				|

		52013DC0379

			Recommendation for a COUNCIL RECOMMENDATION on the implementation of the broad guidelines for the economic policies of the Member States whose currency is the euro /* COM/2013/0379 final */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on the implementation of the broad
guidelines for the economic policies of the Member States whose currency is the
euro
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 136 in conjunction
with Article 121(2) thereof, Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1], and in particular Article 5(2)
thereof,
Having regard to Regulation (EU) No
1176/2011 of the European Parliament and of the Council of 16 November on the
prevention and correction of macroeconomic imbalances[2], and in particular Article 6(1)
thereof,
Having regard to the recommendation of the
European Commission[3],
Having regard to the resolutions of the
European Parliament[4],
Having regard to the conclusions of the
European Council,
After consulting the Economic and Financial
Committee,
Whereas:
(1)       The Eurogroup has a
special responsibility in the economic governance of the euro area. The
economic crisis clearly exposed the close interrelations in the euro area,
underscoring the need for a coherent aggregate policy stance which reflects the
strong spillovers between countries whose currency is the euro, for effective
arrangements for policy coordination to swiftly respond to changes in the
economic environment.
(2)       The Member States whose
currency is the euro have committed themselves to a set of far-reaching additional
policy reforms and policy coordination by signing the Treaty on Stability,
Coordination and Governance in the Economic and Monetary Union on 2 March 2012.
The entry into force of the so called "Two Pack" regulations[5] in 2013 will further deepen budgetary and economic policy coordination within the euro area.
(3)       Work is ongoing to deepen
further the economic and monetary union. On 28 November 2012, the Commission
presented a communication on a blueprint for a deep and
genuine economic and monetary union[6]. The
blueprint identified the rationale and objectives of a genuine EMU as well as
the instruments and steps that would make it possible to reach them. The
blueprint intended to launch the European debate. On 12 September 2012, the
Commission presented a roadmap towards a Banking Union[7]. This proposal was accompanied
by a proposal for two regulations needed to establish the single supervisory
mechanism[8].
On 5 December 2012, the President of the European
Council issued a report which was developed in in close
collaboration with the President of the Commission, the President of the
Eurogroup and the President of the ECB, and which contained a specific and
time-bound road map for the achievement of a genuine Economic and Monetary
Union. It was structured around
the areas of an integrated financial-, budgetary and economic policy framework
and democratic legitimacy and accountability. On 14
December 2012, the Heads of State or Government decided on work to be taken
forward on a roadmap for the completion of EMU, recognising the interdependence
between the economies of the euro area Member States and the benefits that
stability in the euro area can bring to its members and to the European Union
as a whole.
(4)       The European Parliament
has been duly involved in the European Semester and expressed its views on the deepening
of the economic and monetary union in its resolution of 20 November 2012
“Towards a genuine Economic and Monetary Union”[9].
(5)       Crisis
management in the euro area has been characterised by strong resolve. The
commitment of all Member States and EU institutions to safeguarding the
integrity of the euro area has been clearly put beyond question. However, the
effectiveness of euro area governance as well as the conduct of crisis
management by the Eurogroup need to be further improved to fully ensure
effective coordination at the euro area level. Strengthened coordination is
also needed to arrive at a coherent aggregate policy stance in the euro area
and to ensure that the necessary policy measures are implemented. Achieving
these goals will bolster the confidence of citizens and markets, and thereby
contribute to economic recovery and financial stability in the euro area.
(6)       The implementation of
two-pack will further strengthen budgetary surveillance in the euro area. The
two-pack legislation assigns a role to the Eurogroup in discussing the draft
budgets of individual Member States as well as the budgetary prospects for the
euro area as a whole in view of ensuring an appropriate overall fiscal stance.
These discussions take place on the basis of the Commission's opinions of the
draft budgetary plans of the euro area Member States and the of the overall euro
area assessment by the Commission of the draft budgetary plans and their
interaction. For fiscal consolidation across the euro area, the challenge is to put the debt-to-GDP ratio on a steadily
declining path over time. This can be done by pursuing differentiated, growth-friendly
fiscal consolidation policies while boosting the growth potential of the euro
area. The corrective arm of the Stability and Growth
Pact foresees budgetary adjustment as defined in structural terms taking into
account cross-country country differences in risks to sustainability, both in
short and medium term, and allows the automatic stabilisers to function along
the adjustment path. The preventive arm of the Stability and Growth Pact
foresees a gradual adjustment towards the Medium Term Objectives with the
annual structural improvement of 0.5% as a benchmark. This can be modulated on
a country specific basis taking into account cyclical conditions and debt
sustainability risk. The credibility of fiscal policy over the medium-term
would be reinforced by if the composition of government expenditure and
revenues better reflecting the growth impact of the different spending items
and revenue sources. Furthermore, the growth potential of the economy can be
enhanced by further structural reforms and by exploiting available budgetary
margins to foster public investment in the euro area, using the scope provided
by the Stability and Growth Pact.
(8)       Most risk indicators
related to EU financial markets as well as market sentiment improved compared
to 2012 as the intensity of self-fulfilling and destructive confidence spirals
has dissipated. However, significant market fragmentation remains. Improved
funding conditions for banks are yet to feed through to a pick-up of credit for
the real economy and significant differences persist across Member States as regards
bank lending activity and cost of funding to the private sector. Facilitating an orderly deleveraging of both the
banking sector and the non-financial private sector while sustaining the flow
of new credit for productive uses in the real economy and particularly SMEs, are
the key challenge at the current conjuncture.
(9)       Further repairing banks' balance sheets and continuing the
strengthening of equity buffers, where needed, would contribute to repairing
the credit channel. In this
context, asset quality reviews and stress tests by the SSM and EBA will provide
transparency of banks' balance sheets, help identify any remaining pockets of
vulnerability, and hence reinforce confidence in the sector as a whole. The risk of further financial-market fragmentation and financial
turmoil illustrates the importance for the euro area of rapidly moving ahead
with the creation of the Banking Union while avoiding ad hoc approaches to bank
resolution.
(10)     Structural reforms are needed across the euro
area to improve the functioning of product and labour markets in order to promote competitiveness, to strengthen the ongoing adjustment
process and to guarantee a sustainable reallocation of resources. Moreover, structural
reforms play an essential role in facilitating the rebalancing and deleveraging
process. For deficit countries, competitiveness gains will increase net
exports, which help in rebalancing the growth pattern towards more productive,
less labour-intensive tradable sectors, while supporting economic recovery and
bringing down debt ratios. At the same time, reforms to improve competition in
countries with a current account surplus could contribute to the reallocation
of resources and help boosting investment in non-tradable sectors. This would
strengthen the role of domestic demand in the composition of growth making the
adjustment in the euro area more symmetric. At the same time, the crisis had largely asymmetric effects on euro-area Member States’
employment, with countries most hit being those with the most severe
compression of domestic demand linked to current account reversals. In the
absence of an effective and quick absorption of cyclical unemployment,
hysteresis effects, whereby unemployment becomes entrenched and less sensitive
to wage dynamics, may materialise. Structural reforms
in the labour market therefore remain of particular importance to mitigate risks for social cohesion and future growth potential in the
euro area. By signing the Treaty on Stability,
Coordination and Governance in the Economic and Monetary Union, on 2 March
2012, the euro area Member States committed themselves to coordinating ex ante
their national plans for major economic reforms. The
impact of the measures already adopted should be monitored by the Eurogroup,
with a view of encouraging further action where necessary, and to step up the ambition
of reforms in line with the country specific recommendations.
HEREBY RECOMMENDS that euro area
Member States take action, individually and collectively, without prejudice to
the competences of the Council as regards the coordination of economic policies
of the Member States, but in particular in the context of economic policy
coordination in the framework of the Eurogroup, within the period 2013-2014 to:
1.           Take
collective action in the Eurogroup to ensure a coherent policy stance across
the euro area, and to deliver the necessary policy decisions which are needed
to ensure the good functioning of the euro area. Allow the Eurogroup to play a
central role in the strengthened surveillance framework applicable to euro area
Member States to coordinate and monitor reforms at national and at the euro
area level that are necessary for a stable and robust euro area and to ensure
policy coherence.
2.           Ensure that the Eurogroup monitors and coordinates fiscal policies of the euro
area Member States and the implied aggregate fiscal stance for the euro area as
a whole to ensure a growth
friendly and differentiated fiscal policy. To this end the Eurogroup should discuss the Commission opinions of
the draft budgetary plans of each of the euro area Member States, and the
budgetary situation and prospects for the euro area as a whole on the basis of
the overall assessment by the Commission of the draft budgetary plans and their
interaction. The coordination shall contribute to ensuring that the pace of
fiscal consolidation is differentiated according to the fiscal and economic
situation of the euro area Member States with the budgetary adjustment defined
in structural terms, allowing the automatic stabilisers to function along the
adjustment path and that, in view of reinforcing the credibility of fiscal
policy over the medium term, fiscal consolidation is supported by an overall efficient and growth-friendly
mix of expenditure and revenue and by appropriate structural reforms which
enhance the economic growth potential.
3.           Assess, in the framework
of the Eurogroup, the reasons behind the differences in lending rates
especially to SMEs across the euro area Member States; explore the consequences
of the fragmentation of the financial markets in the euro area and advise on
ways to overcome it.
4.           Building on the
recapitalisation and the restructuring of the past years, promote further balance-sheet repair among banks as a means to
reverse fragmentation in the single market and improve the flow of credit to
the real economy, particularly SMEs. To this end: (a) ensure that the balance
sheet assessments and stress tests to be conducted by the Single Supervisory
Mechanism (SSM) in co-operation with the European Banking Authority (EBA) are
concluded in accordance with the agreed timeline; (b) ensure a level playing
field in applying burden-sharing requirements in the recapitalisation of banks;
(c) put in place credible fiscal backstops for possible recapitalisation of
banks ahead of balance sheet assessments and stress; (d) remove supervisory
incentives for banks to match asset and liabilities within national borders;
and (e) accelerate the necessary steps to establish the Banking Union,
comprising the SSM, a single resolution mechanism, a capacity for bail-in, a
common resolution fund and a common fiscal backstop including the possibility
for direct recapitalisation of financial institutions.
5.           Coordinate ex ante the
major economic reform plans of the Member States whose currency is the euro. Monitor the implementation of structural
reforms, notably in the labour and product markets and assess their impact on the euro area,
taking into account the Council recommendations to individual euro area Member
States. Promote further adjustment in the euro area,
ensuring that it proceeds in a balanced and structural way, by following
thoroughly the reforms that address
distortions to saving and investment behaviour in Member States with both
current account deficits and surpluses. Take the necessary steps for an effective implementation of the
Macroeconomic Imbalances Procedure, notably by assessing progress in
reform commitments in Member States experiencing excessive imbalances and in
reform implementation in Member States with imbalances requiring decisive
action to limit negative spillovers to the rest of the euro area.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 2.8.1997, p. 1.
[2]               OJ L 306, 23.11.2011, p. 25.
[3]               COM(2013) 379 final
[4]               P7_TA(2013)0052 and P7_TA(2013)0053.
[5]               COM(2011)821 final and COM(2011)819 final.
[6]               COM(2012) 777 final.
[7]               COM(2012) 510 final.
[8]               COM(2012) 511 final and COM(2012) 512 final.
[9]               The resolution of 20 November 2012 “Towards a genuine
Economic and Monetary Union”, see P7_TA(2012)0430.


