Important legal notice

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52006SC1443

Recommendation for a Council Decision establishing, in accordance with Article 104(8), that the action taken by Poland in response to the recommendation of the Council in accordance with Article 104(7) of the Treaty establishing the European Community is proving to be inadequate  /* SEC/2006/1443 final */

	[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 14.11.2006SEC(2006) 1443 finalRecommendation for aCOUNCIL DECISIONestablishing, in accordance with Article 104(8), that the action taken by Poland in response to the recommendation of the Council in accordance with Article 104(7) of the Treaty establishing the European Community is proving to be inadequate(presented by the Commission)EXPLANATORY MEMORANDUM1. Background: the excessive deficit procedure for PolandThe excessive deficit procedure (EDP) is governed by Article 104 of the Treaty and by Council Regulation (EC) No 1467/97 of 7 July 1997[1] on speeding up and clarifying the implementation of the excessive deficit procedure, which is part of the Stability and Growth Pact.On the basis of the Commission spring 2004 economic forecasts[2], which revealed a deficit of 4.1% of GDP for 2003[3], the Commission initiated the excessive deficit procedure for Poland on 12 May 2004, in accordance with Article 104(3) of the Treaty[4]. In May 2004, Poland submitted its convergence programme and, based on a Commission recommendation, the Council adopted an opinion on it on 5 July 2004[5]. At the same time, the Council decided, on the basis of a Commission recommendation in conformity with Article 104(6) that Poland had an excessive deficit and consequently, pursuant to Article 104(7), issued a recommendation to the Polish authorities for its correction[6]. In this recommendation, the Council invited the Polish authorities “ to put an end to the present excessive deficit situation as rapidly as possible ” and “ take action in a medium-term framework in order to achieve their objective of bringing the deficit below 3% of GDP in 2007 in a credible and sustainable manner, in accordance with the path for deficit reduction specified in the Council Opinion of 5 July 2004 on the convergence programme submitted in May 2004 ” with the following annual targets: “ 5.7% of GDP in 2004, 4.2% of GDP in 2005, 3.3% in 2006 and 1.5% of GDP in 2007 ”. The Council established the deadline of 5 November 2004 to take effective action “ regarding the measures envisaged to achieve the 2005 deficit target ”. Poland was also recommended to “ allocate possible extra revenues to decrease the general government deficit ”. In addition, the Council invited the Polish authorities “ to ensure the rise in the debt ratio is brought to a halt ”.2. The general government data in the excessive deficit procedure and systemic pension reformsThe Eurostat decision of 2 March 2004 on the sectoral classification of pension schemes established that defined contributions funded schemes cannot be classified as social security schemes and thus cannot be considered as part of general government. This was a framework decision which required bilateral discussions with Member States before implementation.In the discussions following that decision, Eurostat acknowledged that “ some Member States might need a transitional period to implement the decision and to avoid disruptions in the conduct of their budgetary policies ”[7]. The 3-year transitional period established by Eurostat will expire with the first fiscal notification of 2007, due by 1 April 2007.Poland currently avails itself of this transitory period for the pension reform it implemented in 1999. Therefore, social contributions and other revenue collected (and expenditure incurred) by funded defined-contribution schemes have been recorded as government revenue (and expenditure), which result in deficit and debt figures being somewhat smaller than otherwise. At the expiry of the transition period, only the definition that includes the cost of the pension reform will be valid.About 20% of the revenue from pension contributions has been redirected from the pay-as-you-go system to the fully-funded defined-contribution pension schemes. While this reform improves the long-run sustainability of public finances, it will have a negative impact on the budget in the short term: on the basis of the recent information, the annual cost of the reform will be about 2% of GDP in 2006 and 2007.The path for deficit reduction endorsed by the Council on 5 July 2004 did not include the cost of the pension reform that Poland implemented in 1999. At the time of the Council’s assessment of the first Polish convergence programme (5 July 2004), the annual cost of the Polish pension reform was estimated at 1.6% of GDP. Accordingly, the Council stated in its opinion on the programme that “ the deficit may have to be revised upwards by 1.6 percentage point of GDP ”. Given a deficit target for 2007 of 1.5% of GDP – and also taking into account the prevailing negative risks attached to the budgetary consolidation strategy – the Council concluded in its opinion that “ the budgetary stance in the programme may not be sufficient to reduce the deficit below 3% of GDP during the programme period ” [i.e. by 2007].3. Developments until 2005After the expiry of the deadline of 5 November 2004 set in the Council Recommendation of 5 July 2004, the Commission concluded, in its Communication to the Council of 14 December 2004, that – in view of the 2005 deficit target – no further steps were necessary under the excessive deficit procedure for Poland[8].On 17 February 2005, the Council delivered its opinion[9] on the November 2004 update of the convergence programme of Poland, based on a Commission recommendation. The update revised the 2007 deficit target upwards as it foresaw a gradual reduction of the general government deficit from 5.4% of GDP in 2004 to 2.2% of GDP in 2007 (compared to the previous 2007 target of 1.5% of GDP). This upward revision occurred in spite of continued strong growth (projected in the programme to average more than 5% per annum), while deficit outcomes / projections for the years 2004-2006 were all lowered. In its opinion, the Council pointed out the negative risks attached to the consolidation strategy and warned that “ the deficit level will have to be adjusted upwards by about 1.5 percentage point. This adjustment means that based on the update and in the absence of additional savings measures, Poland will not be able to bring the deficit below 3% in the end year of the programme ” as the deficit target for 2007 would reach about 3.7% of GDP including the pension reform costs. Besides, the Council noticed a risk of a delayed or incomplete implementation of the measures envisaged in the plan of fiscal consolidation. Accordingly, the Council invited Poland inter alia to strengthen the fiscal adjustment beyond 2005 and to lower the deficit target for 2007. In effect, only a small number of measures was implemented. The fiscal outcome for 2005 was nevertheless better than expected at 2.5% of GDP.4. Developments in 2006 and prospects for 2007Despite the invitation in the Council opinion of 17 February 2005, the January 2006 update of the convergence programme only aimed at a slow reduction of the general government deficit (by ca. 0.3% of GDP annually on average in the period 2006 to 2008) in order to meet the budgetary convergence criteria by the end of the legislature (i.e. by the end of 2009). Also, while deficit outcomes and projections for the years 2004-2006 were again revised downward, the programme confirmed the deficit target for 2007 at 2.2% of GDP (excluding the cost of the pension reform). Moreover, the programme revised upwards the costs of the pension reform, by 0.4% of GDP. With the pension reform cost included, the 2007 deficit target was higher than in the previous update (4.1% of GDP compared to 3.7% of GDP) as the re-estimated cost of the pension reform was expected to reach 1.9% of GDP in 2007.Based on a Commission recommendation, the Council adopted its opinion on the January 2006 update of the convergence programme on 14 March 2006. The Council pointed to various risks attached to the budgetary consolidation strategy, such as relatively favourable growth assumptions in the last year of the programme period (2008), relatively optimistic assumptions about tax elasticities and possible difficulties with expenditure control in the face of social spending pressures. The Council concluded that “ the convergence programme envisages some progress, but not the effective correction of the excessive deficit in 2007 (…) and that the Commission intends to recommend further steps under the excessive deficit procedure as required by the Stability and Growth Pact ”. In addition, the Council mentioned that the planned adjustment in the structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures calculated by the Commission services on the basis of the information provided in the programme according to the commonly agreed methodology) was planned to improve on average by ¼% of GDP per year over the programme period.In the draft 2007 budget (adopted on 27 September 2006), the 2006 general government deficit is estimated to reach 2.1% of GDP (pension reform cost not included), compared to 2.6% of GDP targeted in the January 2006 update of the convergence programme (and 3.3% underlying the July 2004 Council Recommendation under Article 104(7)). The more positive outcome reflects higher revenues (especially personal income tax) owing to stronger-than-projected growth as well as more contained expenditure growth, notably lower-than-planned public investment. In the draft 2007 budget, the Polish government presents the following deficit targets for the subsequent years: 1.7% in 2007, 1.2% in 2008 and 0.5% in 2009.At 1.7% of GDP, the revised deficit target for 2007 (without pension reform costs) is now closer to but still above the original target set in the Council recommendation under Article 104(7), of 1.5% of GDP. However, according to the Commission services’ autumn 2006 forecast, the 2007 deficit will reach 2% of GDP (pension reform cost not included). This reflects a more cautious view of revenue projections of the Commission services, especially for direct taxes (nominal revenue increase by 9.7%, despite planned indexation of tax brackets and introduction of pro-family tax reliefs, compared to the assumed nominal GDP growth of 6.2%). In addition, there are also uncertainties with respect to budgetary outcomes for 2007 at local authorities’ level. Finally, social expenditure is likely to be higher as a result of the adopted legislation which is not fully consistent with the draft 2007 budget.Budgetary developments, 2005-2008% of GDP, unless indicated otherwise | 2005 | 2006 | 2007 | 2008 |Pension reform cost(2) | 1.9 | 2.0 | 2.0 | 2.0 | 2.0 | 2.1 | 2.1 |General government balance incl. Eurostat decision | −4.4 | −4.2 | −4.1 | −4.0 | −3.7 | −3.9 | −3.3 |Primary balance | 0.1 | 0.2 | 0.3 | 0.4 | 0.8 | 0.6 | 1.3 |Structural balance(1) | −2.3 | −2.3 | n.a. | −2.1 | n.a. | −1.8 | n.a. |Structural primary balance(1) | 0.2 | 0.1 | n.a. | 0.3 | n.a. | 0.6 | n.a. |Government gross debt | 42.0 | 42.4 | 42.4 | 43.1 | 43.1 | 42.7 | 42.7 |Pm Real GDP growth (%) | 3.5 | 5.2 | 5.2 | 4.7 | 4.6 | 4.8 | 4.8 |Pm Output gap | −0.3 | 0.4 | n.a. | 0.3 | n.a. | 0.1 | n.a. |(1) Cyclically-adjusted balance excluding one-off and temporary measures (zero in the case of Poland). (2) The pension reform cost is measured as the difference between (i) the government deficit compiled according to ESA95 rules and the Eurostat decision of 2 March 2004 and (ii) an alternative government deficit compiled as if the pension scheme remained classified in the government sector. (3) No-policy change assumption. Sources: Commission services’ autumn 2006 forecast (COM) and 2007 budget of the Ministry of Finance (MF) |5. ConclusionsThe following conclusions can be drawn from above assessment:-  The deficit target for 2007 (1.7% of GDP excluding pension reform costs) is higher than the one endorsed by the Council in July 2004 (1.5% of GDP) in a context of much better-than-expected budgetary outcomes in the years 2004-2006.-  The Commission services’ autumn 2006 forecast projects that the 2007 deficit will be 2.0% of GDP, i.e. 0.3% of GDP higher than targeted by the Polish authorities.-  In 2007, the transitional period for implementing the Eurostat decision of 2 March 2004 on the classification of pension schemes will expire and funded defined-contribution pension funds will be classified outside general government. This will entail an upward revision of the Polish deficit series. For 2007, the deficit target of 1.7% of GDP (excluding pension reform cost) translates into around 3.7% of GDP (including pension reform cost). According to the Commission services’ autumn 2006 forecast, the general government deficit would reach 4% of GDP (including pension reform cost).