title: Recommendation of the European Central Bank of 31 May 2007 amending Recommendation ECB/2004/16 on the statistical reporting requirements of the European Central Bank in the field of balance of payments and international investment position statistics, and the international reserves template (ECB/2007/4)

text:
               20.6.2007

               EN

               Official Journal of the European Union

               C 136/6

      RECOMMENDATION OF THE EUROPEAN CENTRAL BANK

   of 31 May 2007
   amending Recommendation ECB/2004/16 on the statistical reporting requirements of the European Central Bank in the field of balance of payments and international investment position statistics, and the international reserves template
   (ECB/2007/4)
   (2007/C 136/02)
   THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK,
   Having regard to the Statute of the European System of Central Banks and of the European Central Bank, and in particular Article 5.1 thereof,
   Whereas:

               (1)

               The first sentence of Article 5.1 of the Statute requires the European Central Bank (ECB), assisted by the national central banks (NCBs), to collect either from the competent authorities other than NCBs or directly from economic agents the statistical information necessary in order for it to undertake the tasks of the European System of Central Banks (ESCB). The second sentence of Article 5.1 of the Statute provides that for these purposes the ECB must cooperate with the Community institutions or bodies and with the competent authorities of the Member States or third countries and with international organisations.

               (2)

               Information that is necessary to meet the ECB's requirements in the field of balance of payments and international investment position statistics may be collected and/or compiled by competent authorities other than NCBs. Therefore, some of the tasks to be undertaken to meet these requirements require cooperation between the ECB or the NCBs and such competent authorities, in line with Article 5.1 of the Statute. Article 4 of Council Regulation (EC) No 2533/98 of 23 November 1998 concerning the collection of statistical information by the European Central Bank (1) requires the Member States to organise themselves in the field of statistics and to cooperate fully with the ESCB in order to ensure the fulfilment of the obligations arising out of Article 5 of the Statute.

               (3)

               When further Member States adopt the euro, it will be necessary to compile back data for the euro area aggregate in its new composition on balance of payments (including the seasonally adjusted current account) and international investment position statistics. Certain amendments to Recommendation ECB/2004/16 of 16 July 2004 on the statistical reporting requirements of the European Central Bank in the field of balance of payments and international investment position statistics (2) are therefore required to cater for future enlargements of the euro area in respect of the provision of back data. The period for which such back data must be provided may be reassessed by 2010. In the case of Ireland and Italy, such data would have to be reported by the addressees of this Recommendation,

         HAS ADOPTED THIS RECOMMENDATION:
   Article 1
   Annexes I, III, IV and VII to Recommendation ECB/2004/16 are amended in accordance with Annexes I, II, III and IV, respectively, to this recommendation.
   Article 2
   Addressees
   This recommendation is addressed to the Central Statistics Office (CSO) in Ireland and the Ufficio Italiano dei Cambi (UIC) in Italy.

      Done at Frankfurt am Main, 31 May 2007.

            For the Governing Council of the ECB

            The President of the ECB

         Jean-Claude TRICHET

      (1)  OJ L 318, 27.11.1998, p. 8.

      (2)  OJ C 292, 30.11.2004, p. 21.

      ANNEX I
      Annex I to Recommendation ECB/2004/16 is amended as follows:

                  1.

                  Paragraph 1.6 is replaced by the following:
                  ‘From March 2008, starting with data corresponding to January 2008 transactions and to end-2007 positions, portfolio investment collection systems shall conform to one of the models set out in the table contained in Annex VII. The chosen model may be phased in to enable the individual NCB to reach the target coverage indicated in Annex VII at the latest by March 2009, in relation to December 2008 stocks.’

                  2.

                  The following subparagraph 1.7 is added at the end of paragraph 1:

                              ‘1.7

                                          (a)

                                          In respect of any Member State that adopts the euro on or after 1 January 2007, both the NCB of that Member State and the NCBs of all other participating Member States at the time such Member State adopts the euro shall provide the ECB with back data corresponding to the data required under Tables 1 to 8 of Annex III, to enable the compilation of aggregates covering the euro area in its new composition. These NCBs shall provide the back data from the reference dates set out below, with the exception of the breakdowns listed under Table 13, for which the earliest reference period to be reported shall be the one indicated in that table. All back data may be provided on a best estimate basis.

                                                      (i)

                                                      If the Member State that adopts the euro joined the EU before May 2004, the back data shall cover, as a minimum, the period from 1999.

                                                      (ii)

                                                      If the Member State that adopts the euro joined the EU in May 2004, the back data shall cover, as a minimum, the period from 2004.

                                                      (iii)

                                                      If the Member State that adopts the euro joined the EU after May 2004, the back data shall cover, as a minimum, the period from the date on which that Member State joined the EU.

                                          (b)

                                          If the back data referred to in subparagraph (a) do not already include monthly observations covering five years for each of the four main sub-items of the balance of payments current account, namely goods, services, income and current transfers, then the NCBs shall ensure that the data which they provide include such observations.’

                  3.

                  Subparagraph 2.6 is replaced by the following:
                  ‘Transactions and positions in debt securities broken down by currency of issue shall be made available to the ECB within six months of the end of the period to which the data relate.’

                  4.

                  The following new subparagraph 4.4a is inserted:

                              ‘4.4a

                              Best estimates are permitted for the following breakdowns in Table 2 of Annex III:

                                          (a)

                                          sub-items of income on other investment: I C 2.3.1 to C 2.3.3, and memorandum items 1 to 4;

                                          (b)

                                          sub-items of current transfers: I D 1.1 to D 1.8 and D 2.2.1 to D 2.2.11; and

                                          (c)

                                          sub-items of capital transfers: II A.1 and A.2.’

      ANNEX II
      Annex III to Recommendation ECB/2004/16 is amended as follows:

                  1.

                  Table 2 is replaced by the following:
                  ‘Table 2
                  Quarterly national contributions to the euro area balance of payments (1)

                              Credit

                              Debit

                              Net

                                          I.

                                          Current account

                                          A.

                                          Goods

                              extra

                              extra

                              extra

                                          B.

                                          Services

                              extra

                              extra

                              extra

                                          C.

                                          Income

                                          1.

                                          Compensation of employees

                              extra

                              extra

                              extra

                                          2.