title: 2005/207/EC: Council Recommendation of 8 March 2005 on the appointment of a member of the Executive Board of the European Central Bank

text:
               15.3.2005

               EN

               Official Journal of the European Union

               L 68/40

         COUNCIL RECOMMENDATION
   of 8 March 2005
   on the appointment of a member of the Executive Board of the European Central Bank
   (2005/207/EC)
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty establishing the European Community, and in particular Articles 112(2)(b) and 122(4) thereof, and to Articles 11.2 and 43.3 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank,
   Whereas:
   The term of office of Mr Tommaso PADOA-SCHIOPPA expires on 31 May 2005. A member of the Executive Board of the European Central Bank must be appointed,
   HEREBY RECOMMENDS THAT:
   Mr Lorenzo BINI SMAGHI be appointed a member of the Executive Board of the European Central Bank for a term of office of eight years with effect from 1 June 2005.
   This Recommendation shall be submitted for a decision to the Heads of State or Government of the Member States of the European Community whose currency is the euro, after consulting the European Parliament and the Governing Council of the European Central Bank.
   This Recommendation shall be published in the Official Journal of the European Union.

      Done at Brussels, 8 March 2005.

            For the Council

            The President

         J.-C. JUNCKER


title: Recommendation of the European Central Bank of 8 September 2017 to the Council of the European Union on the external auditors of Národná banka Slovenska (ECB/2017/27)

text:
               19.9.2017

               EN

               Official Journal of the European Union

               C 310/1

         RECOMMENDATION OF THE EUROPEAN CENTRAL BANK
   of 8 September 2017
   to the Council of the European Union on the external auditors of Národná banka Slovenska
   (ECB/2017/27)
   (2017/C 310/01)
   THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK,
   Having regard to the Treaty on the Functioning of the European Union,
   Having regard to the Statute of the European System of Central Banks and of the European Central Bank, and in particular Article 27.1 thereof,
   Whereas:

               (1)

               The accounts of the European Central Bank (ECB) and the national central banks of the Member States whose currency is the euro are audited by independent external auditors recommended by the ECB’s Governing Council and approved by the Council of the European Union.

               (2)

               The mandate of Národná banka Slovenska’s current external auditors, Ernst & Young Slovakia, spol. s r.o., ended after the audit for the financial year 2016. It is therefore necessary to appoint external auditors from the financial year 2017.

               (3)

               Národná banka Slovenska has selected Deloitte Audit s.r.o. as its external auditors for the financial years 2017 to 2020, with an option to extend the mandate to the financial years 2021 to 2023,

         HAS ADOPTED THIS RECOMMENDATION:
   It is recommended that Deloitte Audit s.r.o. should be appointed as the external auditors of Národná banka Slovenska for the financial years 2017 to 2020, with an option to extend the mandate to the financial years 2021 to 2023.

      Done at Frankfurt am Main, 8 September 2017.

            The President of the ECB

         Mario DRAGHI


title: Recommendation of the European Central Bank of 1 July 2010 to the Council of the European Union on the external auditors of Národná banka Slovenska (ECB/2010/6)

text:
               8.7.2010

               EN

               Official Journal of the European Union

               C 184/1

         RECOMMENDATION OF THE EUROPEAN CENTRAL BANK
   of 1 July 2010
   to the Council of the European Union on the external auditors of Národná banka Slovenska
   (ECB/2010/6)
   2010/C 184/01
   THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK,
   Having regard to the Statute of the European System of Central Banks and of the European Central Bank, and in particular Article 27.1 thereof,
   Whereas:

               (1)

               The accounts of the European Central Bank (ECB) and national central banks are audited by independent external auditors recommended by the ECB’s Governing Council and approved by the Council of the European Union.

               (2)

               The mandate of Národná banka Slovenska’s current external auditors ended after the audit for the financial year 2009. It is therefore necessary to appoint external auditors from the financial year 2010.

               (3)

               Národná banka Slovenska has selected Ernst & Young Slovakia, spol. s r.o. as its external auditors for the financial years 2010 to 2014,

         HAS ADOPTED THIS RECOMMENDATION:
   It is recommended that Ernst & Young Slovakia, spol. s r.o. should be appointed as the external auditors of Národná banka Slovenska for the financial years 2010 to 2014.

      Done at Frankfurt am Main, 1 July 2010.

            The President of the ECB

         Jean-Claude TRICHET


				|

		52014PC0435

			Recommendation for a COUNCIL DECISION abrogating Decision 2010/282/EU on the existence of an excessive deficit in Austria /* COM/2014/0435 final */

			   	Recommendation for a
COUNCIL DECISION
abrogating Decision 2010/282/EU on the
existence of an excessive deficit in Austria
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union (TFEU), and in particular Article 126(12)
thereof,
Having regard to the recommendation from
the Commission,
Whereas:
(1)       By Council Decision 2010/282/EU
of 2 December 2009, following a recommendation from the Commission, it was
decided that an excessive deficit existed in Austria. The Council noted that
the general government deficit planned for 2009 was 3.9% of GDP, thus above the
3% of GDP Treaty reference value, while the general government gross debt was
planned to reach 68.2% of GDP in 2009, thus above the 60% of GDP Treaty reference
value[1].
(2)       On 2 December 2009, in
accordance with Article 126(7) TFEU 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 procedure[2],
the Council, based on a recommendation from the Commission, addressed a
recommendation to Austria with a view to bringing the excessive deficit
situation to an end by 2013 at the latest. The recommendation was made public.
(3)       In accordance with Article
4 of the Protocol on the excessive deficit procedure annexed to the Treaties,
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 3 of
Council Regulation (EC) No 479/2009 of 25 May 2009 on the application of the
Protocol on the excessive deficit procedure annexed to the Treaty establishing
the European Community[3].