-  Taking into account the risk of a higher-than-targeted deficit outcome in 2007, as identified in the Commission services autumn 2006 forecast, this is well above the 3% of GDP deficit reference value and cannot be considered as being in line with the recommendations of the Council for a correction of the excessive deficit by the 2007 deadline.In the light of these findings, the Commission is of the opinion that, while there has been an improvement in the fiscal position in Poland, the action of the Polish authorities in response to the July 2004 Council recommendations in accordance with Article 104(7) is proving inadequate to correct the excessive deficit by 2007 and it recommends that the Council decides accordingly under Article 104(8)[10].General government balance targets and outcomes and pension reform cost (% of GDP)2004 | 2005 | 2006 | 2007 | 2008 |CP May 2004 | PRC not included | –5.7 | –4.2 | –3.3 | –1.5 | n.a. |estimated PRC | 1.6 | 1.6 | 1.6 | 1.6 | n.a. |PRC included* | –7.3 | –5.8 | –4.9 | –3.1 | n.a. |CP Nov. 2004 | PRC not included | –5.4 | –3.9 | –3.2 | –2.2 | n.a. |estimated PRC | 1.5 | 1.5 | 1.5 | 1.5 | n.a. |PRC included* | –6.9 | –5.4 | –4.7 | –3.7 | n.a. |CP Jan. 2006 | PRC not included | –3.8 | –2.9 | –2.6 | –2.2 | –1.9 |estimated PRC | 1.8 | 1.8 | 2.0 | 1.9 | 1.8 |PRC included* | –5.6 | –4.7 | –4.6 | –4.1 | –3.7 |FN Oct. 2006 | PRC not included | –3.9 | –2.5 | –2.1 | –1.7 | –1.2 |and draft budget 2007 | estimated PRC | 1.8 | 1.9 | 2.0 | 2.0 | 2.1 |PRC included* | –5.7 | –4.4 | –4.1 | –3.7 | –3.3 |PRC = pension reform cost; CP = Convergence Programme; FN = Fiscal Notification * Definition of the general government balance that is applicable from spring 2007. |Recommendation for aCOUNCIL DECISIONestablishing, in accordance with Article 104(8), that the action taken by Poland in response to the recommendation of the Council in accordance with Article 104(7) of the Treaty establishing the European Community is proving to be inadequateTHE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community, and in particular Article 104(8) thereof,Having regard to the recommendation from the Commission,Whereas:(1) According to Article 104 of the Treaty, Member States are to avoid excessive government deficits.(2) The Stability and Growth Pact is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation. The Stability and Growth Pact includes Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure[11] which was adopted to further the prompt correction of excessive general government deficits.(3) The Resolution of the Amsterdam European Council of 17 June 1997[12] solemnly invites all parties, namely the Member States, the Council and the Commission, to implement the Treaty and the Stability and Growth Pact in a strict and timely manner.(4) The Eurostat decision of 2 March 2004 on the sectoral classification of pension schemes[13] established that a defined contributions funded scheme cannot be classified as a social security scheme. This scheme cannot therefore be considered as part of general government. This was a framework decision which required bilateral discussions with Member States before implementation. In the context of those discussions, Eurostat acknowledged that “some Member States might need a transitional period to implement the decision and to avoid disruptions in the conduct of their budgetary policies”[14]. The transitional period, allowed by Eurostat, will expire with the first fiscal notification of 2007, due by 1 April 2007. Poland decided to avail itself of this transitional period. Therefore, social contributions and other revenue collected (and expenditure incurred) by funded defined-contribution schemes have been recorded as government revenue (and expenditure), which result in deficit and debt figures being smaller than otherwise.(5) By Council Decision 2005/183/EC[15] of 5 July 2004, it was decided, in accordance with Article 104(6) of the Treaty, that an excessive deficit existed in Poland.(6) In accordance with Article 104(7) of the Treaty and Article 3(4) of Regulation (EC) No 1467/97, on 5 July 2004, the Council also adopted a recommendation to the Polish authorities to bring the existence of an excessive deficit to an end as rapidly as possible and to take action in a medium-term framework to achieve the objective of bringing the deficit below 3% of GDP by 2007 in a credible and sustainable manner, in accordance with the path for deficit reduction specified in the convergence programme submitted by the authorities in May 2004 and endorsed in the Council Opinion of 5 July 2004, with the following annual targets: 5.7% of GDP in 2004, 4.2% of GDP in 2005, 3.3% in 2006 and 1.5% of GDP in 2007. The Council established the deadline of 5 November 2004 to take effective action “regarding the measures envisaged to achieve the 2005 deficit target”.(7) The deficit reduction path endorsed by the Council on 5 July 2004 did not include the cost of the pension reform implemented in 1999. About 20% of the revenue from pension contributions has been redirected from the pay-as-you-go system to the fully-funded defined-contribution pension schemes. At the time of the recommendation under Article 104(7), the Council took explicitly into account the fact that the deficit targets would have to be revised upwards, with an estimated annual cost of the Polish pension reform of around 1½% of GDP. In view of this, and also of the prevailing negative risks attached to the budgetary consolidation strategy, the Council pointed out in its opinion on the May 2004 convergence programme that “the budgetary stance in the programme may not be sufficient to reduce the deficit below 3% of GDP during the programme period” [i.e. by 2007].(8) After the expiry of the deadline of 5 November 2004 set in the Council recommendation under Article 104(7), the Commission concluded, in its Communication to the Council of 14 December 2004, that no further steps were necessary under the excessive deficit procedure for Poland as the Polish government had taken effective action regarding the measures envisaged to achieve the 2005 deficit target[16].(9) On 17 February 2005, the Council delivered its opinion on the November 2004 update of the convergence programme of Poland. The update revised the 2007 deficit target upwards to 2.2% of GDP in 2007 (from 1.5% in the May 2004 convergence programme), i.e. about 3.7% of GDP including the cost of pension reform. This upward revision occurred in spite of continued strong growth (projected in the programme to average more than 5% per annum), while deficit outcomes/projections for the years 2004-2006 were all lowered. The Council noticed a risk of a delayed or incomplete implementation of the fiscal adjustment measures. Referring to the negative risks attached to the budgetary consolidation strategy, the Council invited Poland inter alia to strengthen the fiscal adjustment beyond 2005 and lower the deficit target for 2007. In effect, only a small number of measures was implemented. The fiscal outcome for 2005 was nevertheless better than expected at 2.5% of GDP.(10) On 14 March 2006, the Council adopted its opinion on the January 2006 update of the convergence programme of Poland. The update aimed at a slow reduction of the general government deficit (by ca. 0.3% of GDP annually on average in the period 2006 to 2008) in order to meet the budgetary convergence criteria by the end of the legislature (i.e. by the end of 2009). Also, while deficit outcomes and projections for the year 2004-2006 were again revised downward, the programme confirmed the deficit target for 2007 at 2.2% of GDP (with the cost of the pension reform not included). Given the upward revision of the pension reform cost, the 2007 deficit target including this cost was 0.4 percentage point of GDP higher than in the previous update (4.1% of GDP compared to 3.7% of GDP). The Council pointed to various risks attached to the budgetary consolidation strategy, such as relatively favourable growth assumptions in the last year of the programme period (2008), relatively optimistic assumptions about tax elasticities and possible difficulties with expenditure control in the face of social spending pressures. The Council concluded that “the convergence programme envisages some progress, but not the effective correction of the excessive deficit in 2007 (…)”. In addition, the Council mentioned that the planned adjustment in the structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures calculated by the Commission services on the basis of the information provided in the programme according to the commonly agreed methodology) was planned to improve on average by ¼% of GDP per year over the programme period.(11) The draft budget for 2007, adopted on 27 September 2006, estimates the 2006 deficit at 2.1% of GDP (pension reform cost not included), compared to 2.6% of GDP targeted in the January 2006 update of the convergence programme (and 3.3% underlying the July 2004 Council recommendation under Article 104(7)). The more positive outcome reflects higher revenues (especially personal income tax) owing to stronger-than-projected growth as well as more contained expenditure growth, notably lower-than-planned public investment. The draft 2007 budget presents the following deficit targets for the subsequent years: 1.7% in 2007, 1.2% in 2008 and 0.5% in 2009.(12) The assessment of the action taken by Poland to correct the excessive deficit by 2007 in response to the Council recommendation under Article 104(7) leads to the following conclusions:-  The revised 2007 deficit target of 1.7% of GDP (excluding pension reform costs), in the draft budget for 2007, is above the target of 1.5% of GDP endorsed in the Council recommendation of 5 July 2004 for the correction of the excessive deficit. The revision of the 2007 deficit occurred against the background of much lower deficit outcomes in the period 2004-2006 than foreseen in the recommendation.-  The transition period for implementing the Eurostat decision of 2 March 2004 on the classification of funded pension schemes will expire with the first notification in 2007 due by 1 April. The inclusion of the pension reform cost leads to a 2007 deficit target of around 3.7% of GDP.-  The Commission services’ autumn 2006 forecast projects the 2007 deficit by 0.3% of GDP higher than targeted by the Polish authorities. In particular, revenues from direct taxes are expected to be lower than planned by the authorities, while social expenditure and public investment are likely to be higher.-  This leads to the conclusion that the 2007 deficit would be well above the 3% of GDP deficit reference value which is not in line with the recommendations of the Council for a correction of the excessive deficit by the 2007 deadline.In line with the Resolution of the Amsterdam European Council on the Stability and Growth Pact, Poland agreed to make the Council recommendation of 5 July 2004 public[17].HAS ADOPTED THIS DECISION:Article 1The action taken by Poland in response to the Council Recommendation of 5 July 2004 under Article 104(7) of the Treaty is proving to be inadequate to correct the excessive deficit within the deadline fixed by the Recommendation.Article 2This decision is addressed to the Republic of Poland.Done at Brussels,For the CouncilThe President [1] OJ L 209, 2.8.1997, p. 6. Regulation as amended by Regulation (EC) No 1056/2005 (OJ L 174, 7.7.2005, p. 5).[2] The Commission spring 2004 economic forecast took into consideration data reported by Poland in March 2004.[3] In the meantime, the deficit figure for 2003 has been revised, according to the usual procedures. It now stands at 4.7% of GDP.[4] See http://ec.europa.eu/economy_finance/about/activities/sgp/edp/edppl_en.htm.[5] OJ C 320, 24.12.2004, p. 15.[6] See http://register.consilium.eu.int/pdf/en/04/st11/st11220.en04.pdf[7] See Eurostat News Releases No 30/2004 of 2 March 2004 and No 117/2004 of 23 September 2004 and Chapter I.1.3 – Classification of funded pension schemes and impact on government finance of the Eurostat’s Manual on government deficit and debt, available for download at: http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-BE-04-002/EN/KS-BE-04-002-EN.PDF.[8] Communication from the Commission to the Council: The action taken by the Czech Republic, Cyprus, Malta, Poland and Slovakia in response to the Council recommendations under the excessive deficit procedure - SEC(2004) 1630.[9] OJ C 136, 3.6.2005, p. 23.[10] Article 104(8) states that, when the Council establishes that action in response to its recommendation according to Article 104(7) has been inadequate, it may decide to make this recommendation public. However, in line with Resolution of the European Council on the Stability and Growth Pact (OJ C 236, 2.8.1997, p. 1), Poland already agreed to make the recommendation public in July 2004 (see http://register.consilium.eu.int/pdf/en/04/st11/st11220.en04.pdf).[11] OJ L 209, 2.8.1997, p. 6, as amended by Regulation (EC) No 1056/2005 (OJ L 174, 7.7.2005, p. 5).[12] OJ C 236, 2.8.1997, p. 1.[13] Eurostat News Releases No 30/2004 of 2 March 2004 and No 117/2004 of 23 September 2004 and Chapter I.1.3 – Classification of funded pension schemes and impact on government finance of the Eurostat’s Manual on government deficit and debt, available for download at: http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-BE-04-002/EN/KS-BE-04-002-EN.PDF.[14] Ibidem[15] OJ L 62, 9.3.2005, p. 18.[16] Communication from the Commission to the Council: The action ta[17]8WXYwxyz’ ± ² É Ê  [18]?@StŠ‹MNOPapy}?‚ƒÁÇÖ× |  ùòîãÜîÜãÜãÜãîÜØÔÏÇ¿Ç¸î¸î¸«¸î¿¤??î¤‰‚¤‚?î‚{‚?t  hƒ#h`ƒ  hƒ#hn{  hƒ#hß9  hƒ#h:3jhƒ#h;00J3U[pic]  hken by the Czech Republic, Cyprus, Malta, Poland and Slovakia in response to the Council recommendations under the excessive deficit procedure - SEC(2004) 1630.[19] See http://register.consilium.eu.int/pdf/en/04/st11/st11220.en04.pdf


