title: Council Recommendation of 12 July 2016 on the 2016 National Reform Programme of the United Kingdom and delivering a Council opinion on the 2016 Convergence Programme of the United Kingdom

text:
               18.8.2016

               EN

               Official Journal of the European Union

               C 299/12

         COUNCIL RECOMMENDATION
   of 12 July 2016
   on the 2016 National Reform Programme of the United Kingdom and delivering a Council opinion on the 2016 Convergence Programme of the United Kingdom
   (2016/C 299/03)
   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(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 November 2015, the Commission adopted the Annual Growth Survey, marking the start of the 2016 European Semester for economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 17-18 March 2016. On 26 November 2015, on the basis of Regulation (EU) No 1176/2011 of the European Parliament and of the Council (2), the Commission adopted the Alert Mechanism Report, in which it identified the United Kingdom as one of the Member States for which an in-depth review would be carried out.

               (2)

               The 2016 country report for the United Kingdom was published on 26 February 2016. It assessed the United Kingdom's progress in addressing the country-specific recommendations adopted by the Council on 14 July 2015 and the United Kingdom's progress towards its national Europe 2020 targets. It also included the in-depth review under Article 5 of Regulation (EU) No 1176/2011. On 8 March 2016, the Commission presented the results of the in-depth review. The Commission's analysis leads it to conclude that the United Kingdom is not experiencing macroeconomic imbalances. High household sector debt, elevated house price levels and the large current account deficits may constitute vulnerabilities. At the same time, household balance sheets are strong in aggregate and the resilience of the banking sector continues to improve. In the short term, the robustness of the household sector and wider economy to handle risks such as an interest rate shock or a shock to employment seems to have increased. While government initiatives are having some impact on housing supply, the imbalance between housing supply and demand remains sizeable. Risks associated with the large current account deficit are mitigated by a favourable institutional framework and low foreign-currency liabilities. The rise in the deficit has been driven by the upward movement in the deficit on primary income and it is expected to decline as adverse cyclical conditions unwind.

               (3)

               On 24 March 2016, the United Kingdom submitted its 2016 National Reform Programme and its 2016 Convergence Programme. In order to take account of their interlinkages, the two programmes have been assessed at the same time.

               (4)

               Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds for the 2014-2020 period. As foreseen in Article 23 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council (3), where it is necessary to support the implementation of relevant Council recommendations, the Commission may request a Member State to review and propose amendments to its Partnership Agreement and relevant programmes. The Commission has provided further details on how it would make use of this provision in guidelines on the application of the measures linking effectiveness of the European Structural and Investment Funds to sound economic governance.

               (5)

               The United Kingdom is currently in the corrective arm of the Stability and Growth Pact. Provided that a durable correction of the excessive deficit is achieved in 2016-17, the United Kingdom will be subject to the preventive arm and the transitional debt rule as from 2017-18. In its 2015-16 Convergence Programme, the Government expects the headline deficit to be below 3 % of GDP in 2016-17 and plans for it to decline further to 2,0 % of GDP by 2017-18. The recalculated (4) structural deficit points to a structural improvement of 0,6 percentage points of GDP in 2015-16; 0,9 percentage points of GDP in 2016-17, and 0,7 percentage points of GDP in 2017-18. The Convergence Programme does not include a medium-term budgetary objective. According to the Convergence Programme, the government debt-to-GDP ratio is expected to fall from 88,9 % in 2015-16 to 88,3 % of GDP in 2016-17, before declining further to 87,1 % in 2017-18. The macroeconomic scenario underpinning the budgetary projections is plausible. Measures to support the planned deficit targets in 2016-17 and 2017-18 are sufficiently specified. However, the impact of some measures in 2017-18, whose budgetary impact is estimated at around 0,2 % of GDP, is more uncertain. Based on the Commission 2016 spring forecast, in 2015-16 the United Kingdom is expected to have achieved the recommended headline deficit of 4,1 % of GDP and to have delivered the recommended fiscal effort. The United Kingdom is forecast to correct its excessive deficit by the 2016-17 deadline as recommended by the Council, though missing the recommended headline deficit target of 2,7 % of GDP. A marginally lower than recommended fiscal effort is projected to be delivered on a cumulative basis over the excessive deficit procedure period. In 2017-18, the United Kingdom is expected to comply with the recommended adjustment towards the minimum medium-term budgetary objective under unchanged policies. The United Kingdom is also forecast to comply with the transitional debt rule in 2017-18. Based on its assessment of the Convergence Programme, and taking into account the Commission 2016 spring forecast, the Council is of the opinion that the United Kingdom is expected to broadly comply with the provisions of the Stability and Growth Pact.

               (6)

               Productivity in the United Kingdom has stagnated since 2008. This may be attributable to various factors such as low capital investment, skills shortages, skill mismatches and a shift in the composition of the economy towards business sectors with lower productivity. The challenges related to insufficient housing, especially in geographical areas of high economic growth also have to be considered in this context. The Government's July 2015 policy document, ‘Fixing the foundations- creating a prosperous nation’ lays out a wide-ranging response. In view of certain barriers to investment that still exist and the low level of public and private investment in the United Kingdom, the Government's policy actions to boost skill levels, innovation and infrastructure investment are timely although effective implementation will be important. One of the main investment challenges is to deliver adequate network infrastructure. The National Infrastructure Plan, which was updated in March 2016, sets out details of the progress of infrastructure projects within a coherent and consistent framework. The plan is reliant on securing an increase in private finance for much of the investment. Delivery and monitoring are crucial and transparency and accountability are key. Despite the Government's various initiatives, housing demand continues to outstrip supply and this is reflected in high and rising house prices. The shortage of housing is most acute in the rapidly-growing regions of London and the South-East. The use of land is guided by principles set out in the national planning policy framework and effective implementation of the reformed planning system could facilitate increased housing construction.

               (7)

               The United Kingdom's labour market remains dynamic. In 2015, the employment rate (age group 20-64) reached 76,9 % while the unemployment rate continued its downward trend, reaching 5,3 %. Youth unemployment and rates of young people not in employment, education or training have also further decreased. Nonetheless, there remains scope for improvement in the prospects for inactive, underemployed and low skilled workers. Better labour market progression prospects and clearer routes to upskilling would assist those who find themselves confined to low-wage and/or low-hours of work. It would also address the skills shortages that are apparent in some parts of the economy, such as construction. Successful deployment of the resources arising from the apprenticeship levy will require careful attention. Proposals to improve supply in childcare will require timely implementation as the availability and affordability of childcare remain a challenge.

               (8)

               In the context of the European Semester, the Commission has carried out a comprehensive analysis of the United Kingdom's economic policy and published it in the 2016 country report. It has also assessed the Convergence Programme and the National Reform Programme and the follow-up given to the recommendations addressed to the United Kingdom in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in the United Kingdom but also their compliance with EU rules and guidance, given the need to strengthen the overall economic governance of the European Union by providing EU-level input into future national decisions. The recommendations under the European Semester are reflected in recommendations (1) to (3) below.

               (9)

               In the light of this assessment, the Council has examined the Convergence Programme, and its opinion (5) is reflected in particular in recommendation (1) below.

         HEREBY RECOMMENDS that the United Kingdom take action in 2016 and 2017 to:

               1.

               Endeavour to correct the excessive deficit in a durable manner by 2016-17. Following the correction of the excessive deficit, achieve a fiscal adjustment of 0,6 % of GDP in 2017-18 towards the minimum medium-term budgetary objective.

               2.

               Address shortfalls in network infrastructure investment, including by delivering the priorities of the National Infrastructure Plan. Take further steps to boost housing supply, including by implementing the reforms of the national planning policy framework.

               3.

               Address skills mismatches and provide for skills progression, including by strengthening the quality of apprenticeships. Further improve the availability of affordable, high-quality, full-time childcare.

      Done at Brussels, 12 July 2016.

            For the Council

            The President

         P. KAŽIMÍR

      (1)  OJ L 209, 2.8.1997, p. 1.

      (2)  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).

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

      (4)  The structural balance as recalculated by the Commission based on the information in the Convergence Programme, following the commonly agreed methodology.

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


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

text:
               29.7.2014

               EN

               Official Journal of the European Union

               C 247/20

         COUNCIL RECOMMENDATION
   of 8 July 2014
   on the National Reform Programme 2014 of Germany and delivering a Council opinion on the Stability Programme of Germany, 2014
   2014/C 247/05
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,
   Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (1), and in particular Article 5(2) thereof,
   Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances (2), and in particular Article 6(1) thereof,
   Having regard to the recommendation of the European Commission,
   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 (3), 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)

               On 9 July 2013, the Council adopted a Recommendation (4) on Germany's National Reform Programme for 2013 and delivered its opinion on Germany's updated Stability Programme for 2012‐2017. On 15 November 2013, in line with Regulation (EU) No 473/2013 of the European Parliament and of the Council (5), the Commission presented its opinion on Germany's draft budgetary plan for 2014.