(4)       When considering whether a
decision on the existence of an excessive deficit should be abrogated, the
Council should take a decision on the basis of notified data. Moreover, a
decision on the existence of an excessive deficit should be abrogated only if
the Commission forecasts indicate that the deficit will not exceed the 3% of
GDP threshold over the forecast horizon[4].
(5)       Based on data provided by
the Commission (Eurostat) in accordance with Article 14 of Regulation (EC) No
479/2009, following the April 2014 notification by Austria, the 2014 Stability Programme and the Commission
2014 spring forecast, the following conclusions are warranted:
–
After peaking at 4.5% of GDP in 2010, Austria's general government deficit fell below the 3% of GDP Treaty reference value
already in 2011. This improvement, compared to the initially planned fiscal
outcome, was related to the recognition of government expenditure measures for the
recapitalisation of the "bad bank" KA Finanz (about 0.4% of GDP) in the
2012 government accounts, when the resultant impacts were confirmed based on
the bank’s financial statements. To a smaller extent, the fall in deficit
stemmed from lower than planned expenditure at all levels of government and
more favourable economic conditions, resulting in higher than projected revenue
growth. In 2012, in contrast with both national and Commission forecasts the
general government deficit continued to remain below 3% of GDP. However, due to
looming risks related to possible further financial sector repair operations,
which could have resulted in a deficit above 3% of GDP in following years, the
Commission did not recommend early abrogation of the EDP. These risks have,
however, not materialised and for 2013, Austria has notified a deficit of 1.5%
of GDP. This further fall in the deficit was largely due to the unexpected size
of the one-off measures, involving the sale of mobile phone spectrum, which
accounted for almost 0.6% of GDP.
–
The stability programme for 2014-18, adopted by
the Austrian government on 29 April 2014, plans the general government deficit
to increase to 2.7% of GDP in 2014 and then decrease to 1.4% of GDP in 2015. The
2014 Commission Spring Forecast projects a deficit of 2.8% of GDP in 2014 and
1.5% of GDP in 2015. Thus, the deficit is set to remain below the reference
value of 3% of GDP over the forecast horizon. Moreover, in the framework of the
Regulation (EU) No. 473/2013 the government announced, and confirmed in a
letter to the Commission, a set of additional savings and higher revenues which
the Commission has assessed to amount to 0.2% of GDP in order to avoid a
planned significant deviation from the required adjustment path towards the MTO.

–
The increase in the general government deficit
in 2014 is caused by the establishment of a defeasance structure (Liquidation
Entity, Abbaueinheit) to wind-down the impaired assets of Hypo Alpe
Adria. The impact of the establishment of the Liquidation Entity for Hypo Alpe
Adria is estimated by an external expert group of advisors, appointed by the government,
to amount to up to EUR 4 billion (1.2% of GDP) including the effect of a
capital injection of EUR 750 million already undertaken in 2014. The final
recording of the deficit-increasing impact will depend on an independent asset
quality review of Hypo Alpe Adria's assets, which will be undertaken later this
year in order to allow Eurostat to evaluate the statistical effect of this
operation. The current evaluation made by the expert group seems to be characterised
by a reasonable degree of caution and therefore can be regarded as plausible;
however; a larger deficit impact stemming from this operation cannot be
excluded. This represents the main downside risk to the 2014 deficit projection.
At the same time, also taking into account the additional discretionary
measures announced by the government after the publication of the Commission
forecast, which should lead to a further reduction of the headline deficit, risks
to the 2014 deficit appear overall balanced.
–
The structural balance i.e. adjusted for the
economic cycle and net of one‑off and other temporary measures has
improved on average by almost 0.7% of GDP each year between 2011 and 2013,
broadly in line with Council recommendations. According to the Commission
spring forecast, its assessment of the updated draft budget plan submitted on
29 April 2014 and of the additional measures announced by the government on 12
May 2014, the structural balance is projected to improve slightly in 2014. In
this context, it appears that there is currently an emerging gap of 0.5% of GDP
relative to the required adjustment of the structural balance towards the
medium-term objective in 2014, suggesting that there is a need to reinforce the
budgetary measures in order to ensure full compliance with the preventive arm
of the pact in view of the emerging risk of a significant deviation from the
required adjustment path.
–
The debt-to-GDP ratio rose from 69.2% to 74.5% between
2009 and 2013. The gross government debt is forecast to increase to around 80%
of GDP in 2014 mainly due to the inclusion in the general government debt of
liabilities incurred in connection with the transfer of the impaired assets of
Hypo Alpe Adria to the Liquidation Entity.
(6)       The Council recalls that, as
from 2014, which is the year following the correction of the excessive deficit,
Austria is subject to the preventive arm of the Stability and Growth Pact and
should progress towards its medium-term objective at an appropriate pace,
including respecting the expenditure benchmark, and make sufficient progress
towards compliance with the debt criterion in accordance with Article 2(1a) of
Council Regulation (EC) 1467/97 of July 1997 on speeding up and clarifying the
implementation of the excessive deficit procedure.
(7)       In accordance with Article
126(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.
(8)       In the view of the
Council, the excessive deficit in Austria has been corrected and Decision
2010/282/EU should therefore be abrogated,
HAS ADOPTED THIS DECISION:
Article 1
From an overall assessment it follows that
the excessive deficit situation in Austria has been corrected.
Article 2
Decision 2010/282/EU is hereby abrogated.
Article 3
This Decision is addressed to the Austrian Republic.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               The general government deficit and debt for 2009 were
subsequently revised to 5.5% and 116.4% of GDP respectively.
[2]               OJ L 209, 2.8.1997, p. 6.
[3]               OJ L 145, 10.6.2009, p. 1.
[4]               In line with the “Specifications on the
implementation of the Stability and Growth Pact and Guidelines on the format
and content of Stability and Convergence Programmes” of 3 September 2012. See: http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/coc/code_of_conduct_en.pdf


title: Council Recommendation of 8 July 2014 on the National Reform Programme 2014 of Portugal and delivering a Council opinion on the Stability Programme of Portugal, 2014

text:
               29.7.2014

               EN

               Official Journal of the European Union

               C 247/102

         COUNCIL RECOMMENDATION
   of 8 July 2014
   on the National Reform Programme 2014 of Portugal and delivering a Council opinion on the Stability Programme of Portugal, 2014
   2014/C 247/20
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,
   Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (1), and in particular Article 5(2) thereof,
   Having regard to the recommendation of the European Commission,
   Having regard to the resolutions of the European Parliament,
   Having regard to the conclusions of the European Council,
   Having regard to the opinion of the Employment Committee,
   Having regard to the opinion of the Economic and Financial Committee,
   Having regard to the opinion of the Social Protection Committee,
   Having regard to the opinion of the Economic Policy Committee,
   Whereas:

               (1)

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

               (2)

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

               (3)

               On 29 June 2012, the Member States' Heads of State or Government decided on a Compact for Growth and Jobs, providing a coherent framework for action at national, EU and euro area levels using all possible levers, instruments and policies. They decided on action to be taken at the level of the Member States, in particular expressing full commitment to achieving the objectives of the Europe 2020 strategy and to implementing the country‐specific recommendations.

               (4)

               Portugal was subject to a macroeconomic adjustment programme until 17 May 2014 in line with Article 1(2) of Council Implementing Decision 2011/344/EU (3), which provided that the financial assistance would be made available for three years. On 23 April 2014, the Council decided (4) to extend the availability of the financial assistance by six weeks, to allow for a comprehensive and thorough assessment of compliance with the programme conditionality and an orderly disbursement of the last loan tranche. Under Article 12 of Regulation (EU) No 472/2013 of the European Parliament and of the Council (5) Portugal was thus exempt from the monitoring and assessment of the European Semester for economic policy coordination for the duration of the programme. Having exited the programme, Portugal should now be fully re-integrated into the European Semester framework.

               (5)

               On 13 November 2013, the Commission adopted the Annual Growth Survey, marking the start of the 2014 European Semester for economic policy coordination. Also, on 13 November 2013, the Commission, on the basis of Regulation (EU) No 1176/2011 of the European Parliament and of the Council (6), adopted the Alert Mechanism Report.

               (6)

               On 20 December 2013, the European Council endorsed the priorities for ensuring financial stability, fiscal consolidation and action to foster growth. It underscored the need to pursue differentiated, growth-friendly fiscal consolidation, to restore normal lending conditions to the economy, to promote growth and competitiveness, to tackle unemployment and the social consequences of the crisis, and to modernise public administration.

               (7)

               Pursuant to Regulation (EU) No 472/2013, Portugal was exempted from the obligation to submit its National Reform Programme and its Stability Programme for the duration of the macroeconomic adjustment programme. Nevertheless, it submitted an updated Fiscal Strategy Document on 30 April 2014 (Documento de Estratégia Orçamental) and a letter from the Government providing an update on developments on the Europe 2020 targets. On 17 May 2014, the Government presented its ongoing reform programme and new initiatives towards sustainable growth in a document entitled ‘The Road to Growth, a medium-term reform strategy for Portugal’.