RECOMMENDATION FOR A COUNCIL DECISION CONCERNING THE CONCLUSION OF AN ADDITIONAL PROTOCOL TO THE COOPERATION AGREEMENT BETWEEN THE EUROPEAN ECONOMIC COMMUNITY AND THE HASHEMITE KINGDOM OF JORDAN


title: Recommendation for a COUNCIL DECISION authorizing the Commission to oepn negotiations with Greece with a view to theconclusion of a textile arrangement in 1980 (presented by the Commission to the Council)

text:
ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (79) 651
Vol. 1979/0221
 ---pagebreak--- Disclaimer
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983
concernant l'ouverture au public des archives historiques de la Communauté économique
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983,
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit
règlement.
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
concerning the opening to the public of the historical archives of the European Economic
Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243,
27.9.2003, p. 1), this file is open to the public. Where necessary, classified documents in this
file have been declassified in conformity with Article 5 of the aforementioned regulation.
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
Februar 1983 über die Freigabe der historischen Archive der Europäischen
Wirtschaftsgemeinschaft und der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983,
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. September 2003
(ABI. L 243 vom 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5
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 ---pagebreak---    *
                                                                  COM ( 79 ) 651 Final
       COMMISSION
         OF THE
                                                                  Brussels, 16 november 1979 .
EUROPEAN COMMUNITIES                                              FOR OFFICIAL USE ONLY
     General Secretariat
                                        Recommendation for a
                                           COUNCIL DECISION
                         authorizing the Commission to oepn negotiations
                         with Greece with a view to theconclusion of a
                                     textile arrangement in 1980
                          ( presented by the Commission to the Council )
                                                                <
                                                            y
                                                                                1
                 C0MC79 ) 651 final
 ---pagebreak---                           Explanatory memorandum
1. At its meeting in December 1977 the Council established global import
   ceilings for 8 ultra-sensitive textile products from low-cost supplier
   countries , including some Mediterranean countries such as Greece .
2. In the case of Greece , one of the Community 's main suppliers for these
   ultra-sensitive products , it was necessary, in order to avoid having
   to take restrictive measures , to seek an arrangement compatible with
   the spirit of the Association Agreement .
3. Such an arrangement was concluded in July 1978 and renewed in 1979 after
   Council approval at its December 1978 meeting .    As , in principle , (
   Greece will only become a member of the Community on 1 January 1981 ,
   it seems indispensable to renew in 1980 the arrangement currently in
   force , in order to preserve the coherence of the Community 's commercial
   textiles policy .
A. It has emerged from exploratory conversations that the Greek authorities
   will only accept such a renewal in exchange for substantial improvements
   in the structure and economic content of the existing agreement .
5. In accordance with the declaration concerning textiles in the minutes
   of the Council of 2 90ctober 1979, the Commission therefore feels it
   necessary to ask the Council for supplementary directives .
                                             Consequently, the Commission
   recommends that the Council adopt on 20 November 1979 the attached draft
   in order to enable negotiations with Greece to be opened as quickly as
   possible .   Any further delay might affect considerably the results of
   the negotiations .
 ---pagebreak---                             Recommendation for a
                              COUNCIL DECISION
          authorizing the Commission to oepn negotiations with Greece
          with a view to the conclusion of a textile arrangement in 1980
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Community , and
in particular Article 113 thereof ,
Having regard to the Recommendation from the Commission , considering the
decisions of commercial policy adopted by the Council at its session of
19 and 20 December 1977 ;
Whereas Gfeece is one of the major supplier countries to the Community for
most of the textile products subject to overall import ceilings ;
Whereas the forthcoming accession of Greece to the Community requires
that the Greek textile industry be integrated into the Community in an
orderly and coordinated manner ;
HAS DECIDED AS FOLLOWS :
                              Sole Article
The Commission is authorized to open negotiations with a view to the
conclusion of an arrangement concerning textiles between the EEC and the
Hellenic Republic .
The Commission shall conduct these negotiations in consultation with the
Special Committee set up under Article 113 of the Treaty in accordance
with the directives annexed to this Decision .
Brussels ,                                     For the Counci I
                                               The President
 ---pagebreak---                                                                                ANNEX
                                                      NEGOTIATION DIRECTIVES
  I   Ecùnomic Content
                                                          I      I        BNL              UK          IRL             DK
Cat .       Unit
                                                                      7.950-8.050      2.650-2.750    220-250       3.000-3.150  51.670-52.600
                       23.700-23.950      - 5.950    8.350-8.500
                                                                    ( 1.850-1.950             ,          25           120-140      5.500-5.800
                                          x            700-800
               ^           650-700        - 1.200           «        \      (1 )     j      70           25
                                                                                ι
                                                                                !
                                                                                -
                                                                                χ          2 .: ^0-2.500
                                                                                ■
                                                                                1.350-1.500     40-50          400-430     38.500-39.500
                                                            χ          4.600-4.800
          1000 ρ        27.500-28.500      χ
          1000 ρ ,      13.000-14.000     >– 6.500          χ                χ
                                                                                ■ I
                                                                                900-950   ' 100-120 :         χ         25.000-26.500
          ιηηα ο             χ             χ       Ι        χ      I         x                 X          15            χ          4.300-4.500
                                                                          300-370         350-400      .  40             Χ  ν      6.100-6.300
                                          3-550              x
                                            χ                χ         5.100-5.400             χ          χ              X
                                                                                I         *
                                                        removal of .restrictions
                                                                                1.050-1.150       50                        3.150-3.500 !
                                        700-800          400-500
          < 1 ) Cats . 2 and 3 together
            X removal of restrictions                                                                                lî
                                                                                ï
                                                                                9
                                                                                i
 ---pagebreak---                                                                            ANNEX ( cont .)
TEXT
     Administrative cooperation ; - renewal of all the provisions in force in1979 covering all
                                    categories whether or not these are subject to limits .
                                  - Consultation clause to be maintained (par . 6 of the Memorandum
                                     of Joint Action of 7 February 1979 )
b ) Flexibility : carryover : 10% of non-utilised 1979 quantities
                  Transfer : 15% between cats ; 2 and 3 on the one hand and among cats . 4, 5 and 7
                               on the other
  c ) Validity :  One year ( from 1 January 1980 to 31 December 1980 )


