcting the situation of excessive deficit, and annual
targets for the government deficit.
(5)       Council Decision
2010/320/EU was substantially amended several times. Since further amendments
were to be made, it was recast, on 12 July 2011, by Council Decision
2011/734/EU[2]
in the interest of clarity. This decision was amended a first time on 8
November 2011[3].
(6)       On 13 March 2012[4], following a recommendation
from the Commission, Council Decision 2011/734/EU was again amended in a number
of respects, including the fiscal adjustment path, while keeping unchanged the
deadline for the correction of the excessive deficit[5]. The decision confirmed the
recommendation that Greece would have to take measures to correct the situation
of excessive deficit by 2014 at the latest, ensuring an improvement in the
structural balance of at least 10 percentage points of GDP over the period
2009-14.
(7)       According to Article 5(2)
of Regulation (EC) No 1467/97, if effective action has been taken in compliance
with Article 126(9) TFEU and unexpected adverse economic events with major
unfavourable consequences for government finances occur after the adoption of
that notice, the Council may decide, on a recommendation from the Commission,
to adopt a revised notice pursuant to Article 126(9) TFEU.
(8)       Economic activity is
currently projected to be much weaker than expected when the latest amendment
to Council Decision 2011/734/EU was adopted in March 2012. Both real and
nominal GDP are expected to be at much lower levels in 2012 and 2013. The
recent revision of the Greek national accounts in October 2012 revealed a steeper
contraction of real GDP, as compared to the underlying figures in the Council
Decision. According to the Commission services' 2012 Autumn Forecast, real GDP
is projected to contract in 2012 by 6.0% and by a further 4.2% in 2013 - against
4.7% and a growth of 0.0% in the Council Decision, for 2012 and 2013,
respectively - before growing by 0.6% in 2014. This marked worsening of the
economic scenario implies a corresponding deterioration of the outlook for
public finances given unchanged policies.
(9)       In 2012, the general government
deficit is expected to have reached 6.9% of GDP, well within the 7.3% of GDP
government deficit (ESA95 basis) ceiling for 2012 established by the Council
Decision. In nominal terms the 2012 general government deficit is expected to
have reached €13.4 billion compared with a €14.8 billion deficit ceiling
prescribed in the Council Decision. The primary deficit however is expected to
be slightly higher than the targeted 1.0% of GDP because of the deeper-than-expected
recession. Greece is estimated to have improved its structural deficit by 13.9
percentage points of GDP from a 14.7% deficit in 2009 to an estimated 1.5%
deficit in 2012. Greece has thus ensured an improvement in the structural
balance in 2009-2012 which is already larger than the at least 10 percentage
points of GDP over the period 2009-14 recommened by the Council. On 11 November
2012, the budget for 2013 was adopted by the Greek parliament, bringing savings
of more than €9.2 billion, over 5% of GDP. The 2013 budget forms part of the
Medium-Term Fiscal Strategy (MTFS) 2013-2016 that was adopted by the Greek
Parliament a few days earlier on 7 November 2012. The MTFS and the relevant
legislation to implement it set out a very sizeable and front-loaded fiscal
consolidation amounting to over 7% of GDP by 2016, with a comprehensive set of
structural measures underlying a substantial fiscal consolidation. Taking into
account these developments, the policy conditionality in the Memorandum of
Understanding of the economic adjustment programme of Greece needs to be
updated. The commitment undertaken by Greece concern not only the fiscal
consolidation measures, but also those measures needed to enhance the
growth-friendly nature and to minimise any negative social impact. Overall
therefore Greece has taken effective action in 2012 to reduce its deficit in
compliance with Council decision 2011/734/EU.
(10)     The general government
consolidated debt is expected to have declined by €11.1 billion in 2012 against
€ 26.95 billion set in the Council Decision. This is due to lower-than-expected
privatisation receipts, a lower-than-expected consolidation of government debt
and worse-than-expected cash-accruals and other interest adjustments. Owing to
a lower nominal GDP following the statistical data revision and in the light of
worse macroeconomic prospects, the debt-to-GDP ratio is likely to rise to
162.5% in 2012. Agreed initiatives by euro area Member states to improve the
sustainability of debt and certain debt-reducing measures considered by Greece should
improve the sustainability of the debt trajectory, without altering the fiscal
path for the primary surplus. Taking also into account a narrowing of the
budget deficit and stronger nominal GDP growth resulting from structural policy
measures, the debt-to-GDP ratio is expected to peak in 2013. The debt-to-GDP
ratio would start declining from 2014 onwards to reach below 160% of GDP in 2016.

(11)     Despite the effective action
undertaken, the marked worsening of the economic scenario implies a
corresponding deterioration of the outlook for public finances given unchanged
policies and makes it difficult to complete the correction of the excessive
deficit by 2014, as requested by the Council in its decision 2011/734/EU. Given
the adverse economic events, an extension of the deadline for the adjustment
period is warranted. In particular, the deadline that was set in the Council
Decision needs to be extended by two years to 2016. Under a revised Economic Adjustment
Programme path, the primary balance targets should be set at 0%, 1.5%, 3% and
4.5% of GDP for the four-year period 2013-2016. The revised path means that the
general government budget balance will fall below 3% of GDP in 2016. Notwithstanding
the extension, however, the fiscal effort needed to achieve the target remains
very large in 2013-14, and heavily frontloaded. This revision of the deadline will
therefore maintain the credibility of the programme, while considering the
economic and social impact of the consolidation and the need to maintain confidence
on the capacity of the government to address the fiscal challenge.
(12)     Each measure required by
this Decision is instrumental in achieving the required budgetary adjustment.
Some measures have a direct impact on the budgetary situation of Greece while
the others are structural measures that will result in improved fiscal
governance and a sounder budgetary situation in the medium term.
(13)     The very severe
deterioration of the financial situation of the Greek Government has led euro
area Member States to decide to provide stability support to Greece, with a
view to safeguarding the financial stability of the euro area as a whole, in
conjunction with multilateral assistance provided by the International Monetary
Fund. Since March 2012, support provided by the euro area Member States takes
the form of both a bilateral Greek Loan Facility and a loan from the EFSF. The
lenders have decided that their support shall be conditional on Greece
respecting Decision 2011/734/EU as amended by this Decision. In particular,
Greece is expected to carry out the measures specified in this Decision in
accordance with the calendar set out herein,
HAS ADOPTED THIS DECISION:
Article 1
Decision 2011/734/EU is hereby amended as
follows:
1.         Article 1 is replaced by the
following:
'(1)    Greece shall put an end to the present
excessive deficit situation as rapidly as possible and, at the latest, by the
deadline of 2016.