               (8)

               The objective of the budgetary strategy outlined in the 2014 Fiscal Strategy Document is to correct the excessive deficit by 2015 in a sustainable manner and reach the medium-term objective by 2017. The strategy plans to bring the government deficit to 4,0 % of GDP in 2014 and to lower it further to 2,5 % of GDP in 2015, in line with the targets set in the Excessive Deficit Procedure Recommendation of 21 June 2013 and re-confirmed by the 12th review of the macroeconomic adjustment programme. However, on 30 May 2014 the Constitutional Court annulled consolidation measures estimated to impact the budgetary results in 2014 by around 0,4 % of GDP, with possible follow-on effects in 2015. In order to achieve the agreed targets, the Government will have to introduce replacement measures of equivalent size. There are, however, two rulings of the Constitutional Court still pending which prevents a complete quantification of the measures to be taken. In view of the limited time available, the Government may need to resort to measures of a less growth-friendly nature, particularly on the revenue side. Beyond 2015, the strategy confirms the aim of achieving the medium-term objective by 2017 by way of delivering a structural effort of 0,5 % of GDP in 2016 and achieving a structural deficit of 0,5 % in 2017. According to the strategy, general government gross debt will peak at around 130,2 % of GDP in 2014 and will gradually start declining as from 2015. The macroeconomic scenario underlying the budgetary projections of the strategy is in line with the Commission spring forecast and was analysed by the Public Finance Council. Following the constitutional court ruling the fiscal strategy in 2014 will have to be revised in order to achieve the deficit target of 4 % of GDP. Nevertheless, downside risks to the target remain, in particular due to legal uncertainties and the statistical impact of operations aimed at a more efficient management of the debt overhang of some state-owned enterprises.
               The 2015 budgetary adjustment is underpinned by fiscal consolidation measures amounting to 0,8 % of GDP which is considered to be sufficient to achieve the target of 2,5 % of GDP. Based on the assessment of the Governments' fiscal strategy and the Commission forecast, pursuant to Regulation (EC) No 1466/97, the Council is of the opinion that the strategy's targets are consistent with the requirements of the Stability and Growth Pact.

               (9)

               Fiscal consolidation needs to be underpinned by further reforms of the system of public financial management. In particular, despite progress made under the macroeconomic adjustment programme, the comprehensive reform of the Budget Framework Law needs to be completed and further efforts are necessary to strictly ensure expenditure control by enforcing the commitment control law and to prevent the further accumulation of public sector arrears. Continued restructuring of state-owned enterprises, ensuring their financial sustainability and tightly controlling pension and healthcare expenditure will be crucial. On the revenue side, there is scope for making the tax system more growth-friendly and further fostering tax compliance.

               (10)

               Portugal faces challenges relating to unemployment which, notwithstanding the recent decline, remains very high, particularly for young people. The unemployment rate stood at 16,4 % in 2013 and youth unemployment at 38,1 %, substantially above the EU average, as was the percentage of young people not in education, employment, or training. Portugal's traditionally high employment rate among 20-64 years old, has declined markedly since the start of the economic crisis, from 73,1 % in 2008 to 65,6 % in 2013. As regards youth unemployment, in line with the objectives of a youth guarantee, the main challenges include weak outreach to non-registered young people, and a need to better align education and training with labour market needs. Under the macroeconomic adjustment programme, Portugal has implemented a wide range of labour market reforms aimed at easing overly restrictive employment protection legislation, making wage-setting mechanisms more flexible and improving the functioning of the public employment services and activation policies. Challenges remain, however, in particular the need to tackle labour market segmentation and improve the responsiveness of wages to the economic conditions. An independent evaluation of the effects of the recent reforms in the employment protection system would help to assess, in particular, their impact on job creation, precariousness, overall labour costs and on the number of court appeals against dismissals and their outcome. Despite efforts to alleviate the negative social impact, the necessary economic adjustment following the crisis has had negative repercussions in terms of poverty.

               (11)

               Portugal has made significant progress in reforming its education system by means of several measures to fight early school leaving, and improve tertiary attainment rate and labour market matching. However, the full implementation and efficient use of funding remain crucial. In particular, further work is necessary to reduce skills mismatches, including by increasing the quality and attractiveness of vocational education and training, including dual vocational education and training, fostering employers' involvement in helping to design programmes and providing adequate in job trainings and apprenticeships. There is also a need to effectively implement career guidance and counselling services for secondary and tertiary students in line with labour market needs and skills anticipation, and strengthen links with the business sector.

               (12)

               Portugal has taken significant steps under the macroeconomic adjustment programme to improve the capital base of the banking sector and to strengthen its supervision and resolution framework. However, important challenges remain and need to be carefully monitored and managed; these include the profitability of the Portuguese banks. Data for the first quarter of 2014 show that some of the assisted banks registered positive results. Asset quality is still a major problem, with impairment levels remaining high at about 6 % of total gross loans and non-performing loans at elevated levels (10,6 %), in particular in the corporate segment (over 16 %) according to the data available at end 2013. Portugal has adopted a number of measures to facilitate lending to viable companies, but financing conditions remain difficult, particularly for SMEs, and the range of financing alternatives for the corporate sector, other than bank-based finance, remains limited. Freshly granted loans to SMEs fell by 4,8 % in 2013 as compared with 2012. The average interest rates on new loans to Portuguese firms have come down somewhat since early 2013, but remain significantly above the euro area average. Given the high corporate debt overhang and the need for a further deleveraging of the banking sector, banks' ability to extend credit to viable firms at reasonable cost remains constrained.

               (13)

               With a view to ensuring the efficiency and sustainability of the energy sector and lowering the energy cost for the economy, two packages of measures have been enacted under the macroeconomic adjustment programme. Rents in the energy sector must, however, be further reduced and the high and rising tariff debt tackled. To this end, Portugal has recently announced a third package of measures, including the extension to 2015 of the 2014 special levy on the energy operators. In addition, improving cross-border integration of the energy networks and speeding up implementation of the electricity and gas interconnection projects remain outstanding issues and necessitate robust follow-up in view of ending the isolation of the Iberian peninsula from the EU energy market. In the transport sector, progress has been made under the programme, in particular in enhancing the competitive position of the Portuguese ports, drawing up a comprehensive long-term transport plan, after weaknesses and gaps had been addressed, and improving the regulatory framework. However, further measures remain necessary to effectively implement the comprehensive long-term transport plan and the reform action plan for ports. Steps are also needed to ensure the independence and capacity of the transport regulator, and the financial sustainability of the state-owned enterprises in the sector and enhance efficiency and competition in rail transport.

               (14)

               A landmark reform has been implemented in the urban lease market with a view to making the housing market more dynamic including by better balancing rights and obligations of landlords and tenants, introducing more flexibility in the choice of contract duration, and incentivising renovation works. More work is still required to comprehensively evaluate the impact of this reform on the basis of data on key drivers of the market and on the shadow economy in the Portuguese rental market. Portugal has made substantial progress in enhancing its business environment, in particular by fostering better framework conditions, promoting entrepreneurial culture and improving insolvency proceedings for firms in distress. Attention should now be shifted to implementation. The simplification of administrative and licensing procedures has made progress but a number of measures still require completion. Further efforts are necessary to remove obstacles to competition in the services sector, in particular by adopting sectoral amendments, and in professional services, by adopting legislation on the remaining professional bodies. As regards regulation and competition, follow-up measures are necessary to ensure the independence and autonomy of the national sectoral regulators and the Competition Authority. Significant delays still affect payments by public authorities.

               (15)

               Good progress has been made under the macroeconomic adjustment programme in rationalising and modernising the public administration in terms of employment, remuneration policy, working conditions, organisational efficiency and quality of services. However, some of the envisaged reform measures still need to be completed and transparency improved. Despite significant progress made to improve the efficiency of the judicial system, further improvements are called for in particular in terms of the length of proceedings, the clearance rate, the number of pending cases, and the monitoring and evaluation process.

               (16)

               The Commission's analysis leads it to conclude that the successful implementation of the macroeconomic adjustment programme was instrumental in managing economic and financial risks and reducing imbalances. Portugal has adopted a wide range of challenging structural reforms under the programme, which are starting to bear fruit in terms of enhanced competitiveness and resuming economic growth, but more work is needed to assess the reforms' impact on the functioning of the economy. Continued monitoring of all implemented reforms is therefore essential to assess whether they contribute to boosting competitiveness, output and employment growth.

               (17)

               Since after the end of the macroeconomic adjustment programme, which will be legally concluded on 28 June 2014, Portugal will be fully re-integrated in the European Semester exercise, the Commission, on this basis has assessed the documents submitted by Portugal. It has taken into account not only their relevance for sustainable fiscal and socio-economic policy in Portugal but also their compliance with EU rules and guidance, given the need to reinforce the overall economic governance of the Union by providing EU-level input for future national decisions. Its recommendations for Portugal under the European Semester are reflected in recommendations (1) to (8) below.