RECOMMENDATION FOR A COUNCIL DECISION ON THE CONCLUSION OF A PROTOCOL ON FINANCIAL AND TECHNICAL COOPERATION BETWEEN THE EUROPEAN ECONOMIC COMMUNITY AND THE HASHEMITE KINGDOM OF JORDAN


title: RECOMMENDATION FOR A COUNCIL DECISION concluding an Agreement between the European Economic Community and the Office of the United Nations Disaster Relief Co-ordinator (UNDRO) for the supply of skimmed milk powder as food aid for the disaster victims in Honduras (submitted to the Council by the Commission)

text:
ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (74) 1923
Vol. 1974/0309
 ---pagebreak--- Disclaimer
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983
concernant l'ouverture au public des archives historiques de la Communauté économique
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983,
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit
règlement.
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
concerning the opening to the public of the historical archives of the European Economic
Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243,
27.9.2003, p. 1), this file is open to the public. Where necessary, classified documents in this
file have been declassified in conformity with Article 5 of the aforementioned regulation.
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
Februar 1983 über die Freigabe der historischen Archive der Europäischen
Wirtschaftsgemeinschaft und der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983,
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. September 2003
(ABI. L 243 vom 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5
der genannten Verordnung freigegeben.
 ---pagebreak---   COMMISSION OF THE EUROPEAN COMMUNITIES
                                                       COM(74)1923 final
                                                       Brussels , 21 November 1974
                   RECOMMENDATION FOR A COUNCIL DECISION
      concluding an Agreement between the European Economic Community
  and the Office of the United Nations Disaster Relief Co-ordinator (UNDRO)
             for the supply of skimmed milk powder as food aid
                     for the disaster victims in Honduras
                ( submitted to the Council by the Commission)
C0M(74) 1923 final
 ---pagebreak---                                                                ïïII/ 1 242(74 ) B-4-E
                                       - 2 -
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard, to the Treaty establishing the European Economic Community
and in particular Articles 113 , 114 and 228 thereof;
Having regard to the Recommendation from the Commission;
Whereas the Council , by Regulation ( EEC ) No 2480 of 1 October 1974 on the
supply of skimmed milk powder as emergency food aid , decided to make
available to the Office of the United Nations Disaster Relief Co-ordinator (UirTF?;
90 metric tons of this product for the benefit of the Republic of Honduras^,
HAS DECIDED AS FOLLOWS :
                                     Article 1
An Agreement between the European Economic Community and the Office of the
United Nations Disaster Relief Co-ordinator (T.TDPC ) o.*. the  v-'-
                                                                 z l-~i of skicaed milk
powder as food aid for the Republic of Honduras , the text of which is
annexed hereto , is hereby concluded on behalf of the European Economic Community .
                                     Article 2
The President of the Council is hereby authorized to designate the persons
empowered to sign the Agreement , and to confer on them the necessary powers
to bind the Communitv ,
Done at Brussels ,                                For the Council
                                                  The Président
 OJ No L 265 , 2 October 1974 . p. 1 .
 ---pagebreak---                          - 3 -
AGREEMENT BETWEEN THE EUROPEAN ECONOMIC COMMUNITY
AND THE OFFICE OF THE UNITED NATIONS DISASTER RELIEF
CO-ORDINATOR ( UNDRO ) ON THE SUPPLY OF SKIMMED MILK
POWDER AS EMERGENCY FOOD AID FOR THE BENEFIT OF THE
REPUBLIC OF HONDURAS.                       '
 ---pagebreak---                                                            VIIl/1 242(74) B-4-E
                                    - 4 -
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
of the one part ,
THE OFn,Tr,T1       UNITED nations disaster relief co-ordinator (undro ),
of the other part ,
HAVE DECIDED to conclude this Agreement , and to this end designated as
their Plenipotentiaries :
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
TIE OFFICE CF THE UNITED NATIONS DlfACTTR RELIEF CO-ORDINATOR ( UNDRO ),
WHO HAVE AGREED AS FOLLOWS :
 ---pagebreak---                                                                VIIl/1 242(74) B-4-E
                                     - 5 -
                                    Article I                                      I
The European Economic Community , hereinafter referred to as the " Community",
shall supply as gift to the Office of the United Nations Disaster Relief
Co-ordinator ( UNDRO ), hereinafter referred to as the "recipient "body ", 90 metric
 tens of skimmed milk powder fot the benefit of the disaster victims in the
Republic of Honduras .
The quality and packaging are specified in Annex I , which forms an integral
part of this Agreement .
                                    Article II
Deliveries shall be made franco European airport in accordance with the
arrangements laid down in Annex II , which forms an integral part of this
Agreement .
                                    Article III
The recipient body undertakes to make all necessary arrangements for the
transport and insurance of the delivered product from the airport of dispatch
to the place of destination .
                                    Article IV
The recipient body undertakes to obtain from the Government of the Republic
of Honduras the assurance that :
( a) this milk will be distributed free of charge to the needy victims of
      the disaster ;
(b)   it will be distributed by the national and international bodies currently
      responsible for local relief operations .  The recipient body also under
      takes to supervise distribution through its representatives in Honduras
      in cooperation with the distributing bodi.es .
 ---pagebreak---                                                                VIIl/1 242(74) B-4-E
                                      - 6 -
                                     Article V
   The recipient body undertakes to inform the Community as to how this
   Agreement has been implemented as soon as possible after the completion
   of the operation.
                                     Article VI
   At the request of either of them , the Contracting Parties shall consult
   each other on any questions concerning the implementation of this Agreement .
                                     Article VII
   This Agreement is drawn up in duplicate in the Danish, Dutch , English ,
.. French , German, Italian and Spanish languages , each of these texts being
   authentic .
 ---pagebreak---                                                                        VIII/1 242(74 ) B-4-2
                                     - 7 -
                                                                       ADTNEX I
                            SKH2ED IHLK POUDER
Quality rcquirementn :
( a)   fat content :                                       not excccding 1 . %
00     water content :                                     not exceeding 4.0^
(c)    total acidity ( lactic acid):                       not e::cceding 0.15$ ( 18 Dornic )
( d)   teet for neutralizing agents :                      négative
( e ) permitted additives :                                none
(f     test for phocphatasis :                             négative
  e    solubility :                                        not c::ceeding 0.5 ral ( not less than
                                                                                sm
00     degree of purity :                                  not less than diso B ( 15»0 mg)
  i    gerra content :                                     not exceeding 50 000/ g
  k    strength of colon Dacillus :                        négative in 0.1 g
  1    flavour and smell :                                 fresh
  n    appearance :                                        white or slightly yellowish ,
                                                           absence of impurities and coloured
                                                           particles .
Pacicaging :
1 Kraft paper bag, of a strength representing at least 70 g/m ;
1 Kraft paper bag , lined with polyethylene , of a strength representing
    at least 18 g + 15 g/m ;
                                                                                2
3 Kraft paper bags , of a strength representing at least 70 g/m ;
1 polyethylene inner bag at least 0.06 mm thick , welded or double-bound.
Marking on the packaging in Spanish :
SKEMKED MILK PONDER -
GIFT OF THE EUROPEAN ECONOMIC COMMUNITY
TO THE REPUBLIC OF HONDURAS -
OPERATION OF THE TrTCZ        TI~ TIITTT " T " T. -v»*" -i TlT'* ~WT>"                T* ' * Tnn (
 ---pagebreak---                                                             "WIII/1 242(74) B-4-E
                                     - 8 -
                                                             ANÏÏEX II
             AHNEX PROVIDED FOR III ARTICLE II OP THE AGREEMENT
                                    Article 1
Delivery shall be effected and all risk shall pass from the Community to the
recipient tody at the moment at which the goods actually arrive at the European
airport indicated.
The recipient "body shall pay all costs for taking delivery of the goods , any
costs of loading and all costs subsequent to delivery .
Any costs resulting from delays in taking delivery of the goods which are
attributable to the recipient body shall be borne by the latter .
                                     Article 2
The place and date of delivery shall be fixed by mutual agreement between the
Community and the recipient body .
                                     Article 3
To implement the provisions of this Annex , the Community shall appoint an
authorized agent whose name and address it shall make known in good time to
the recipient body.
The recipient body shall appoint a receiving agent in each place of delivery ,
whose name and address it shall make known to the Community before the Agreement
is implemented.
                                     Article 4
On delivery of the goods , the recipient body shall hand to the Community 1 s
authorized agent a certificate of delivery indicating the place and date of
taking delivery, the nature , quantity and any comments on the quality of these
products , and shall send a copy of this certificate to the Commisssion of the
European Communities .