                                          Investment income

                                          2.1.

                                          Direct investment

                              extra

                              extra

                              extra

                                          2.1.1.

                                          Income on equity

                              extra

                              extra

                              extra

                                          2.1.1.1.

                                          Dividends and distributed profit

                              extra

                              extra

                              extra

                                          2.1.1.2.

                                          Reinvested earnings and undistributed profit

                              extra

                              extra

                              extra

                                          2.1.2.

                                          Income on debt (interest)

                              extra

                              extra

                              extra

                                          2.2.

                                          Portfolio investment

                              extra

                              national

                                          2.2.1.

                                          Income on equity

                              extra

                              national

                                          2.2.2.

                                          Income on debt (interest)

                              extra

                              national

                                          2.2.2.1.

                                          Bonds and notes

                              extra

                              national

                                          2.2.2.2.

                                          Money market instruments

                              extra

                              national

                                          2.3.

                                          Other investment

                              extra

                              extra

                              extra

                                          2.3.1.

                                          Interest according to BPM5 (not adjusted for FISIM (2))

                              extra

                              extra

                              extra

                                          2.3.2.

                                          Income attributed to insurance policyholders

                              extra

                              extra

                              extra

                                          2.3.3.

                                          Other

                              extra

                              extra

                              extra

                              Memorandum item:

                                          1.

                                          investment income — interest according to the SNA93  (3)(adjusted for FISIM)

                              extra

                                          2.

                                          value of FISIM

                              extra

                              extra

                              extra

                                          3.

                                          investment income — interest according to BPM5 (not adjusted for FISIM)

                              extra

                                          4.

                                          investment income — other than interest

                              extra

                                          D.

                                          Current transfers

                              extra

                              extra

                              extra

                                          1.

                                          General government

                              extra

                              extra

                              extra

                                          1.1.

                                          taxes on products

                              extra

                              extra

                              extra

                                          1.2.

                                          other taxes on production

                              extra

                              extra

                              extra

                                          1.3.

                                          subsidies on products

                              extra

                              extra

                              extra

                                          1.4.

                                          other subsidies on production

                              extra

                              extra

                              extra

                                          1.5.

                                          taxes on income, wealth, etc.

                              extra

                              extra

                              extra

                                          1.6.

                                          social contributions

                              extra

                              extra

                              extra

                                          1.7.

                                          social benefits other than social transfers in kind

                              extra

                              extra

                              extra

                                          1.8.

                                          other current transfers of general government

                              extra

                              extra

                              extra

                                          2.

                                          Other sectors

                              extra

                              extra

                              extra

                                          2.1.

                                          workers' remittances

                              extra

                              extra

                              extra

                                          2.2.

                                          other transfers

                              extra

                              extra

                              extra

                                          2.2.1.

                                          taxes on products

                              extra

                              extra

                              extra

                                          2.2.2.

                                          other taxes on production

                              extra

                              extra

                              extra

                                          2.2.3.

                                          subsidies on products

                              extra

                              extra

                              extra

                                          2.2.4.

                                          other subsidies on production

                              extra

                              extra

                              extra

                                          2.2.5.

                                          taxes on income, wealth, etc.

                              extra

                              extra

                              extra

                                          2.2.6.

                                          social contributions

                              extra

                              extra

                              extra

                                          2.2.7.

                                          social benefits other than social transfers in kind

                              extra

                              extra

                              extra

                                          2.2.8.

                                          net non-life insurance premiums

                              extra

                              extra

                              extra

                                          2.2.9.

                                          non-life insurance claims

                              extra

                              extra

                              extra

                                          2.2.10.

                                          other current transfers of other sectors not included elsewhere

                              extra

                              extra

                              extra

                                          2.2.11.

                                          adjustment for the change in net equity of households in pension fund reserves

                              extra

                              extra

                              extra

                                          II.

                                          Capital account

                              extra

                              extra

                              extra

                                          A.

                                          Capital transfers

                              extra

                              extra

                              extra

                                          1.

                                          capital taxes

                              extra

                              extra

                              extra

                                          2.

                                          investment grants and other capital transfers

                              extra

                              extra

                              extra

                                          B.

                                          Acquisition/disposal of non-produced non-financial assets

                              extra

                              extra

                              extra

                              Net assets

                              Net liabilities

                              Net

                                          III.

                                          Financial account

                                          1.

                                          Direct investment

                              extra

                                          1.1.

                                          Abroad

                              extra

                                          1.1.1.

                                          Equity capital

                              extra

                                          1.1.1.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.1.1.2.

                                          Other sectors

                              extra

                                          1.1.2.

                                          Reinvested earnings

                              extra

                                          1.1.2.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.1.2.2.

                                          Other sectors

                              extra

                                          1.1.3.

                                          Other capital

                              extra

                                          1.1.3.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.1.3.2.

                                          Other sectors

                              extra

                                          1.2.

                                          In the reporting country

                              extra

                                          1.2.1.

                                          Equity capital

                              extra

                                          1.2.1.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.2.1.2.

                                          Other sectors

                              extra

                                          1.2.2.

                                          Reinvested earnings

                              extra

                                          1.2.2.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.2.2.2.

                                          Other sectors

                              extra

                                          1.2.3.

                                          Other capital

                              extra

                                          1.2.3.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.2.3.2.

                                          Other sectors

                              extra

                                          2.

                                          Portfolio investment

                              intra/extra

                              national

                                          2.1.

                                          Equity securities

                              intra/extra

                              national

                                 of which: Investment funds and money market funds shares

                              intra/extra

                              national

                                          (i)

                                          held by monetary authorities

                              extra

                                          (ii)

                                          held by general government

                              extra

                                          (iii)

                                          held by MFIs (excluding central banks)

                              extra

                                          (iv)

                                          held by other sectors

                              extra

                                          2.1.1.

                                          Held by monetary authorities

                              extra

                                          2.1.2.

                                          Held by general government

                              extra

                                          2.1.3.

                                          Issued by MFIs (excluding central banks)

                              intra

                              national

                                          2.1.4.

                                          Held by MFIs (excluding central banks)

                              extra

                                          2.1.5.

                                          Issued by other sectors

                              intra

                              national

                                          2.1.6.