(2)     The adjustment path towards the correction
of the excessive deficit shall aim to achieve a general government primary
deficit (deficit excluding interest expenditure) not exceeding EUR 2,925
million (1.5% of GDP) in 2012, and general government primary surpluses of at
least EUR 0 million (0.0% of GDP) in 2013, EUR 2,775 million (1.5% of GDP) in
2014, EUR 5,700 million (3.0% of GDP) in 2015 and EUR 9,000 million (4.5% of
GDP) in 2016. These targets for the primary deficit/surplus imply an overall ESA-government
deficit of 6.9% of GDP in 2012, 5.4% of GDP in 2013, 4.5% of GDP in 2014, 3.4%
of GDP in 2015 and 2.0% of GDP in 2016. These numbers could be estimated to
translate into an improvement in the cyclically-adjusted primary balance to GDP
ratio from 4.1% in 2012 to 6.2% in 2013 and at least 6.4% of GDP in 2014, 2015
and 2016 and into a cyclically-adjusted government deficit to GDP ratio at
-1.3% in 2012, 0.7% in 2013, 0.4% in 2014, 0.0% in 2015 and -0.4% in 2016,
reflecting the profile of interest payments. Proceeds from the privatisation of
financial and non-financial assets, transactions related to bank
recapitalisation, as well as all transfers related to the Eurogroup decision of
21 February 2012 in regard to income of euro zone national central banks,
including the Bank of Greece (BoG), stemming from their investment portfolio
holdings of Greek government bonds shall not reduce the required fiscal
consolidation effort and shall not be counted in the assessment of these
targets.
(3)     The adjustment path referred to in
paragraph 2 would be consistent with a general government consolidated debt ratio
to GDP of 172.5% in 2013, 171.4% in 2014, 166.2% in 2015 and 157.3% in 2016.
2.         In Article 2, the following
paragraph is inserted after paragraph 10:
'10a.  Greece shall have adopted the following
measures without delay and at latest by [date
of adoption of the decision]:
(a)     the budget for 2013 and the
medium-term fiscal strategy (hereinafter MTFS) through 2016 as well as the
measures as described in the Annex IA to this Decision and the respective implementing
legislation. The MTFS shall elaborate on the permanent fiscal consolidation
measures which ensure that the deficit ceilings for 2012-2016 as established by
this Decision are not exceeded and that the debt-to-GDP ratio is put on a
sustainable downward path;
(b)     the presentation of an updated
Privatisation Plan to Parliament and the publication of a semi-annual update of
the Asset Development Plan;
(c)     the transfer to the portfolio of
privatisation assets of the HRADF of the full and direct ownership (shares or
concession rights) of Egnatia Motorway and the regional ports of Elefsina,
Lavrio, Igoumenitsa, Alexandropolis, Volos, Kavala, Corfu, Patras, Heraklion,
and Rafina;
(d)     ensuring the line Ministries and other
relevant entities provide the General Secretariat for Public Property with full
access to the inventory of all real estate assets owned by the State;
(e)     the amendment and/or the repeal of
statutory provisions of state-owned enterprises (PPC, OLP and OLTH port
authorities, HELPE, EYATH and EYDAP, ports, etc.) that diverge from private
company law regarding any restrictions on voting rights of private shareholders;

(f)      legislation to define the role and
qualifications of the Secretary General of the Tax Administration and for the
Minister of Finance to delegate decision-making powers to the Secretary General;
(g)     the deployment of experienced tax
auditors towards activities serving the immediate revenue imperatives, making
fully operational key enforcement areas as the large taxpayer unit by
transferring 100 auditors, establishing one functional unit for high-wealth
individuals and high-income self-employed and staffing the unit with 50
experienced tax auditors directly accountable to the Secretary General of the Tax
Administration;
(h)     a Council of Ministers act (replacing
the Council of Ministers act adopted on 29 October 2012), aiming at
strengthening the Budget execution and enhancing the sound fiscal management,
and including, beyond the provisions in the original Council of Ministers act,
additional provisions: (i) establishing that Memoranda of Cooperation are
signed by end-December of each year between the Ministry of Finance and the
other Ministries or between the Ministries and managers of the supervised
entities (thus covering the entire General Government); (ii) strengthening the
current balanced budget constraints for Local Governments in order to be more
effective, including corrective and sanctioning mechanisms; (iii) strengthening
the current monitoring system for state-owned enterprises (SOEs), introducing
an enforcement mechanism in case of deviations from the specific targets
identified for each SOE; and (iv) setting the framework for defining specific
targets for the coverage of operational commitment registers for Local Governments
and SOEs to be established by December of each year; it shall also include a
framework for correcting transfers from central government to address
deviations from targets within the year and possibly in the following years
while ensuring that arrears are not increasing; it shall make explicit that the
proceeds from the privatisation of government assets are paid directly into a segregated
account to monitor cash flows, avoid diversion of official financing and secure
a timely debt servicing; it shall set automatic cuts in expenditures to be
applied as a rule when targets are missed, while ensuring that arrears are not
increasing;
(i)      a set of measures to improve the
current financial situation of the National Organisation for Healthcare
Provision (EOPYY) and ensure that the budgetary execution is closer to a
balanced budget in 2012 and 2013, including: (i) streamlining the benefit
package; (ii) increasing cost-sharing for healthcare delivered by private
providers; (iii) negotiating price-volume agreements and revising case-mix
agreements with private providers; (iv) revising the fees for and number of
diagnostic and physiotherapy services contracted by EOPYY to private providers
with the aim of reducing related costs by at least EUR 80 million in 2013; (v)
introducing a reference price system for reimbursement of medical devices; and (vi)
progressively increasing the contributions paid by OGA members to the average
of those paid by other members of EOPYY;
(j)      the following measures related to the
reimbursement of medicines: (i) a legislation to control pharmaceuticals
spending that activates contingency measures (including e.g. a cross-the-board
cut in prices), if for any reason the claw-back is not able to achieve the
target. Such measures shall produce equivalent amount of savings; (ii) a
ministerial decree, setting the new claw-back threshold for 2013 (EUR 2.4
billion for outpatients); (iii) the update of the price list and the positive
list of reimbursed medicines notably by reimbursing only the cost effective
packages for chronic diseases, by moving medicines from the positive to the
negative and over-the-counter lists and by introducing the reference price
system developed by the National Organisation for Medicines (EOF). These lists
must be updated at least twice a year in line with Council Directive 89/105/EEC;
and (iv) The substitution of prescribed medicines by the lowest–priced product
of the same active substance in the reference category by pharmacies
(compulsory "generic substitution").'