title: Recommendation for a Council Decision abrogating Decision 2005/185/EC on the existence of an excessive deficit in the Czech Republic

text:
   EN
EN    EN
 ---pagebreak---    COMMISSION OF THE EUROPEAN COMMUNITIES
                                    Brussels, 7.5.2008
                                    SEC(2008) 571 final
                  Recommendation for a
                 COUNCIL DECISION
    abrogating Decision 2005/185/EC on the existence
      of an excessive deficit in the Czech Republic
              (presented by the Commission)
EN                                                      EN
 ---pagebreak---                                     EXPLANATORY MEMORANDUM
   1.        BACKGROUND
   Article 104 of the Treaty establishes that Member States should avoid excessive deficits and
   lays down a procedure for their identification and correction. The excessive deficit procedure
   (EDP) is further specified in Council Regulation (EC) No 1467/97 on “speeding up and
   clarifying the implementation of the excessive deficit procedure”1, which is part of the
   Stability and Growth Pact. According to Article 104(2) of the Treaty, the Commission has to
   monitor compliance with budgetary discipline on the basis of two criteria, namely: (a)
   whether the planned or actual government deficit exceeds the reference value of 3% of GDP
   (unless either the deficit ratio has declined substantially and continuously and reached a level
   that comes close to the reference value; or, alternatively, the excess over the reference value is
   only exceptional and temporary and the ratio remains close to the reference value); and (b)
   whether government debt exceeds the reference value of 60% of GDP (unless the debt ratio is
   sufficiently diminishing and approaching the reference value at a satisfactory pace).
   In accordance with the Protocol on the excessive deficit procedure annexed to the Treaty, the
   Commission provides the data for the implementation of the EDP. As part of the application
   of this Protocol, Member States have to notify data on government deficits and debt and other
   associated variables twice a year, namely before 1 April and before 1 October, in accordance
   with Article 4 of Council Regulation (EC) No 3605/932,3.
   On 12 May 2004, the Commission initiated the EDP for the Czech Republic with the adoption
   of a report under Article 104(3), based on a general government deficit of 12.9% of GDP in
   20034 (5.9% of GDP excluding a major one-off operation related to imputed state guarantees).
   On 5 July 2004, the Council decided, on a recommendation from the Commission, that the
   Czech Republic was in excessive deficit according to Article 104(6)5. At the same time, and
   also based on a Commission recommendation, the Council addressed recommendations under
   Article 104(7) to the Czech Republic with a view to bringing the situation of an excessive
   government deficit to an end, by 2008 at the latest.
   1
           OJ L 209, 2.8.1997, p. 6. Regulation as amended by Regulation (EC) No 1056/2005 (OJ L 174,
           7.7.2005, p. 5).
   2
           OJ L 332, 31.12.1993, p. 7. Regulation as last amended by Regulation (EC) No 2103/2005 (OJ L 337,
           22.12.2005, p. 1).
   3
           The most recent notification of the Czech Republic can be found at:
           http://epp.eurostat.ec.europa.eu/portal/page?_pageid=2373,58110711&_dad=portal&_schema=portal.
   4
           SEC(2004) 575. In the meantime the 2003 deficit outturn has been revised downwards to 6.6% of GDP
           (no longer including any one-offs).
   5
           OJ L 62, 9.3.2005, p. 20.
EN                                                        2                                                  EN
 ---pagebreak---    In view of the forecast of a marked budgetary slippage in 2007 and a continuing excess of the
   deficit over the reference value in 2008, based on budgetary plans proposed before the June
   2006 general election, the Council adopted a decision under Article 104(8) on 10 July 2007,
   based on a recommendation from the Commission, stating that the action being taken by the
   Czech Republic did not appear to be adequate to correct the excessive deficit by the deadline
   of 2008. On 10 October 2007, the Council issued a new recommendation under Article
   104(7), based on a recommendation from the Commission, recommending the Czech
   Republic to further contain the budgetary deterioration in 2007 and confirming the original
   target year of 2008 to put an end to the excessive deficit situation. The Czech authorities had
   to bring the deficit below the 3% of GDP reference value in a credible and sustainable
   manner. To this end, on the basis of then available projections the Council recommended the
   Czech authorities to ensure an improvement in the structural balance (i.e. the cyclically-
   adjusted balance net of one-off and other temporary measures) of at least ¾% of GDP in 2008
   compared to 2007. The Council set a deadline of 9 April 2008 for the Czech authorities to
   take effective action.
   In addition, the Council invited the Czech Republic “to ensure that budgetary consolidation
   towards its medium-term objective (MTO) for the budgetary position of a structural deficit of
   1% of GDP is sustained after the excessive deficit has been corrected and to achieve the MTO
   by the original deadline of 2012 at the latest.”
   Table 1: Adjustment endorsed by the Council on 10 October 2007
   % of GDP, unless indicated otherwise                     2006              2007                   2008
   General government balance                               -2.7        better than -3.3          deficit < 3
   change in structural balance                                                                   at least ¾
   p.m.: Real GDP growth (%)                                 6.0               5.0                    4.9
   Notes: Structural balance = cyclically-adjusted balance excluding one-off and other temporary measures.
   Source: Council recommendation under Article 104(7), adopted on 10 October 2007, and Commission services’
   Spring 2007 forecast
   After the expiry of the deadline set by the Council, the Commission habitually makes a formal
   assessment of the action taken by the authorities in response to the Council’s
   recommendations, taking into account the most recent Commission services’ forecasts. This
   represents an intermediate assessment of whether the country is on track to correct the
   excessive deficit in time. In the case of the Czech Republic, this intermediate assessment is
   subsumed under and replaced by the current document. It takes into account the Czech
   government’s note on corrective measures adopted under the EDP of April 20086.
   According to Article 104(12), a Council decision on the existence of an excessive deficit is to
   be abrogated, on the basis of a Commission recommendation, when the excessive deficit in
   the Member State concerned has, in the view of the Council, been corrected.
   6
            Letter of 10 April 2008 addressed by the Czech Minister of Finance to the Commissioner for Economic
            and Monetary Affairs.
EN                                                         3                                                    EN
 ---pagebreak---    2.         RECENT DEFICIT DEVELOPMENTS
   The general government deficit reached a high of 6.6% of GDP in 2003. Thereafter, with the
   exception of 2005 (3½% of GDP), the general government deficit has not been above 3% of
   GDP. The nominal deficit developments since 2004 have been better than the recommended
   (nominal) deficit reduction path in the 104(7) recommendation of 5 July 2004. The
   improvement in the general government deficit has been due to better-than-expected revenues
   from higher-than-anticipated growth, which has exceeded 6% annually since 2005, as well as
   expenditure restraint. General government expenditure has fallen gradually as a percentage of
   GDP from 45% of GDP in 2004 to 42.4% of GDP in 2007. This is partly due to government
   consumption which has been lowered by about 2% of GDP and also diminishing costs related
   to the consolidation of the banking sector7.
   Based on data provided by the Commission (Eurostat), following the reporting by the Czech
   Republic before April 20088,9, the general government deficit stood at 1.6% of GDP in 200710
   which is significantly below the target of 4% of GDP, set in the March 2007 update of the
   convergence programme. In the outturn, revenues, as a percentage of GDP, were 0.8% of
   GDP higher than projected in the March 2007 convergence programme, and government
   expenditure was 1.8% of GDP lower. The much better-than-expected outturn appears to
   mainly reflect containment of social expenditure, which was projected to rise by about 1% of
   GDP. Other elements of public expenditure including compensation of employees and
   intermediate consumption were also contained. In addition, growth turned out at 6.5% of GDP
   compared to 4.9% of GDP, as expected in the March 2007 convergence programme, and tax
   elasticities were better than predicted.
   Both revenues and expenditures were positively affected by a stronger than expected rise in
   employment. Social contributions grew more than anticipated and social transfers only
   increased marginally, as a percentage of GDP.
   Compared to 2006, the headline deficit declined by 1.1% of GDP, of which about one half is
   due to measures taken, as illustrated by the improvement in the structural balance, and the
   other half is thanks to stronger growth. Total expenditures decreased by 1.2% of GDP while
   total revenues decreased by 0.2% of GDP. The improvement in 2007 represents an
   overachievement of the Council’s recommendation to “further contain the budgetary
   deterioration” that was at the time expected for 2007.
   7
            In the context of privatisation of the banking sector, the Czech government bore much of the costs
            related to non-performing loans, in particular, through the creation of the Czech Consolidation Agency.
            Over time, the proportion of these assets has declined.
   8
            Eurostat News Release No 54/2008 of 18 April 2008.
   9
            In accordance with Article 8g(1) of Regulation (EC) No 3605/93.
   10
            Deficit ratios are usually revised – upwards or downwards – after the publication of the first outcome in
            the spring notification. For most EU Member States, the revisions are usually relatively small and on
            average insignificantly different from zero. For the Czech Republic, in view of the distance between the
            currently reported deficit for 2007 and the deficit reference value, there is a low probability that any
            potential future revision in government accounts will raise the 2007 deficit ratio to a level in excess of
            3% of GDP.
EN                                                          4                                                          EN
 ---pagebreak---    The overall reduction in government expenditure is reflected in the increase in the size of the
   reserve funds which are estimated to have expanded to 2¾% of GDP (from about 2% in
   2006), of which about ¾% of GDP is non-EU funds related expenditure that is deferred
   expenditure which may swell future deficits. The other 2% are EU-funds related and backed-
   up by revenues.
   In structural terms, the deficit decreased from 2.9% of GDP in 2006 to 2.3% of GDP in 2007
   due to continued government expenditure restraint including public sector wages.
   3.        DEFICIT PROJECTIONS FOR 2008 AND BEYOND
   According to the Commission services’ spring 2008 forecast, the general government deficit
   is projected to decline further, reaching 1.4% of GDP in 2008 and, under a no-policy change
   assumption, 1.1% of GDP in 2009. This is due to the balance of measures included in the
   stabilisation package, approved on 19 September 2007, which is estimated to have a positive
   impact amounting to around 0.3% of GDP for each year (see box I). The level of social
   transfers is expected to fall, as a percentage of GDP, in 2008 and 2009 as a result of
   legislative measures in the stabilisation package. In addition to legislative measures, the
   consolidation also relies on continuing public sector wage restraint and a reduction in public
   consumption as a percentage of GDP. Revenues are expected to remain stable as a percentage
   of GDP, although the range of tax measures occurring at the same time makes forecasting
   difficult. The Commission services’ deficit projections in the spring forecast are in line with
   the planned deficit reported in the spring notification (1.5% of GDP).
   Based on the Commission services’ spring 2008 forecast, the structural balance is expected to
   improve from -2¼% of GDP in 2007 to around -2% of GDP in 2008. The improvement is
   lower than recommended by the Council (at least ¾% of GDP) in light of the much better
   headline deficit in 2007, underpinned by a structural improvement in 2007, of about ½% of
   GDP, which was not anticipated at the time of the recommendation.
   The medium-term objective (MTO) of the Czech Republic is a structural deficit to 1% of
   GDP, which according to the most recent convergence programme submitted in November
   2007 should be achieved by 2012. The Council opinion of 4 March 2008 on the programme11
   invited the Czech authorities to “exploit the high rate of growth in the economy by
   strengthening the pace of adjustment so as to build a safety margin against breaching the
   reference value as soon as possible, and achieve the MTO by 2012 at the latest”.
            Box I: Summary of measures in the stabilisation package of September 2007
     The stabilisation package has shifted the overall tax burden from direct to indirect taxation.
     From 1 January 2008, a 15% flat rate of personal income tax was introduced, albeit on an
     expanded base, which is planned to be further reduced to 12.5% in 2009. From 1 January
     2008, the corporate income tax rate was reduced from 24% to 21% and will decline further
     to 19% by 2010. Indirect taxes were increased in January 2008 through an increase in the
     lower band of VAT from 5 to 9 %, increases to excise taxes, and the introduction of an
     environmental tax on electricity, natural gas and solid fuels. A ceiling has also been
     introduced on the maximum base for payment of social contributions which will reduce
   11
           OJ C 74, 20.3.2008, p. 24.
EN                                                  5                                               EN
 ---pagebreak---      revenue.
     The stabilisation package introduced new legislation aimed at reducing expenditure in
     primarily the area of social benefits, including child benefits, social care benefits, parental
     allowances, maternity benefits, foster care benefits, benefits for school supplies, and funeral
     benefits. In addition to fixed reductions, most social care benefits have ceased to be indexed
     to the minimum subsistence level, which in turn has been changed to a discretionary basis
     by the government. The stabilisation package also introduced service charges for healthcare
     services from January 2008. This includes charges for medical consultations, prescription
     medicines, and hospitalisation. These changes are estimated to have a small positive impact
     on government revenues by generating additional income and reducing expenditure by
     lowering demand.
   The government tabled a proposal on 23 January 2008 to compensate churches for confiscated
   religious property (see box II). Pursuant to its approval by the Czech parliament, the financial
   compensation will be registered as a one-off deficit-increasing expenditure amounting to
   2.2% of GDP in the year in which the government liability is recognised, though most
   effective payment will be deferred over a very long period of 60 years. This transaction was
   not considered in the Commission services’ spring 2008 forecasts based on the usual no-