                                          Held by other sectors

                              extra

                                          2.2.

                                          Debt securities

                              intra/extra

                              national

                                          2.2.1.

                                          Bonds and notes

                              intra/extra

                              national

                                          2.2.1.1.

                                          Issued by monetary authorities

                              intra

                              national

                                          2.2.1.2.

                                          Held by monetary authorities

                              extra

                                          2.2.1.3.

                                          Issued by general government

                              intra

                              national

                                          2.2.1.4.

                                          Held by general government

                              extra

                                          2.2.1.5.

                                          Issued by MFIs (excluding central banks)

                              intra

                              national

                                          2.2.1.6.

                                          Held by MFIs (excluding central banks)

                              extra

                                          2.2.1.7.

                                          Issued by other sectors

                              intra

                              national

                                          2.2.1.8.

                                          Held by other sectors

                              extra

                                          2.2.2.

                                          Money market instruments

                              intra/extra

                              national

                                          2.2.2.1.

                                          Issued by monetary authorities

                              intra

                              national

                                          2.2.2.2.

                                          Held by monetary authorities

                              extra

                                          2.2.2.3.

                                          Issued by general government

                              intra

                              national

                                          2.2.2.4.

                                          Held by general government

                              extra

                                          2.2.2.5.

                                          Issued by MFIs (excluding central banks)

                              intra

                              national

                                          2.2.2.6.

                                          Held by MFIs (excluding central banks)

                              extra

                                          2.2.2.7.

                                          Issued by other sectors

                              intra

                              national

                                          2.2.2.8.

                                          Held by other sectors

                              extra

                                          3.

                                          Financial derivatives

                              national

                                          3.1.

                                          Monetary authorities

                              national

                                          3.2.

                                          General government

                              national

                                          3.3.

                                          MFIs (excluding central banks)

                              national

                                          3.4.

                                          Other sectors

                              national

                                          4.

                                          Other investment

                              extra

                              extra

                              extra

                                          4.1.

                                          Monetary authorities

                              extra

                              extra

                                          4.1.1.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.1.2.

                                          Other assets/liabilities

                              extra

                              extra

                                          4.2.

                                          General government

                              extra

                              extra

                                          4.2.1.

                                          Trade credits

                              extra

                              extra

                                          4.2.2.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.2.2.1.

                                          Loans

                              extra

                                          4.2.2.2.

                                          Currency and deposits

                              extra

                                          4.2.3.

                                          Other assets/liabilities

                              extra

                              extra

                                          4.3.

                                          MFIs (excluding central banks)

                              extra

                              extra

                                          4.3.1.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.3.2.

                                          Other assets/liabilities

                              extra

                              extra

                                          4.4.

                                          Other sectors

                              extra

                              extra

                                          4.4.1.

                                          Trade credits

                              extra

                              extra

                                          4.4.2.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.4.2.1.

                                          Loans

                              extra

                                          4.4.2.2.

                                          Currency and deposits

                              extra

                                          4.4.3.

                                          Other assets/liabilities

                              extra

                              extra

                                          5.

                                          Reserve assets

                              extra

                                          5.1.

                                          Monetary gold

                              extra

                                          5.2.

                                          Special drawing rights

                              extra

                                          5.3.

                                          Reserve position in the IMF

                              extra

                                          5.4.

                                          Foreign exchange

                              extra

                                          5.4.1.

                                          Currency and deposits

                              extra

                                          5.4.1.1.

                                          with monetary authorities and the BIS

                              extra

                                          5.4.1.2.

                                          with MFIs (excluding central banks)

                              extra

                                          5.4.2.

                                          Securities

                              extra

                                          5.4.2.1.

                                          Equities

                              extra

                                          5.4.2.2.

                                          Bonds and notes

                              extra

                                          5.4.2.3.

                                          Money market instruments

                              extra

                                          5.4.3.

                                          Financial derivatives

                              extra

                                          5.5.

                                          Other claims

                              extra

                  2.

                  Table 4 is replaced by the following:
                  ‘Table 4
                  Quarterly national contributions to the euro area international investment position (4)

                              Assets

                              Liabilities

                              Net

                                          I.

                                          Direct Investment

                              extra

                                          1.1.

                                          Abroad

                              extra

                                          1.1.1.

                                                      —

                                                      Equity and reinvested earnings

                              extra

                                          1.1.1.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.1.1.2.

                                          Other sectors

                              extra

                                          1.1.2.

                                                      —

                                                      Other capital

                              extra

                                          1.1.2.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.1.2.2.

                                          Other sectors

                              extra

                                          1.2.

                                          In the reporting economy

                              extra

                                          1.2.1.

                                                      —

                                                      Equity and reinvested earnings

                              extra

                                          1.2.1.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.2.1.2.

                                          Other sectors

                              extra

                                          1.2.2.

                                                      —

                                                      Other capital

                              extra

                                          1.2.2.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.2.2.2.

                                          Other sectors

                              extra

                                          II.

                                          Portfolio Investment

                              national

                                          2.1.

                                          Equity securities

                              intra/extra

                              national

                                 of which: Investment funds and money market funds shares

                              intra/extra

                              national

                                          (i)

                                          held by monetary authorities

                              extra

                                          (ii)

                                          held by general government

                              extra

                                          (iii)

                                          held by MFIs (excluding central banks)

                              extra

                                          (iv)

                                          held by other sectors

                              extra

                                          2.1.1.

                                          Held by monetary authorities

                              extra

                                          2.1.2.

                                          Held by general government

                              extra

                                          2.1.3.

                                          Issued by MFIs (excluding central banks)

                              intra

                              national

                                          2.1.4.

                                          Held by MFIs (excluding central banks)

                              extra

                                          2.1.5.

                                          Issued by other sectors

                              intra

                              national

                                          2.1.6.

                                          Held by other sectors

                              extra

                                          2.2.

                                          Debt securities

                              intra/extra

                              national

                                          2.2.1.

                                          Bonds and notes

                              intra/extra

                              national

                                          2.2.1.1.

                                          Issued by monetary authorities

                              intra

                              national

                                          2.2.1.2.

                                          Held by monetary authorities

                              extra

                                          2.2.1.3.

                                          Issued by general government

                              intra

                              national

                                          2.2.1.4.