               (18)

               In the light of this assessment, the Council has examined the Government's fiscal strategy, and its opinion (7) is reflected in particular in recommendation (1) below. These recommendations were prepared in the wake of the conclusion of the macroeconomic adjustment programme and therefore build on that programme's achievements to secure its lasting implementation.

               (19)

               In the context of the European Semester, the Commission has also carried out an analysis of the economic policy of the euro area as a whole. On this basis, the Council has issued specific recommendations addressed to the Member States whose currency is the euro (8). As a country whose currency is the euro, Portugal should also ensure the full and timely implementation of these recommendations,

         HEREBY RECOMMENDS that Portugal take action within the period 2014-2015 to:

               1.

               Implement the necessary fiscal consolidation measures for 2014 so as to achieve the fiscal targets and prevent the accumulation of new arrears. For the year 2015, implement a revised budgetary strategy in order to bring the deficit to 2,5 % of GDP, in line with the target set in the Excessive Deficit Procedure Recommendation, while achieving the required structural adjustment. Replace consolidation measures which the Constitutional Court considers unconstitutional by measures of similar size and quality as soon as possible. The correction of the excessive deficit should be done in a sustainable and growth-friendly manner, limiting recourse to one-off/temporary measures. After the correction of the excessive deficit, pursue the planned annual structural adjustment towards the medium-term objective, in line with the requirement of an annual structural adjustment of at least 0,5 % of GDP, more in good times, and ensure that the debt rule is met in order to put the high general debt ratio on a sustainable path. Prioritise expenditure-based fiscal consolidation and increase further the efficiency and quality of public expenditure. Maintain tight control of expenditure in central, regional and local administration. Continue the restructuring of the state-owned enterprises. Develop by the end of 2014 new comprehensive measures as part of the ongoing pension reform, aimed at improving the medium-term sustainability of the pension system. Control healthcare expenditure growth and proceed with the hospital reform. Review the tax system and make it more growth‐friendly. Continue to improve tax compliance and fight tax evasion by increasing the efficiency of the tax administration. Strengthen the system of public financial management by swiftly finalising and implementing the comprehensive reform of the Budgetary Framework Law by the end of 2014. Ensure strict compliance with the Commitment Control Law. Effectively implement single wage and supplements' scales in the public sector from 2015 onwards.

               2.

               Maintain minimum wage developments consistent with the objectives of promoting employment and competitiveness. Ensure a wage setting system that promotes the alignment of wages and productivity at sectoral and/or firm level. Explore, in consultation with the social partners and in accordance with national practice, the possibility of mutually agreed firm-level temporary suspension of collective agreements. By September 2014, present proposals on mutually agreed firm-level temporary suspension of collective agreements and on a revision of the survival of collective agreements.

               3.

               Present, by March 2015, an independent evaluation of the recent reforms in the employment protection system, together with an action plan for possible further reforms to tackle labour market segmentation. Pursue the ongoing reform of active labour market policies and Public Employment Services aimed at increasing employment and labour participation rates, specifically by improving job counselling/job search assistance and activation/sanction systems with a view to reducing long-term unemployment and integrating those furthest away from the labour market. Address the high youth unemployment, in particular by effective skills anticipation and outreach to non-registered young people, in line with the objectives of a youth guarantee. Ensure adequate coverage of social assistance, including the minimum income scheme, while ensuring effective activation of benefit recipients.

               4.

               Improve the quality and labour-market relevance of the education system in order to reduce early school leaving and address low educational performance rates. Ensure efficient public expenditure in education and reduce skills mismatches, including by increasing the quality and attractiveness of vocational education and training and fostering cooperation with the business sector. Enhance cooperation between public research and business and foster knowledge transfer.

               5.

               Monitor banks' liquidity position and potential capital shortfalls, including by on-site thematic inspections and stress-testing. Assess the banks' recovery plans and introduce improvements to the evaluation process where necessary. Implement a comprehensive strategy to reduce the corporate debt overhang and reinforce efforts to widen the range of financing alternatives, including for early stages of business developments, by enhancing the efficiency of the debt restructuring tools (particularly PER and SIREVE) for viable companies, introducing incentives for banks and debtors to engage in restructuring processes at an early stage and improving the availability of financing via the capital market. Ensure that the identified measures support the reallocation of financing towards the productive sectors of the economy, including to viable SMEs, while avoiding risks to public finances and financial stability. Implement, by end September 2014, an early warning system mainly with supervisory purposes, to identify firms, including SMEs, with a high probability of default due to an excessive level of indebtedness, and which can, indirectly, promote early corporate debt restructuring.

               6.

               Implement the second and third packages of measures in the energy sector aimed at reducing energy costs for the economy, while eliminating the electricity tariff debt by 2020, and closely monitor implementation. Improve the cross-border integration of the energy networks and speed up implementation of the electricity and gas interconnection projects. Implement the comprehensive long-term transport plan and the ‘chronogram’ setting out the ports sector reforms. Complete the transports concessions for the metropolitan areas of Lisbon and Oporto. Ensure that the renegotiations of the existing port concessions and the new authorisation schemes are performance-oriented and in line with internal market principles, in particular procurement rules. Ensure that the national regulatory authority for transport (AMT) is fully independent and operational by the end of September 2014. Ensure the financial sustainability of the state-owned enterprises in the transport sector. Strengthen efficiency and competition in the railways sector, by implementing the plan for the competitiveness of CP Carga, after the transfer of the freight terminals while ensuring the management independence of the state-owned infrastructure manager and railway undertakings.

               7.

               Further improve the evaluation of the housing market, including by setting up, by the end of 2014, a more systematic monitoring and reporting framework and issue a comprehensive report on the shadow economy in that market. Continue efforts to carry out further inventories of regulatory burdens with a view to including, by March 2015, sectors not yet covered. Adopt and implement, by the end of September 2014, the outstanding licensing decrees and sectoral amendments. Remove, by the end of September 2014, remaining restrictions in the professional services sector and enact the professional bodies' amended by-laws which have not yet been adopted under the macroeconomic adjustment programme. Eliminate payment delays by the public sector. Ensure adequate resources of the national regulators and competition authority.

               8.

               Continue to rationalise and modernise central, regional and local public administration. Implement the reforms to enhance the efficiency of the judicial system and increase transparency. Step up efforts to evaluate the implementation of reforms undertaken under the macroeconomic adjustment programme as well as planned and future reforms. In particular, insert mandatory systematic ex ante and ex post assessments in the legislative process. Set up a functionally independent central evaluation unit at government level, which assesses and reports every six months on the implementation of these reforms, including consistency with the ex ante impact assessment, with corrective action if needed.

      Done at Brussels, 8 July 2014.

            For the Council

            The President

         P. C. PADOAN

      (1)  OJ L 209, 2.8.1997, p. 1.

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

      (3)  Council Implementing Decision 2011/344/EU of 30 May 2011 on granting Union financial assistance to Portugal (OJ L 159, 17.6.2011, p. 88).

      (4)  Council Implementing Decision 2014/234/EU of 23 April 2014 amending Implementing Decision 2011/344/EU of 30 May 2011 on granting Union financial assistance to Portugal (OJ L 125, 26.4.2014, p. 75).

      (5)  Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability (OJ L 140, 27.5.2013, p. 1).

      (6)  Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances (OJ L 306, 23.11.2011, p. 25).

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

      (8)  See page 141 of the current Official Journal.


title: Council Recommendation of 12 July 2011 on the National Reform Programme 2011 of Estonia and delivering a Council opinion on the Stability Programme of Estonia, 2011-2015

text:
               20.7.2011

               EN

               Official Journal of the European Union

               C 213/5

         COUNCIL RECOMMENDATION
   of 12 July 2011
   on the National Reform Programme 2011 of Estonia and delivering a Council opinion on the Stability Programme of Estonia, 2011-2015
   2011/C 213/02
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,
   Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (1), and in particular Article 5(3) thereof,
   Having regard to the recommendation of the European Commission,
   Having regard to the conclusions of the European Council,
   Having regard to the opinion of the Employment Committee,
   After consulting the Economic and Financial Committee,
   Whereas:

               (1)

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

               (2)

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

               (3)

               On 12 January 2011, the Commission adopted the first Annual Growth Survey, marking the start of a new cycle of economic governance in the EU and the first European semester of ex-ante and integrated policy coordination, which is anchored in the Europe 2020 strategy.

               (4)

               On 25 March 2011, the European Council endorsed the priorities for fiscal consolidation and structural reform (in line with the Council's conclusions of 15 February and 7 March 2011 and further to the Commission's Annual Growth Survey). It underscored the need to give priority to restoring sound budgets and fiscal sustainability, reducing unemployment through labour market reforms and making new efforts to enhance growth. It requested Member States to translate these priorities into concrete measures to be included in their stability or convergence programmes and national reform programmes.