3.         In Article 2, paragraph 11 is replaced
by the following:
‘11.    Greece shall adopt the following
measures by the end of December 2012:
(a)     a tax reform of the personal income
tax and corporate income tax that aims at simplifying the tax system, broadening
the tax base and eliminating exemptions and preferential regimes;
(b)     the necessary primary and secondary
legislation to ensure the swift implementation of the Privatisation Plan;
(c)     the establishment of a regulatory
framework for water companies;
(d)     measures to improve the tax
administration, introducing performance assessments, improving the use of risk
assessment techniques, and establishing and reinforcing specialist debt
management units;
(e)     the preparation and publication of a
plan for the clearance of arrears owed to suppliers by public entities and of
tax refunds;
(f)      the finalisation of the
implementation of the reform of the functioning of secondary/supplementary
public pension funds and the unification of all existing funds in the public
sector domain;
(g)     a legislation to extend the
application of the 5% rebate on pharmaceutical companies (which exists for
hospital-priced medicines) to all products sold in EOPYY pharmacies;
(h)     an increase of the share of the
generic medicines to reach 35 percent of the overall volume of medicines sold
by pharmacies;
(i)      the assignment of internal
controllers to all hospitals and the adoption by all hospitals of commitment
registers.'
4.         In Article 2, the following
paragraphs are added:
‘12.    Greece shall adopt the following
measures by the end of March 2013:
(a)     issue a Ministerial Decree for the adjustment
of end-user prices for low-voltage customers;
(b)     update of MTFS, including setting
binding 3-years expenditure ceilings for government subsectors;
(c)     adopt Staffing plans for line
Ministries;
(d)     establish a significantly more
autonomous tax administration and specify the degree of autonomy, governance
framework, accountability, legal powers of the head of the tax administration
and the initial staffing of the organization;
(e)     issue and make public a new
fully-fledged anti-corruption plan for civil service, including special
provisions for the tax and customs administration.
(f)      make fully operational a standard
procedure for revision of legal values of real estate to better align them with
market prices under the responsibility of the Directorate of Capital Taxation;
(g)     transfer forty new real estate assets
(identified as "real estate assets lots 2 and 3" in the Privatisation
Plan) to the HRADF.'
'13.    Greece shall adopt the following
measures by the end of June 2013:
(a)     achieve the target of 2 000 tax
auditors fully operational;
(b)     adopt a new tax procedures code;
(c)     ensure all central purchasing bodies
use e-procurement for all their tendering procedures.'
'14.    Greece shall adopt the following
measures by the end of September 2013:
(a)     the government will adopt the
necessary legislation with a view to introducing a structural budget balance
rule with an automatic correction mechanism.'
5.         The annex to this decision is
added as annex IA to Decision 2011/734/EU.
Article 2
This Decision shall take effect on the day
of its notification.
Article 3
This Decision is addressed to the Hellenic
Republic.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
Annex:
'Annex IA:
Medium-Term Fiscal Strategy 2013-16 measures
The additional measures included in the
medium-term fiscal strategy (MTFS) through 2016 are the following:
1.           Rationalisations in wage
bill by at least EUR 1,100 million in 2013, and additional EUR 247 million
from 2014 onwards.
2.           Savings in pensions
by at least EUR 4 800 million in 2013, and additional EUR 423 million from 2014
onwards.
3.           Cuts in the state's
operational expenditures by at least EUR 239 million in 2013 and additional
EUR 285 million from 2014 onwards.
4.           Savings from
rationalisation and efficiency improvements in education-related expenses by
at least EUR 86 million in 2013, and additional EUR 37 million from 2014
onwards.
5.           Savings in state-owned
enterprises by at least EUR 249 million in 2013 and additional EUR 123
million from 2014 onwards.
6.           Cuts in operational
defense-related expenditure producing savings by at least EUR 303 million
in 2013, additional EUR 100 million from 2014.
7.           Savings in healthcare and
pharmaceutical expenditure by at least EUR 455 million in 2013, and
additional EUR 620 million from 2014 onwards.
8.           Savings from rationalisation
of social benefits by at least EUR 217 million in 2013, additional EUR 78
million from 2014 onwards.
9.           Cuts in state transfers
to local governments by at least EUR 50 million in 2013 and additional EUR
160 million from 2014 onwards.
10.         Cuts in expenditure by
the public investment budget (domestically-financed public investment) by
EUR 150 million in 2013 and additional 150 million from 2014 onwards.
11.         Increases in revenue by
at least EUR 1 668 million in 2013 and additional EUR 1 820 million from 2014
onwards.
[1]               OJ L 145, 11.6.2010, p. 6.
[2]               OJ L 296, 15.11.2011, p. 38.
[3]               Council Decision 2011/791/EU (OJ L 320, 3.12.2011, p.
28).
[4]               The latest amendment being Council Decision
2012/211/EU of 13 March (OJ L 113, 25.4.2012, p. 8).
[5]               Council Decision 2012/211/EU of 13 March (OJ L 113,
25.4.2012, p. 8).