                                          Held by general government

                              extra

                                          2.2.1.5.

                                          Issued by MFIs (excluding central banks)

                              intra

                              national

                                          2.2.1.6.

                                          Held by MFIs (excluding central banks)

                              extra

                                          2.2.1.7.

                                          Issued by other sectors

                              intra

                              national

                                          2.2.1.8.

                                          Held by other sectors

                              extra

                                          2.2.2.

                                          Money market instruments

                              intra/extra

                              national

                                          2.2.2.1.

                                          Issued by monetary authorities

                              intra

                              national

                                          2.2.2.2.

                                          Held by monetary authorities

                              extra

                                          2.2.2.3.

                                          Issued by general government

                              intra

                              national

                                          2.2.2.4.

                                          Held by general government

                              extra

                                          2.2.2.5.

                                          Issued by MFIs (excluding central banks)

                              intra

                              national

                                          2.2.2.6.

                                          Held by MFIs (excluding central banks)

                              extra

                                          2.2.2.7.

                                          Issued by other sectors

                              intra

                              national

                                          2.2.2.8.

                                          Held by other sectors

                              extra

                                          III.

                                          Financial derivatives

                              extra

                              extra

                              extra

                                          3.1.

                                          Monetary authorities

                              extra

                              extra

                              extra

                                          3.2.

                                          General government

                              extra

                              extra

                              extra

                                          3.3.

                                          MFIs (excluding central banks)

                              extra

                              extra

                              extra

                                          3.4.

                                          Other sectors

                              extra

                              extra

                              extra

                                          IV.

                                          Other investment

                              extra

                              extra

                              extra

                                          4.1.

                                          Monetary authorities

                              extra

                              extra

                                          4.1.1.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.1.2.

                                          Other assets/liabilities

                              extra

                              extra

                                          4.2.

                                          General government

                              extra

                              extra

                                          4.2.1.

                                          Trade credits

                              extra

                              extra

                                          4.2.2.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.2.2.1.

                                          Loans

                              extra

                                          4.2.2.2.

                                          Currency and deposits

                              extra

                                          4.2.3.

                                          Other assets/liabilities

                              extra

                              extra

                                          4.3.

                                          MFIs (excluding central banks)

                              extra

                              extra

                                          4.3.1.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.3.2.

                                          Other assets/liabilities

                              extra

                              extra

                                          4.4.

                                          Other sectors

                              extra

                              extra

                                          4.4.1.

                                          Trade credits

                              extra

                              extra

                                          4.4.2.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.4.2.1.

                                          Loans

                              extra

                                          4.4.2.2.

                                          Currency and deposits

                              extra

                                          4.4.3.

                                          Other assets/liabilities

                              extra

                              extra

                                          V.

                                          Reserve assets

                              extra

                                          5.1.

                                          Monetary gold

                              extra

                                          5.2.

                                          Special drawing rights

                              extra

                                          5.3.

                                          Reserve position in the IMF

                              extra

                                          5.4.

                                          Foreign exchange

                              extra

                                          5.4.1.

                                          Currency and deposits

                              extra

                                          5.4.1.1.

                                          with monetary authorities and the BIS

                              extra

                                          5.4.1.2.

                                          with MFIs (excluding central banks)

                              extra

                                          5.4.2.

                                          Securities

                              extra

                                          5.4.2.1.

                                          Equities

                              extra

                                          5.4.2.2.

                                          Bonds and notes

                              extra

                                          5.4.2.3.

                                          Money market instruments

                              extra

                                          5.4.3.

                                          Financial derivatives

                              extra

                                          5.5.

                                          Other claims

                              extra

                  3.

                  Table 5 is replaced by the following:
                  ‘Table 5
                  Annual national contributions to the euro area international investment position (5)

                              Assets

                              Liabilities

                              Net

                                          I.

                                          Direct investment

                              extra

                                          1.1.

                                          Abroad

                              extra

                                          1.1.1.

                                                      —

                                                      Equity and reinvested earnings

                              extra

                                          1.1.1.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.1.1.2.

                                          Other sectors

                              extra

                                 of which:

                                          1.1.1.A

                                          Equity stocks in foreign listed companies (market values)

                              extra

                                          1.1.1.B

                                          Equity stocks in foreign unlisted companies (book value)

                              extra

                                 Memorandum item:

                                 Equity stocks in foreign listed companies (book values)

                              extra

                                          1.1.2.

                                                      —

                                                      Other capital

                              extra

                                          1.1.2.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.1.2.2.

                                          Other sectors

                              extra

                                          1.2.

                                          In the reporting economy

                              extra

                                          1.2.1.

                                                      —

                                                      Equity and reinvested earnings

                              extra

                                          1.2.1.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.2.1.2.

                                          Other sectors

                              extra

                                 of which:

                                          1.2.1.A

                                          Equity stocks in euro area listed companies (market values)

                              extra

                                          1.2.1.B

                                          Equity stocks in euro area unlisted companies (book values)

                              extra

                                 Memorandum item:

                                 Equity stocks in euro area listed companies (book values)

                              extra

                                          1.2.2.

                                                      —

                                                      Other capital

                              extra

                                          1.2.2.1.

                                          MFIs (excluding central banks)

                              extra

                                          1.2.2.2.

                                          Other sectors

                              extra

                                          II.

                                          Portfolio Investment

                              national

                                          2.1.

                                          Equity securities

                              intra/extra

                              national

                                 of which: Investment funds and money market funds shares

                              intra/extra

                              national

                                          (i)

                                          held by monetary authorities

                              extra

                                          (ii)

                                          held by general government

                              extra

                                          (iii)

                                          held by MFIs (excluding central banks)

                              extra

                                          (iv)

                                          held by other sectors

                              extra

                                          2.1.1.

                                          Held by monetary authorities

                              extra

                                          2.1.2.

                                          Held by general government

                              extra

                                          2.1.3.

                                          Issued by MFIs (excluding central banks)

                              intra

                              national

                                          2.1.4.

                                          Held by MFIs (excluding central banks)

                              extra

                                          2.1.5.

                                          Issued by other sectors

                              intra

                              national

                                          2.1.6.

                                          Held by other sectors

                              extra

                                          2.2.