   policy change assumption, since it was not clear whether and when the government proposal
   would be adopted by Parliament. This transaction was not considered either in the projections
   of the convergence programme. In case the proposal became effective in 2008 or 2009, the
   government deficit (including this transaction) would on current projections be temporarily in
   excess of 3% of GDP for that year.
     Box II: The Czech proposal for compensation for the confiscation of religious property
     On 23 January 2008, the Czech Government tabled in parliament a proposal to compensate
     the church for religious property confiscated during the period 1948-1990. Two ways of
     compensation are foreseen: restitution in kind and financial compensation when restitution
     in kind is no longer possible. According to the proposal, as far as the financial compensation
     is concerned, the churches will receive from the government 60 yearly cash instalments of
     CZK 4274.9 million (0.1% of the 2008 GDP). Given an annual interest rate of 4.85%, this
     corresponds to a principal of CZK 83.0 billion (2.2% of the 2008 GDP) and CZK 173.5
     billion of interest12.
     The Czech statistical office has required Eurostat to clarify the appropriate accounting
     implications of the proposal for compensation. Eurostat clarified that the restitutions in kind
     have no impact on the government deficit. When the returned asset is the same as
     confiscated in the past, the transaction is recorded in ESA accounts as other changes in
     volume without any direct impact on the government revenue and expenditure accounts.
     When the returned good is not the same, the restitution is booked as a capital transfer paid
     offset by negative investment.
     In relation to the financial compensation, Eurostat clarified that, according to its
     interpretation of ESA accounting rules, the principal to be paid should be booked as
     government expenditure when the legal act is approved, instead of when cash payments take
   12
            According to information provided by the Czech authorities, part of the compensation deal is also that
            state support to churches (e.g. payment of priests’ salaries) will be phased out. This state support
            amounts to CZK 1406 million (0.04% of GDP in 2008).
EN                                                      6                                                          EN
 ---pagebreak---      place. Interest will be booked as government expenditure over the 60 following years.
     Eurostat also clarified that the outstanding liability vis-à-vis the churches will be booked as
     accounts payable13.
     Therefore, in the year the Czech Parliament adopts the law and the latter enters into force,
     the Czech government accounts will include a very large one-off deficit-increasing
     transaction amounting to 2.2% of GDP. The fact that the liability vis-à-vis the churches will
     be booked as accounts payable means that it will not constitute government debt in the sense
     of Regulation (EC) No 3605/93. At the moment the expenditure is booked, the stock-flow
     adjustment will include an exceptionally large negative cash-accrual difference, which will
     be progressively offset over 60 years.
   4.        DEBT DEVELOPMENTS AND PROJECTIONS
   Despite significant general government deficits since 2004, the increase of the level of debt
   has been largely contained. Due to record growth since 2005, and a substantial reduction in
   the general government deficit in 2007 compared to 2006, the level of government debt has
   decreased from 30.4% of GDP in 2004 to 28.7% of GDP in 2007.
   On the basis of the Commission services’ spring 2008 forecast, the debt ratio is expected to
   continue on a downward path to below 28% of GDP in 2009, due to continuing fiscal
   consolidation and sustained macroeconomic growth.
   5.        CONCLUSIONS
   Despite the expectation of a strong fiscal expansion in 2007, the general government balance
   improved from -2.7% of GDP in 2006 to -1.6% of GDP in 2007. This was due in part to
   expenditure savings as well as higher growth. The structural balance, i.e. the cyclically-
   adjusted balance net of one-off and other temporary measures, improved by ½% of GDP in
   2007.
   The Czech government has introduced a range of legislative measures, effective from 2008,
   with the aim of consolidating public finances in 2008 and 2009, including through the
   containment of social spending and the introduction of service charges for healthcare, which
   will have a net positive impact on public finances. Combined with continuing expenditure
   restraint, and a close monitoring of the impact on revenues of the wide range of tax measures
   implemented in 2008, these measures are expected to lead to a further reduction in the general
   government deficit. According to the Commission services’ spring 2008 forecast, the headline
   deficit is expected to improve further to 1.4% of GDP in 2008 and, on a no-policy change
   basis, to 1.1% in 2009. This indicates that the deficit has been brought below the 3% of GDP
   ceiling in a credible and sustainable manner.
   General government gross debt declined from 29.4% of GDP in 2006 to 28.7% in 2007, well
   below the 60% of GDP reference value. According to the Commission services’ spring 2008
   forecast, the debt ratio is expected to fall further to below 28% of GDP by 2009 (on a no-
   policy change basis).
   13
           The Eurostat letter of 14 March 2008 providing ex ante advice to the Czech statistical office is available
           at: http://epp.eurostat.ec.europa.eu/pls/portal/docs/PAGE/PGP_DS_GFS/PGE_DS_GFS_8/ADV%20-
           %20CZ%20-%202008.1%20-%20CONFISCATED%20PROPERTIES.PDF
EN                                                        7                                                           EN
 ---pagebreak---      From an overall assessment, it follows that the excessive deficit situation in the Czech
     Republic has been corrected. Accordingly, the Commission recommends to the Council to
     abrogate its decision on the existence of an excessive deficit in the Czech Republic.
     Table 2: Budgetary developments, 2003-2009
                                                  2003 2004 2005 2006           2007          2008          2009
   % of GDP, unless indicated otherwise                                    COM CP(2) COM CP(2) COM(3) CP(2)
   General government balance                     -6.6 -3.0 -3.6 -2.7 -1.6 -3.4 -1.4 -2.9               -1.1    -2.6
   - Total revenues                               40.7 42.2 41.4 41.0 40.8 39.8 40.7 39.5 40.7 38.1
   - Total expenditure                            47.3 45.2 44.9 43.6 42.4 43.3 42.2 42.4 41.8 40.7
     Of which : - interest expenditure             1.2 1.2 1.2        1.1    1.2    1.2    1.1    1.3    1.1     1.2
                - gross fixed capital formation 4.5 4.8 4.9           5.0    4.8    5.1    4.8    5.3    4.9     5.4
   Primary balance                                -5.5 -1.8 -2.4 -1.5 -0.4 -2.3 -0.3 -1.7                0.0    -1.3
   One-off and temporary measures                  0.0 -0.7 -1.1 -0.2 0.0           0.0    0.0    0.0    0.0     0.0
   Structural balance(1)                          -5.5 -1.3 -2.1 -2.9 -2.3 -4.1 -1.9 -3.4               -1.5    -2.8
   Structural primary balance(2)                  -4.4 -0.1 -1.0 -1.7 -1.2 -2.9 -0.8 -2.2               -0.4    -1.6
   Government gross debt                          30.1 30.4 29.7 29.4 28.7 30.4 28.1 30.3 27.2 30.2
   Pm        Real GDP growth (%)                   3.6 4.5 6.4        6.4    6.5    5.9    4.7    5.0    5.0     5.1
   Pm        Output gap                           -3.0 -2.6 -0.8 0.8         2.0    1.8    1.4    1.4    1.1     0.7
   (1)
              Cyclically-adjusted (primary) balance excluding one-off and temporary measures.
   (2)
              Cyclically-adjusted and structural balances and output gaps according to the programme as calculated by
              Commission services on the basis of the information in the programme.
   (3)
              No-policy change assumption.
   Sources: Commission services’ spring 2008 forecast (COM) and November 2007 update of the convergence
   programme (CP)
EN                                                           8                                                        EN
 ---pagebreak---                                           Recommendation for a
                                         COUNCIL DECISION
                            abrogating Decision 2005/185/EC on the existence
                              of an excessive deficit in the Czech Republic
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty establishing the European Community, and in particular
   Article 104(12) thereof,
   Having regard to the recommendation from the Commission,
   Whereas:
   (1)     By Council Decision 2005/185/EC14, following a recommendation from the
           Commission in accordance with Article 104(6) of the Treaty, it was decided that an
           excessive deficit existed in the Czech Republic. The Council noted that the general
           government deficit was 12.9% of GDP in 2003 (5.9% of GDP excluding a major one-
           off operation related to imputed state guarantees), well above the 3% of GDP Treaty
           reference value.
   (2)     On 5 July 2004, in accordance with Article 104(7) of the Treaty and Article 3(4) of
           Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the
           implementation of the excessive deficit procedure15, the Council made, based on a
           recommendation from the Commission, a recommendation addressed to the Czech
           Republic with a view to bringing the excessive deficit situation to an end by 2008 at
           the latest. The recommendation was made public.
   (3)     In view of the forecast of a marked budgetary slippage in 2007 and a continuing
           excess of the deficit over the reference value in 2008, the Council adopted a decision
           under Article 104(8) on 10 July 2007, based on a recommendation from the
           Commission, stating that the action being taken by the Czech Republic did not appear
           to be adequate to correct the excessive deficit by the deadline of 200816. On 10
           October 2007, the Council issued a new recommendation under Article 104(7), based
           on a recommendation from the Commission, recommending the Czech Republic to
           further contain the budgetary deterioration in 2007 and reconfirming the excessive
           deficit had to be put to an end by 2008 at the latest, with a deadline of 9 April 2008 for
           the Czech authorities to take effective action. On the basis of then available
           projections the Council invited the Czech authorities to ensure an improvement in the
   14
           OJ L 62, 9.3.2005, p. 20.
   15
           OJ L 209, 2.8.1997, p. 6. Regulation as amended by Regulation (EC) No 1056/2005 (OJ L 174,
           7.7.2005, p. 5).
   16
           OJ L 260, 5.10.2007, p. 13.
EN                                                   9                                                EN
 ---pagebreak---        structural balance (i.e. the cyclically-adjusted balance net of one-off and other
       temporary measures) of at least ¾% of GDP in 2008 compared to 2007.
   (4) In accordance with Article 104(12) of the Treaty, a Council Decision on the existence
       of an excessive deficit is to be abrogated when the excessive deficit in the Member
       State concerned has, in the view of the Council, been corrected.
   (5) In accordance with the Protocol on the excessive deficit procedure annexed to the
       Treaty, the Commission provides the data for the implementation of the procedure. As
       part of the application of this Protocol, Member States are to notify data on
       government deficits and debt and other associated variables twice a year, namely
       before 1 April and before 1 October, in accordance with Article 4 of Council
       Regulation (EC) No 3605/93 of 22 November 1993 on the application of the Protocol
       on the excessive deficit procedure annexed to the Treaty establishing the European
       Community17.
   (6) Based on data provided by the Commission (Eurostat) in accordance with Article
       8g(1) of Regulation (EC) No 3605/93 following the notification by the Czech
       Republic before 1 April 2008 and on the Commission services’ spring 2008 forecast,
       the following conclusions are warranted:
         –     the general government deficit was reduced from 2.7% of GDP in 2006 to
               1.6% of GDP in 2007, which is below the 3% of GDP deficit reference value.
               This compares with a target of 4% of GDP in the March 2007 convergence
               programme,
         –     while tax revenues exceeded expectations due to higher-than-projected
               economic growth, the deficit reduction in 2007 was also the consequence of
               expenditure restraint, in particular with respect to the compensation of public
               sector employees and intermediate consumption. Most of the expenditure
               savings are of a permanent nature. The improvement in the structural balance
               (i.e. the cyclically-adjusted balance net of one-off and other temporary
               measures) is estimated at just above ½% of GDP in 2007,
         –     for 2008, the spring 2008 forecast projects the deficit to be reduced further, to
               1.4% of GDP, driven by additional expenditure savings measures, legislative
               measures to reduce social expenditure and the introduction of partial health
               charges. Revenue as a percentage of GDP is expected to remain broadly
               constant on the back of a wide range of tax measures implemented in 2008.
               The spring forecast is in line with the deficit target of 1.5% of GDP in the April
               fiscal notification. For 2009, the spring forecast projects, on a no-policy change
               basis, a further decline in the deficit to 1.1% of GDP. This indicates that the
               deficit has been brought below the 3% of GDP ceiling in a credible and
               sustainable manner. The structural balance is projected to improve by almost ½
               a percentage point of GDP in 2008 and again, on a no-policy change basis, in
               2009. This has to be seen against the need to make progress towards the
               medium-term objective (MTO) for the budgetary position, which for the Czech
   17
       OJ L 332, 31.12.1993, p. 7. Regulation as last amended by Regulation (EC) No 2103/2005 (OJ L 337,
       22.12.2005, p. 1).
EN                                                  10                                                   EN
 ---pagebreak---                  Republic is a structural deficit of 1% of GDP, to be reached by 2012 according
                 to the November 2007 update of the convergence programme.
            –    government debt remains well below the 60% of GDP reference value. It
                 declined from 29.4% of GDP in 2006 to 28.7% in 2007. According to the
                 spring 2008 forecast, the debt ratio is projected to fall further to below 28% by
                 end-2009 (on a no-policy change basis).
   (7)    In the view of the Council, the excessive deficit in the Czech Republic has been
          corrected and Decision 2005/185/EC should therefore be abrogated.
   HAS ADOPTED THIS DECISION:
                                              Article 1
   From an overall assessment it follows that the excessive deficit situation in the Czech
   Republic has been corrected.
                                              Article 2
   Decision 2005/185/EC is hereby abrogated.
                                              Article 3
   This Decision is addressed to the Czech Republic.
   Done at ,
                                                For the Council
                                                The President
EN                                                11                                               EN