title: Recommendation for a Council opinion in accordance with the third paragraph of Article 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 on the updated stability programme of Germany, 2006-2010

text:
Important legal notice

|

52007SC0065

Recommendation for a Council opinion in accordance with the third paragraph of Article 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated stability programme of Germany, 2006-2010  /* SEC/2007/0065 */

	[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 23.1.2007SEC(2007) 65 finalRecommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Article 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated stability programme of Germany, 2006-2010(presented by the Commission)EXPLANATORY MEMORANDUM1. GENERAL BACKGROUNDThe Stability and Growth Pact, which entered into force on 1 July 1998, is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation. The 2005 reform of the Pact acknowledged its usefulness in anchoring fiscal discipline but sought to strengthen its effectiveness and economic underpinnings as well as to safeguard the sustainability of the public finances in the long run.Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[1], which is part of the Stability and Growth Pact, stipulates that Member States have to submit, to the Council and the Commission, stability or convergence programmes and annual updates thereof (Member States that have already adopted the single currency submit (updated) stability programmes and Member States that have not yet adopted it submit (updated) convergence programmes). The first stability programme of Germany was submitted in January 1999. In accordance with the Regulation, the Council delivered an opinion on it on 15 March 1999 on the basis of a recommendation from the Commission and after having consulted the Economic and Financial Committee. In accordance with the same procedure, updated stability and convergence programmes are assessed by the Commission and examined by the Committee mentioned above, while the Council may examine them.2. BACKGROUND FOR THE ASSESSMENT OF THE UPDATED PROGRAMMEThe Commission has examined the most recent update of the stability programme of Germany, submitted on 30 November 2006, and has adopted a recommendation for a Council opinion on it (see box for the main points covered by the assessment).In order to set the scene against which the budgetary strategy in the new stability programme is assessed, the following paragraphs summarise:1.  the economic and budgetary performance over the last ten years2.  the country’s position under the corrective arm of the Stability and Growth Pact (excessive deficit procedure)3.  the most recent assessment of the country’s position under the preventive arm of the Stability and Growth Pact (summary of the Council opinion on the previous update of the stability programme) and4.  the Commission’s assessment of the October 2006 national reform programme.2.1. Recent economic and budgetary performanceOver the past ten years, Germany has gone through a period of adjustment to correct past re-unification imbalances. Wage moderation contributed to a recovery of external price competitiveness, and Germany has significantly gained export market shares, in particular from 2000 onwards. It is noteworthy that the restoration of Germany's external price competitiveness has taken place in a period when other euro area countries enjoyed lower real long-term interest rates than Germany. However, Germany has recently experienced that a strong export performance does not always spill over quickly to higher domestic demand.Germany's growth problem is mostly structural in nature. Economic performance is mainly held back by sluggish growth of total factor productivity and high structural unemployment. Potential growth is not only substantially lower than in the past. It has also fallen behind that of other euro area member states. Economic policy faces the challenge of improving the conditions for growth, addressing simultaneously the contributions from labour, factor productivity and, to a lesser extent, capital formation. This difficult task has to be accomplished against the background of strained public finances, despite recent improvements.In some areas, the German authorities have initiated reforms, such as on the labour market or in the micro-economic domain on the promotion of research and innovation, which still need time to show their full impact. In others, like corporate taxation, reform steps are under consideration. Yet, further efforts are likely to be necessary, especially on the labour market, to boost potential growth substantially in the longer run.2.2. The excessive deficit procedure for GermanyIn accordance with Article 104(7) of the Treaty and Article 3(4) of Regulation (EC) No 1467/97, the Council addressed a Recommendation to Germany on 21 January 2003, calling on Germany to bring the excessive deficit to an end as rapidly as possible and by 2004 at the latest. The Recommendation was made public. As stated in the Commission Communication of 14 December 2004, with which the Council concurred on 18 January 2005, in view of the unique circumstances created by the Council conclusions of 25 November 2003 and of the ruling of the European Court of Justice of 13 July 2004, the year 2005 should be considered to be the relevant deadline for the correction of the excessive deficit.As the general government deficit for 2005 exceeded the ceiling of 3% of GDP, the Council decided, on 14 March 2006, to give notice to Germany, in accordance with Article 104(9), to take measures for the deficit reduction judged necessary in order to remedy the situation of excessive deficit "as rapidly as possible and at the latest by 2007." Specifically, the Council requested that "in 2006 and 2007, Germany shall ensure a cumulative improvement in its cyclically-adjusted balance net of one-off and temporary measures by at least one percentage point." In addition, Germany was invited to "take the necessary measures to ensure that budgetary consolidation towards its medium-term objective of a balanced budget in structural terms is sustained through a reduction in the structural deficit by at least 0.5% of GDP per year after the excessive deficit has been corrected." Following the submission of an implementation report by Germany on 5 July, on 19 July 2006 the Commission adopted a Communication to inform the Council that Germany had taken action representing adequate progress towards the correction of the excessive deficit within the time limits set by the Council and that no further steps in the excessive deficit procedure were needed at that point. In its meeting of 10 October 2006, the Council shared this view.2.3. The assessment in the Council opinion on the previous programmeOn 14 March 2006, the Council adopted its opinion on the updated stability programme covering the period 2005-2009. The Council welcomed “the priority attributed by the government to budgetary consolidation as laid out in the programme”, but noted “that there are risks linked to the achievement of the budgetary targets and to long-term sustainability of public finances.” Also in the light of the Council decision of 14 March in accordance with Article 104(9) of the Treaty, the Council invited “Germany to-  ensure the planned cumulative structural adjustment of at least one percentage point in the years 2006 and 2007 which would bring the general government deficit below 3% of GDP at the latest by 2007 in a credible and sustainable manner;-  rapidly achieve the medium-term budgetary objective through a reduction in the structural balance of at least 0.5 percentage point per year after the excessive deficit has been corrected, notably by implementing the planned expenditure restraint rigorously so as to be able to provide the planned relief on social contributions, and by ensuring that the announced reform on corporate taxation does not jeopardise the fiscal consolidation;-  implement the plans to reform the federal system in order to improve the budgetary framework and thus contribute to ensuring that budgetary targets are achieved at all levels of government.”2.4. The Commission assessment of the October 2006 national reform programmeThe Implementation Report of the National Reform Programme of Germany, provided for in the context of the renewed Lisbon strategy for growth and jobs, was submitted on 18 October 2006. Germany's National Reform Programme identifies as key challenges/priorities: the knowledge society; market functioning and competitiveness; business environment; the sustainability of public finances (including sustainable growth and social security); ecological innovation; and reform of the labour market.The Commission’s assessment of that