                                          Debt securities

                              intra/extra

                              national

                                          2.2.1.

                                          Bonds and notes

                              intra/extra

                              national

                                          2.2.1.1.

                                          Issued by monetary authorities

                              intra

                              national

                                          2.2.1.2.

                                          Held by monetary authorities

                              extra

                                          2.2.1.3.

                                          Issued by general government

                              intra

                              national

                                          2.2.1.4.

                                          Held by general government

                              extra

                                          2.2.1.5.

                                          Issued by MFIs (excluding central banks)

                              intra

                              national

                                          2.2.1.6.

                                          Held by MFIs (excluding central banks)

                              extra

                                          2.2.1.7.

                                          Issued by other sectors

                              intra

                              national

                                          2.2.1.8.

                                          Held by other sectors

                              extra

                                          2.2.2.

                                          Money market instruments

                              intra/extra

                              national

                                          2.2.2.1.

                                          Issued by monetary authorities

                              intra

                              national

                                          2.2.2.2.

                                          Held by monetary authorities

                              extra

                                          2.2.2.3.

                                          Issued by general government

                              intra

                              national

                                          2.2.2.4.

                                          Held by general government

                              extra

                                          2.2.2.5.

                                          Issued by MFIs (excluding central banks)

                              intra

                              national

                                          2.2.2.6.

                                          Held by MFIs (excluding central banks)

                              extra

                                          2.2.2.7.

                                          Issued by other sectors

                              intra

                              national

                                          2.2.2.8.

                                          Held by other sectors

                              extra

                                          III.

                                          Financial derivatives

                              extra

                              extra

                              extra

                                          3.1.

                                          Monetary authorities

                              extra

                              extra

                              extra

                                          3.2.

                                          General government

                              extra

                              extra

                              extra

                                          3.3.

                                          MFIs (excluding central banks)

                              extra

                              extra

                              extra

                                          3.4.

                                          Other sectors

                              extra

                              extra

                              extra

                                          IV.

                                          Other investment

                              extra

                              extra

                              extra

                                          4.1.

                                          Monetary authorities

                              extra

                              extra

                                          4.1.1.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.1.2.

                                          Other assets/liabilities

                              extra

                              extra

                                          4.2.

                                          General government

                              extra

                              extra

                                          4.2.1.

                                          Trade credits

                              extra

                              extra

                                          4.2.2.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.2.2.1.

                                          Loans

                              extra

                                          4.2.2.2.

                                          Currency and deposits

                              extra

                                          4.2.3.

                                          Other assets/liabilities

                              extra

                              extra

                                          4.3.

                                          MFIs (excluding central banks)

                              extra

                              extra

                                          4.3.1.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.3.2.

                                          Other assets/liabilities

                              extra

                              extra

                                          4.4.

                                          Other sectors

                              extra

                              extra

                                          4.4.1.

                                          Trade credits

                              extra

                              extra

                                          4.4.2.

                                          Loans/currency and deposits

                              extra

                              extra

                                          4.4.2.1.

                                          Loans

                              extra

                                          4.4.2.2.

                                          Currency and deposits

                              extra

                                          4.4.3.

                                          Other assets/liabilities

                              extra

                              extra

                                          V.

                                          Reserve assets

                              extra

                                          5.1.

                                          Monetary gold

                              extra

                                          5.2.

                                          Special drawing rights

                              extra

                                          5.3.

                                          Reserve position in the IMF

                              extra

                                          5.4.

                                          Foreign exchange

                              extra

                                          5.4.1.

                                          Currency and deposits

                              extra

                                          5.4.1.1.

                                          with monetary authorities and the BIS

                              extra

                                          5.4.1.2.

                                          with MFIs (excluding central banks)

                              extra

                                          5.4.2.

                                          Securities

                              extra

                                          5.4.2.1.

                                          Equities

                              extra

                                          5.4.2.2.

                                          Bonds and notes

                              extra

                                          5.4.2.3.

                                          Money market instruments

                              extra

                                          5.4.3.

                                          Financial derivatives

                              extra

                                          5.5.

                                          Other claims

                              extra

                  4.

                  Table 9 is replaced by the following:
                  ‘Table 9
                  ECB geographical breakdowns for quarterly balance of payments flows and annual international investment position data

                              —

                              Denmark

                              —

                              Sweden

                              —

                              United Kingdom

                              —

                              EU Member States outside the euro area and excluding Denmark, Sweden and the United Kingdom (6)

                              —

                              EU institutions (7)

                              —

                              Switzerland

                              —

                              Canada

                              —

                              United States

                              —

                              Japan

                              —

                              Offshore centres (8)

                                          —

                                          of which: Hong Kong

                              —

                              International organisations excluding the EU institutions (9)

                              —

                              Brazil

                              —

                              China

                              —

                              India

                              —

                              Russian Federation’

                  5.

                  Table 13 is amended by inserting the following rows at the end of the Table:

                              ‘Income on equity breakdown

                              Quarterly b.o.p.
                              Items I. C.2.1.1.1 and C.2.1.1.2 (10)

                              Q4 2007

                              March 2008

                              Annex III, Table 2

                              Income on other investment breakdown

                              Quarterly b.o.p.
                              Items I. C.2.3.1 to C.2.3.3 (10)

                              Q4 2008

                              March 2009

                              Annex III, Table 2

                              Memorandum items 1 to 4 (10)

                              Q4 2008

                              March 2009

                              Annex III, Table 2

                              Current transfer breakdown

                              Quarterly b.o.p.
                              Items I. D.1, D.2, D.2.1 and D.2.2 (10)

                              Q4 2007

                              March 2008

                              Annex III, Table 2

                              Items I. D.1.1 to D.1.8 and D.2.2.1 to D 2.2.11 (10)

                              Q4 2008

                              March 2009

                              Annex III, Table 2

                              Capital account breakdown

                              Quarterly b.o.p.
                              Items II.A and II.B (10)

                              Q4 2007

                              March 2008

                              Annex III, Table 2

                              Items II.A.1 and II.A.2 (10)

                              Q4 2008

                              March 2009

                              Annex III, Table 2

                              Portfolio investment — equity securities — investment funds and money market funds shares

                              Quarterly b.o.p.