               (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, adopted the Alert Mechanism Report, in which it identified Germany as one of the Member States for which an in‐depth review would be carried out.

               (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)

               On 5 March 2014, the Commission published the results of its in‐depth review for Germany, under Article 5 of Regulation (EU) No 1176/2011. The Commission's analysis leads it to conclude that Germany is experiencing macroeconomic imbalances, which require monitoring and policy action. In particular, the current account has persistently recorded a very high surplus, which reflects the positive effects of strong competitiveness, with a large amount of savings being invested abroad. It is also a sign that domestic growth has remained subdued and economic resources may not have been allocated efficiently. Although the current account surpluses do not raise risks similar to large deficits, the size and persistence of the current account surplus in Germany deserve close attention. The need for action to reduce the risk of adverse effects on the functioning of the domestic economy and the euro area is particularly important given the size of the German economy.

               (8)

               On 14 April 2014, Germany submitted its 2014 National Reform Programme and, on 8 April 2014, its 2014 Stability Programme. In order to take account of their interlinkages, the two programmes have been assessed at the same time.

               (9)

               The objective of the budgetary strategy outlined in the 2014 Stability Programme is to ensure the continued achievement of the medium‐term objective. The Stability Programme confirms the medium‐term objective of ‐0,5 % of GDP, which reflects the requirements of the Stability and Growth Pact. According to the Stability Programme, the (recalculated) structural balance will remain positive in 2014 and thereafter and gross debt is planned to fall to 76 % of GDP in 2014 and to remain on a sufficiently downward path thereafter. Therefore, the budgetary strategy outlined in the Stability Programme is in line with the requirements of the Stability and Growth Pact. The macroeconomic scenario underpinning the budgetary projections in the Stability Programme, which has not been formally endorsed by an independent body, is plausible, as it is broadly in line with the Commission services 2014 Spring forecast. Based on the assessment of the Stability Programme and the Commission forecast, pursuant to Regulation (EC) No 1466/97, the Council is of the opinion that public finances in Germany remain sound overall as the medium‐term objective is forecast to continue to be maintained and the debt rule respected.

               (10)

               Only limited progress has been made by Germany in enhancing the cost‐effectiveness of public spending on healthcare and long‐term care, although new initiatives have been announced. While their aim is to improve the cost‐effectiveness of healthcare, these plans might not be sufficient to contain expected future cost increases. The recently adopted pension reform aims to improve early retirement conditions (‘Rente mit 63’) and pension levels for certain groups, the latter also including a pension supplement for those having raised children born before 1992 (‘Mütterrente’). The reform puts an additional strain on the sustainability of the public pension system and is planned to be financed by a higher pension contribution rate, with negative implications for disposable incomes of the active labour force. The reform could also have a negative impact on take‐up of complementary second and third pillar pensions. Germany has made limited progress in increasing spending on education and some progress concerning higher research spending. Further efforts appear necessary at all levels of government to meet the target for total public and private expenditure on education and research of 10 % of GDP by 2015, and even more ambitious follow‐up targets should be aimed for in order to catch up with the most innovative economies. Infrastructure investment has been increased in Germany in recent years and plans exist to reinforce it further, but additional efforts appear necessary.

               (11)

               Germany has made overall limited progress in improving the efficiency and growth‐friendliness of the tax system and to reduce the high tax burden on labour. No major measures are foreseen to shift towards more growth‐friendly revenue sources. The application of the reduced value‐added tax (VAT) rate (currently 7 %) could be narrowed and the general VAT base broadened. Rather low revenues from recurrent property taxes suggests that there is scope for increases and the distribution of the tax burden could be fairer if the tax base for the municipal real estate tax (Grundsteuer) would be reassessed. Conditions for investment in Germany could be further improved by reforming the local trade tax (Gewerbesteuer), cutting the administrative burden linked to tax collection, and reducing the existing corporate tax bias in favour of debt‐financing.

               (12)

               The fiscal framework has been complemented by a national balanced‐budget rule and the establishment of an independent advisory board. Specific rules for implementing the constitutional balanced‐budget rule (‘debt brake’) still appear to be required in several Länder so as to ensure the effective application of the debt brake in the annual budgetary cycle. The planned review of fiscal relations between the federation, Länder and municipalities should be used to strengthen fiscal responsibility and accountability.

               (13)

               Wages have risen in recent years after a prolonged period of wage moderation, but in 2013 real wage growth was more moderate than in 2012. Germany plans to introduce a general minimum wage of EUR 8,50/hour in 2015, which will take full effect as of 2017. The introduction of the planned general minimum wage, which is aimed at ensuring an adequate minimum income for workers, requires close monitoring of its impact, in particular on employment. Limited effort has been made to reduce the high tax wedge, in particular for low‐wage earners. The adopted pension reform and current reform plans in the area of long‐term care, which involve a rise in social insurance contribution rates, could again increase the tax wedge. Germany has made some progress in raising the educational achievement of disadvantaged people, but the link between educational achievement and socio‐economic background remains strong and persists over people's working life. Despite some progress towards appropriate activation and integration measures, long‐term unemployment remains a concern, signalling a need for additional measures. Only limited progress has been made in taking measures to facilitate the transition from mini‐jobs into forms of employment subject to full mandatory social security contributions. No progress has been made to reduce fiscal disincentives to work for second earners. Germany has made some progress in expanding the availability of full‐time early childhood education and care places as well as in the extension of all‐day schools. At the same time, childcare facilities and all‐day schools are still the subject of quality concerns and regional disparities.

               (14)

               The government proposal for a revision of the Renewable Energy Act aims to slow down overall energy cost increases, distribute the costs more evenly across consumers, control the expansion of renewables and promote market integration. The implementation of the reform needs to be carefully monitored with regard to its impact on the cost‐effectiveness of the support system. Further efforts are needed as regards network expansion and coordination with neighbouring countries.

               (15)

               Policy action to further stimulate competition in the services sectors has been limited, even though isolated reforms in specific professions and regions have been enacted, for instance as regards authorisations and commercial communication in the construction sector. While productivity growth may be structurally lower in the service sectors than in industry, it is particularly low in some service sectors, in particular professional services. There are still barriers to entering the market and exercising professional services. These include restrictions on the legal form and shareholding, and professional qualifications requirements. The diversity of regulatory arrangements for professional services across Länder suggests that there is scope for identifying the least burdensome regulatory approaches and extending them throughout the country. The value of contracts published by the German authorities under EU procurement legislation remains one of the lowest in the Union. The comprehensive transition to a transparent e‐procurement market could increase competition. In the retail sector, planning regulations in certain Länder continue to restrict new entries to the market. Progress in improving competition in the railway markets has been limited.

               (16)

               Germany has made limited progress on measures taken to consolidate the banking sector, in particular by improving the governance framework. Commission State aid decisions have largely driven the restructuring of Landesbanken in recent years and the sector remains fragmented. Further efforts are needed to address structural and governance obstacles that hamper a market‐driven consolidation, which would also increase the overall efficiency of the financial sector. Reviewing the legal framework of the second banking pillar could further support consolidation in the public banking sector.

               (17)

               In the context of the European Semester, the Commission has carried out a comprehensive analysis of Germany's economic policy. It has assessed the National Reform Programme and the Stability Programme. It has taken into account not only their relevance for sustainable fiscal and socio‐economic policy in Germany 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 into future national decisions. Its recommendations under the European Semester are reflected in recommendations (1) to (4) below.

               (18)

               In the light of this assessment, the Council has examined the Stability Programme, and its opinion (6) is reflected in particular in recommendation (1) below.

               (19)

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

               (20)

               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 Member States whose currency is the euro (7). As a country whose currency is the euro, Germany should also ensure the full and timely implementation of those recommendations,

         HEREBY RECOMMENDS that Germany take action within the period 2014‐2015 to:

               1.

               Pursue growth‐friendly fiscal policy and preserve a sound fiscal position, ensuring that the medium‐term budgetary objective continues to be adhered to throughout the period covered by the Stability Programme and that the general government debt ratio remains on a sustained downward path. In particular, use the available scope for increased and more efficient public investment in infrastructure, education and research. Improve the efficiency of the tax system, in particular by broadening the tax base, in particular on consumption, by reassessing the municipal real estate tax base, by improving the tax administration and by reviewing the local trade tax, also with a view to foster private investment. Make additional efforts to increase the cost‐effectiveness of public spending on healthcare and long‐term care. Ensure the sustainability of the public pension system by (i) changing the financing of new non‐insurance/extraneous benefits (‘Mütterrente’) to funding from tax revenues, also in order to avoid a further increase of social security contributions, (ii) increasing incentives for later retirement, and (iii) increasing the coverage in second and third pillar pension schemes. Complete the implementation of the debt brake consistently across all Länder, ensuring that monitoring procedures and correction mechanisms are timely and relevant. Improve the design of fiscal relations between the federation, Länder and municipalities also with a view to ensuring adequate public investment at all levels of government.