programme (adopted as part of its December 2006 Annual Progress Report[2]) showed that Germany is making good progress overall in the implementation of its National Reform Programme, and especially on the macro- and micro-economic key challenges and priority actions. It is moving forward more slowly in the field of employment. Against the background of strengths and weaknesses identified, Germany was recommended to take action in the areas of long-term sustainability of public finances, competition in goods and services markets, and structural unemployment.Box: Main points covered by the assessment As required by Article 5(1) (for stability programmes) and Article 9(1) (for convergence programmes) of Council Regulation (EC) No 1466/97, the assessment covers the following points: whether the economic assumptions on which the programme is based are plausible; the medium-term budgetary objective (MTO) presented by the Member State and whether the adjustment path towards it is appropriate; whether measures being taken and/or proposed to respect that adjustment path are sufficient to achieve the MTO over the cycle; when assessing the adjustment path towards the MTO, whether a higher adjustment effort is made in economic good times, whereas the effort may be more limited in economic bad times, and, for euro-area and ERM II Member States, whether the Member State pursues an annual improvement of the cyclically-adjusted balance, net of one-off and other temporary measures, of 0.5% of GDP as a benchmark to meet its MTO; when defining the adjustment path to the MTO (for Member States that have not yet reached it) or allowing a temporary deviation from the MTO (for Member States that have), the implementation of major structural reforms which have direct long-term cost-saving effects (including by raising potential growth) and therefore a verifiable impact on the long-term sustainability of public finances (subject to the condition that an appropriate safety margin with respect to the 3% of GDP reference value is preserved and that the budgetary position is expected to return to the MTO within the programme period), with special attention for pension reforms introducing a multi-pillar system that includes a mandatory, fully-funded pillar; whether the economic policies of the Member State are consistent with the broad economic policy guidelines. The plausibility of the programme’s macroeconomic assumptions is assessed by reference to the Commission services’ autumn 2006 forecast, using also the commonly agreed methodology for the estimation of potential output and cyclically-adjusted balances. The assessment of consistency with the broad economic policy guidelines is made against the broad economic policy guidelines in the area of public finances as included in the integrated guidelines for the period 2005-2008. The assessment also examines: the evolution of the debt ratio and the outlook for the long-term sustainability of the public finances, which should be given “sufficient attention in the surveillance of budgetary positions” according to the Council report of 20 March 2005 on “Improving the implementation of the Stability and Growth Pact”. A Commission Communication of 12 October 2006 sets out the approach to the assessment of long-term sustainability[3]; the degree of integration with the national reform programme, submitted by Member States in the context of the Lisbon strategy for growth and jobs. In its cover note of 7 June 2005 to the European Council on the broad economic policy guidelines for the period 2005-2008, the ECOFIN Council stated that the national reform programmes should be consistent with the stability and convergence programmes; compliance with the code of conduct[4], which inter alia prescribes a common structure and set of data tables for the stability and convergence programmes. |-  Recommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Article 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated stability programme of Germany, 2006-2010THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community,Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[5], and in particular Article 5(3) thereof,Having regard to the recommendation of the Commission,After consulting the Economic and Financial Committee,HAS DELIVERED THIS OPINION:5.  On [27 February 2007] the Council examined the updated stability programme of Germany, which covers the period 2006 to 2010.6.  The macroeconomic scenario underlying the programme envisages that real GDP growth will temporarily slow down from 2.3% in 2006 to 1.4% in 2007, after which it is projected at 1¾% on average over the rest of the programme period. Assessed against currently available information (the first official estimate of GDP growth in 2006 is a figure of 2.5%), this scenario appears to be based on plausible assumptions until 2008 and mildly favourable ones thereafter, compared with Commission projections for potential growth. The programme’s projections for inflation appear to be on the high side.7.  For 2006, the programme cites a general government deficit of 2.1% of GDP (revised down to 1.9% by latest government announcement), against a target of 3.3% of GDP set in the previous update of the stability programme. The government received unexpectedly high revenues from taxes, which, in line with the Stability and Growth Pact, were not spent in 2006. The tax burden (i.e. revenues from taxes and social contributions) is now forecast to increase to around 40% of GDP in 2006, which is about 1% of GDP higher than projected in the previous update. General government expenditure has been kept under control in 2006. The somewhat tighter budgetary execution derives from lower monetary transfers, stemming mainly from the unexpected relief that the improving labour market has provided to the Federal Employment Agency. In addition, interest expenditure and subsidies have been lower than expected.8.  The main goal of the medium-term budgetary strategy is to ensure the long-term sustainability of public finances. To achieve this, the programme proposes to continue budgetary consolidation, while improving the conditions for growth and employment. After the envisaged correction of the excessive deficit in 2006, the deficit ratio is projected to decline by ½ percentage point per year (except in 2008) to reach ½ % of GDP in 2010. The improvement in the primary balance follows the same pattern, with the surplus reaching 2% of GDP by 2010. While the budget contains corrective measures on the revenue side, notably the increase in the central VAT rate from 16% to 19%, both revenue and expenditure ratios are set to follow a downward trend in a year-to-year comparison. Indeed, the expenditure ratio would fall by 2½ percentage points to 43% of GDP by 2010, which is planned to be achieved mostly through restraint in social spending. Over the same period, the revenue-to-GDP ratio is projected to decrease by 1½ percentage point to 42% of GDP by 2010; an increase in the tax share (e.g. increase in the central VAT rate in 2007) is broadly offset by a decrease in the share of social contributions (due to the cut in the unemployment insurance rate in 2007 and the downward trend of the contributions share), while non-tax revenues decline. Compared with the previous update, the budgetary targets are higher in each year although no adjustment is planned in 2008.9.  The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures), calculated according to the commonly agreed methodology, is planned to improve from a deficit of around 2% of GDP in 2006 to ½% at the end of the programme period, on average by almost ½% of GDP per year. As in the previous update of the stability programme, the medium-term objective (MTO) for the budgetary position presented in the programme is a balanced position in structural terms, which the programme does not aim to achieve within the programme period. As the MTO is more demanding than the minimum benchmark (estimated at a deficit of around 1½% of GDP), achieving it should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO lies within the range indicated for euro-area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term.10.  The risks to the budgetary projections in the programme appear broadly balanced for 2007, but budgetary outcomes thereafter could be worse than projected. In particular, the risk remains that the envisaged decline in the social expenditure ratio would not be achieved without additional measures that are not specified in the programme. Indeed, the update itself states that further reforms are needed on the labour market and in the social security systems. In addition, a significant risk stems from the planned company tax reform in 2008 beyond the budgetary burden estimated in the programme. Thus, it might prove necessary to compensate possible shortfalls in company tax revenues through additional expenditure restraint. Abstracting from that reform, the revenue projections seem prudent. Nevertheless, overall, negative risks to the budgetary adjustment remain, in particular from the implementation of the adjustment path in the outer years.11.  