                              Q1 2010

                              June 2010

                              Annex III, Table 2

                              Quarterly i.i.p.

                              Q1 2010

                              June 2010

                              Annex III, Table 4

                              Annual i.i.p.

                              End December 2009

                              June 2010

                              Annex III, Table 5'

         (1)

                  “extra”

                  means transactions with non-euro area residents (for portfolio investment assets and related income it refers to the residency of the issuers)

                  “intra”

                  means transactions between different Member States of the euro area

                  “national”

                  means all cross-border transactions by residents of a participating Member State (used only in connection with liabilities on portfolio investment accounts and the net balance of the financial derivatives accounts)

         (2)  Financial intermediation services indirectly measured.

         (3)  System of National Accounts 1993.’

         (4)

                  “extra”

                  means positions with non-euro area residents (for portfolio investment assets, it refers to the residency of the issuers)

                  “intra”

                  means positions between different Member States of the euro area

                  “national”

                  means all cross-border positions by residents of a participating Member State (used only in connection with liabilities on portfolio investment accounts)’

         (5)

                  “extra”

                  means positions with non-euro area residents (for portfolio investment assets, it refers to the residency of the issuers)

                  “intra”

                  means positions between different Member States of the euro area

                  “national”

                  means all cross-border positions by residents of a participating Member State (used only in connection with liabilities on portfolio investment accounts)’

         (6)  No individual breakdown is required.

         (7)  See composition in Table 12. No individual breakdown is required.

         (8)  Only mandatory for the balance of payments financial account, the related income accounts and the international investment position. Current account (excluding income) flows vis-à-vis offshore centres may be reported either separately or indistinguishably under the residual item category. See composition in Table 11. No individual breakdown is required.

         (9)  See composition in Table 12. No individual breakdown is required.

         (10)  See Table 2 of Annex III’.

      ANNEX III
      Annex IV to Recommendation ECB/2004/16 is amended as follows:

                  1.

                  The following text is inserted immediately before Section 1:
                  ‘The terms “resident” and “residing” fall within the definitions laid down in Article 1.4 of Council Regulation (EC) No 2533/1998. In the case of the euro area, the economic territory comprises: (i) the economic territory of the participating Member States; and (ii) the ECB, which is regarded as a resident unit of the euro area.
                  The rest of the world (RoW) comprises the economic territories outside the euro area, i.e. Member States that have not adopted the euro, all third countries and international organisations, including those physically located within the euro area. All EU institutions (1) are considered to be resident outside the euro area. Consequently, all transactions of participating Member States vis-à-vis EU institutions are recorded and classified as non-euro area transactions in the euro area balance of payments and international investment position statistics.
                  In the cases set out below, residence is determined as follows:

                              (a)

                              staff from embassies and military bases are to be classified as residents of the country of the employing government, except if they have been recruited locally in the host country where the embassy or military base is located;

                              (b)

                              when undertaking cross-border transactions in land and/or buildings (e.g. holiday homes), property owners are treated as if they have transferred their ownership to a notional institutional unit that is actually resident in the country where the property is located. The notional unit is treated as being owned and controlled by the non-resident owner;

                              (c)

                              in the absence of any significant physical dimension to a legal entity, e.g. investment funds (as distinct from their managers), securitisation vehicles, and some special purpose entities, its residence is determined by the economic territory under whose laws the entity is incorporated. If the entity is not incorporated, legal domicile is used as a criterion, namely the country whose legal system governs the creation and continued existence of the entity.’

                  2.

                  In the third paragraph of subsection 1.1, the second sentence (‘The main difference is that the ECB does not require a breakdown of direct investment income on equity into distributed and undistributed profits.’) is deleted.

                  3.

                  The second paragraph of subsection 1.2 (‘While the IMF's standard components of the capital account consist of a sectoral breakdown into the items “general government” and “other sectors” (with a further breakdown thereafter), the ECB compiles only a lump-sum capital account, without any breakdown.’) is deleted.

         (1)  The ECB is not included.

      ANNEX IV
      Annex VII to Recommendation ECB/2004/16 is amended as follows:

                  1.

                  In the third paragraph, the second sentence (‘Therefore, if the “project closure document” for Phase 1 of the CSDB project is not submitted to the Governing Council via the Statistics Committee of the European System of Central Banks by the end of March 2005, this deadline will be postponed by the same amount of time as that by which the submission is late.’) is deleted.

                  2.

                  The sentence starting ‘From March 2008’ and ending ‘in the following table’ is replaced by the following sentence:
                  ‘From the date specified in paragraph 1.6 of Annex I, and taking into account the phasing-in option referred to in that paragraph, euro area portfolio investment collection systems conform to one of the models in the following table:’.


Avis juridique important

|

52004SC0833

Recommendation for a Council opinion in accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the convergence programme of Slovakia, 2004-2007  /* SEC/2004/0833 final */