               2.

               Improve conditions that further support domestic demand, inter alia by reducing high taxes and social security contributions, especially for low‐wage earners. When implementing the general minimum wage, monitor its impact on employment. Improve the employability of workers by further raising the educational achievement of disadvantaged people and by implementing more ambitious activation and integration measures in the labour market, especially for the long‐term unemployed. Take measures to reduce fiscal disincentives to work, in particular for second earners, and facilitate the transition from mini‐jobs to forms of employment subject to full mandatory social security contributions. Address regional shortages in the availability of fulltime childcare facilities and all‐day schools while improving their overall educational quality.

               3.

               Keep the overall costs of transforming the energy system to a minimum. In particular, monitor the impact of the Renewable Energy Act reform on the cost‐effectiveness of the support system for renewable energies. Reinforce efforts to accelerate the expansion of the national and cross‐border electricity and gas networks. Step up close energy policy coordination with neighbouring countries.

               4.

               Take more ambitious measures to further stimulate competition in the services sector, including certain professional services, also by reviewing existing regulatory approaches and converging towards best practices across Länder. Identify the reasons behind the low value of public contracts open to procurement under EU legislation. Increase efforts to remove unjustified planning regulations which restrict new entries in the retail sector. Take action to remove the remaining barriers to competition in the railway markets. Pursue consolidation efforts in the Landesbanken sector, including by improving the governance framework.

      Done at Brussels, 8 July 2014.

            For the Council

            The President

         P. C. PADOAN

      (1)  OJ L 209, 2.8.1997, p. 1.

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

      (3)  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).

      (4)  OJ C 217, 30.7.2013, p. 33.

      (5)  Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013 on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area (OJ L 140, 27.5.2013, p.11).

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

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


				|

		52012DC0304

			Recommendation for a COUNCIL RECOMMENDATION on Denmark’s 2012 national reform programme and delivering a Council opinion on Denmark’s convergence programme for 2012-2015 /* COM/2012/0304 final */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on Denmark’s 2012 national reform
programme
and delivering a Council opinion on Denmark’s convergence programme for
2012-2015
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 121(2) and 148(4)
thereof,
Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1], and in particular Article 5(2)
thereof,
Having regard to Regulation (EU) No
1176/2011 of the European Parliament and of the Council of 16 November on the
prevention and correction of macroeconomic imbalances[2], and in particular Article 6(1)
thereof,
Having regard to the recommendation of the
European Commission[3],
Having regard to the resolutions of the
European Parliament,[4]
Having regard to the conclusions of the
European Council,
Having regard to the opinion of the
Employment Committee,
After consulting the Economic and Financial
Committee,
Whereas:
(1)       On 26 March 2010, the
European Council agreed to the European 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[5],
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 July 2011, the
Council adopted a recommendation on Denmark’s national reform programme for 2011
and delivered its opinion on Denmark’s updated convergence programme for
2011-2014.
(4)       On 23 November 2011, the
Commission adopted the second Annual Growth Survey, marking the start of the second
European Semester of ex-ante and integrated policy coordination, which is
anchored in the Europe 2020 strategy. On 14 February 2012, the Commission, on
the basis of Regulation (EU) No 1176/2011, adopted the Alert Mechanism Report[6], in which it identified Denmark
as one of the Member States for which an in-depth review would be carried out.
(5)       On 2 March 2012, 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.
(6)       On
2 March 2012, the European Council also invited the Member States participating
in the Euro Plus Pact to present their commitments in time for inclusion in
their stability or convergence programmes and their national reform programmes.
(7)       On 30 April 2012, Denmark
submitted its convergence programme for the period 2012-2015 and its 2012 national
reform programme. In order to take account of their interlinkages, the two
programmes have been assessed at the same time. The Commission concluded in its
in-depth review[7],
under Article 5 of Regulation (EU) No 1176/2011, that Denmark is experiencing
an internal and external imbalance, although not excessive.
(8)       Based on the assessment of
the 2012 convergence programme pursuant to Council Regulation (EC) No 1466/97,
the Council is of the opinion that the macroeconomic scenario underpinning the
budgetary projections in the programme is plausible. The scenario projecting
GDP growth at 1.2 and 1.5% in 2012 and 2013 is broadly in line with the
Commission's 2012 spring forecast of 1.1 and 1.4%. Accordingly, the government
deficits are slightly smaller in the convergence programme (4.0 and 1.8% of GDP
in 2012 and 2013 respectively, compared with 4.1 and 2.0% of GDP in the
Commission's 2012 spring forecast). The objective of the budgetary strategy
outlined in the programme is to correct the excessive deficit by 2013 and
achieving the medium term budgetary objective (MTO) of at least a structurally
balanced budget in 2020. The programme thereby confirms the previous MTO, which
adequately reflects the requirements of the Stability and Growth Pact. The
planned headline deficit in 2013 is consistent with a timely correction of the
excessive government deficit and, based on the (recalculated) structural budget
balance[8],
the planned fiscal effort in that year complies with the Council recommendation issued under the Excessive Deficit Procedure
in July 2010. The consolidation path has become more
back-loaded than previously planned and a sizeable effort is needed in 2013 to
ensure the required structural adjustment. Risks of falling short of the 3% of
GDP reference value in 2013 are limited; the Commission's 2012 spring forecast
sees the government deficit at 2.0% of GDP. Based on the (recalculated) structural
budget balance, from 2013 onwards, the estimated budgetary improvement in the
structural budget balance falls short of the 0.5% of GDP required by the Stability
and Growth Pact.. At the same time, the growth rate of government expenditure,
taking into account discretionary revenue measures, is expected to be in line
with the expenditure benchmark of the Stability and Growth Pact. Part of the
budget deficits will be financed by reducing the government's account with Denmark's
Nationalbank. Denmark's gross public debt is projected to fall from 46.5% of
GDP in 2011 to 41.1% in 2015, well below 60% of GDP.
(9)       Increasing labour supply
is a key priority for Denmark in order to ensure future welfare and fiscal
sustainability. In 2011, Denmark concluded an ambitious reform of the voluntary
early retirement pension scheme and brought forward the previously planned
increase in the statutory retirement age and its link to life expectancy. The focus
now needs to shift to reforming the disability pension and subsidised
employment (flex-job) schemes. The government has presented a proposal for
reform in this area, which should be implemented without delay. The widening gap
in employment outcomes between people with a migrant background and the rest of
the working population also needs to be addressed.
(10)     Labour productivity growth
in Denmark has slowed down over the last decades, one of the causes being a
relatively weak education performance. Despite a high level of spending on education,
the quality of Danish school education — as measured by the OECD’s PISA survey —
is only average. Furthermore, students generally finish their studies at a
later age than in other Member States and the drop-out rates from vocational education
institutions are relatively high. To respond to the challenges in this field,
the government has announced a number of new measures for both compulsory and
secondary education. The 2012 budget also supports the introduction of social
clauses in public procurement calls and measures to make it financially
beneficial for private companies to offer apprenticeships, in order to increase
the number of available places. Increasing the provision of apprenticeships will
also be addressed in tripartite negotiations and in the work of an
inter-ministerial Committee.
(11)     Another potential reason
for slow productivity growth is the relatively weak degree of competition in
Denmark. In 2011, a competition package was adopted, mainly targeting the
construction sector, the retail sector, and health and public sector services. Competition
for taxis and transportation services as well as the liberalisation of
pharmacies are under investigation, in view of possible new measures. The issue
of increasing public procurement in municipalities and regions is currently being
negotiated with regional and local governments. In this context, a government committee
recently concluded that the Danish competition law is in need of reinforcement,
and that sanctions for infringements are currently too low to serve as a
deterrent. Given that only limited concrete initiatives have been taken in this
area over the past year, further steps are needed to adequately address this
challenge.
(12)     As confirmed in the
in-depth review under Article 5 of Regulation (EU) No 1176/2011, while the high
household gross debt to some extent is a structural feature of the Danish
economy, with household assets considerably exceeding liabilities, concerns
regarding high household debt arise as developments in the housing market seem
to have caused the debt to move beyond levels explained by structural factors.
Furthermore, the composition of mortgage loans has changed since 2003, with
instalment-free and variable-rate loans gaining in popularity over fixed-rate
loans with instalment. For a given debt level, households are therefore more
sensitive to interest rates hikes and fluctuations in property prices now than
they were a decade ago. This poses higher potential risks in terms of financial
and economic stability. Relevant measures have been taken in Denmark to address
vulnerabilities in the mortgage system. Moreover, the Ministry of Business and
Growth is currently analysing the distribution of assets and liabilities across
households and their potential vulnerability in the event of different economic
shocks. However, measures should also be considered to prevent pro-cyclical developments
in the housing market in the medium term, preferably by realigning the property
value tax with actual market values. Removing the ceiling of the annual
increase of the municipal land value tax could also prevent future pro-cyclical
effects. Such measures should be introduced gradually, taking into account the
current need for stabilisation in the housing market.
(13)     Denmark has made a number
of commitments under the Euro Plus Pact. These commitments, and the
implementation of the commitments presented in 2011, relate to fostering
employment, improving competitiveness, enhancing sustainability of public
finances and reinforcing financial stability. The Commission has assessed the
implementation of the Euro Plus Pact commitments. The results of this
assessment have been taken into account in the recommendations.
(14)     In the context of the
European Semester, the Commission has carried out a comprehensive analysis of Denmark’s
economic policy. It has assessed the convergence programme and national reform programme,
and presented an in-depth review. It has taken into account not only their
relevance for sustainable fiscal and socio-economic policy in Denmark but also
their compliance with EU rules and guidance, given the need to reinforce the
overall economic governance of the European Union by providing EU-level input
into future national decisions. Its recommendations under the European Semester
are reflected in recommendations (1) to (5) below.
(15)     In the light of this
assessment, the Council has examined Denmark’s convergence programme, and its
opinion[9]
is reflected in particular in recommendation (1) below.
(16)     In the light of the results
of the Commission’s in-depth review and this assessment, the Council has
examined Denmark’s 2012 national reform programme and Denmark’s convergence
programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011
are reflected in particular in recommendations (3), (4) and (5) below,
HEREBY RECOMMENDS that Denmark
should take action within the period 2012-2013 to:
1.           Implement the budgetary
strategy as envisaged, to ensure a correction of the excessive deficit by 2013 and
achieve the annual average structural adjustment effort specified in the
Council recommendations under the Excessive Deficit Procedure. Thereafter,
ensure an adequate structural adjustment effort to make sufficient progress
towards the medium-term budgetary objective (MTO), including meeting the
expenditure benchmark.
2.           Take further steps to enhance
long-term labour supply by reforming the disability pension, better targeting
subsidised employment schemes (the ‘flex-job’ system) towards people with
reduced work capacity, and improving the employability of people with migrant
background.
3.           Implement announced
measures, without delay, to improve the cost-effectiveness of the education
system, reduce drop-out rates, in particular within vocational education, and
increase the number of apprenticeships.
4.           Continue efforts to remove
obstacles to competition, in particular in local services, the retail and
construction sector, including by further opening the municipal and regional
procurement of services to competition and ensuring that competition law
sanctions are sufficiently deterrent.
5.           Consider further
preventive measures to strengthen the stability of the housing market and
financial system in the medium-term, including by taking account of the results
of the ongoing study by the Ministry of Business and Growth on the distribution
of assets and liabilities across households and by reviewing the property value
and municipal land value tax system.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 02.08.1997, p. 1
[2]               OJ L 306, 23.11.2011, p. 25
[3]               COM(2012)304 final
[4]               P7_TA(2012)0048 and P7_TA(2012)0047
[5]               Council Decision 2012/238/EU of 26 April 2012
[6]               COM(2012) 68 final
[7]               SWD(2012)153 final
[8]               Cyclically adjusted balance net of one-off and
temporary measures, recalculated by the Commission services on the basis of the information provided in the programme, using
the commonly agreed methodology.
[9]               Under Article 9 (2) of Council Regulation (EC) No
1466/97.