In view of this risk assessment, the budgetary stance in the programme is consistent with a correction of the excessive deficit by 2006, one year ahead of the deadline set by the Council. In addition, it seems to provide a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations as from 2007, although subject to some risks for 2008. In the years following the correction of the excessive deficit, the pace of the adjustment towards the MTO implied by the programme should be strengthened, especially in 2008, to be in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0.5% of GDP as a benchmark and that the adjustment should be higher in "good" economic times and could be lower in "bad" economic times. In particular, no improvement in the structural balance is planned for 2008, at a time when economic "good times" are expected to prevail. Meeting the required structural adjustment path would actually allow the MTO to be reached by the programme horizon.12.  Government gross debt is estimated to have levelled off at 67.9% of GDP in 2006, above the 60% of GDP Treaty reference value. The programme projects the debt ratio to decline by 3½ percentage points over the programme period. The evolution of the debt ratio may turn out to be less favourable than projected in the programme given the risks to the deficit targets and uncertainty about the debt-reducing stock-flow adjustments assumed in the programme. In view of this risk assessment, the debt ratio may not be sufficiently diminishing towards the reference value over the programme period.13.  The long-term budgetary impact of ageing in Germany is close to the EU average, though with pension expenditure showing a somewhat smaller increase than in many other countries, as a result of the pension reforms already enacted. A draft law has been adopted to raise the statutory retirement age in steps to 67 years, from 2012 onwards. Although exemptions to the higher age limit are being granted, the move will enhance the long-term sustainability of public finances. In addition, developing further private pension arrangements would contribute positively to retirement incomes. The initial budgetary position constitutes a risk to sustainable public finances even before the long-term budgetary impact of ageing populations is considered. Moreover, the current level of gross debt is above the Treaty reference value. Overall, Germany appears to be at medium risk with regard to the sustainability of public finances.14.  The stability programme does not contain a qualitative assessment of the overall impact of the October 2006 implementation report of the National Reform Programme within the medium-term fiscal strategy. In addition, it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the National Reform Programme and its budgetary projections do not explicitly take into account the public finance implications of the actions outlined in the National Reform Programme. The measures in the area of public finances that are mentioned in the stability programme seem consistent with those foreseen in the national reform programme. In particular, the company tax reform 2008 and the health care reform are put forward in both programmes. Moreover, both programmes envisage, as the second stage of the reform of the federal system, a review of the fiscal relations between levels of government in order to strengthen the accountability of each level. In addition, the stability programme recognises in this context the necessity to develop an institutional framework that would ensure budgetary discipline at all levels of government and foresee measures to pre-empt emerging budgetary crises.15.  The envisaged measures in the area of public finances are broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.16.  As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has some gaps in the required and optional data[6].Overall, the updated programme is deemed consistent with a correction of the excessive deficit as of 2006, one year before the deadline set by the Council, and some progress towards the medium term objective will be made in the subsequent years. However, there are risks linked to the achievement of the budgetary targets.In view of the above assessment, Germany is invited to:(i) benefiting from economic "good times", strengthen the structural adjustment towards the medium-term objective in 2008 and thereafter: by maintaining tight control over expenditures, while ensuring that the announced reform of the corporate tax system does not jeopardise the fiscal consolidation;(ii) in view of the level of debt and the projected increase in age-related spending, improve long-term sustainability of public finances by achieving the MTO and by implementing reforms, particularly in the health care system;(iii) improve the budgetary framework so as to strengthen fiscal discipline at all levels of government, notably by implementing the plans for the second stage of the reform of the federal system.Comparison of key macroeconomic and budgetary projections2005 | 2006 | 2007 | 2008 | 2009 | 2010 |Real GDP (% change) | SP Nov 2006 | 0.9 | 2.3 | 1.4 | 1 ¾ | 1 ¾ | 1 ¾ |COM Nov 2006 | 0.9 | 2.4 | 1.4 | 2.0 | -- | -- |SP Feb 2006 | 0.9 | 1 ½ | 1 | 1 ¾ | 1 ¾ | -- |HICP inflation (%) | SP Nov 2006 | -- | -- | -- | -- | -- | -- |COM Nov 2006 | 1.9 | 1.8 | 2.2 | 1.2 | -- | -- |SP Feb 2006 | -- | -- | -- | -- | -- | -- |Output gap (% of potential GDP) | SP Nov 20061 | -1.2 | -0.3 | -0.3 | -0.2 | 0.0 | 0.0 |COM Nov 20065 | -1.3 | -0.2 | -0.4 | 0.1 | -- | -- |SP Feb 20061 | -0.9 | -0.7 | -1.1 | -0.7 | -0.4 | -- |General government balance (% of GDP) | SP Nov 2006 | -3.2 | -2.1 | -1 ½ | -1 ½ | -1 | -½ |COM Nov 2006 | -3.2 | -2.3 | -1.6 | -1.2 | -- | -- |SP Feb 2006 | -3.3 | -3.3 | -2 ½ | -2 | -1 ½ | -- |Primary balance (% of GDP) | SP Nov 2006 | -0.5 | 1/2 | 1 | 1 | 1 ½ | 2 |COM Nov 2006 | -0.5 | 0.4 | 1.1 | 1.5 | -- | -- |SP Feb 2006 | -0.5 | - ½ | ½ | 1 ¼ | 1 ½ | -- |Cyclically-adjusted balance (% of GDP) | SP Nov 20061 | -2.6 | -2.0 | -1.5 | -1.5 | -1.0 | -0.6 |COM Nov 2006 | -2.6 | -2.2 | -1.4 | -1.2 | -- | -- |SP Feb 20061 | -2.9 | -2.9 | -1.8 | -1.5 | -1.1 | -- |Structural balance2 (% of GDP) | SP Nov 20063 | -2.7 | -2.0 | -1.5 | -1.5 | -1.0 | -0.6 |COM Nov 20064 | -2.7 | -2.2 | -1.4 | -1.2 | -- | -- |SP Feb 2006 | -3.0 | -2.9 | -1.8 | -1.5 | -1.1 | -- |Government gross debt (% of GDP) | SP Nov 2006 | 67.9 | 67.9 | 67 | 66 ½ | 65 ½ | 64 ½ |COM Nov 2006 | 67.9 | 67.8 | 67.7 | 67.3 | -- | -- |SP Feb 2006 | 67 ½ | 69 | 68 ½ | 68 | 67 | -- |Notes: 1Commission services calculations on the basis of the information in the programme. 2Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures. 3One-off and other temporary measures taken from the programme (deficit-increasing 0.1% of GDP in 2005). 4One-off and other temporary measures taken from the Commission services’ autumn 2006 forecast (deficit-increasing 0.1% of GDP in 2005). 5Based on estimated potential growth of 1.2%, 1.3%, 1.4% and 1.4% respectively in the period 2005-2008. Source: Stability programme (SP); Commission services’ autumn 2006 economic forecasts (COM); Commission services’ calculations |[1] OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). All the documents referred to in this text can be found at the following website:http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm[2] Communication from the Commission to the Spring European Council, “Implementing the renewed Lisbon strategy for growth and jobs - A year of delivery” - COM(2006) 816, 12.12.2006.[3] Communication from the Commission to the Council and the European Parliament, “The long-term sustainability of public finances in the EU” - COM(2006) 574, 12.10.2006 - and European Commission, Directorate-General for Economic and Financial Affairs (2006), “The long-term sustainability of public finances in the European Union”, European Economy No 4/2006.[4] “Specifications on the implementation of the Stability and Growth Pact and guidelines on the format and content of stability and convergence programmes”, endorsed by the ECOFIN Council of 11 October 2005.[5] OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm[6] In particular, data on HICP inflation, total social transfers and the stock-flow adjustment are not provided in the programme, as well as compensation of employees and the break-down of tax revenues, which were provided separately to the Commission.