               (5)

               On 25 March 2011, the European Council also invited the Member States participating in the Euro Plus Pact to present their commitments on time for their inclusion in their stability or convergence programmes and their national reform programmes.

               (6)

               On 29 April 2011, Estonia submitted its 2011 stability programme covering the period 2011-2015 and its 2011 national reform programme. In order to take account of the interlinkages, the two programmes have been assessed at the same time.

               (7)

               Estonia was particularly hard-hit by the global financial crisis, which amplified the reversal of the domestic real estate and consumption boom. The cumulative loss of GDP reached 19 % in 2008-2009 and the unemployment rate increase almost four fold to 16,8 % by 2010. However, the economy has bounced back quickly and the real GDP growth is expected to accelerate in the coming years. The recovery has been driven mainly by exports, but domestic demand is gaining ground mostly through strong investment. The improved growth outlook has provided a positive impetus to the labour market. Employment rate has risen markedly recently, although long-term unemployment remains high. While inflation accelerated compared to last year, it is expected to moderate in line with developments in the global commodity prices.

               (8)

               Based on the assessment of the stability programme pursuant to Regulation (EC) No 1466/97, the Council is of the opinion that the macroeconomic scenario underpinning the budgetary projections is plausible. The medium-term budgetary strategy of the stability programme is to achieve the medium-term objective, defined as structural balance, by 2013, and to maintain it throughout the rest of the stability programme period, by aiming at structural surpluses in 2013 and beyond. The headline general government budgetary position is projected to reach surplus by 2013, while in the short term the headline deficit is expected to deteriorate somewhat due to the one-off impact of environmental investments on carbon credits. The budgetary adjustment of the stability programme relies on holding back growth in government consumption expenditure. The stability programme provides some information regarding measures to reach the targeted position and the previous track record of meeting the fiscal targets mitigates the risk of missing them in the coming years. In particular, the envisaged reforms seek efficiency gains in several areas, such as education and active labour market policies. Risks to the budgetary targets thus appear to be broadly balanced. Nevertheless, it will be important for the upcoming budgets to provide the key details of measures to further enhance the efficiency of public spending, thus underpinning the implementation of the stability programme.

               (9)

               Long-term unemployment remains high and unemployment rates across regions have been rather diverging and persistent. Despite considerable increases since 2009, financing of active labour market policies remains one of the lowest in the EU, and results in a low share of the unemployed receiving active support. The Estonian labour market is relatively flexible, reinforced by the decision to postpone increases in the unemployment insurance benefit coverage in the Labour Law package to 2013. Despite this flexibility, Estonia has a relatively high labour tax wedge, which could have negative consequences for labour supply and demand. This problem is particularly acute in view of the high unemployment rate of the young and the low-skilled, who are exposed to a risk of poverty. Reforms envisaged to reduce social insurance contributions address the right issues, but need to take place while strengthening the budgetary position. There is potential for efficiency gains through a stricter means testing to better target other benefits.

               (10)

               Estonia's resource intensity is among the highest in the EU. This is partly the result of a production structure concentrated on energy-intensive sectors and industries. Another determinant is the low energy efficiency performance at sectoral level. In its national reform programme, Estonia indicates a national energy savings target of 9 % in 2016 compared to projections (16 % by 2020 in the NRP). Besides, there is little information on how and when measures will be implemented and their expected results. Hence, improving energy efficiency has further potential. Increasing energy efficiency is likely to have a positive impact on the environment and on the security of energy supply, but also to reduce inflationary pressures and improve cost competitiveness.

               (11)

               Notwithstanding the overall high share of people with tertiary education, further reform of the education system at all levels could help address skill gaps, a large number of schools and tertiary education institutions, and a lack of focus in professional education resulting in the high share of people with no professional qualification. Given current demographic trends, improving the quality of human capital is important for raising potential growth in the medium term. In particular, ensuring that tertiary education is aimed at fields of key importance to the economy (e.g. engineering) could support the ongoing rebalancing towards tradable sectors. Implementing the education reform would also contribute to improving public sector efficiency, as the current system of managing education is too fragmented at the local level, leading to both inefficient subsidies and low-quality services.

               (12)

               Estonia has made a number of commitments under the Euro Plus Pact. These contain measures to address public finance sustainability, employment, and competitiveness. On the fiscal side, the Pact commits to achieve budget balance by 2013 and a surplus in 2014; to include a public sector budget balance requirement in the state budget base law; as well as first steps to reform special pension schemes. In order to promote employment, some tax incentives are envisaged. For competitiveness, measures focus on innovation, higher education, and public service reform. The Pact commitments reflect the agenda presented in the national reform programme. The objectives set out in the Pact would benefit from further measures to strengthen labour market policies, as well as addressing resource efficiency and the energy market. The Euro Plus Pact commitments have been assessed and taken into account in the recommendations.

               (13)

               The Commission has assessed the stability programme and national reform programme, and the Euro Plus Pact commitments. It has taken into account not only their relevance for sustainable fiscal and socio-economic policy in Estonia but also their conformity with EU rules and guidance, given the need to reinforce the overall economic governance of the EU by providing EU-level input into future national decisions. It considers that while measures to reach the targeted budgetary position would have to be specified in forthcoming budgets, the track record of the Estonian authorities mitigates the risk of missing the fiscal targets. Further steps should be taken to strengthen labour market policies and provide better incentives to work, to enhance human capital through a large scale education reform as well as addressing resource efficiency and the energy market.

               (14)

               In light of this assessment, the Council has examined the 2011 stability programme of Estonia and its opinion (3) is reflected in particular in its recommendation 1 below. Taking into account the European Council conclusions of 25 March 2011, the Council has examined the national reform programme of Estonia,

         HEREBY RECOMMENDS that Estonia take action within the 2011-2012 period to:

               1.

               Achieve structural surplus by 2013 at the latest, while limiting deficit in 2012 to at most 2,1 % of GDP, keeping tight control over expenditure and enhancing the efficiency of public spending.

               2.

               Take steps to support labour demand and to reduce the risk of poverty, by reducing the tax and social security burden in a budgetary neutral way, as well as through improving the effectiveness of active labour market policies, including by targeting measures on young people and the long-term unemployed, especially in areas of high unemployment.

               3.

               Ensure implementation of planned incentives to reduce energy intensity and improve the energy efficiency of the economy, targeted on the buildings and transportation sectors, including by ensuring better market functioning.

               4.

               While implementing the education system reform, give priority to measures improving the availability of pre-school education, and enhance the quality and availability of professional education. Focus education outcomes more on labour market needs, and provide opportunities for low-skilled workers to take part in lifelong learning.

      Done at Brussels, 12 July 2011.

            For the Council

            The President

         J. VINCENT-ROSTOWSKI

      (1)  OJ L 209, 2.8.1997, p. 1.

      (2)  Maintained for 2011 by Council Decision 2011/308/EU of 19 May 2011 on guidelines for the employment policies of the Member States (OJ L 138, 26.5.2011, p. 56).

      (3)  Foreseen in Article 5(3) of Regulation (EC) No 1466/97.


title: Council Recommendation of 12 July 2011 on the National Reform Programme 2011 of Hungary and delivering a Council Opinion on the updated convergence programme of Hungary, 2011-2015

text:
               15.7.2011

               EN

               Official Journal of the European Union

               C 209/10

         COUNCIL RECOMMENDATION
   of 12 July 2011
   on the National Reform Programme 2011 of Hungary and delivering a Council Opinion on the updated convergence programme of Hungary, 2011-2015
   2011/C 209/03
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,
   Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (1), and in particular Article 9(3) thereof,
   Having regard to the recommendation of the European Commission,
   Having regard to the conclusions of the European Council,
   Having regard to the opinion of the Employment Committee,
   After consulting the Economic and Financial Committee,
   Whereas:

               (1)

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

               (2)

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

               (3)

               On 12 January 2011, the Commission adopted the first Annual Growth Survey, marking the start of a new cycle of economic governance in the EU and the first European semester of ex-ante and integrated policy coordination, which is anchored in the Europe 2020 strategy.

               (4)

               On 25 March 2011, the European Council endorsed the priorities for fiscal consolidation and structural reform (in line with the Council's conclusions of 15 February and 7 March 2011 and further to the Commission's Annual Growth Survey). It underscored the need to give priority to restoring sound budgets and fiscal sustainability, reducing unemployment through labour market reforms and making new efforts to enhance growth. It requested member states to translate these priorities into concrete measures to be included in their stability or convergence programmes and national reform programmes.

               (5)

               On 15 April 2011, Hungary submitted its 2011 convergence programme update covering the period 2011-2015 and its 2011 national reform programme. In order to take account of the interlinkages, the two programmes have been assessed at the same time.