title: Recommendation No U2 of 12 June 2009 concerning the application of Article 64(1)(a) of Regulation (EC) No 883/2004 of the European Parliament and of the Council to unemployed persons accompanying their spouses or partners pursuing a professional or trade activity in a Member State other than the competent State (Text of relevance to the EEA and to the EC/Switzerland Agreement)

text:
               24.4.2010

               EN

               Official Journal of the European Union

               C 106/51

         RECOMMENDATION No U2
   of 12 June 2009
   concerning the application of Article 64(1)(a) of Regulation (EC) No 883/2004 of the European Parliament and of the Council to unemployed persons accompanying their spouses or partners pursuing a professional or trade activity in a Member State other than the competent State
   (Text of relevance to the EEA and to the EC/Switzerland Agreement)
   2010/C 106/16
   THE ADMINISTRATIVE COMMISSION FOR THE COORDINATION OF SOCIAL SECURITY SYSTEMS,
   Having regard to Article 72(a) of Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems (1), under which the Administrative Commission is responsible for dealing with all administrative questions or questions of interpretation arising from the provisions of Regulation (EC) No 883/2004 and Regulation (EC) No 987/2009 of the European Parliament and of the Council of 16 September 2009 laying down the procedure for implementing Regulation (EC) No 883/2004 on the coordination of social security systems (2),
   Having regard to Article 64(1) of Regulation (EC) No 883/2004 and Article 55(1) of Regulation (EC) No 987/2009,
   Whereas:

               (1)

               Under the terms of Article 64(1) of Regulation (EC) No 883/2004 a person who is wholly unemployed and who goes to a Member State other than the competent State in order to seek employment is allowed, subject to certain conditions and limits, to retain his entitlement to unemployment benefits in cash.

               (2)

               One of the conditions set out in subsection (a) of the said paragraph is that the person concerned must have remained available to the employment services of the competent State for at least 4 weeks after becoming unemployed.

               (3)

               The final sentence of subsection (a) does, however, allow the competent services or institutions to authorise the job-seeker’s departure before 4 weeks have expired.

               (4)

               This authorisation should not be denied to persons who, while meeting the other conditions set out in Article 64(1) of the said Regulation, wish to accompany their spouse or partner who has taken a job in another Member State.
               Acting in accordance with the conditions laid down in Article 71(2) of Regulation (EC) No 883/2004,

         HEREBY RECOMMENDS TO THE COMPETENT SERVICES AND INSTITUTIONS THAT:

               1.

               Authorisation of departure before 4 weeks have expired as provided for in the final sentence of Article 64(1)(a) of Regulation (EC) No 883/2004 shall be granted to a person who is wholly unemployed, meets all the other conditions laid down in Article 64(1) and is accompanying his/her spouse or partner who has taken a job in a Member State other than the competent State.
               The partner shall be determined on the basis of the legislation of the competent Member State.

               2.

               This Recommendation shall be published in the Official Journal of the European Union. It shall apply from the date of entry into force of Regulation (EC) No 987/2009.

            The Chair of the Administrative Commission

         Gabriela PIKOROVÁ

      (1)  OJ L 166, 30.4.2004, p. 1.

      (2)  OJ L 284, 30.10.2009, p. 1.


Avis juridique important

|

31994K3118

Commission Recommendation No 3118/94/ECSC of 19 December 1994 on prior Community surveillance of imports of certain iron and steel products covered by the ECSC Treaty originating in non-member countries

Official Journal L 330 , 21/12/1994 P. 0006 - 0014 Finnish special edition: Chapter 3 Volume 64 P. 0086  Swedish special edition: Chapter 3 Volume 64 P. 0086