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		52013DC0364

			Recommendation for a COUNCIL RECOMMENDATION on Latvia’s 2013 national reform programme and delivering a Council opinion on Latvia’s convergence programme for 2012-2016 /* COM/2013/0364 final */

Recommendation for a
COUNCIL RECOMMENDATION
on Latvia’s 2013 national reform programme
and delivering a Council opinion on Latvia’s convergence programme for
2012-2016

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,
After consulting the Economic and Financial
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, which will focus on the key areas where action is needed to boost Europe’s potential for sustainable growth and competitiveness.
(2)       On 13 July 2010, on the
basis of the Commission's proposals, the Council adopted a recommendation on
the broad guidelines for the economic policies of the Member States and the
Union (2010 to 2014) and, on 21 October 2010, adopted a decision on guidelines
for the employment policies of the Member States[4],
which together form the ‘integrated guidelines’. Member States were invited to
take the integrated guidelines into account in their national economic and
employment policies.
(3)       On 29 June 2012, the Heads
of State or Government decided on a Compact for Growth and Jobs, providing a
coherent framework for action at national, EU and euro area levels using all
possible levers, instruments and policies. They decided on action to be taken
at the level of the Member States, in particular expressing full commitment to
achieving the objectives of the Europe 2020 Strategy and to implementing the
country-specific recommendations.
(4)       On 6 July 2012, the
Council adopted a recommendation on Latvia’s national reform programme for 2012
and delivered its opinion on Latvia’s updated convergence programme for 2011-2015.
(5)       On 28 November 2012, the
Commission adopted the Annual Growth Survey[5],
marking the start of the 2013 European Semester of economic policy
coordination. Also on 28 November 2012, the Commission, on the basis of
Regulation (EU) No 1176/2011, adopted the Alert Mechanism Report[6], in which it did not identify Latvia as one of the Member States for which an in-depth review would be carried out.
(6)       On 14 March 2013, the
European Council endorsed the priorities for ensuring financial stability,
fiscal consolidation and action to foster growth. It underscored the need to
pursue differentiated, growth-friendly fiscal consolidation, to restore normal
lending conditions to the economy, to promote growth and competitiveness, to
tackle unemployment and the social consequences of the crisis, and to modernise
public administration.
(7)       On 29 April 2013, Latvia
submitted its 2013 convergence programme covering the period 2012-2016 and, on 2
May 2013, its 2013 national reform programme. In order to take account of their
interlinkages, the two programmes have been assessed at the same time.
(8)       Based on the assessment of
the 2013 convergence programme pursuant to Council Regulation (EC) No 1466/97,
the Council is of the opinion that the macroeconomic scenario underpinning the
budgetary projections in the programme is plausible. Economic growth is
expected to slow down somewhat, to around 4% per year, over the programme
period, while price increases are projected to remain moderate. The general government
deficit declined in 2012 to a level well below 3% of GDP and the medium-term
objective (MTO) was reached in that year, considerably earlier than what was
foreseen in the previous programme. The programme confirms the previous MTO of
-0.5%, which adequately reflects the objectives of the Pact. The objective of
the budgetary strategy outlined in the programme is to maintain a structural
budgetary position which is based on the MTO, with any deviation limited to the
incremental impact of systemic pension reform; this reform entails a gradual
increase in the share of social security contributions which is diverted to a
funded pension scheme and is implemented in 2013, 2015 and 2016. However,
following an overall assessment with the recalculated structural balance as a
reference, including an analysis of expenditure net of discretionary measures,
it appears that the structural balance is set to deviate from the MTO by 1.0
pp. of GDP in 2013, i.e. significantly more than the incremental impact of the
systemic pension reform, and by further 0.2 pp. in 2014. Government debt is set
to remain well below 60% over the whole programme period, increasing from 40.7%
of GDP in 2012 to 44.5% in 2013, as the government accumulates assets for debt
repayments, and is declining from 2014 as repayments take effect, reaching
34.6% by the end of the programme period. The Fiscal
Discipline Law was approved by the Latvian Parliament in January 2013 and
entered into force in March 2013. If effectively
implemented, the new law would considerably strengthen the fiscal framework in Latvia, providing an effective mechanism to limit expenditure growth in good economic times
and serving as a basis for rules-based multi-annual budgeting.
(9)       Latvia has reduced taxes on labour and plans to
take further steps in this regard in 2014 and 2015. However, the tax wedge for low-wage earners is still among the highest in
the EU, indicating a need for appropriate calibration of tax policy to
stimulate employment for the low-skilled. Moreover, shifting taxation from labour to recurrent property taxes and taxes
on the use of natural and other resources should improve the structural
balance. Environmental taxes remain relatively underdeveloped and are heavily
dominated by motor-fuel taxation, while taxation of other energy sources,
pollution and the use of natural resources is below the EU average. Further
broadening of the tax base to include other sources of environmental taxation
would help in achieving environmental goals. The government has stepped up
efforts to combat the informal economy and these efforts should be maintained.
(10)     While the post-crisis
structural adjustment has been successful, the experience of a pronounced
boom-bust cycle calls for monitoring future credit growth and the stability of
the bank funding base related to foreign deposit inflows by appropriate micro-
and macro-prudential policies.
(11)     Latvia has taken a number
of steps to tackle high long-term and youth unemployment. Funding and coverage
of active labour market policies was increased in 2013 as compared to 2012, new
measures are being implemented, including profiling of the unemployed and
improved job search assistance. Nevertheless, long term unemployment and youth
unemployment are still high, activation of the unemployed and benefit
recipients is low and access to social services is poor. There are concerns
that vocational education and training is failing to provide sufficient quality
of skills for the workforce and there is limited availability of quality
work-based training. Establishment of comprehensive career guidance and
continued implementation of reforms in vocational education and training,
including improving the quality and the accessibility of its work-based
learning and apprenticeship components are necessary.