               (6)

               Hungary was severely hit by the crisis in autumn 2008, with the country losing access to market-based financing. To overcome these difficulties, Hungary implemented an adjustment programme that focused on fiscal consolidation and financial sector supervision and was supported by financial assistance from the EU and the IMF. Against this background, the country regained market access in spring 2009 and the economy emerged from recession: after a contraction of 6,7 % in 2009, GDP grew by 1,2 % in 2010, supported by increasing exports. At the same time, unemployment increased further to over 11 % from the pre-crisis level of below 8 %. In the second half of 2010, the government announced significant tax cuts to be implemented over 2010-2013. To limit the fiscal deterioration, it introduced in parallel extraordinary levies and took additional spending cuts of a permanent nature. Moreover, the decision to abolish the mandatory private pension pillar has resulted in both permanent and one-off revenues. Although these measures made it possible to limit the slippage in 2010 to 0,4 % of GDP above the deficit target of 3,8 % of GDP and will result in a surplus in 2011, the underlying position deteriorated significantly. Against this background, and with a view to strengthening the economic growth potential, the government announced a structural reform programme in March 2011 and adopted further consolidating measures.

               (7)

               Based on the assessment of the updated convergence programme pursuant to Council Regulation (EC) No 1466/97, the Council is of the opinion that, based on the Commission services 2011 spring forecast, the macroeconomic scenario underpinning the budgetary projections is slightly favourable, in particular regarding the development of domestic demand. The update aims to correct the excessive deficit by the 2011 deadline set by the Council, to be achieved with a surplus of 2 % of GDP thanks to the significant one-off revenues from the pension assets. The budget would turn into a deficit of 2,5 % of GDP in 2012 and thereafter gradually decline to 1,5 % of GDP in 2015, mainly based on expenditure restraint. The update confirms the country's medium-term objective (MTO) for the budgetary position in structural terms, a deficit of 1,5 % of GDP. The consolidation strategy is expected to reduce the budgetary deficit in a structural way and put the debt on a downward path to reach 64 % of GDP by 2015. However, it appears to be rather back-loaded with structural improvement starting only from 2012, whereas the cumulative structural deterioration of over 3 % of GDP over 2010 and 2011 is not in line with the Council Recommendation of July 2009 asking Hungary to achieve a structural adjustment of at least 0,5 % of GDP. The spring forecast shows a deficit of 3,3 % of GDP in 2012, which assumes some implementation risks of 0,5 % of GDP; on this basis it cannot be excluded that the threshold may be breached again in that year unless further measures are taken. In addition, the projected structural deficit path, as recalculated by the Commission, does not provide for the necessary adjustments that would ensure achievement of the MTO by the end of the convergence programme period; in particular, there is no further structural adjustment beyond 2013, though the margin to the MTO is small.
               Finally, the abolishment of the mandatory private pension pillar results in additional one-off and permanent revenues but also increases the long-term liabilities. The ensuing likely deterioration of the long-term fiscal sustainability taking into account that part of the pension funds' assets are used to finance current expenditure, is partly offset by several announced steps related to the pension system in the context of the structural reform programme (e.g. the partly already implemented parametric changes in the public pillar). According to the Commission's latest assessment, the risks with regards to the long-term sustainability of public finances appear to be medium.

               (8)

               Fiscal consolidation remains a major challenge. Without rigorous implementation of the measures announced and additional measures of a structural nature as needed, it cannot be ensured that the excessive deficit is corrected on a sustainable basis and appropriate progress is made towards the MTO. Moreover, fiscal consolidation will also help to put debt reduction on an appropriately declining path and improve long-term sustainability which appears to be at medium risk. Making full use of windfall revenues could help accelerate the fiscal consolidation. Against this background, the authorities' bi-annual Excessive Deficit Procedure progress reports will serve as a useful tool for closely monitoring progress of fiscal consolidation.

               (9)

               The recently adopted Constitution establishes a constitutional debt brake at 50 % of GDP and gives the Fiscal Council a veto right over the annual budget, which could be a first step forward improving the budgetary framework. However, important details will only be specified in the subsequent ‘cardinal’ laws (e.g. what the temporary numerical rules will be until the debt ratio declines to 50 %, the precise interpretation of the escape clause). The imposition of a nominal debt cap if used as an all-purpose device could, ceteris paribus, lead to a pro-cyclical fiscal stance. In addition, the remit of the revamped fiscal body is relatively narrow (limited to preparing an opinion on the draft budget, although with a strong right to veto) and does not cover the entire budgetary cycle (e.g. through real-time assessments of new policies with major budgetary implications). Finally, other aspects of fiscal governance, such as the medium-term orientation of fiscal policy and the issue of transparency still need to be clarified.

               (10)

               The employment rate is among the lowest in the EU (60,4 %). The employment rate of women is also low (55 %), while the gap between the employment rates of women with and without children aged six and under is the second biggest in the EU (33,6, against the EU average of 12,1 percentage points). There are deficiencies in the capacity of day-care services in Hungary, with particularly scant provision outside the larger cities, and in regions with very high unemployment. Improving day-care provision would be an important measure to facilitate both parents' participation in the labour force.

               (11)

               Hungary has had a relatively high tax burden on labour. The new personal income tax system partly addresses its negative effects on employment, particularly for those above-medium-income and/or those with children, and thus aims at tackling the most urgent competitiveness and demographic issues. Though the tax rate was reduced, the tax burden on low earners without children has in fact increased, when taking into account the phasing out of employment tax credits.

               (12)

               The public employment services (PES) suffer from insufficient administrative capacity, and previous injections of funds have not improved considerably the efficiency of services in integrating the unemployed into the labour market. The funding of employment programmes is not sufficiently linked to results, especially in the case of nationally funded measures. Recently, it has been announced that the duration of unemployment benefits is to be reduced to the lowest levels in the EU. The impact of this measure on the labour market needs to be assessed, in particular to determine its effectiveness in raising employment participation.

               (13)

               Poverty and related factors, such as joblessness or low education levels, continue to affect some disadvantaged groups, particularly the Roma, disproportionately. The low-skilled have a particularly low employment rate (36,8 %, compared with the European average of 53,4 %), especially among men. According to estimates, 70 % of the Roma population live under the poverty threshold. A great majority of them live in deprived regions, with little access to labour market opportunities and public services.

               (14)

               SMEs have been hindered by the complexity of the regulatory framework, a heavy administrative burden and limited accountability and transparency in public administration. SMEs' access to early-stage financing has been more scant than the EU average. The national reform programme includes a number of measures to reduce administrative burdens and improve business environment in general. The role of non-banking funding mechanisms is lagging behind that played in other European countries. The effectiveness of prior programmes to support the sector has not been systematically evaluated.

               (15)

               The Commission has assessed the convergence programme and national reform programme for Hungary and has also taken into account the government's intention to shadow the Euro Plus Pact. It has taken into account not only their relevance for sustainable fiscal and socio-economic policy in Hungary, but also their conformity with EU rules and guidance, given the need to reinforce the overall economic governance of the European Union by providing EU-level input into future national decisions. It considers that the fiscal adjustment strategy is mainly based on the expenditure side and that the 2011 deadline set by the Council for bringing the deficit below the 3 % of GDP threshold is only met due to the significant one-off revenues, notably from the pension assets, and the structural improvement will begin only in 2012. Taking into account the implementation risks, it cannot be excluded that the threshold may be breached again in that year unless further measures are taken. Moreover, in the longer term the convergence programme, as re-calculated by the Commission, does not secure further progress towards the MTO, though the margin is small. Further measures to increase labour market participation and modernise employment services would help to increase job opportunities. Further reductions in administrative burdens would help improve the business environment and help SMEs to grow.

               (16)

               In light of this assessment, also taking into account the Council Recommendation under Article 126(7) of the Treaty on the Functioning of the European Union of 7 July 2009, the Council has examined the 2011 update of the convergence programme of Hungary and its opinion (3) is reflected in particular in its recommendations (1) and (2) below. Taking into account the European Council conclusions of 25 March 2011, the Council has examined the national reform programme of Hungary,

         HEREBY RECOMMENDS that Hungary take action within the period 2011-2012 to:

               1.

               Strengthen the fiscal effort in order to comply with the Council recommendation to correct the excessive deficit in a sustainable manner, inter alia by avoiding the structural deterioration in 2011 implicit in the planned 2 % of GDP budget surplus and ensure that the budget deficit is kept safely below the 3 % of GDP threshold in 2012 and beyond, contributing to the reduction of the high public debt ratio. Fully implement the announced fiscal measures and adopt additional measures of a permanent nature if needed at the latest in the 2012 budget to secure the budgetary target for that year. The 2012 budget should also identify the additional measures in order to attain the 2013 target in the convergence programme. Ensure progress towards the medium-term objective (MTO) by at least 0,5 % of GDP annually until the MTO is reached and use possible windfall revenues to accelerate the fiscal consolidation.