COMMISSION RECOMMENDATION No 3118/94/ECSC of 19 December 1994 on prior Community surveillance of imports of certain iron and steel products covered by the ECSC Treaty originating in non-member countriesTHE COMMISSION OF THE EUROPEAN  COMMUNITIES,  Having regard to the Treaty establishing the European Coal and Steel Community, and in particular Article 74 thereof,  Whereas by recommendation No 85/94/ECSC (1), the Commission made imports into the Community of certain iron and steel products covered by the Treaty establishing the European Coal and Steel Community subject to Community surveillance;  Whereas, in view of current conditions in the steel industry, such prior Community surveillance continues to be necessary to provide statistical information to permit rapid analysis of import trends;  Whereas the completion of the internal market requires that the formalities to be accomplished by Community importers be the same wherever the goods may be cleared;  Whereas the import documents issued for the purposes of Community surveillance must be valid throughout the Community, regardless of the Member State of issue;  Whereas the issue of import documents, while subject to standard conditions at Community level, is to be the responsibility of the national authorities,  MAKES THE FOLLOWING RECOMMENDATION:   Article 1  1. The release for free circulation in the Community of iron and steel products covered by the ECSC Treaty listed in Annex I, originating in non-member countries other than the countries which are parties to the Agreement on the European  Economic Area (EEA), shall be subject to the issue of an import document.  2. The import document or licence (import authorization) shall be issued by the competent authority in the Member States, free of charge and for any quantities requested, upon receipt of the application and in any case within not more than 10 working  days of the submission by a Community importer of the completed application, regardless of the importer's place of establishment in the Community.  3. Paragraph 2 shall apply without prejudice to the applicability of Community quantitative limits or to decisions taken in the framework of an agreement or the management of a quota.  4. An import document or licence issued by one of the authorities listed in Annex II shall be valid throughout the Community.  5. The importer's application shall include the particulars provided for in Article 2 (1). Where the goods are to be put into free circulation in a Member State other than that which issued the import document or licence, the form provided for in Annex  III must be used.  6. Without prejudice to possible changes in the import regulations in force or decisions taken in the framework of an agreement or the management of a quota:  - the period of validity of the import document or licence is hereby fixed at four months;  - unused or partly used import documents or licences may be renewed.   Article 2  1. The importer's application must state:  (a) the consignor's name and address;  (b) the full name and address of the importer (consignee);  (c) the exact decription of the goods and the combined nomenclature code(s);  (d) the country of origin;  (e) the country of consignment;  (f) the net weight, by combined nomenclature heading;  (g) the cif value at Community frontier by combined nomenclature heading;  (h) whether the products concerned are seconds or of substandard quality (2);  (i) the proposed period and place(s) of customs clearance.  2. The importer shall state whether his application is a repeat of a previous application concerning the same contract.  3. The importer shall certify that his application is accurate and shall submit a copy of the contract of sale or purchase, the pro forma invoice and/or, in cases where the goods are not directly purchased in the country of production, a certificate of  production issued by the producing steel mill.   Article 3  Where agreed between the Communtiy and any particular third country, an export licence issued by the authorities of that country shall also be required for the import into the Community of the ECSC products concerned. The list of countries  covered by such agreements, together with the date of entry into force of the agreements, shall be published and updated in the form of annexes to this recommendation.   Article 4  1. Without prejudice to Article 1 (3), Article 2 (1) (g) shall not prevent release for free circulation in cases where the unit price for transaction exceeds that indicated in the import document.  2. Without prejudice to Article 1 (3), Article 2 (1) (f) shall not prevent release for free circulation where the quantity of products presented on import does not exceed that stipulated in the import document or licence by more than 5 % on aggregate.  3. Where the goods are to put into free circulation in a Member State other than the one in which the import document or licence was issued, the authority which issued the authorization shall send it directly, together with the application referred to  in Article 1 (5), to the licensing authority in the Member State of importation. The latter authority shall if necessary automatically endorse or confirm the authorization issued by the first authority, which shall then be forwarded immediately to  customs at the intended place of importation.  4. Applications for import documents or licences and the licences themselves shall be confidential. They shall be restricted to the competent authorities and the applicant.   Article 5  1. Within the first ten days of each month, the Member States shall notify the Commission of the tonnage and values (calculated in ECU) for which import documents or licences were issued during the preceding month, giving the particulars  entered in the importers' applications under Article 2 (1) (c) to (h).  2. The Member States shall give notification of any anomalies or cases of fraud which they discover and, where relevant, the basis on which they have refused to grant an import document or licence.   Article 6  This recommendation shall be applicable from 1 January 1995.  It shall apply until 31 December 1995.  Done at Brussels, 19 December 1994.  For the Commission Leon BRITTAN Member of the Commission  (1) OJ No L 17, 20. 1. 1994, p. 1.  (2) Under the criteria given in OJ No C 180, 11. 7. 1991, p. 4.     PARARTIMA I ANEXO I - BILAG I - ANHANG I -  - ANNEX I - ANNEXE I - ALLEGATO I - BIJLAGE I - ANEXO I   "" ID="1">7201 10 11> ID="2">7208 32 91> ID="3">7210 70 39> ID="4">7216 31 19> ID="5">7222 10 81">   ANNEX II  MEMBER STATES' LICENSING ADDRESSES  BELGIUM Ministère des affaires économiques Office central des contingents et licences rue J. A. De Mot 24-26 B-1040 Bruxelles Fax: 32-2/230 83 22 Ministerie van Economische Zaken Centrale Dienst voor Contingenten en Vergunningen J.-A. De Motstraat 24-26 B-1040 Brussel Fax: 32-2/230 83 22 SPAIN Ministerio de Comercio y Turismo Dirección General de Comercio Exterior Paseo de la Castellana 162 E-28046 Madrid Fay: 34-1/563 18 23 GREECE Ypoyrgeio Ethnikis Oikonomias Diefthynsi Rythmistikon Thematon Exoterikoy Emporioy Mitropoleos 1, Plateia Syntagmatos GR-10557 Athina Fax: 30-1/323 43 93 UNITED KINGDOM Department of Trade and Industry, North East,  Import Licensing Branch,  Queensway House, West Precinct,  UK-Billingham, Cleveland,  TS23 2NF;  Telefax: 44-642/53 35 57 IRELAND Department of Trade and Industry,  Trade Regulation Branch,  Frederick Building, Setanda Centre,  South Frederick Street,  IRL-Dublin 2;  telefax: 353-1/679 57 10 AUSTRIA Bundesministerium fuer wirtschaftliche Angelegenheiten Aussenwirtschaftsadministration Landstrasser Hauptstrasse 55-57 A-1030 Wien Fax: 43-1/715 83 47 DENMARK Erhvervsfremme Styrelsen Soendergade 25 DK-8600 Silkeborg Fax: 45-87 20 40 77 GERMANY Bundesamt fuer Wirtschaft, Dienst 01 Postfach 5171 D-65762 Eschborn 1 Fax: 49-6196/40 42 12 FRANCE Ministère de l'industrie Seribe 3-5, rue Barbet-de-Jouy F-75353 Paris 07 SP Fax: 33-1/43 19 43 69 THE NETHERLANDS Centrale Dienst voor In- en Uitvoer Postbus 30.003, Engelse Kamp 2 NL-9722 AX Groningen Fax: 31-50/26 06 98 PORTUGAL Direcçao-Geral do Comércio Externo Av. da República, 79 P-1000 Lisboa Fax: 351-1/793 22 10 ITALY Ministero per il Commercio estero D.G. Import-export, Division V Via Boston I-00144 Roma Fax: 39-6/59 93 26 36; 59 93 26 37 LUXEMBOURG Ministère des affaires étrangères Office des licences BP 113 L-2011 Luxembourg Téléfax: 352/46 61 38 FINLAND National Board of Customs,  Annankatu 12 A,  FIN-00120 Helsinki;  Telefax: 358-0/614 27 64 SWEDEN Swedish National Board of Trade,  Box 1209,  S-11182 Stockholm;  Telefax: 46-8/20 03 24.     ANNEX III