(12)     A high proportion of the
Latvian population is at risk of poverty or social exclusion (40%) and for
children it is even higher (43.6%). Overall, the at-risk-of-poverty rate
increased slightly in 2012, suggesting that growth does not automatically
translate into less poverty, and targeted policies are necessary. Latvia has taken some steps to address poverty of unemployed and children. However, there
has been less direct action to address the problems of the social assistance
system in particular in relation to transparency, benefit adequacy and
coverage, and insufficient activation measures for benefit recipients. Lack of
fiscal space has led Latvia to decrease the level of guaranteed minimum income
(GMI) and to abolish the state budget financing of the GMI benefit. These
decisions are likely to aggravate extreme poverty and exacerbate the existing
inequality in access to social assistance across local governments, while
reducing central government incentives to invest in policy development and
control of social assistance. It
is important to monitor the effects of these decisions to prevent any
deterioration in the situation.
(13)     Latvia has proposed an
ambitious reform that can be expected to have a significant positive impact on
the quality of its higher education system. Reform plans cover an overhaul of
the accreditation process, the separation of academic and management functions
of the universities, the development of a new financing model, and a consolidation
of the higher education institutions. However, the plans are still at an early
stage and need to be properly implemented to ensure that the foreseen positive
impacts materialise. Moreover, in 2013, an evaluation will be carried out of
the effectiveness of scientific institutions and their development strategies.
This important assessment should help underpin future reform and funding of
scientific institutions, in support of increased innovation activity in Latvia.
(14)     Latvia has put forward
policy measures addressing energy savings for the main sectors of the economy.
It is expected that in coming years more than 70 % of energy savings will
be generated in the buildings sector. However, the implementation of housing
insulation projects has been slow and the number of completed projects remains
small relative to the stock of buildings, with large energy losses. The
potential for efficiency gains in this field is significant as energy intensity
of Latvian households was the highest in the EU in 2010. In 2012, Latvia made progress in opening its electricity market to competition and participation in
regional markets. Direct contracting with electricity suppliers is fully
enforced in the business sector and is introduced on voluntary basis for
households. Latvia is set to join Nord Pool Spot trading in June 2013. However,
there has been no progress in opening the natural gas market and a
single-source dependency prevails. The authorities are also facing difficult
negotiations on the ownership and management of the gas storage facility, which
is of high importance for the proper functioning of the regional gas market.
(15)     The Latvian judicial system
is characterised by inefficiencies in the civil justice system. The system
combines several unfavourable factors such as lengthy proceedings to solve
civil and commercial cases in first instance and low clearance rates leading to
a backlog of court cases. Disposition times are particularly long for
insolvency proceedings. Moreover, many cases do not get resolved at first
instance, which creates delays at all levels, up to the Supreme Court. Positive
steps to improve the efficiency and quality of the system have been taken
recently, but it is too early to assess their impact. It is particularly
important to devote sufficient attention to human resources management policies
within the judiciary. Stronger involvement of the Judicial Council, rethinking
of the role of management positions within the judiciary and more training of
judges could contribute to a higher quality judiciary. Amendments to the Law on
Insolvency were proposed by the end of 2012. However, the scope of the
amendments is limited and does not address the shortcomings of the law in a
comprehensive way. For instance, problems have been identified in relation to
the practical implementation of the law, in particular with regard to the role
of the insolvency practitioners, their responsibilities with regard to the
judges and the effective liquidation of assets, as well as issues with personal
insolvencies, which also need to be addressed.
(16)     In the context of the
European Semester, the Commission has carried out a comprehensive analysis of Latvia’s economic policy. It has assessed the convergence programme and national reform
programme. It has taken into account not only their relevance for sustainable
fiscal and socio-economic policy in Latvia but also their compliance with EU
rules and guidance, given the need to reinforce the overall economic governance
of the European Union by providing EU-level input into future national
decisions. Its recommendations under the European Semester are
reflected in recommendations (1) to (6) below.
(17)     In the light of this
assessment, the Council has examined Latvia’s convergence programme, and its
opinion[7]
is reflected in particular in recommendation (1) below,
HEREBY RECOMMENDS that Latvia should take action within the period 2013-2014 to:
1.           Reinforce the budgetary
strategy to ensure that the deviation from the MTO only reflects the
incremental impact of the systemic pension reform. Within this strategy, reduce
taxation of low-income earners by shifting taxation to areas such as excise
duties, recurrent property taxes and/or environmental taxes. Maintain efforts
to improve tax compliance and combat the shadow economy. Continue strengthening
the fiscal framework through effective implementation of the Fiscal Discipline
Law and multi-annual budgeting.
2.           Tackle long-term and youth
unemployment by increasing coverage and effectiveness of active labour market
policies and targeted social services. Improve the employability of young
people, for example through a Youth Guarantee, establish comprehensive career
guidance, implement reforms in the field of vocational education and training,
and improve the quality and accessibility of apprenticeships.
3.           Tackle high rates of poverty
by reforming social assistance for better coverage, by improving benefit
adequacy and strengthening activation measures for benefit recipients. Reinforce
the delivery mechanisms to effectively reduce child poverty.
4.           Implement the planned
reforms of higher education concerning, in particular, the establishment of a quality-rewarding
financing model, reform of the accreditation system, consolidation of the
institutions and promotion of internationalization. Take further steps to
modernise research institutions based on the on-going independent assessment.
5.           Continue improving energy
efficiency, especially of residential buildings and district heating networks,
provide incentives for reducing energy costs and shift consumption towards
energy-efficient products. Improve connectivity with EU energy networks and
take steps towards liberalisation of the natural gas market, including
provision of clear rules for third-party access to storage capacities.
6.           Complete pending reforms
to improve the efficiency and quality of the judiciary and reduce the backlog
and length of proceedings, including as regards insolvency. Put in place a
comprehensive human resources policy and take steps to implement the mediation
laws and streamline the arbitration court system.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 2.8.1997, p. 1.
[2]               COM(2013) 364 final.
[3]               P7_TA(2013)0052 and P7_TA(2013)0053.
[4]               Council Decision2013/208/EU of 22 April 2013.
[5]               COM(2012) 750 final.
[6]               COM(2012) 751 final.
[7]               Under Article 9(2) of Council Regulation (EC) No
1466/97.