               2.

               Adopt and implement regulations specifying the operational aspects of the new constitutional fiscal governance framework, including, inter alia, the numerical rules that will be implemented at the central and local level until the debt ratio has declined to below 50 % of GDP. Regarding the fiscal framework, implement and strengthen multiannual fiscal planning, improve the transparency of public finances and broaden the remit of the Fiscal Council.

               3.

               Enhance participation in the labour market by alleviating the impact of the tax reform on low earners in a budget-neutral manner. Strengthen measures to encourage women's participation in the labour market by expanding childcare and pre-school facilities.

               4.

               Take steps to strengthen the capacity of the Public Employment Service and other providers to increase the quality and effectiveness of training, job search assistance and individualised services. Reinforce active labour market measures delivering positive evidence-based results. In consultation with stakeholders, introduce tailor-made programmes, for the low-skilled and other particularly disadvantaged groups.

               5.

               Improve the business environment by implementing all the measures envisaged for regulatory reform and lowering administrative burdens in the national reform programme; assess the effectiveness of current SME support policies and adjust public programmes in order to improve access to non-bank funding.

      Done at Brussels, 12 July 2011.

            For the Council

            The President

         J. VINCENT-ROSTOWSKI

      (1)  OJ L 209, 2.8.1997, p. 1.

      (2)  Maintained for 2011 by Council Decision 2011/308/EU of 19 May 2011 on guidelines for the employment policies of the Member States (OJ L 138, 26.5.2011, p. 56).

      (3)  Foreseen in Article 9(3) of Regulation (EC) No 1466/97.


title: RECOMMENDATION FOR A COUNCIL REGULATION (EEC) ON THE CONCLUSION OF THE AGREEMENT IN THE FORM OF AN EXCHANGE OF LETTERS AMENDING ANNEX A TO THE COOPERATION AGREEMENT BETWEEN THE EUROPEAN ECONOMIC COMMUNITY AND THE SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA (presented by the Commission to the Council)

text:
ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (80) 571
Vol. 1980/0183
 ---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
                                              con (80) 571 final
                                              Brussels/ 9th October 1980
                       \A                A&
                 RECOMMENDATION FOR A COUNCIL REGULATION ( EEC )
             ON THE CONCLUSION  OF THE AGREEMENT IN THE FORM OF AN
            EXCHANGE OF LETTERS AMENDING ANNEX A TO THE COOPERATION
             AGREEMENT BETWEEN THE EUROPEAN ECONOMIC COMMUNITY AND
                 THE SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA
                 (presented by the Commission to . the Council )
 COM ( 80 ) 571 final
 ---pagebreak---                             EXPLANATORY HEKQRAHXM
On 22 July the Council approved the directives for negotiation of an
exchange of letters with Yugoslavia to amend certain provisions of the
Interim Agreement and the Cooperation Agreement *
Negotiations vath regard to the Interim Agreement took place at the
meeting on 22 July .
It ia now necessary to conclude the agreement in the form of an exchange
of letters amending Annex A to the Cooperation Agreement , which is
identical to that relating to the Interim Agreement ,
The Commission also transmits to the Council herewith the draft agreement
in the form of an exchange of letters and a recommendation for a regulation
concluding the agreement in the form of an exchange of letters amending
the Cooperation Agreement .    The Council will approve the regulation at the
same time aB that for the Cooperation Agreement .
 ---pagebreak---                   AGREEMENT
        IN THE FORM OF AN EXCHANGE OF LETTERS
   AMENDING ANNEX A TO THE COOPERATION AGREEMENT
     . BETWEEN THE EUROPEAN  ECONOMIC COMMUNITY
AMD THE SOCIALIST FEDERAL REPU8LI C OF YUGOSLAVIA
 ---pagebreak---                         COUNCIL REGULATION .( EEC )
               on the conclusion of the Agreement in the form of an
           Exchange of Letters amending Annex A to the Cooperation Agree
         ment between the European Economic Community and the Socialist
                   Federal Republic of Yugoslavia
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Community ,
Having regard to the recommendation from the Commission ,
Having regard to the opinion of the European Parliament ,
Whereas it is necessary to approve the Agreement in the form of an
Exchange of Letters amending Annex A to the Cooperation Agreement between
the European Economic Community and the Socialist Federal Republic of
Yugoslavia ,
HAS ADOPTED THIS REGULATION :
                            Article   1
       The Agreement in the form of an Exchange of Letters amending Annex .
A to the Cooperation Agreement between the European Economic Community and
the Socialist Federal Republic of Yugoslavia is hereby approved on behalf
of the Community .
       The text of the Agreement is annexed to this Regulation .
                              Article 2   •
       The President of the Council is hereby authorized to designate the
person empowered to sign the Agreement in order to bind the Community .
 ---pagebreak---                                                   9
                              Article 3
       This Regulation shall enter into force on the third day follow
ing     its publication in the Official Journal of the European Communities .
               0
       It shall apply with effect from
       This Regulation shall be binding in its entirety and directly
applicable in all Member States .
                                        Done at Luxembourg ,
                                        For the Council ,
                                        The President
 ---pagebreak---                 COMMISSION
                   DES                                                                   ,                                        - '•
COMMUNAUTES EUROPEENNES
                            AGREEMENT IN THE FORM OF AN EXCHANGE OF LETTERS, AMENDING ANNEX                                              A '■ >
             TO THE COOPERATION AGREEMENT BETWEEN THE EUROPEAN ECONOMIC COMMUNITY AND THE
           \                                                                                ■    '
                                         SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA
        Madam President ,
                       I have the honour to inform you that a material error has occurred in
        Annex A of the Cooperation Agreement between the European Econpmic Community
        and the Socialist Federal Republic of                                              Yugoslavia .                • . ■
                      Since this error leads to a different result from that sought by the
        parties regarding imports of Vljivovica falling within position ex . 22.09 of
        the Common Customs Tariff , originating in Yugoslavia , it is necessary to amend
        Annex A as follows :                                                   '
             Common Customs Tariff
                                                                                Description                             ' '
                Heading No .
                                                                Spirits ( other than those of heading No . 22.08 );
                22.09                                           liqueurs and other spirituous beverages ; compound
                                                                alcoholic preparations ( known as " concentrated extracts ")
                                                                for the manufacture of beverages .
      '  .    '  1                        1                1 • ■■■ "" ■ – m - –    i I-I                i. .1                                      .
                                                                                ...         · .                 ν/
                      I should be obliged if you would acknowledge receipt of this letter and at
        the same time confirm your Delegation 's agreement with its contents .
                     Please accept , Madam , the assurance of my highest consideration .
                                                                                . On behalf of the Council
                                                                                of         the European Communities
                    Ι.Ι.Ι .  Ι-.Ι ■ I .1    I ■ ι ι   I ■■          ■   ■ ■■!■   ■           ■ ■■■ ι          '               111
  Adresse provisoire : 23-27, «venue ée loJoyeosr£ntré%> BruKeWes 4 <--Téiéphone 35.00. 40 - 35.0U4Q1 ,»*'.' Adresse télégraphique :
                                               •    « COMEUR BruxeUel»' - Ttlexr 'éCOMEURBRU                       21.877 •
 ---pagebreak--- legation of the Socialist Federal
 Repubtic of Yugoslavia
                   AGREEMENT IN THE FORM OF AN EXCHANGE OF LETTERS AMENDING ANNEX A
              TO THE COOPERATION AGREEMENT BETWEEN THE EUROPEAN ECONOMIC COMMUNITY AND
                         THE SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA
      Sir-
              In your letter of today , you made the following communication :
            "I have the honour to inform you that a material error has occurred in
      Annex A of the Cooperation Agreement signed between the European Economic Community
      and the Socialist Federal Republic of Yugoslavia .
              Since this error leads to a different result from that sought by the
     parties regarding imports of Slijvovica falling within position ex 22.09 of the
   N Common Customs Tariff , originating in Yugoslavia , it is necessary to amend
     Annex A as follows :
         Common Customs Tariff                       Description                           Ì
           Heading No .
            22.09
                                     Spirits ( other than those of headiag no. 22.08 );
                                     liqueurs and other spirituous beverages ; compound
                                     alcoholic preparations ( known as " concentrated ex-
                                     tracts ") for the manufacture of beverages .
   W
             I should be obliged if you would acknowledge receipt of this letter and
     at the same time confirm your      Delegation 's agreement with its contents .".
             I have   the honour to acknowledge receipt of your letter and confirm
     my Delegation 's agreement with its contents .
             Please accept , Sir , the assurance of my highest consideration .
                                                 For the Federal Executive Council
                                           of the Socialist Federal Republic of Yugoslavia