				|

		52011SC0803

			Recommendation for a COUNCIL RECOMMENDATION on the National Reform Progamme 2011 for Cyprusand delivering a Council opinionon the updated Stability Programme of Cyprus, 2011-2014 /* SEC/2011/0803 final */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on the National Reform Progamme 2011 for Cyprus
and delivering a Council opinion
on the updated Stability Programme of Cyprus, 2011-2014
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[2],
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 European 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,[3]
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 in time to be included in their Stability or Convergence Programmes
and their National Reform Programmes.
(6)
On 6 May 2011, Cyprus submitted its National
Reform Programme and on 7 May 2011 its updated Stability Programme covering the
period 2010-2014. In order to take account of the interlinkages, the two
programmes have been assessed at the same time.
(7)
The Cypriot economy is recovering moderately
after experiencing the first economic contraction in the last thirty-five years
in 2009, when real GDP fell by 1.7 %. The
labour market suffered from the recession, with unemployment reaching
6.5 % in 2010. Public finances also deteriorated. From a surplus, the
general government budget dropped to a deficit of 6 % of GDP in 2009,
driven by automatic stabilisers, discretionary fiscal
stimulus measures to counter the economic downturn and rather large effects due to a less tax-rich growth pattern. Economic activity
improved moderately in 2010 with growth at 1 %, mainly driven by inventory
accumulation, after the large destocking that took place in 2009, in tandem
with a mild resumption of private consumption. The strengthening economic
outlook is expected to benefit the labour market, employment is projected to
recover modestly while unemployment should ease gradually from its peak at the
end of 2010.
(8)
Based on the assessment of the updated Stability
Programme pursuant to Council Regulation (EC) No 1466/97, the Council is of the
opinion that the macroeconomic scenario underpinning the budgetary projections
is plausible until 2012, but too favourable thereafter, as assessed against the
Commission services' spring 2011 forecast. The Stability Programme aims to
reduce the budgetary deficit to 4 % of GDP in 2011 and 2.6 % in 2012, in line with the Council recommendations, and
to continue consolidation afterwards. The programme
projects the debt ratio to peak in 2012 and to decline thereafter. The annual average improvement in the structural
balance for the period 2011-12 is 1.5 % of GDP, in line with the Council recommendations. However, the
structural improvement is set to be below the requirements of the Stability and
Growth Pact in both 2013 and 2014. The medium-term
objective (MTO), which is reaffirmed as a balanced budget in structural terms, will not be reached within the programme period. While the overall
adjustment planned is based on expenditure restraint, most measures in 2011 are
on the revenue side. Overall, there are downside risks to the
consolidation path mapped out in the programme, associated with the continued
rebalancing towards a less tax-rich growth pattern, the practice of adopting
supplementary budgets during the course of the year and the timely
implementation of measures which are still to be
agreed with the social partners and others still to be specified (e.g.
containment of current expenditure). In view of these risks, additional
measures may need to be adopted if macroeconomic or budgetary developments turn
out to be worse than expected.
(9)
Despite the decline to around 9 % of GDP in
2010, the current account deficit is still large and likely to constrain
economic growth over the medium term. High public-sector outgoings need to be
financed by either foreign debt or higher domestic private savings. The latter
would imply lower output growth by crowding out private consumption or
investment. In the medium term, the deficit would continue improving, but at a
moderate rate. On 13 July 2010, in the context of the excessive deficit
procedure, the Council recommended to the Cypriot authorities to strengthen the
binding nature of their medium-term budgetary framework too. Until now, no
progress has been reported. According to the Stability Programme, the
medium-term budgetary framework is to be fully implemented from the fiscal year 2014 onwards, rather than 2012, as expected
until recently. Therefore, its impact would be felt only in the medium term. Timely implementation of the new framework would be important for
successful and lasting consolidation of the public finances.
(10)
The banking sector weathered the global
financial crisis and the sovereign debt crisis in the euro area well, without any
need for government intervention. However, with assets of more than six times GDP,
excluding subsidiaries and branches of foreign banks, and ten times GDP when
they are included, the banking sector is large in relation to the economy.
Moreover, it is relatively concentrated, with the market dominated by three
domestic groups that hold about 55 % of total consolidated banking assets,
excluding the cooperative banks. The ongoing risks on international financial
markets call for continuation of conservative balance-sheet management and for
prudent supervision. There are two different supervisors: the Central Bank of Cyprus for commercial banks and the Authority for the Supervision and Development of
Cooperative Societies (ASDCS) for cooperative credit institutions. In spite of the
IMF recommendation to have a single supervisor for both banks and cooperative
credit institutions, no progress has been made.
(11)
The projected long-term budgetary impact of
ageing is well above the EU average, mainly as a result of a relatively strong
increase in pension expenditure as a share of GDP over the decades ahead. A
pension reform was introduced in April 2009. It is aimed mainly at the revenue
side and would only slightly slow down the rise in pension expenditure. Progress
on healthcare reform, with the aim of curbing the projected rise in expenditure
by establishing a national health system and transforming public hospitals into
autonomous entities, has been very limited.
(12)
The twice-a-year automatic cost-of-living
allowance (COLA) adjustment is linked directly to the average percentage change
in the consumer price index (CPI) over the last six months compared with the
preceding six months. It enjoys strong support from the social partners and has
remained non-negotiable during the collective bargaining process. However, its
uniform application does not allow wages to reflect productivity differences
across sectors. The shortcomings of the COLA are, first, that wages are
connected to product prices only and not to productivity gains. Second, those
benefiting most from this system are those with higher incomes (70 % of whom
have wages that are index-linked via the COLA), whereas most of the lowest-paid
(e.g. unskilled workers) are not covered (only 6 % are index-linked
by the COLA). Third, the COLA also has a significant impact on public finances
as, beyond wages and salaries, it is also an integral feature of pensions,
benefits and other allowances.
(13)
While labour participation in Cyprus is higher than the EU average, the labour market displays strong gender imbalances.
Gender employment gaps, the cost and
availability of childcare facilities (including geographical location and proximity
to places of work), the scarcity of flexible forms of employment and the persistently high gender pay gap are
acknowledged in the NRP as major bottlenecks hindering employment and growth.
While educational attainment at secondary school and university level in
  Cyprus is high, vocational education and training (VET) does not appear to be
an attractive option. High youth unemployment, combined with a high proportion
of people with high educational attainment in total unemployment, is a sign of a
significant skills mismatch in the Cypriot economy. Also, participation in
lifelong learning is low for a country that has generally good educational
levels, particularly for certain groups (the low-skilled, older people and the unemployed).
To address these issues, the NRP envisages establishing a series of new
post-secondary VET institutions from 2012-2013 on. There are also plans to
introduce the new apprenticeship system in the same academic year. Overall, the country’s strategic objective
of shifting from low- to high-productivity jobs would benefit greatly from the
reorientation of the education and training system to bring about a better mix
of skills to match the labour market demand.
(14)
Cyprus adopted a general law for transposition of the Services
Directive in July 2010. However, there are concerns about the completeness
and thoroughness of the transposition, as many obstacles to establishment and
free provision of services persist in sector-specific legislation, where no
amendments have been made. These obstacles range from generally applicable ones,
such as authorisations required by local authorities for any business activity
or the limited duration of authorisations, irrespective of the field and the
risks involved, to very specific ones, such as fixed tariffs applicable to tourism
services, economic needs tests and involvement of competitors in the
authorisations for car rentals, discriminatory treatment of construction
companies from other Member States and bans on architects and engineers exercising
their profession as legal persons.
(15)
Overall, environmental constraints and issues connected
with resource and energy use could create severe bottlenecks to growth. These
are related to its specific geographical location and to the consequences of
climate change in the form of severe droughts. The cost-effectiveness of
support schemes for renewable energy would need to be assessed. The functioning
of the energy sector can be significantly improved in the short term already, by
means of market liberalisation, introduction of competition and facilitation of
infrastructure investments.
(16)
Cyprus has made a number
of commitments under the Euro Plus Pact.[4] On the fiscal
side, the Pact commits the country to strengthen fiscal sustainability by
preparing a framework law for dealing with financial crises and setting up a
fully independent Financial Stability Fund. Furthermore, a dialogue on
restructuring the public pension system is taking place and should be concluded
by the end of 2011. Employment measures are focusing on combating illegal and
undeclared work, addressing the skills mismatch and increasing the
competitiveness of enterprises. The competitiveness measures cover containing
public-sector wages (redesigning the wage indexation mechanism), strengthening
the competitiveness of SMEs, finalising the National Digital Strategy by 2011
and promoting energy efficiency and renewable energy sources. These commitments
reflect the four areas of the Pact. They provide for continuity of the broader reform
agenda outlined in the Stability and National Reform Programmes and confirm the
plans already announced to deliver reforms to address the country’s structural
weaknesses, without at this stage specifying a timeframe to address issues such
as the public-sector wages and pension system. These commitments have been
assessed and taken into account in the recommendations.
(17)
The Commission has assessed the Stability
Programme and National Reform Programme, including Euro Plus Pact commitments[5].
It has taken into account not only their relevance for sustainable fiscal and
socio-economic policy in Cyprus but also their respect of 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. In
this light, the Commission considers that more efforts are needed on achieving
the 2011 budget deficit target and that additional consolidation measures
should be specified for 2012 and beyond. In order to improve the long-term
sustainability of public finances, further action on the pension and healthcare
system is needed. Further steps should also be taken to strengthen the prudential
framework of banking supervision, to adjust the wage-indexation system and to
improve vocational education, training and skills, the business environment and
energy efficiency.
(18)
In the light of this assessment, also taking
into account the Council Recommendation of 13 July 2010 under Article 126(7) of
the Treaty on the Functioning of the European Union, the Council has examined
the 2011 update of the Stability Programme of Cyprus and its opinion[6]
is reflected in particular in its recommendations (1) and (3) below. Taking
into account the European Council conclusions of 25 March 2011, the Council has
examined the National Reform Programme of Cyprus,
HEREBY RECOMMENDS that Cyprus should take action within the period 2011-2012 to:
(1)
Adopt the necessary measures of a permanent
nature to achieve the correction of the excessive deficit by 2012. Take
measures to keep tight control over expenditure and make use of any better-than-expected
budgetary developments for faster deficit and debt reduction. Ensure progress
towards the Medium Term Objective by at least 0.5% of GDP annually. Accelerate
the phasing-in of an enforceable multiannual budgetary framework with a binding
statutory basis and corrective mechanisms, as from the preparation of the 2012
Budget, as well as Programme and Performance Budgeting.
(2)
Strengthen further the prudential framework for
supervision of banks and cooperative credit societies to ensure early detection
of risks.
(3)
Improve the long-term sustainability of public
finances by implementing reform measures to control pension and healthcare
expenditure in order to curb the projected increase in age-related expenditure.
For pensions, extend years of contribution, link retirement age with life
expectancy, while taking care to address the high at-risk-of-poverty rate for
the elderly. For healthcare, take further steps to accelerate implementation of
the national health insurance system.
(4)
Reform, in consultation with social partners and
in accordance with national practices, the system of wage bargaining and wage
indexation to ensure that wage growth better reflects developments in labour
productivity and competitiveness.
(5)
Take further steps, within the reforms planned
for the vocational education and training system, to match education outcomes
to labour market needs better, notably by setting up a post-secondary
vocational education and training institute. Take measures to increase the
effectiveness of the vocational training system by increasing the incentives for
and improving access to vocational education and training, especially for the
low-skilled, women and older workers.
(6)
Abolish remaining obstacles to the establishment and free provision of
services in
sector-specific legislation by October 2011 in order to create more
opportunities for growth and jobs in the services sector.
(7)
Introduce measures to increase competition in
network services by allowing greater freedom to set prices. Establish, by 2012,
a water management plan and a price-setting scheme reflecting cost efficiency
and equity concerns in order to ensure more sustainable management of water
resources.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 2.8.1997, p. 1.
[2]               OJ C , p. .
[3]               Maintained for 2011 by Council Decision 2011/308/EU
of 19 May 2011.
[4]               More details on the commitments made under the Euro
Plus Pact can be found in (SEC(2011) 721.
[5]               SEC(2011) 721.
[6]               Foreseen in Article 5(3) of Council Regulation (EC)
No 1466/97.