RECOMMENDATION FOR A COUNCIL DECISION CONCERNING THE NEGOTIATIONS FOR THE ACCESSION OF THE PEOPLE' S REPUBLIC OF CHINA TO THE GENERAL AGREEMENT ON TARIFFS AND TRADE


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52011PC0115

/* COM/2011/0115 final  */  Recommendation for a COUNCIL DECISION designating the European Capital of Culture for the year 2015 in the Czech Republic

	[pic] | EUROPEAN COMMISSION |Brussels, 14.3.2011COM(2011) 115 finalRecommendation for aCOUNCIL DECISIONdesignating the European Capital of Culture for the year 2015 in the Czech RepublicENEXPLANATORY MEMORANDUMDecision No 1622/2006/EC of the European Parliament and the Council of 24 October 2006 establishing a Community action for the European Capital of Culture event for the years 2007 to 2019[1] lays down the procedure for designating of the European Capitals of Culture. According to Article 2 of this Decision, from 2009 onwards, two cities of two Member States will be designated as European Capitals of Culture, in turn, according to the chronological order set out in the Annex to the Decision. Belgium and the Czech Republic are entitled to host the event in 2015.The nomination of European Capitals of Culture concerning the year 2015 is submitted to the following process.A call for submissions of applications is published by each of the Member States concerned no later than six years before the event. A selection panel composed of 13 independent experts in the cultural sector is convened for a pre-selection meeting no later than five years before the event. It assesses the applications received against the criteria laid down in article 4 of Decision No 1622/2006/EC and agrees on a short list of candidate cities which have to be considered further after completing their application.Each of the Member States concerned convenes the panel for final selection, 9 months after the pre-selection meeting. After an extensive evaluation of the preselected cities based on the criteria laid down for the action, the panel recommends one city for the title in each Member State concerned.On the basis of these recommendations, both Member States nominate one city each to be European Capital of Culture and notify the European Parliament, the Council, the Commission and the Committee of the Regions no later than four years before the event in question is due to begin.The European Parliament may forward an opinion to the Commission no later than 3 months after receipt of the nominations.The Council, acting on a recommendation from the Commission, officially designates the cities in question for the year for which they have been nominated.Three applications for the European Capital of Culture title were received in the Czech Republic : Hradec Králové, Ostrava and Plzeň.At the end of the two stage selection procedure, the project of Plzeň was judged to respond best to the objectives and criteria of the event as defined in article 4 of Decision No 1622/2006/EC.Consequently, the panel recommended that Plzeň hosts the event in the Czech Republic in 2015 in its report of September 2010. The Czech Republic notified these nominations to the European Parliament, the Council, the Commission and the Committee of the Regions at the end of 2010.The European Parliament forwarded its positive opinion to the Commission in early January 2011.The selection process in Belgium was finalised in spring 2010 and the designation of Mons took place in November 2010.Consequently, the Commission, in accordance with Article 9(3) of Decision No 1622/2006/EC submits to the Council the appended recommendation for the official designation of Plzeň for the 2015 European Capital of Culture event in the Czech Republic.Recommendation for aCOUNCIL DECISIONdesignating the European Capital of Culture for the year 2015 in the Czech RepublicTHE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty on the functioning of the European Union,Having regard to Decision No 1622/2006/EC of the European Parliament and of the Council of 24 October 2006 establishing a Community action for the European Capital of Culture event for the years 2007 to 2019[2], and in particular Article 9(3) thereof,Having regard to the recommendation from the European Commission,Having regard to the Selection Panel report of September 2010 regarding the selection process of the European Capitals of Culture in the Czech Republic,Whereas:Considering that the criteria referred to in Article 4 of Decision No1622/2006/EC are entirely fulfilled,HAS ADOPTED THIS DECISION:Article 1Plzeň is designated as “European Capital of Culture 2015” in the Czech Republic.Article 2This Decision shall enter into force on the day following that of its publication in the Official Journal of the European Union .Done at […],For the CouncilThe President [1] OJ L 304 of 3.11.2006, p1[2] OJ L 304, 3.11.2006, p. 1.