Recommendation for a COUNCIL OPINION in accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the convergence programme of Slovakia, 2004-2007(presented by the Commission)EXPLANATORY MEMORANDUMCouncil Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies [1] stipulates that non-participating Member States, that is, those which have not adopted the single currency, have to submit convergence programmes to the Council and the Commission for the purpose of multilateral surveillance at regular intervals under Article 99 of the Treaty.[1]  OJ L 209, 2.8.1997. 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.In accordance with Article 9 of this Regulation, the Council has to examine each convergence programme based on assessments prepared by the Commission and the Committee set up by Article 114 of the Treaty (the Economic and Financial Committee). On the basis of a recommendation from the Commission and after consulting the Economic and Financial Committee, the Council is required to deliver an opinion, following its examination of the programme. According to the Regulation, Member States need to submit annual updates of their convergence programmes, which may also be examined by the Council in accordance with these same procedures.The ten countries that joined the EU on 1 May 2004 have a derogation and thus do not participate in the single currency. They committed themselves to submitting their convergence programmes by 15 May 2004 and a first update thereof towards the end of 2004.Slovakia's convergence programme covering the period 2004-2007 was submitted on 14 May 2004. The Commission services have carried out a technical evaluation of this programme, taking into account the results of the Spring 2004 forecasts and having regard to the Code of Conduct [2] and the principles laid down in the Communication from the Commission to the Council and the European Parliament of 27 November 2002 on strengthening the co-ordination of budgetary policies [3]. This evaluation warrants the following assessment:[2]  Revised Opinion of the Economic and Financial Committee on the content and format of stability and convergence programmes, document EFC/ECFIN/404/01 - REV 1 of 27.6.2001 endorsed by the ECOFIN Council of 10.7.2001.[3]  COM(2002) 668 final, 27.11.2002.Slovakia submitted its first convergence programme on 14 May 2004. The programme covers the period 2004 to 2007 and, in addition, provides indicative projections until 2010. The document incorporates the measures taken in the budget 2004 and is consistent with the authorities' detailed draft multi-annual budget framework for the years 2005 to 2007. It expresses the authorities' intention to adopt the euro in 2008 or 2009 at the latest.The programme is very well presented and largely complies with the data requirements of the revised "code of conduct on the content and format of stability and convergence programmes" [4]. It compares favourably with the pre-accession economic programmes 2001 to 2003 in terms of the richness and coherence of the supplied information.[4]  Indeed, with a few minor exceptions (a few missing projections for the years 2006 and 2007 in the table on external assumptions and the provision of public consumption only in aggregated form [lines 16 and 17 together] in table 2), the code-of-conduct tables annexed to the programme provide not only the required but also the optional information indicated in the code. In addition, the programme furnishes a broad array of supplementary data. Furthermore, estimated consolidated expenditure- and revenue-to-GDP ratios and disaggregations thereof in line with ESA95 classifications are now available back to 2002, whereas, before that, consolidated expenditure- and revenue-to-GDP ratios are still lacking.The general government deficit decreased to 3.6% of GDP in 2003, above the 3% of GDP Treaty reference value. The Commission initiated the excessive deficit procedure for Slovakia on 12 May 2004, with the adoption of a report in accordance with Article 104(3) of the Treaty. The Economic and Financial Committee issued its opinion on this report on 25 May. On 5 July 2004, the Council is expected, on the basis of Commission recommendations, to decide that an excessive deficit exists in Slovakia and to make recommendations to Slovakia to bring this situation to an end.The macroeconomic scenario presented in the programme is plausible and broadly in line with the Commission forecast: after a steady increase of the real GDP growth rate from 1.5% in 1999 to 4.2% in 2003, the programme projects real GDP expansion to continue at about this rate in 2004 and 2005, underpinned by an increasingly stronger domestic demand and a weakening external growth contribution. Beyond the Commission forecast horizon, for 2006 and 2007, the programme plausibly predicts an acceleration of growth to almost 5% (i.e. roughly in the range of available estimates for potential growth by that time) -- driven by again strengthening exports as FDI-induced export capacity comes on stream. Throughout the programme period, exports benefit from a projected growth pick-up in Slovakia's major trading partners until 2005 and their flat but robust growth thereafter. In line with the growth outlook and, since recently, more decisive labour market reforms, unemployment is anticipated to drop gradually to around 14½% by 2007 (from somewhat over 17% in 2003).Inflation is forecast to fall rapidly after the year 2004 (to below 3% in 2006 and 2007) as increases in administered prices taper off. The inflation projection is realistic under the assumption that second-round effects are strictly contained, notably by counter-acting backward-looking wage setting, in particular in the public sector because of potentially unfavourable demonstration effects. Monetary policy pursues an implicit inflation target, while trying to reduce excessive exchange rate volatility and to offset exchange rate pressures that are deemed inconsistent with economic fundamentals. Policy interest rates have been decreased, triggered by concerns about the strength of the currency, which appreciated by some 10 percent since mid-2002, and supported by the on-going fiscal consolidation efforts. The programme suggests that Slovakia would start participating in ERM II in 2005 or 2006.The programme aims at a reduction of the general government deficit to 3.0% of GDP by 2007 from 3.6% of GDP in 2003 in order to comply with the Maastricht deficit criterion - with the adjustment path being almost completely in line with the 2003 pre-accession economic programme (up to 2006) and with the following intermediate deficit targets: 4.0% of GDP in 2004, 3.9% of GDP in 2005 and 3.9% of GDP in 2006. Against the backdrop of a far-reaching but expected to be basically revenue-neutral tax reform package, which essentially constitutes a shift of the tax burden from direct to indirect taxation and is effective since the beginning of 2004, the adjustment over the programme period is based on reductions in primary expenditures of 1.5 percentage points of GDP. These reductions are to a large extent underpinned by structural reforms, predominantly in the health and social protection area, which are mostly already enacted and in force.In particular in an environment of robust growth, the envisaged deficit reduction of a mere 0.6 percentage of GDP over four years does not look very ambitious. In addition, it is back-loaded. However, the following modulating factors need to be taken into account: first, the relatively large deficit reduction from 2002 to 2003 of 2.1 percentage points of GDP, which was partly due to non-recurrent factors; second, the expenditure-based nature of the adjustment; third, the introduction of a funded pension pillar in 2005, which leads to a re-direction of social security contributions and, hence, a revenue decrease for general government, starting with ½ percentage point of GDP in 2005 and amounting to 1 percentage point of GDP by the end of the programme period; and fourth, the increase in public investment over the programme horizon. Contingent on the strict containment of risks on the expenditure side, which would be helped by binding medium-term expenditure ceilings, potentially higher than budgeted tax revenues in 2004 and beyond would provide a welcome opportunity to accelerate the deficit reduction in comparison to what is foreseen in the programme.The possibility of accelerating the deficit reduction is an especially important consideration. Not only would it allow the general government deficit to be below 3.0% of GDP in 2007, but it would also pave the way to achieve the second major objective expressed in the programme, namely a structural budgetary position of close to balance or in surplus by the end of the decade, and to attain a sufficient safety margin against breaching the 3% of GDP Treaty reference value for the deficit criterion with normal macroeconomic fluctuations. Furthermore, accelerating the deficit reduction whenever the opportunity arises would also create a buffer against potential downside risks. Whereas risks in 2004 are somewhat tilted to the positive side, risks over the whole programme period seem to be broadly balanced. Nevertheless, important downside risks seem to be concentrated on the expenditure side and include in particular delays in the envisaged health care reform and a lack of public sector rationalisation.The authorities' structural reform agenda, which is for the most part already enacted and in force, increases the quality of public finances both on the revenue side (tax reform package) and expenditure side (in particular health care and social protection) and is likely to enhance growth, notably by strengthening the incentives to work (including through a better targeting of social transfers) and to create new jobs.The programme projects an increase in the debt-to-GDP ratio between 2003 and 2005 by 2½ percentage points to 46.4% - broadly in line with the Commission forecast. Thereafter, it plans a reduction to 45.5% by 2007. The role of stock-flow adjustments in determining debt dynamics, which was large before 2003 due to privatisation and other exceptional factors, has substantially diminished. The year 2004 is a notable exception, mainly due to a lower accrual than cash deficit.On long-term sustainability, the programme projections are contingent on the strict adherence to the fiscal consolidation targets (leading to a budgetary position of close to balance or in surplus by 2010), the full implementation of the envisaged policies (including additional increases in the retirement age after the programme horizon), and the underlying demographic assumptions, in particular potentially too optimistic fertility rates. Under these conditions, the projections suggest that Slovakia would be relatively well placed to meet the budgetary costs of an ageing population. Apart from some additional risks that may emerge in the long run, the main risks to these projections stem from a lack or a delay in reform implementation or from any backtracking on already implemented reforms.Table: Comparison of key macroeconomic and budgetary projections>TABLE POSITION>Based on this assessment, the Commission has adopted the attached recommendation for a Council Opinion on the convergence programme of Slovakia and is forwarding it to the Council.Recommendation for a COUNCIL OPINION in accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the convergence programme of Slovakia, 2004-2007THE 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 9(3) thereof,[5]  OJ L 209, 2.8.1997, p. 1. The documents referred to in this text can be found at the following websitehttp://europa.eu.int/comm/economy_finance/ about/activities/sgp/main_en.htm.Having regard to the recommendation of the Commission,After consulting the Economic and Financial Committee,HAS DELIVERED THIS OPINION:On [5 July 2004], the Council examined the convergence programme of Slovakia, which covers the period 2004 to 2007 and, in addition, provides indicative projections until 2010. The programme largely complies with the data requirements of the revised "code of conduct on the content and format of stability and convergence programmes".The budgetary strategy underlying the programme aims at reducing the general government deficit to 3.0% of GDP by 2007 from 3.6% of GDP in 2003 in order to comply with the Maastricht deficit criterion -- with the following intermediate deficit targets: 4.0% of GDP in 2004, 3.9% of GDP in 2005 and 3.9% of GDP in 2006. The reduction of the deficit is expected to occur mainly in 2007. The programme envisages an adjustment based on primary expenditure reductions of 1.5 percentage points of GDP. These reductions are to a large extent underpinned by structural reforms, predominantly in the health care and social protection area, which are mostly already enacted and in force. The reforms on the expenditure side take place against the backdrop of a far-reaching but expected to be basically revenue-neutral tax reform package (effective since the beginning of 2004); the tax reforms essentially constitute a shift of the tax burden from direct to indirect taxation. In addition, a funded pension pillar will be introduced in 2005, which leads to a revenue decrease for general government, starting with an estimated ½ percentage point of GDP in 2005 and amounting to 1 percentage point of GDP by the end of the programme period.On the basis of currently available information, the macro-economic scenario underlying the programme seems to reflect plausible growth assumptions, i.e. growth of somewhat over 4% in 2004 and 2005 and an acceleration of growth to almost 5% in 2006 and 2007 - due to further strengthening exports on the back of an FDI-induced expansion of export capacity. The anticipated drop in unemployment will require the continued vigorous pursuit of policies which address the deep-seated structural problems in the labour market - given the still very high unemployment rate prevailing in Slovakia. The projection of rapid disinflation after 2004, when administrative price adjustments and indirect tax hikes taper off, is within reach if second-round effects are strictly contained. In particular, wage developments, including in the public sector, should not be guided by past inflation developments.The programme foresees the general government deficit to be reduced to the 3% of GDP reference value in 2007 and to fall further thereafter. Given the assumption of a very robust growth of the Slovak economy, the size and path of the deficit reduction does not look very ambitious. However, in particular the following modulating factors need to be taken into account: the envisaged reduction in primary expenditures, the revenue decrease resulting from the pension reform, and the, partly one-off, adjustment achieved in 2003. The budgetary stance in the programme seems sufficient to reduce the deficit to the 3% of GDP deficit threshold by the end of the programme period. The risks to the budgetary projections over the overall programme horizon appear broadly balanced. They are tilted to the positive side in 2004, when the deficit is projected to increase marginally. Downside risks seem to be concentrated on the expenditure side and consist mainly in a delay of the proposed further health care reforms and a lack of further public sector rationalisation. The achievement of the deficit targets will depend on the ability of the government to control primary expenditures, which would be helped by binding medium-term expenditure ceilings. Opportunities, in particular in the form of any higher than expected tax revenues, should be seized to accelerate the deficit reduction. In addition to increasing the likelihood of achieving a deficit below 3% of GDP in 2007, this would pave the way to reach the second major fiscal objective expressed in the programme, namely a structural budgetary position of close to balance or in surplus, earlier than by the year 2010 envisaged in the programme, and to attain a sufficient safety margin against breaching the 3% of GDP Treaty reference value for the deficit criterion with normal macroeconomic fluctuations. It would also provide a better basis for dealing with potentially surging capital inflows.In the programme, the debt ratio is projected to increase between 2003 and 2005 by 2½ percentage points to 46.4% and to fall again to 45.5% by 2007. Slovakia appears relatively well-placed to meet the budgetary cost of an ageing population. Long-term sustainability is contingent on the strict adherence to the fiscal consolidation targets and the full implementation of the envisaged policies. In particular as regards fertility rates, the demographic assumptions underlying the related programme projections may be on the optimistic side. The main risks to long-term sustainability stem from a lack or a delay in reform implementation or from any backtracking on already implemented reforms.****On [5 July 2004], on the basis of recommendations from the Commission, the Council decided that an excessive deficit existed in Slovakia in accordance with Article 104(6) of the Treaty and made recommendations under Article 104(7) to Slovakia with a view to bringing that situation to an end, in which the Council expresses its policy advice.Key projections from the convergence programme of Slovakia>TABLE POSITION>