title: Recommendation of the European Central Bank of 23 March 2012 to the Council of the European Union on the external auditors of the Banque de France (ECB/2012/5)

text:
               30.3.2012

               EN

               Official Journal of the European Union

               C 93/1

         RECOMMENDATION OF THE EUROPEAN CENTRAL BANK
   of 23 March 2012
   to the Council of the European Union on the external auditors of the Banque de France
   (ECB/2012/5)
   2012/C 93/01
   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)

               Pursuant to Article L.142-2 of the Monetary and Financial Code, the General Council of the Banque de France appoints two statutory auditors to audit the accounts of the Banque de France. Pursuant to Article L.823-1 of the Commercial Code, one or more deputy auditors are appointed to replace the incumbent auditors in the event of their refusal, impediment, resignation or death.

               (3)

               The mandate of the Banque de France’s external auditors will end following the audit for the financial year 2011. It is therefore necessary to appoint external auditors from the financial year 2012.

               (4)

               The Banque de France has selected Deloitte & Associés and KPMG SA as its external auditors and B.E.A.S. and KPMG Audit FS I SAS as their deputy auditors for the financial years 2012 to 2017,

         HAS ADOPTED THIS RECOMMENDATION:

               1.

               It is recommended that Deloitte & Associés and KPMG SA should be appointed jointly as the external auditors of the Banque de France for the financial years 2012 to 2017.

               2.

               It is recommended that B.E.A.S. should be appointed as deputy auditors to Deloitte & Associés and KPMG Audit FS I SAS as deputy auditors to KPMG SA for the financial years 2012 to 2017.

      Done at Frankfurt am Main, 23 March 2012.

            The President of the ECB

         Mario DRAGHI


title: Recommendation for a Council opinion in accordance with the third paragraph of Art. 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 on the updated stability programme of Austria, 2004-2008

text:
Important legal notice

|

52005SC0016

Recommendation for a Council opinion in accordance with the third paragraph of Art. 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated stability programme of Austria, 2004-2008  /* SEC/2005/0016 final */