Avis juridique important

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52004SC0815

Recommendation for a Council Decision on the existence of an excessive deficit in Greece  /* SEC/2004/0815 final */

Recommendation for a COUNCIL DECISION on the existence of an excessive deficit in Greece(presented by the Commission)EXPLANATORY MEMORANDUMOn 7 April 2004, the Commission published its spring 2004 forecasts. [1] According to these forecasts, which took into consideration revised data reported by Greece on 30 March 2004 but not validated by Eurostat, the general government deficit in 2003 reached 2.95% of GDP. Following contacts between Eurostat and the Greek authorities at the end of April, the latter submitted on 4 May a further revised notification with a deficit of 3.2% of GDP for 2003, thus exceeding the 3% of GDP Treaty reference value, and substantially higher than the 2002 deficit (1.5% of GDP). Moreover, at 103.0 percentage points the gross debt to GDP ratio remains well above the 60% Treaty reference value. Based on this prima facie evidence, the Commission initiated the Excessive Deficit Procedure for Greece on 19 May 2004, with the adoption of the report as foreseen in Article 104(3) of the Treaty. [2][1]  The Commission Spring 2004 forecast is available at the following website: http://europa.eu.int/comm/economy_finance/publications/european_economy/2004/ee204en.pdf.[2]  The full text of this report is available at the following website: http://europa.eu.int/comm/economy_finance/about/activities/sgp/procedures_en.htm.The application of the excessive deficit procedure (EDP) is governed by Article 104 of the Treaty and by Council Regulation (EC) No 1467/97 "on speeding up and clarifying the implementation of the excessive deficit procedure", which is part of the Stability and Growth Pact. [3][3]  OJ L 209, 2.8.1997.The Commission report according to Article 104(3) of the Treaty concluded that the excess of the 3.2% of GDP deficit in 2003 over the 3% of GDP Treaty reference value did not result, in the sense of the Stability and Growth Pact, from an unusual event outside the control of the Greek authorities, nor was it the result of a severe economic downturn, which is defined in the Pact as an annual fall of real GDP of at least 2%. On the contrary, it occurred in a context of strongly positive growth, with real GDP growth at 4.2% in 2003, and a positive output gap of around 1.5% of GDP. The outturn of general government deficit for 2003 compares with a target deficit of 0.9% of GDP set in the December 2002 updated stability programme. The significant slippage is attributed to non recurrent factors (overruns in the expenditure related to the preparation of the Olympic Games and compensation for weather damages), to higher than planned primary spending (social transfers and public sector wages) and to a shortfall of budgetary revenues (VAT, income taxes and reclassification, as a financial transaction, of a payment from the Saving Postal Bank to government). Concerning developments in 2004, the report concluded that the general government deficit would probably increase and remain above 3% of GDP, in the absence of further measures.The Commission report, based on the Commission Spring forecasts, noted that the debt-to-GDP ratio reached 103% of GDP in 2003, well above the 60% reference value of the Treaty. Moreover, it also noted that the Commission projects the debt ratio to decline only marginally to 102.8% of GDP in 2004, which is above the 98.3% of GDP reported by the Greek authorities on 4 May 2004. The report considered that both the high level of government debt and its slow pace of reduction are a cause of concern, especially in a period of high nominal growth and a positive and widening output gap.Article 104(4) of the Treaty states that "the Committee provided for in Article 114 (i.e. the Economic and Financial Committee) shall formulate an opinion on the report of the Commission". The Committee issued its opinion on 2 June 2004, subscribing to the assessment made by the Commission in its report. In particular, the Committee concluded that the budgetary developments in Greece in 2003 indicated the existence of an excessive deficit under both criteria foreseen by Article 104(2) for the identification of such deficits. Consideration of other relevant factors, in particular the medium-term budgetary position and public investment ratio did not change the assessment based on the criteria themselves. The Committee also considered that in the present stage of policy setting and growth prospects, the general government deficit would continue to exceed the Treaty reference value in 2004, and that the general government gross debt would continue to remain well above the Treaty reference value of 60% of GDP in 2004. The Committee considered that both the high level of government debt and its slow pace of reduction are a cause of concern, especially in a period of high nominal growth and positive, widening gaps.The Commission, having examined the relevant factors taken into account in its report and having regard to the opinion of the Committee, is of the opinion that an excessive deficit exists in Greece. This opinion, adopted by the Commission on 24 June 2004, has been addressed to the Council, according to Article 104(5) of the Treaty. The Commission recommends that the Council shall decide accordingly, in conformity with Article 104(6) and herewith addresses a recommendation for a decision to that effect. In addition, the Commission is submitting to the Council a recommendation for a Council recommendation to be addressed to Greece with a view to bringing the situation of an excessive deficit to an end, according to Article 104(7) of the Treaty.COUNCIL DECISION on the existence of an excessive deficit in GreeceTHE COUNCIL OF THE EUROPEAN UNIONHaving regard to the Treaty establishing the European Community, and in particular Article 104(6) thereof,Having regard to the recommendation from the Commission,Having regard to the observations made by Greece,Whereas:(1) According to Article 104 of the Treaty Member States are to avoid excessive government deficits;(2) The Stability and Growth Pact is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation;(3) The excessive deficit procedure under Article 104 provides for a decision on the existence of an excessive deficit; The Protocol on the excessive deficit procedure annexed to the Treaty sets out further provisions relating to the implementation of the excessive deficit procedure. Council Regulation (EC) No 3605/93 [4] amended by Council Regulation (EC) No 475/2000 [5] and by Commission Regulation (EC) No 351/2002 [6] lays down detailed rules and definitions for the application of the provision of the said Protocol;[4]  OJ L 332, 31.12.1993, p. 7.[5]  OJ L 058, 3.03.2000, p. 1.[6]  OJ L 055, 26.02.2002 p. 23.(4) Article 104(5) of the Treaty requires the Commission to address an opinion to the Council if the Commission considers that an excessive deficit in a Member State exists or may occur. The Commission has addressed such an opinion on Greece to the Council on 24 June 2004. Having examined all relevant factors taken into account in its report in accordance with Article 104(3) and having regard to the opinion of the Economic and Financial Committee in accordance with Article 104(4), the Commission concluded in its opinion on 24 June 2004 that there exists an excessive deficit in Greece.(5) Article 104(6) of the Treaty lays down that the Council should consider any observations which the Member State concerned may wish to make before deciding, after an overall assessment, whether an excessive deficit exists.(6) The overall assessment leads to the following conclusions: The general government deficit reached 3.2% of GDP in 2003 in Greece. The breach of the 3% of GDP Treaty reference value in 2003 did not result, in the sense of the Stability and Growth Pact, from an unusual event outside the control of the Greek authorities, nor is it the result of a severe economic downturn. On the contrary, it occurred in a context of strong economic growth at 4.2% in 2003, and a positive output gap of around 1.5% of GDP. The outturn of the general government deficit in 2003 compares with a target deficit of 0.9% of GDP set in the December 2002 updated stability programme. According to the Commission, the significant slippage is attributed to extraordinary factors (overruns in expenditure related to the preparation of the Olympic Games and compensation for weather damages), to higher than planned current spending (social transfers and public sector wages) and to a shortfall of revenues (VAT, income taxes and reclassification, as a financial transaction, of a payment from the Saving Postal Bank to government).(7) According to its Spring 2004 forecasts, based on the assumption of no-policy change and a deficit figure for 2003 of 2.95% of GDP notified at the end of March, the Commission projects the general government deficit in Greece to reach 3.2% of GDP in 2004.(8) The debt-to-GDP ratio reached 103% of GDP in 2003, well above the 60% reference value of the Treaty. Moreover, in its Spring 2004 forecasts, the Commission projects the debt ratio to decline only marginally to 102.8 % of GDP in 2004, which is above the 98.3% of GDP reported by the Greek authorities on 4 May 2004. The high level of government debt and its slow pace of reduction are a cause of concern, especially in a period of high nominal growth and positive and widening output gap.(9) At present the quality of public finance data remains uncertain. The deficit figure for 2003 of 3.2% of GDP in the notification of 4 May compares with a deficit of 1.7% of GDP notified in early March, which was modified to 2.95% of GDP at the end of the same month, following the new government's initiative for a far-reaching auditing of public finances. Since open issues remained about the underlying data, the Greek authorities are committed to resolve most pending issues promptly in close collaboration with Eurostat. Moreover, although Eurostat validated the figures of the 4 May notification, there are firm indications that there will be significant further, and as regards deficits almost certainly upwards, revisions for 2003 and earlier years, when a customary notification is made in September 2004. Such revisions are moreover expected to have an upward impact on the deficit figures for 2004.HAS ADOPTED THIS DECISION:Article 1From an overall assessment it follows that an excessive deficit exists in Greece.Article 2This decision is addressed to the Hellenic Republic.Done at Brussels, (05 July 2004).For the Council


RECOMMENDATION FOR A COUNCIL DECISION AUTHORIZING THE COMMISSION TO OPEN NEGOTIATIONS WITH A VIEW TO THE CONCLUSION OF AGREEMENTS BETWEEN THE EUROPEAN ECONOMIC COMMUNITY AND CERTAIN THIRD COUNTRIES CONCERNING THE PROTECTION OF LEGAL PAPERS IN CONNECTION WITH THE APPLICATION OF THE RULES ON COMPETITION