	Brussels, 11.1.2005SEC(2005) 16 finalRecommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Art. 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated stability programme of Austria, 2004-2008(presented by the Commission)EXPLANATORY MEMORANDUMCouncil Regulation (EC) No. 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[1] stipulates that participating Member States, that is, those which have adopted the single currency, had to submit stability programmes to the Council and the Commission by 1 March 1999. In accordance with Article 5 of this Regulation, the Council had to examine each stability programme based on assessments prepared by the Commission and the Committee set up by Article 114 of the Treaty (the Economic and Financial Committee). On the basis of a recommendation from the Commission and after having consulted the Economic and Financial Committee, the Council delivered an opinion, following its examination of the programme. According to the Regulation, Member States need to submit annual updates of their stability programmes, which may also be examined by the Council in accordance with these same procedures.The first stability programme of Austria, covering the period 1998-2002 was submitted on 30 November 1998 and assessed by the Council on 18 January 1999. Updates were presented every following year. Austria submitted the most recent update of its stability programme on 30 November 2004. The Commission services have carried out a technical evaluation of this update, taking into account the results of the Commission services Autumn 2004 economic forecasts, and having regard to the code of conduct[2], the commonly agreed methodology for the estimation of potential output and cyclically-adjusted balances, the recommendations in the broad economic policy guidelines for the period 2003-2005 and the principles laid down in the Communication from the Commission to the Council and the European Parliament of 27 November 2002 on strengthening the coordination of budgetary policies[3]. This evaluation warrants the following assessment:-  The Austrian Council of Ministers adopted the update of the Austrian stability programme on 30 November 2004. It covers the period from 2004 to 2008, and largely complies with the revised “Code of Conduct on the content and format of stability and convergence programmes”, except for a small number of minor deviations in the ESA reporting format. However, while the consolidation path is legally fixed in a National Stability Pact, the programme remains vague about the specific measures through which a significant budget consolidation could be achieved in the last two years of the programme.-  The update’s underlying macroeconomic projection until 2006 is broadly in line with the Commission’s autumn 2004 forecast. Growth is envisaged to pick up from 1.9% in 2004 and to remain at around 2½% over the remainder of the programme period. The programme argues that the current, mainly export-driven, recovery is gradually translating into stronger domestic demand. The upturn is expected to gain momentum, with sizeable tax cuts taking effect in 2005, accompanied by strengthening employment growth. In 2007 and 2008, real GDP is forecast to outpace its potential growth rate, estimated at 2%, by ¼ pp and by ½ pp respectively. As a consequence, the negative output gap, according to the Commission services’ calculations, will close and eventually turn positive in 2008. The update’s short-term macroeconomic assumptions are plausible; however, for 2007/08, the assumption of GDP growth continuing above 2% p.a. appears somewhat optimistic as, in that case, growth would exceed potential for four years in a row.-  Compared with the previous programme, the budgetary targets of the update have been lowered by about ½% of GDP in all programme years. The target of reaching a balanced budget has thereby also been pushed back by one year to 2008. From a ratio of 1.3% of GDP in 2004, the deficit is expected to rise to 1.9% of GDP in 2005, after which it first declines slowly to 1.7% in 2006, and then drops to zero in 2008 in two equally large reduction steps. This trajectory reflects a budgetary strategy that combines a sustained lowering of the tax burden with the return to a balanced budget over the medium term. In ESA 95 terms, the tax burden is set to fall from 43% in 2003 to 40% in 2008, reaching the latter benchmark two years earlier than originally envisaged by the government.-  Even more than in the previous update, the budgetary path frontloads tax relief, but backloads the corresponding restraint on expenditure. The rise in the deficit in 2005 is dominated by the sizeable tax cuts that will become effective on 1 January. Nevertheless, the budgetary risks appear balanced for 2005 and 2006, particularly in view of the realistic underlying macroeconomic scenario. However, for the outer years 2007/08, there are clear downside risks from, first, the assumption that GDP growth will remain consistently above potential and, second, the fact that the substantial fall envisaged in the expenditure/GDP ratio remains largely unspecified in the programme. The update’s medium-term objective of a budgetary position close to balance in cyclically-adjusted terms may thus not be achieved within the programme period. However, it seems to provide a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations over the programme period.-  The consolidation path until 2008 has been enshrined in a National Stability Pact between the territorial authorities, which is to be enforced at all levels of government via a penalty system. However, the ambition to forcefully restrain expenditure in these two years is not fully substantiated by those policy measures presented in the programme which have already passed into legislation.-  Partially reversing significant upward revisions in previous years, figures for gross government debt have been revised downwards. Since at the same time GDP figures have been revised upwards due to a change in the statistical method, the debt ratio for 2003 has been reduced by nearly 2 pp, to 64.5% of GDP. While this should make it easier to attain the 60% reference value, the date for achieving that target has been pushed back by one year to 2008 as a result of the reduced ambition to bring down the deficit. A scenario with higher growth would move the date forward, while lower growth would push it back by one year. With GDP growth rates assumed to remain practically constant over the programme period, the debt dynamic is dominated by changes in the primary deficit. By way of a positive risk, the update does not include the full potential for privatisations in Austria. The attainment of the debt criterion in 2008 therefore remains plausible, even if slippage should occur in the deficit target.-  The ambitious reduction in the expenditure/GDP ratio is projected to be achieved through significant cutbacks across all expenditure categories throughout the programme period. The bulk of the consolidation in the longer term is expected from reductions in social transfer payments. While government investments are reduced over-proportionally, the biggest savings volume stems from reductions in social transfer payments. The update is optimistic about cost savings from presumed future administrative reforms at lower levels of government that have already been implemented successfully at the federal level.-  Austria appears to be in a relatively favourable position with regard to the long-term sustainability of public finances, in spite of important projected budgetary costs of an ageing population. The pension reforms of 2003 and 2004 are set to provide substantial budgetary relief in the long term. However, the 2004 reform step further back-loads the consolidation effect: while the plan to adjust pensions from 2030 onwards only for inflation, keeping real benefit levels constant, is indeed ambitious, savings in earlier periods introduced by the 2003 reform step have been taken back to some extent.-  The economic policies outlined in the programme are partly consistent with the country-specific broad economic policy guidelines in the area of public finances. Although Austria will lower its high tax burden, this does not go hand-in-hand with expenditure restraint, so that the cyclically-adjusted position of close to balance is projected to be reached only in the final year of the programme.-  In view of the above assessment, Austria is recommended to achieve a higher degree of front loading in the overall budget consolidation path. Furthermore, Austria should lay out in greater detail the specific measures through which a significant budget consolidation could be achieved in the last two years of the programme.Comparison of key macroeconomic and budgetary projections2004 | 2005 | 2006 | 2007 | 2008 |Real GDP (% change) | SP Dec 2004 | 1.9 | 2.5 | 2.5 | 2.2 | 2.4 |COM | 1.9 | 2.4 | 2.4 | n.a. | n.a. |SP Nov 2003 | 1.9 | 2.5 | 2.5 | 2.4 | n.a. |HICP inflation (%) | SP Dec 2004 | 2.1 | 1.8 | 1.4 | 1.5 | 1.6 |COM | 2.1 | 1.8 | 1.4 | n.a. | n.a. |SP Nov 2003 | 1.2 | 1.5 | 1.7 | 1.8 | n.a. |General government balance (% of GDP) | SP Dec 2004 | -1.3 | -1.9 | -1.7 | -0.8 | 0.0 |COM | -1.3 | -2.0 | -1.7 | n.a. | n.a. |SP Nov 2003 | -0.7 | -1.5 | -1.1 | -0.4 | n.a. |Primary balance (% of GDP) | SP Dec 2004 | 1.9 | 1.2 | 1.3 | 2.2 | 2.9 |COM | 1.7 | 0.9 | 1.2 | n.a. | n.a. |SP Nov 2003 | 2.8 | 1.9 | 2.2 | 2.8 | n.a. |Cyclically-adjusted balance (% of GDP) | SP Dec 20041 | -0.9 | -1.7 | -1.6 | -0.8 | -0.1 |COM | -1.0 | -1.9 | -1.7 | n.a. | n.a. |SP Nov 20031 | -0.4 | -1.4 | -1.1 | -0.5 | n.a. |Government gross debt (% of GDP) | SP Dec 2004 | 64.2 | 63.6 | 63.1 | 61.6 | 59.1 |COM | 64.0 | 63.9 | 63.4 | n.a. | n.a. |SP Nov 2003 | 65.8 | 64.1 | 62.3 | 59.9 | n.a. |1Commission services’ calculations on the basis of the information in the programme Sources: Stability programme (SP); Commission services’ autumn 2004 economic forecasts (COM); Commission services’ calculations. |Based on this assessment, the Commission has adopted the attached recommendation for a Council Opinion on the updated stability programme of Austria and is forwarding it to the Council.Recommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Art. 5 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated stability programme of Austria, 2004-2008THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community,Having regard to Council regulation (EC) No. 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[4], and in particular Article 5(3) thereof,Having regard to the recommendation of the Commission,After consulting the Economic and Financial Committee,HAS DELIVERED THIS OPINION:On [18 January 2005] the Council examined the updated stability programme of Austria , which covers the period 2004-2008. The programme largely complies with the data requirements of the “code of conduct on the content and format of stability and convergence programmes”, except for a small number of minor deviations in the ESA reporting format.The macroeconomic scenario underlying the programme envisages that real GDP growth will pick up from 1.9% in 2004 and remain at around 2½% over the remainder of the programme period. On the basis of the currently available information this scenario seems to reflect plausible growth assumptions for the first years, but appears rather too favourable for the final years, as the forecast remains above potential output for four years in a row. The programme’s projections for inflation are realistic.Austria aims to achieve a balanced budget by 2008. From a ratio of 1.3% of GDP in 2004, the deficit is expected to rise to 1.9% of GDP in 2005, after which it first declines slowly to 1.7% in 2006, and then drops to zero in 2008 in two equally large reduction steps. This trajectory reflects a budgetary strategy that combines a sustained lowering of the tax burden with a return to a balanced budget over the medium term. In ESA 95 terms, the tax burden is set to fall from 43% in 2003 to 40% in 2008. The consolidation path has been enshrined in a National Stability Pact between the territorial authorities, which is to be enforced at all levels of government via a penalty system.The budgetary outcome could be worse than projected in the programme. In particular, the budgetary path front-loads tax relief but back-loads the corresponding restraint on expenditure. Risks are balanced for 2005 and 2006, when deficit developments are dominated by the sizeable tax cuts that will become effective on 1 January 2005, and in view of a realistic underlying macroeconomic scenario. However, for the outer years 2007/08, risks appear to be downward-biased as, first, GDP growth is assumed to remain above potential and, second, the envisaged substantial fall in the expenditure/GDP ratio remains largely unspecified in the programme. In view of this risk assessment, the budgetary stance in the programme may not be sufficient to achieve the Stability and Growth Pact’s medium-term objective of a budgetary position of close-to-balance in cyclically-adjusted terms by 2008. However, it seems to provide a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations over the programme period.The debt ratio is estimated to have reached 64.2% of GDP in 2004, above the 60%-of-GDP Treaty reference value. The programme projects the debt ratio to decline by 5 percentage points over the programme period. The evolution of the debt ratio may be less favourable than projected given the risks to the budgetary targets mentioned above. On the other hand, Austria could potentially compensate for this risk with large-scale privatisations.Austria appears to be in a relatively favourable position with regard to the long-term sustainability of public finances, in spite of important projected budgetary costs of an ageing population.. The pension reforms of 2003 and 2004 are set to provide substantial budgetary relief in the long-term. However, the 2004 reform step further back-loads the consolidation effect: while the plan to adjust pensions from 2030 onwards only for inflation, keeping real benefit levels constant, is indeed ambitious, the savings in earlier periods introduced by the 2003 reform step have been taken back to some extent.The economic policies outlined in the programme are partly consistent with the country-specific broad economic policy guidelines in the area of public finances. Although Austria will lower its high tax burden, this does not go hand-in-hand with expenditure restraint, so that the cyclically-adjusted position close to balance is projected to be reached only in the final year of the programme.***In view of the above assessment, Austria is recommended to achieve a higher degree of front loading in the overall budget consolidation path. Furthermore, Austria should lay out in greater detail the specific measures through which a significant budget consolidation could be achieved in the last two years of the programme.Key projections from the updated stability programme of Austria2003 | 2004 | 2005 | 2006 | 2007 | 2008 |Real GDP growth (%) | 0.8 | 1.9 | 2.5 | 2.5 | 2.2 | 2.4 |HICP inflation (%) | 1.3 | 2.1 | 1.8 | 1.4 | 1.5 | 1.6 |General government balance (% of GDP) | -1.1 | -1.3 | -1.9 | -1.7 | -0.8 | 0.0 |Primary balance (% of GDP) | 2.1 | 1.9 | 1.2 | 1.3 | 2.2 | 2.9 |Cyclically-adjusted balance (% of GDP)1 | -0.7 | -0.9 | -1.7 | -1.6 | -0.8 | -0.1 |Government gross debt (% of GDP) | 64.5 | 64.2 | 63.6 | 63.1 | 61.6 | 59.1 |1 Commission services’ calculations applying the commonly agreed methodology to the information in the programme. |[1] OJ L 209, 2.8.1997. All the documents referred to in this text can be found at the following website: http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm.[2] Revised Opinion of the Economic and Financial Committee on the content and format of stability and converge programmes, endorsed by the Ecofin Council on 10.7.2001.[3] COM(2002) 668 final, 27.11.2002.[4] OJ L 209, 2.8.1997. All the documents referred to in this text can be found at the following website: http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm.