title: Commission Recommendation No 1758/78/ECSC of 26 July 1978 imposing a definitive anti-dumping duty on certain angles, shapes and sections of iron or steel, originating in Spain

text:
 No L 203 /28                              Official Journal of the European Communities                                      27 . 7 . 78
                                COMMISSION RECOMMENDATION No 1758 / 78 / ECSC
                                                           of 26 July 1978
                imposing a definitive anti-dumping duty on certain angles, shapes and sections
                                               of iron or steel , originating in Spain
 THE COMMISSION OF THE EUROPEAN                                        sional anti-dumping duties, the Commission gave inte
 COMMUNITIES,                                                          rested parties the opportunity to make known their
                                                                       views in writing and gave the parties directly
 Having regard to the Treaty establishing the European                 concerned who so requested the opportunity orally to
 Coal and Steel Community, and in particular Articles                  develop their views ;
 74 and 86 thereof,
                                                                       Whereas, however, in so far as interested parties did
 Having     regard      to    Commission        recommendation         not avail themselves of the opportunity to make
 77/329/ ECSC of 15 April 1977 on protection against                   known their views or present their arguments, the
 dumping or the granting of bounties or subsidies by                   Commission had to base its findings on the facts avail
 countries which are not members of the European                       able ;
 Coal and Steel Community ('), as amended by recom
 mendation No 3004/77/ ECSC (2), and in particular
 Articles 17 and 19 thereof,                                           Whereas in view of the particular situation prevailing
                                                                       on    national   and   international     markets for steel      it
 Having heard the opinions expressed within the Advi                  appeared to the Commission that sales                   on the
 sory Committee provided for by recommendation                         domestic market of Spain were not made in              the ordi
 77/329/ ECSC,                                                         nary course of trade and die. not permit              a proper
                                                                       comparison for the purposes of establishing           dumping
 Whereas the Commission has received a complaint,                      margins ;
 submitted in the name of the relevant Community
 industry, setting out evidence as to the existence of                 Whereas, for these reasons, the Commission has
 dumping of certain angles, shapes and sections of iron                decided to base its dumping calculations on the cost
 or steel, originating in Spain and certain other coun                of production in a country considered to be one of the
 tries, and material injury resulting therefrom ;                      most efficient producers of the product in question, as
                                                                       established by means of the latest publicly available
 Whereas, since the information received indicated                     data ;
 that the complaint was admissible and that defensive
 measures might be necessary, the Commission offi
                                                                       Whereas such cost of production has been calculated
 cially informed the importers and exporters known to
                                                                       taking into consideration inter alia the following
 be concerned , published in the Official Journal of
                                                                       elements : raw material (covering iron ore, sinter,
 the European Communities a notice of the initiation
                                                                       pellets, scrap, ferro alloys and other iron-bearing mate
 of an inquiry concerning the imports in question (3)
 and commenced an examination of the matter in                         rials and fluxes), energy costs (coke, fuel oil, electri
                                                                       city), labour costs including social costs, other
 cooperation with the Member States ;
                                                                       operating costs (including maintenance costs and
 Whereas, since preliminary examination of the matter                  transport costs) and capital costs, to which was added
 showed that there was dumping and sufficient                          a reasonable amount for administration , selling and
 evidence of injury and the interests of the Community                 any other costs and for profits ;
 called for immediate intervention , the Commission ,
 by recommendation No 159/78/ECSC (4), imposed a                       Whereas        the    aforementioned         calculation      has
 provisional anti-dumping duty on the imports in ques                 confirmed the reasonableness of the basic prices as
 tion ;                                                                published by the Commission (7) ;
 Whereas, the said provisional                 duty   has   been       Whereas the prices of imports into the Community of
 extended (5 ) and suspended (6) ;                                     the products which are the subject of the complaint
                                                                       have been compared with these basic prices ;
 Whereas, in the course of the examination of the
 matter, completed after the imposition of the provi
                                                                       Whereas this price comparison was made on a free
(>)  OJ  No  L 114, 5. 5. 1977, p. 6.                                  Community frontier duty-paid basis ;
(2)  OJ  No  L 352, 31 . 12. 1977, p. 13 .
(3)  OJ  No  C 33, 9 . 2. 1978 , p. 3 .                                (7) Communication from the Commission of 31 December
(4)  OJ  No  L 23 , 28 . 1 . 1978 , p. 3 .                                 1977 concerning the basic prices of certain steel products
(5)  OJ No  L  115, 27. 4. 1978 .                                          (OJ No L 353, 31 . 12. 1977, p. 1 ), as modified by commu
(<>) OJ  No  L 120, 4. 5 . 1978 .                                          nication of 5 July 1978 (OJ No L 183, 5 . 7 . 1978 , p. 3).
 ---pagebreak---  27 . 7. 78                         Official Journal of the European Communities                              No L 203/29
 Whereas this examination of the matter has shown             Whereas the amount of such definitive duty should
 that the products in question were offered for import        correspond to the difference between the basic price
 within the Community at prices lower than the basic          published by the Commission for the products in
 prices and that dumping has taken place, the margin          question and their price on importation into the
 of which is constituted by this undercutting ;               Community, due consideration being given to any
                                                              reduction in value claimed by the importers and esta
 Whereas, with regard to injury to the industry               blished to the satisfaction of the competent national
 concerned, the evidence available to the Commission          authorities ;
 shows that imports into the Community of the
 products concerned increased overall from 374 000            Whereas, however, certain arrangements have been
 tonnes in 1974 to 519 000 tonnes in 1977, while those        made between the Community and Spain with respect
 originating in Spain rose from 32 000 to 259 000             to trade in steel products ;
 tonnes over the same period, the market shares thus
 achieved being 9 % for all imports and 6 % for those         Whereas these arrangements, which the Commission
 originating in Spain, together with those from               considers satisfactory, allow the definitive duty under
 Czechoslovakia, Hungary, Japan and South Africa,             this recommendation to be suspended and to exclude
 which are also subject to defensive measures in the          certain    transactions  from   the  definitive    collection
 Community or to steel arrangements concluded with            duty,
 the ECSC ;
 Whereas, on the other hand, the Community steel
 industry is in a state of crisis ; whereas during the        HAS ADOPTED THIS RECOMMENDATION :
 period 1974 to 1977 deliveries of the products fell by
 some 21 % , while the number employed fell from
 780 000 to 720 000, short-time working became neces
 sary and most of the firms concerned showed reduced                                    Article 1
 profits or serious losses ;
                                                               1 . A definitive anti-dumping duty is hereby
 Whereas, in order to remedy this situation, the              imposed on the following products originating in
 Commission has introduced a system of guidance               Spain :
 prices (') for sales within the Community of certain
 steel products produced by the European steel
 industry ;
                                                                         CCT
                                                                        heading                     Description
                                                                          No
 Whereas the import prices into the Community of
 products originating in Spain are considerably lower
 than these guidance prices ; whereas such undercut          73.11 A I                Certain angles, shapes and U, I or
 ting prevents the European producers from achieving          (NIMEXE            codes H sections of iron or steel , not
                                                              73.11-11 , 12, 14, 16)   further worked than hot-rolled or
 the guidance pricfes, jeopardizes the equilibrium of the
                                                                                extruded
 entire pricing system and causes or threatens to cause
 material injury to the Community industry or to a
 major part thereof ;
                                                              2. The amount of this duty shall be equal to the
Whereas, therefore, the facts as finally established          amount by which the effective price (basic price plus
show that material injury has been caused to the              extras) established by contract, free frontier duty-paid,
 Community industry, or that such injury would have           is lower than the effective price (basic price plus
 been caused if provisional action had not been taken,        extras) last published by the Commission for this
 by imports originating in Spain together with those          product at the time of its entry for Community
 from Czechoslovakia, Hungary, Japan and South                consumption .
Africa, which are also subject to defensive measures or
covered by steel arrangements concluded with the              3. The amount of the duty shall however be
 Community ;                                                  reduced to the extent that the importer establishes to
                                                              the satisfaction of the competent national authorities
Whereas, in the serious conditions being experienced          that the price differential referred to in paragraph 2
by the Community steel industry, the interests of the         above is due to a diminution in value resulting from
Community require the imposition of a definitive              the quality of the goods being inferior to the lowest
anti-dumping duty and the definitive collection of the        quality described in the last publication of basic prices
amount secured by way of provisional duty ;                   by the Commission .
(!) OJ No L 114, 5. 5. 1977, p. 1 ; OJ No C 174, 22. 7.       4.    This duty shall be collected on the same basis as
    1977 ; OJ No L 352, 31 . 12. 1977, p. 17.                 customs duties.
 ---pagebreak--- No L 203/30                        Official Journal of the European Communities                            27 . 7 . 78
                        Article 2                                sion clause permitting an adaptation of the
                                                                 contract prices to the basic prices applied in the
The amounts secured by way of provisional duty                   Community ;
under the provisions of recommendation No 159/78 /
ECSC in respect of products originating in Spain shall       (c) deliveries made under the contracts referred to
be definitively collected to the extent that they do not         under (b) above and destined for shipbuilding
exceed the rate of duty fixed in this recommendation .           yards within the Community.
                        Article 3                                                    Article 5
The application of the definitive anti-dumping duty          This recommendation shall be notified to the Member
imposed under Article 1 above is hereby suspended.           States .
                        Article 4                            It shall enter into force for each Member State on the
                                                             date of its publication in the Official Journal of the
In derogation from Article 2, the amounts secured by          European Communities.
way of provisional duty shall not be definitively
collected but shall be refunded, upon request of the
importer concerned, as regards :
                                                             Done at Brussels, 26 July 1978 .
(a) shapes and sections of iron or steel, not further
    worked than hot rolled or extruded, joists,
    universal beams and columns and channels with a                                     For the Commission
    web measurement of less than 80 mm ;
                                                                                Wilhelm HAFERKAMP
(b) deliveries made under contracts concluded before
    20 December 1977 which contain no price revi                                            Vice-President


Important legal notice

|

52005SC0140

Recommendation for a Council opinion in accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Malta, 2004-2007  /* SEC/2005/0140 final */

	Brussels, 2.2.2005SEC(2005) 140 finalRecommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Malta, 2004-2007(presented by the Commission)EXPLANATORY MEMORANDUMCouncil Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[1] stipulates that non-participating Member States, that is, those which have not adopted the single currency, have to submit convergence programmes to the Council and the Commission. In accordance with Article 9 of this Regulation, the Council has to examine each convergence programme based on assessments prepared by the Commission and the Committee set up by Article 114 of the Treaty (the Economic and Financial Committee). On the basis of a recommendation from the Commission and after consulting the Economic and Financial Committee, the Council is required to deliver an opinion, following its examination of the programme. According to the Regulation, Member States need to submit annual updates of their convergence programmes, which may also be examined by the Council in accordance with these same procedures.The Member States that joined the EU on 1 May 2004 do not participate in the single currency, but are required to fulfil in due time the convergence criteria, including the one on the sustainability of the government financial position, in order to qualify for the adoption of the euro. In view of a general government deficit of 9.7% of GDP and a debt ratio of 70.4% of GDP recorded in 2003, the Council decided that Malta was in excessive deficit on 5 July 2004 and recommended that the excessive deficit be corrected by year 2006 at the latest. Malta was also recommended to implement measures of a structural nature aimed at rationalising and reducing expenditures and to take effective action by 5 November 2004 regarding the measures envisaged to achieve the 2005 deficit target. The Maltese authorities were also invited to ensure that the rise in the debt ratio is brought to a halt in 2005 and reversed thereafter. In its Communication of 22 December 2004, the Commission concluded that the Maltese government had taken effective action regarding the measures envisaged to achieve the 2005 deficit target.The Member States which joined the EU on 1 May 2004 committed themselves to submitting their convergence programmes by 15 May 2004 and a first update thereof towards the end of 2004.The first convergence programme of Malta, covering the period 2004-2007, was submitted on 21 May 2004 and assessed by the Council on 5 July 2004. Malta submitted an update of its convergence programme on 7 December 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, 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 first update of the convergence programme covering the period 2004-2007 was submitted by the government of Malta on 7 December 2004. The programme broadly complies with the code of conduct. Specifically, the breakdown of public expenditures is incomplete and price data are not consistent with the harmonised definitions.-  The macroeconomic scenario presented in the updated programme projects a gradual acceleration of economic activity. The estimated GDP growth rate for 2004 (0.6%) is lower than in the Commission autumn 2004 forecast (1%), while growth projections for 2005 (1.5%) and 2006 (1.8%) appear plausible and fully in line with Commission’s projections. Growth is expected to accelerate further at the end of the programme period and attain 2.2% in 2007. Overall, the growth assumptions appear plausible.-  Year-on-year inflation, which in Malta is currently measured by the annual change in the retail price index, receded somewhat during recent months, and is estimated at 2.9% for the whole year 2004. Projections over the programme period assume that inflation will be kept in a downwards path attaining 2.4% in 2005 and 1.9% in both 2006 and 2007. The effective exchange rate of the Maltese lira recorded a modest appreciation during 2004, in nominal as well as in real terms. The nominal effective exchange rate of the lira is expected to remain broadly unchanged over the programme period. The central bank maintains short term interest rates, its main policy rate, unchanged at 3% (100 basis points above the euro area level) since September 2003. Interest rates are projected to increase by a half a percentage point in 2005 and remain at 3.5% until 2007-  Recent information on the implementation of the 2004 budget indicates that the deficit target of 5.2% of GDP, set up for that year, and confirmed in the programme, seems within reach. Deficit targets up to 2007 have also been confirmed in the update. Specifically, the convergence programme still aims at reducing the deficit below the 3% of GDP reference value in 2006. The general government deficit is projected to fall from 5.2% of GDP in 2004 to 3.7% in 2005 and 2.3% in 2006, and to decline further in 2007 to 1.4% of GDP. Compared with the previous programme, the current update broadly confirms the planned adjustment against unchanged macroeconomic scenario. Fiscal consolidation is based on both revenue-rising measures and expenditure cuts.-  The size and the openness of the Maltese economy make it highly volatile and exposed to external shocks. This increases both upside and downside risks associated not only to the macroeconomic scenario but also to the implementation of the fiscal adjustment projected in the programme. However, albeit bearing such risks in mind, the prudent underlying macro-economic scenario, the nature of the announced measures aiming at reducing the deficit, as well as budgetary projections set up in the programme make the consolidation path broadly plausible.-  Gross government debt is estimated to reach 73.2% of GDP in 2004, up from 70.4% of GDP in 2003. According to the programme, the debt ratio should fall to 72% in 2005 and to go back to a figure close to 70% by the end of the programme period. The Maltese authorities foresee that economic growth, gradual improvements in the primary balance and the sale of assets will drive the reduction of the debt-to-GDP ratio since 2005. However, the projected debt dynamics call for a more detailed information on, and closer monitoring of, below-the-line operations, which partially offset the effects of significant privatization proceeds (more than 2% of GDP in 2005 and 2006).-  The programme reviews the government’s structural reform programme which focuses on initiatives to restructure public entities and to improve the functioning of certain activity sectors, such as the industry, ports, transport and energy. Privatisations are part of the reform package spelled out in the programme, which also contemplates strengthening the fight against tax and benefit fraud. The government also presented a White Paper on the reform of the Maltese pension system. Other important structural reforms in tax-benefit systems and the healthcare system remain to be undertaken.-  There are risks with regard to the long-term sustainability of public finances, reflecting the projected cost of an ageing population. The strategy for ensuring sustainability outlined in the programme is dependent on the achievement of the budgetary targets. It also includes reforms of the pension and healthcare systems that have not yet been defined or implemented. While failure to achieve budgetary targets would definitively put sustainability at risk, the pursuit of the reform process is also important for the containment of the increase in age-related public expenditure in the long term.-  Overall, the economic policies outlined in the update are broadly consistent with the country-specific broad economic policy guidelines in the area of public finances. In particular, the programme is in line with the reduction of the general government deficit recommended by the Council.Based on this assessment, the Commission has adopted the attached recommendation for a Council Opinion on the updated convergence programme of Malta and is forwarding it to the Council.Recommendation for aCOUNCIL OPINIONin accordance with the third paragraph of Art. 9 of Council Regulation (EC) No 1466/97 of 7 July 1997 On the updated convergence programme of Malta, 2004-2007THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community,Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies[4], and in particular Article 9(3) thereof,Having regard to the recommendation of the Commission,After consulting the Economic and Financial Committee,HAS DELIVERED THIS OPINION:On [17 February 2005] the Council examined the updated convergence programme of Malta, which covers the period 2004 to 2007. The programme broadly complies with the Code of Conduct. However, the breakdown of public expenditures is incomplete and price data are not consistent with the Maastricht harmonised definitions. Accordingly, Malta is invited to achieve compliance with the data requirementsThe macro-economic scenario underlying the programme envisages real GDP growth to pick up from 0.6% in 2004 to 1.8% on average over the rest of the programme period. On the basis of currently available information, this scenario seems to reflect plausible growth assumptions. The programme’s projections for inflation also appear realistic.On 5 July 2004, the Council decided that an excessive deficit existed in Malta and recommended to correct it by 2006.The programme aims at reducing the deficit below the 3% of GDP reference value in 2006. Fiscal consolidation is based on both revenue-rising measures and expenditure cuts. The general government deficit is projected to fall from 5.2% in 2004 to 2.3% of GDP in 2006 and to decline further in 2007 to 1.4% of GDP. Compared with the previous programme, the current update broadly confirms the planned adjustment against a broadly unchanged macroeconomic scenario.The risks to the budgetary projections in the programme appear broadly balanced. In particular, on the one hand, the fiscal target of a general government deficit of 5.2% in 2004 seems within reach, on the other, concerning 2005 and beyond, the prudent underlying macro-economic scenario and the nature of the announced measures aiming at reducing the deficit, as well as budgetary projections set up in the programme make the consolidation path broadly plausible within the currently projected external environment.In view of this risk assessment the budgetary stance in the programme seems sufficient to reduce the deficit to below 3% of GDP by 2006 and seems to provide a sufficient safety margin against breaching this threshold with normal macroeconomic fluctuations in the programme period. However, it may not be sufficient to ensure that the Stability and Growth Pact’s medium-term objective of a budgetary position of close to balance is achieved within the programme period.According to the programme the debt ratio is likely to reach 73.2% of GDP in 2004, up from 70.4% of GDP in 2003. Thereafter, it is projected to decline to 70.4% of GDP at the end of the programme period. The Maltese authorities foresee that economic growth, progressive improvements in the primary balance and the sale of assets will drive the reduction of the debt-to-GDP ratio as of 2005. However, a number factors, which partially offset the effects of significant privatization proceeds (more than 2% of GDP in 2005 and 2006), call for a more detailed information on, and closer monitoring of, below-the-line operations.There are risks with regard to the long-term sustainability of public finances, reflecting the projected cost of an ageing population. The strategy for ensuring sustainability outlined in the programme is dependent on the achievement of the budgetary targets. It also includes reforms of the pension and healthcare systems that have not yet been defined or implemented. While failure to achieve budgetary targets would clearly put sustainability at risk, the pursuit of the reform process is also important for the containment of the increase in age-related public expenditure in the long term.Overall, the economic policies outlined in the update are broadly consistent with the country-specific broad economic policy guidelines in the area of public finances. In particular, the programme is in line with the reduction of the general government deficit recommended by the Council.Comparison of key macroeconomic and budgetary projections2004 | 2005 | 2006 | 2007 |Real GDP (% change) | CP Dec. 2004 | 0.6 | 1.5 | 1.8 | 2.2 |COM Oct 2004 | 1.0 | 1.5 | 1.8 | n.a. |CP May 2004 | 1.1 | 1.7 | 2.1 | 2.1 |HICP inflation (%) | CP Dec. 2004 | 2.9 | 2.4 | 1.9 | 1.9 |COM Oct 2004 | 3.7 | 3.1 | 2.6 | n.a. |CP May 2004 | 3.4 | 2.1 | 2.1 | 2.0 |General government balance (% of GDP) | CP Dec. 2004 | -5.2 | -3.7 | -2.3 | -1.4 |COM Oct 2004 | -5.1 | -4.0 | -3.3 | n.a. |CP May 2004 | -5.2 | -3.7 | -2.3 | -1.4 |Primary balance (% of GDP) | CP Dec. 2004 | -1.4 | 0.3 | 1.6 | 2.4 |COM Oct 2004 | -1.3 | -0.2 | 0.4 | n.a. |CP May 2004 | -1.4 | 0.1 | 1.4 | 2.2 |Government gross debt (% of GDP) | CP Dec. 2004 | 73.2 | 72.0 | 70.5 | 70.4 |COM Oct 2004 | 72.4 | 73.7 | 74.2 | n.a. |CP May 2004 | 72.1 | 72.4 | 70.5 | 70.4 |Sources: Convergence programme (CP); Commission services 2004 economic forecasts (COM) |[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 convergence 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, p. 1. The documents referred to in this text can be found at the following website:http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm.


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		52012DC0305

			Recommendation for a COUNCIL RECOMMENDATION on Germany’s 2012 national reform programme and delivering a Council opinion on Germany’s stability programme for 2012-2016 /* COM/2012/0305 final */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on Germany’s 2012 national reform
programme
and delivering a Council opinion on Germany’s stability programme for 2012-2016
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 121(2) and 148(4)
thereof,
Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1], and in particular Article 5(2)
thereof,
Having regard to the recommendation of the
European Commission[2],
Having regard to the resolutions of the
European Parliament[3],
Having regard to the conclusions of the
European Council,
Having regard to the opinion of the
Employment Committee,
After consulting the Economic and Financial
Committee,
Whereas:
(1)       On 26 March 2010, the
European Council agreed to the 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[4],
which together form the ‘integrated guidelines’. Member States were invited to
take the integrated guidelines into account in their national economic and
employment policies.
(3)       On 12 July 2011, the
Council adopted a recommendation on Germany’s national reform programme for
2011 and delivered its opinion on Germany’s updated stability 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[5],
in which it did not identify Germany 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 18 April 2012, Germany
submitted its stability programme for the period 2012-2016 and, on 12 April 2012,
its 2012 national reform programme. In order to take account of their
interlinkages, the two programmes have been assessed at the same time.
(8)       According to the first
2012 notification of deficit and debt figures by Germany for the years 2008-2011
for the application of the excessive deficit procedure (EDP), the general
government deficit in 2011 was below the 3% of GDP reference value of the
Treaty. Moreover, the Commission's 2012 spring forecast projects the general
government deficit to stay below the reference value of the Treaty and to
further decline over the forecast period. As a result, and in line with the
provisions of the Stability and Growth Pact, on 30 May the Commission adopted a
recommendation for a Council decision abrogating the decision on the existence
of an excessive deficit under Article 126(12) of the Treaty.
(9)       Based on the assessment of
the stability 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 programme's
projections for 2012-13 are broadly in line with the Commission's 2012 spring
forecast as regards the pace and pattern of economic growth as well as labour
market developments. The programme's projections for economic growth in the
outer years are broadly in line with the Commission's estimate of Germany's
medium-term potential growth rate. The objective of the budgetary strategy
outlined in the programme is to meet the medium-term budgetary objective (MTO)
already in 2012 and to reach virtually balanced nominal budgets as from 2014,
starting from a nominal deficit of 1.0% of GDP in 2011, thus below the 3% of
GDP reference value of the Treaty significantly ahead of the 2013 deadline. The
programme specifies the previous MTO of a structural deficit of ½% of GDP, (interpreted
as a narrow range around 0.5% of GDP), which adequately reflects the
requirements of the Stability and Growth Pact, to imply a deficit not exceeding
0.5% of GDP. Risks to the deficit and debt targets may arise notably if
additional measures to stabilise the financial sector turned out to be
required. Based on the (recalculated) structural deficit[6], Germany plans to respect its
MTO throughout the programme period, which should also be the case taking into
account the risk assessment. According to the information provided in the
programme and also taking into account the risk assessment, the growth rate of
government expenditure, taking into account discretionary revenue measures, would
exceed the expenditure benchmark of the Stability and Growth Pact in 2012,
while respecting it in 2013. Gross debt is planned to increase by 0.8 pp.
to 82.0% of GDP in 2012, before falling to 80% of GDP in 2013 and remaining on
a downward path thereafter. Following the correction of the excessive deficit,
Germany is in a transition period and, according to plans, is making sufficient
progress towards compliance with the debt reduction benchmark of the Stability
and Growth Pact.
(10)     The federal government has
taken measures to improve the efficiency of public spending on health care and
has proposed a reform of long-term care. Additional efforts to improve
efficiency in health care are necessary to contain expected further expenditure
increases. The proposed reform of long-term care is also insufficient to cope
with expected future cost increases. There is scope for improving the efficiency
of the tax system. The federal government is well on track to meet its
commitment to increase growth-enhancing spending on education and research.
However, it remains important that also the Länder and municipalities,
which bear the bulk of expenditure on education and research, ensure adequate
and efficient spending in these areas. The introduction of the new
constitutional debt brake has further strengthened the German fiscal framework.
However, there has been no significant progress in the implementation of the
budgetary rule at Länder level.
(11)     Substantial public support
for the financial sector, in conjunction with the sector’s own adjustment
efforts and the beneficial effects of the rebound of the German economy, has
stabilised the sector as a whole. Despite the overall relatively stable
financial sector and the absence of a credit crunch, there remain weaknesses,
in particular, the structural problems of some Landesbanken, notably the
lack of a viable business model, weak governance
structures and vulnerabilities due to a high degree of
dependence on wholesale funding.
(12)     The good performance of the
German labour market, with increasing employment and moderate unemployment, has
not benefited all participants to the same extent and wages have not always
increased in line with productivity. Fiscal disincentives arising from the high
tax wedge, in particular due to the high social security contributions,
continue to hinder the integration of low-wage earners in particular into the
labour market. Extensive use of mini-jobs leads to low acquisition of pension
rights. Therefore, there is a need to improve the transition from mini-jobs to
more stable forms of contracts. The recent reform of labour market instruments should
support employment opportunities for all. Raising the effectiveness of the
education system and the educational achievement of disadvantaged groups is a
major challenge for Germany. In the medium- to long-term, ensuring the
availability of qualified labour will be crucial to mitigate the negative
effects of demographic changes on potential growth. The low full-time
participation of women in the labour force is a concern. Fiscal disincentives
for second earners and the lack of full-time childcare facilities and all-day
schools hinder female labour market participation.
(13)     Germany
is pursuing a major reform of the energy system. The overall economic costs of transforming the energy system should
be minimised by accelerating the national and
cross-border network expansion, continuously increasing the cost-effectiveness
of climate and renewables policies, taking decisive steps to further foster
energy efficiency, and raising competition in the energy markets. Given
Germany’s central geographical position, the German railway system has a
significant impact on the overall European railway system. Competition in the
passenger and freight rail markets remains very low, mainly due to the lack of
effective separation between the infrastructure manager and the railway
holding. Despite progress made in recent years, inter alia through the
implementation of the Services Directive, there is scope to further stimulate
competition and productivity growth in some services sectors (e.g.
construction).
(14)     Germany has made a number
of commitments under the Euro Plus Pact. The 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.
(15)     In the context of the
European Semester, the Commission has carried out a comprehensive analysis of
Germany’s economic policy. It has assessed the stability programme and national
reform 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 European Union by providing EU-level input into
future national decisions. Its recommendations under the European Semester are
reflected in recommendations (1) to (4) below.
(16)     In the light of this
assessment, the Council has examined Germany’s 2012 stability programme, and
its opinion[7]
is reflected in particular in recommendation (1) below,
HEREBY RECOMMENDS that Germany
should take action within the period 2012-2013 to:
1.           Continue with sound fiscal
policies to achieve the medium-term budgetary objective by 2012. To this
end, implement the budgetary strategy as envisaged, ensuring compliance with
the expenditure benchmark as well as sufficient progress towards compliance
with the debt reduction benchmark. Continue the growth-friendly consolidation
course through additional efforts to enhance the efficiency of public spending
on health care and long-term care, and by using untapped potential to improve
the efficiency of the tax system; use available scope for increased and more
efficient growth-enhancing spending on education and research at all levels of
government. Complete the implementation of the debt brake in a consistent
manner across all Länder, ensuring timely and relevant monitoring
procedures and correction mechanisms.
2.           Address the remaining
structural weaknesses in the financial sector, inter alia by further restructuring
of those Landesbanken which are in need of an adequately funded viable
business model while avoiding excessive deleveraging.
3.           Reduce the high tax wedge
in a budgetary neutral way, in particular for low-wage earners, and maintain
appropriate activation and integration measures, notably for the long-term
unemployed. Create the conditions for wages to grow in line with productivity. Take
measures to raise the educational achievement of disadvantaged groups, notably
through ensuring equal opportunities in the education and training system. Phase
out the fiscal disincentives for second earners, and increase the availability
of fulltime child-care facilities and all-day schools.
4.           Continue efforts to keep
the overall economic costs of transforming the energy system to a minimum,
including by accelerating the expansion of the national and cross-border
electricity and gas networks. Ensure that the institutional set-up guarantees
effective competition in railway markets. Take measures to further stimulate
competition in the services sectors, including professional services and
certain crafts, in particular in the construction sector.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 02.08.1997, p. 1
[2]               COM(2012)305 final
[3]               P7_TA(2012)0048 and
P7_TA(2012)0047
[4]               Council Decision 2012/238/EU of 26 April 2012
[5]               COM(2012) 68 final
[6]               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.
[7]               Under Article 5(2) of Council Regulation (EC) No
1466/97.


title: Recommendation for a COUNCIL RECOMMENDATION on the National Reform Programme 2011 of Franceand delivering a Council opinionon the updated Stability Programme of France, 2011-2014

text:
     EUROPEAN COMMISSION
                                    Brussels, 7.6.2011
                                    SEC(2011) 806 final
                     Recommendation for a
              COUNCIL RECOMMENDATION
      on the National Reform Programme 2011 of France
               and delivering a Council opinion
   on the updated Stability Programme of France, 2011-2014
                    {SEC(2011) 719 final}
EN                                                         EN
 ---pagebreak---                                            Recommendation for a
                                     COUNCIL RECOMMENDATION
                          on the National Reform Programme 2011 of France
                                      and delivering a Council opinion
                       on the updated Stability Programme of France, 2011-2014
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular
   Article 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
   policies1, and in particular Article 5(3) thereof,
   Having regard to the recommendation of the European Commission2,
   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.
   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.
EN                                                     2                                         EN
 ---pagebreak---    (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 3 May 2011, France submitted its 2011 Stability Programme update covering the
       period 2011-2014 and its 2011 National Reform Programme. In order to take account
       of the interlinkages, the two programmes have been assessed at the same time.
   (7) France was relatively less affected than other EU Member States by the economic and
       financial crisis, with a decline of 2.7% in GDP in 2009, partly due to sizeable
       economic stabilisers and a relatively low degree of openness of its economy, which
       reduced the impact to some extent on France of the collapse in world trade. The
       banking sector also proved to be resilient. In 2010, the economy recovered and,
       overall, GDP growth came out at 1.5%. However, the economic crisis has substantially
       impacted France's public finances. Due to the automatic stabilisers and discretionary
       fiscal stimulus, the general governement deficit rose from 3.3% of GDP in 2008 to
       7.5% in 2009. Similarly, the crisis has exacerbated the insufficient utilisation of labour
       and the structural weaknesses of the French labour market, where there was a
       relatively high level of unemployment of 9.7% in 2010. In addition, the trade balance
       of goods has gradually deteriorated during the last decade, highlighting the challenges
       of French companies in terms of cost and non-price competitiveness.
   (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 too favourable. Expected growth
       levels are slightly higher than the most recent projections of the Commission services
       for 2011 and 2012 and they remain well above the potential growth in later years.
       After a better-than-expected deficit of 7% of GDP in 2010, the programme plans to
       bring it down to 3% in 2013, which is the deadline set by the Council for correcting
       the situation of excessive deficit, and to continue consolidation thereafter. Starting
       from a debt of 82% of GDP in 2010, the debt ratio is set to increase until 2012 (86%),
       after which it will decline slightly. The deficit and debt adjustment paths are subject to
       downside risks, which include the possibility of a macroeconomic scenario that could
       turn out to be less favourable, a lack of specification of measures, and the fact that
       targets have often been missed in the past. Therefore, in the absence of further
       measures it cannot be ensured that the excessive deficit will be corrected by 2013. The
       medium-term objective (MTO) of a balanced budget in structural terms is not likely to
EN                                              3                                                 EN
 ---pagebreak---         be reached within the programme period. The average annual fiscal effort over the
        2010-2013 period, based on the trend of the (recalculated) structural balance, is
        slightly below what was called for in the Council recommendation (above 1% of
        GDP).
   (9)  Implementation of fiscal consolidation remains a major challenge. Avoiding
        expenditure slippages by means of a strengthened fiscal effort based on fully specified
        measures is vital to re-establishing a sustainable fiscal position, especially since the
        2013 target does not provide any safety margin below the 3% of GDP threshold.
        Moreover, it would be appropriate to use all windfall revenues to accelerate the deficit
        and debt reduction. To improve the long-term sustainability of public finances, France
        adopted a new pension reform in 2010. The planned measures, including the gradual
        increase in the minimum retirement age from 60 to 62 and the phasing out of early
        retirement schemes, should have an impact on the low employment rate of older
        workers. Moreover, the pension system is expected to be in balance by 2020. A deficit
        is likely to appear thereafter unless further measures are taken. The latest pension
        reform has also created a new public body, the "Comité de pilotage des régimes de
        retraite", which is in charge of presenting annual assessments of the budgetary
        situation of pension accounts and, if there is any likelihood of a deterioration, of taking
        corrective measures.
   (10) The current employment protection legislation is still too strict: the conditions for
        economic dismissals are subject to legal uncertainty, while there are major
        redeployment obligations that apply to large collective dismissals (Plans de
        sauvegarde de l'emploi). This is leading to labour market outcomes where workers on
        indefinite labour contracts (majority of the labour 'stock') benefit from a relative
        degree of security and workers on temporary labour contracts (majority of the inflow
        into the labour market) are exposed to uncertainties. Hence, the share of temporary
        contracts is significantly higher for young workers, and there are few transitions from
        temporary contracts to permanent contracts. This segmentation also applies to access
        to vocational training. There is consequently a high turnover and a limited
        accumulation of human capital in these workers. Young workers and the low-skilled
        are therefore exposed to disproportionate risks in the labour market. The aim of the
        2008 Labour Market Modernisation Act was to modernise social dialogue and to
        address the issue of labour market dualism. However, the reform did not tackle
        contractual segmentation and generally fell short of the measures needed to resolve the
        dualism of the French labour market.
   (11) The French unemployment rate was slightly above the EU average in 2010 and long-
        term unemployment is on the rise (3.9% in 2010 vs. 2.9% in 2008). In this context,
        public employment services should play an important role in supporting the
        unemployed in their search for a job. In France, the new one-stop shop public
        employment service Pôle Emploi has so far shown mixed results. In 2009-2010, its
        main objective was mainly focused on the merger of the two pre-existing
        administrative entities. Outsourcing of placement services has so far yielded mixed
        results in achieving the return to work targets set by Pôle Emploi. At the same time,
        Pôle emploi resources dedicated to individualised support of job seekers remain
        underdeveloped (71 full-time equivalents per 10 000 unemployed, which is
        significantly below the levels recorded in some peer countries).
EN                                              4                                                   EN
 ---pagebreak---    (12) The French current account deficit has gradually deteriorated during the last decade,
        reflecting the decline in the trade balance of goods, partly due to a decrease in labour
        cost competitiveness after the single minimum wage was reintroduced in the 2003-
        2005 period (the previous reform of the 35 hours working week had resulted in five
        different minimum levels). Some improvements have been made to the indexation
        procedure (creation of an advisory commission of independent experts, elimination of
        discretionary hikes) leading to a moderation of the increase in the minimum wage. As
        a result, the proportion of employees that are paid the minimum wage has decreased
        substantially, enabling better wage differentiation. However, the French minimum
        wage is still among the highest in the European Union when compared to the median
        salary even if the tax-wedge is much lower than for the average salary due to cuts in
        employers' social security contributions.
   (13) France has one of the highest tax and social security burdens on labour in the EU,
        while the tax on consumption remains relatively low. Moreover, environmental tax
        revenues as a share of GDP are also well below the EU average. Rebalancing the tax
        system by switching taxation from labour towards consumption and the environment
        is likely to have a beneficial effect on jobs as well as on environmental objectives.
   (14) Tax and social security exemptions (including ‘niches fiscales’) in France are very
        high (around 11% of GDP) and pose a threat to the consolidation of its public
        finances. In addition, understanding and exploiting the benefits of the system requires
        firms and households to invest in extensive expertise. While tax expenditures are used
        to implement a given economic policy, there is no systematic assessment whether they
        have managed to fulfil the objectives pursued. Eventually, their substitutability with
        public expenditures has allowed the French authorities to formally meet existing
        spending rules. A decrease of the budgetary cost of tax expenditures (partly linked to
        the reduction of their number) by around 0.75% of GDP over the period 2011-2013 is
        foreseen by the French authorities. However, the precise tax expenditures to be
        abolished have not yet been identified as from 2012.
   (15) Competition in the retail sector is still hampered by administrative restrictions on the
        opening of large retail outlets, and a ban on resale below cost. In the services sector,
        there are still barriers to competition for several regulated professions, which could be
        tackled either by reviewing the entry conditions, or by gradually doing away with
        certain quotas (numerus clausus) and the exclusive rights that these professions hold.
   (16) France has made a number of commitments under the Euro Plus Pact4. On the fiscal
        side, France has undertaken to swiftly implement the 2010 pension reform. With a
        view to strengthening fiscal sustainability, France will also change its constitution to
        introduce binding multiannual budget planning. To increase labour participation,
        various measures are being considered to increase active labour market policies (e.g.
        apprenticeship to ease the school-to-work transition of younger workers, additional
        childcare facilities by 2012 to improve female employment prospects, strengthening of
        the public employment services for jobseekers). The competitiveness measures focus
        on improving the higher education system and promoting R&D and innovation
        ("investissements d'avenir"), as well as reducing the administrative burden by
        implementing a comprehensive programme of administrative simplification. These
   4
        More details on the commitments made under the Euro Plus Pact can be found in SEC(2011) 719.
EN                                                 5                                                 EN
 ---pagebreak---         commitments refer to three of the four areas of the Pact, leaving out the financial
        sector. Although they are taken in those areas where the main French challenges lie,
        many of them (particularly those concerning fiscal governance or support to higher
        education and R&D) are confirmations of existing public policies/reforms. The reform
        agenda does not seem fully consistent with the extent of the macroeconomic
        challenges faced in the labour market or the business environment. In addition, the
        envisaged constitutional reform is subject to political uncertainty. These Euro Plus
        Pact 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 for France5. It has taken into
        account not only their relevance to sustainable fiscal and socio-economic policy in
        France but also their conformity with EU rules and guidance, given the need to
        reinforce the overall economic governance of the European Union by providing EU
        level input into future national decisions. In this light, the Commission considers that
        the fiscal consolidation strategy needs to be made more specific, particularly for 2012
        and beyond, in order to ensure that the excessive deficit is corrected by 2013 and the
        debt is brought onto a downward path. Any windfall revenues should be used to
        accelerate the deficit and debt reduction. A shift from labour towards environmental
        and consumption taxes, and a streamlining of tax expenditure, would bolster fiscal and
        environmental objectives and improve the business environment. Further steps in
        2011-12 should focus on adapting the employment protection legislation to reducing
        the dualism of the labour market, and on strengthening public employment services in
        order to provide comprehensive support to jobseekers. Existing policy on minimum
        wage moderation should be pursued. Competition should be fostered in regulated
        professions and retail trade.
   (18) In light of this assessment, also taking into account the Council Recommendation
        under Article 126(7) Treaty on the Functioning of the European Union of 2 December
        2009, the Council has examined the 2011 update of the Stability Programme of France
        and its opinion6 is reflected in particular in its recommendation under (1) set out
        below. Taking into account the European Council conclusions of 25 March 2011, the
        Council has examined the National Reform Programme of France,
   HEREBY RECOMMENDS that France should take action within the period 2011-2012 to:
   (1)    Ensure the recommended average annual fiscal effort of more than 1% of GDP over
          the period 2010-2013 and rigorously implement the correction of the excessive
          deficit by 2013; specify the necessary corresponding measures and use any windfall
          revenues to accelerate the deficit and debt reduction; continue to review the
          sustainability of the pension system and take additional measures if needed.
   (2)    Undertake renewed efforts, in accordance with national practices of consultation with
          the social partners, to combat labour market segmentation by reviewing selected
          aspects of employment protection legislation; ensure that any adaptations in the
          minimum wage are supportive of job creation, especially for the young and the low-
          skilled.
   5
        SEC(2011) 719.
   6
        Foreseen in Article 5(3) of Council Regulation (EC) No 1466/97.
EN                                                    6                                          EN
 ---pagebreak---    (3)     Encourage access to training in order to help maintain older workers in employment
           and create incentives to support return to employment. Step up active labour market
           policies and introduce measures to improve the organisation, decision-making, and
           procedures of the public employment service to strengthen services and
           individualised support provided to those at risk of long-term unemployment.
   (4)     Increase the efficiency of the tax system, including through a move away from
           labour towards environmental and consumption taxes, and implementation of the
           planned reduction in the number and cost of tax and social security exemptions
           (including 'niches fiscales').
   (5)     Take further steps to remove unjustified restrictions on regulated trades and
           professions, in particular in services and the retail sector.
   Done at Brussels,
                                                For the Council
                                                The President
EN                                                 7                                           EN


Avis juridique important

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32001H0256

Commission Recommendation of 15 November 2000 on quality assurance for the statutory audit in the European Union: minimum requirements (Text with EEA relevance) (notified under document number C(2000) 3304)

Official Journal L 091 , 31/03/2001 P. 0091 - 0097

Commission Recommendationof 15 November 2000on quality assurance for the statutory audit in the European Union: minimum requirements(notified under document number C(2000) 3304)(Text with EEA relevance)(2001/256/EC)THE COMMISSION OF THE EUROPEAN COMMUNITIES,Having regard to the Treaty establishing the European Community, and in particular Article 211, second indent thereof,Whereas:(1) Council Directive 84/253/EEC, of 10 April 1984, based on Article 54(3)(g) of the EEC Treaty, on the approval of persons responsible for carrying out the statutory audits of accounting documents(1), lays down the requirements for persons who are allowed to carry out statutory audits.(2) Quality assurance for the statutory audit is fundamental for ensuring good audit quality. Good audit quality implies adding credibility to published financial information and adding value and protection to shareholders, investors, creditors and other stakeholders.(3) Quality assurance is the profession's principal means of assuring the public and regulators that auditors and audit firms are performing at a level that meets the established auditing standards and ethical rules. Quality assurance also allows the profession to encourage quality improvements.(4) Audit opinions throughout the European Union should give a certain minimum level of assurance concerning the reliability of financial information. It could therefore be argued that Member States should have already taken measures to ensure that all statutory auditors carrying out statutory audits are subject to a quality assurance system.(5) However, quality assurance in the European Union is a relatively new phenomenon which is reflected in the fact that several Member States have implemented it very recently and several other Member States did not have a quality assurance system as at 1 January 1999.(6) The current national quality assurance systems differ in several aspects such as the scope of the quality review, being mandatory or voluntary, the cycle of coverage and the existence of public reporting. Such differences make it difficult to assess whether national quality assurance systems meet relevant minimum requirements.(7) At this moment there is no internationally accepted standard defining minimum requirements for quality assurance which could be used as a benchmark for national quality assurance systems.(8) The scope of this initiative on quality assurance is the EU statutory audit profession as a whole and it aims at setting a benchmark for Member State quality assurance systems throughout the European Union.(9) The definition of minimum requirements can be complemented by other forms of external control on the statutory audit function that may be carried out by supervisory authorities, stock exchange regulators or other sector specific regulators with the objective of improving the quality of statutory audit.(10) Additional quality controls of the statutory audit are at the discretion of Member States.(11) The issue of quality assurance was addressed by the Commission's Green Paper on the role, position and liability of the statutory auditor in the European Union(2), which was supported by the Council, the Economic and Social Committee and the European Parliament.(12) Following on to the Commission's Communication "The statutory audit in the European Union, the way forward"(3) the EU Committee on Auditing was established which has decided to put quality assurance as one of the priorities on its agenda and its discussions showed agreement that each Member State should have in place a system of quality assurance for statutory audit.(13) The abovementioned Communication clearly contains an intention to work on harmonising and improving quality on statutory audit preferably without preparing new legislation. It is therefore appropriate to issue a Commission recommendation. If this Recommendation does not bring about the desired harmonisation on quality assurance, the Commission will reconsider the need for legislation. To this effect, the Commission intends to review the situation three years after the adoption of this Recommendation.(14) The Commission has, following the conclusions of the Lisbon European Council, issued a communication "The financial reporting strategy: the way forward"(4) which underlines the importance of a statutory audit carried out to uniformly high levels across the European Union.(15) There is general agreement in the EU Committee on Auditing and in the Contact Committee on the Accounting Directives on the minimum requirements in this Recommendation,HEREBY RECOMMENDS:That quality assurance systems in the Member States of the European Union should meet the following minimum requirements:1. COVERAGE OF THE QUALITY ASSURANCE REGIMEMember States should take measures to ensure that all persons carrying out statutory audits are subjected to a quality assurance system.The term persons is related to the eighth Directive which defines rules on the approval of persons carrying out statutory audits (statutory auditors). Currently not every person in the European Union carrying out statutory audits is subject to a system of quality assurance.2. METHODOLOGYBoth peer review and monitoring are acceptable methodologies for quality assurance.There are essentially two different methodologies of quality assurance applied within the European Union: monitoring and peer review. Monitoring refers to a situation where staff employed by the professional body or regulator manages the quality assurance system and carries out the quality assurance reviews. Peer review refers to a situation where (active) members, "peers", carry out review visits.Monitoring and peer review are considered as methodologies of equal stature. In either case, care should be taken to ensure both the quality of the reviewers and their objectivity. Adequate measures should be taken to ensure that reviewers have an up-to-date knowledge on auditing standards and quality control systems (see also point 9). This is in particular relevant where the monitoring methodology is applied.Concerns regarding reviewers objectivity should be mitigated by a sufficient public supervision over the administration and functioning of the quality assurance system and the presentation of its results (see also points 6 and 10). This is of particular importance when the peer review methodology is used.3. REVIEW COVERAGE AND SELECTION OF REVIEWEES3.1. The subject for a quality review is the statutory auditor, which can be an audit firm or an individual auditor (see point 1).Some Member States require joint audits. In this situation the starting point for selection of the subject of quality review could be the individual statutory audit assignment instead of the statutory auditor but the subject of quality review remains the statutory auditor.3.2. The selection of the statutory auditors for review should be made on a consistent basis so as to ensure coverage of all statutory auditors over a predetermined period.Provided that a full coverage of all statutory auditors is ensured over a predetermined period of time, the annual selection of statutory auditors for review could be made on a risk basis (for example based on the nature of the client portfolio, the turnover from auditing in relation to total turnover or the results of previous reviews), on a random basis or by a combination of these methods.3.3. In the case of a multi-office audit firm the optimal unit size for a quality review is the office. A quality assessment of a multi-office audit firm should always include an adequate coverage of its offices.Larger audit firms have firm wide control policies and procedures ensuring a certain degree of uniformity but individual offices might apply norms and standards differently. It is therefore considered that offices are the most appropriate subject for quality assurance reviews.3.4. The cycle to achieve full coverage of all statutory auditors should be a maximum of six years.The current EU systems of quality assurance achieve full coverage in cycles varying from one year to 10 years. In accordance with the differentiation under point 5.1, the cycle of full coverage should be shortened for statutory auditors with "public interest entity" clients.Where a statutory auditor audits only small, low-risk entities it may be acceptable for the cycle of review to extend to a maximum of 10 years. In such cases it will be necessary to obtain regular information from the statutory auditor to confirm that the nature of his client portfolio has not changed significantly.3.5. The cycle should be shortened for statutory auditors previously reviewed with less than satisfactory results.In situations where the outcome of the quality review was in general satisfactory but with some recommendations for improvement it could be more effective to follow up the implementation of the specific recommendations than to carry out a new comprehensive quality review.4. SCOPE OF QUALITY REVIEW4.1. Quality assurance relates to statutory audits of financial statements carried out by statutory auditors in public practice. The scope of the quality review should include an assessment of the internal quality control system of an audit firm with sufficient compliance testing of procedures and audit files to verify its adequate functioning.All Member States have already required audit firms to implement an internal quality control in line with the International Standard on Auditing 220 "Quality Control for Audit work". In addition to the black-lettered paragraphs of ISA 220 it could be necessary to establish at Member State level more specific requirements on the internal quality control of statutory auditors underpinning the quality reviews. These additional requirements could be based on the quality control procedures as mentioned in point 6 of ISA 220, dealing with the objectives of internal quality control systems of audit firms.4.2. The scope of quality review should include the following subjects for testing individual audit files:- the quality of the evidence from the audit working papers as a basis for assessing the quality of the audit work,- compliance with auditing standards,- compliance with ethical principles and rules, including independence rules,- audit reports:1. appropriate format and type of opinion;2. compliance of financial statements with the financial reporting framework as referred to in the audit report;3. failure to mention non-compliance of financial statements with other legal requirements as referred to in the audit report.A statutory audit carried out in compliance with legal requirements, established auditing standards and respecting ethical rules is crucial to users of audited financial information because it ensures a certain level of credibility of audited financial statements. Specific requirements are laid down concerning the audit report because of its importance as the public product of a statutory audit. Compliance with a financial reporting framework is included to underline the instrumental role of the statutory audit for the enforcement of accounting standards.5. DIFFERENTIATION IN METHODOLOGY5.1. It is considered appropriate to differentiate between the approach of quality assurance for statutory auditors with public interest entity clients and quality assurance for those with no public interest entity clients. The differentiation relates to some systematic aspects of quality assurance such as a higher frequency of coverage, increased public oversight on managing the quality assurance, and the possibility of access to files of the reviewer by the competent authorities (see point 5.2). Differentiation does not alter the scope, the objectives or the overall methodology of the individual quality review.The term "public interest entity" includes amongst others: listed companies, credit institutions, insurance companies, investment firms, UCITS (undertakings for collective investments in transferable securities) and pension funds.5.2. The regulator or competent authority ultimately responsible for administrating and maintaining the quality assurance system may have access to individual files of the reviewer prepared on statutory auditors with, in particular, public interest entity clients. The access to files of the reviewer should be subject to the confidentiality provisions outlined under point 8.6. PUBLIC OVERSIGHT AND PUBLIC REPORTING6.1. Quality assurance systems should have adequate public oversight consisting of a majority of non-practitioners on the overview board of the quality assurance system.Quality assurance systems in the European Union should have enough credibility to satisfy the external objectives: sustaining public confidence and demonstrating to regulators the adequate discharge of self-regulating responsibilities. The public oversight requirement is meant to ensure that the quality assurance is in fact and appearance an exercise with sufficient public integrity. The actual organisation of public oversight for quality assurance will differ between Member States depending on existing structures of supervision on the statutory audit profession and the importance of sector specific regulatory monitoring of statutory audit quality.Public oversight for quality assurance could be an "add-on" to existing supervision structures on the audit profession that already involve public participation whilst in other situations it would require a separate committee including non-professionals such as representatives of business, representatives of securities regulators and representatives of shareholders.The objectives of public oversight on quality assurance could include:1. supervision of the management (planning and control) of the quality assurance system;2. evaluation of the review results;3. approval of public reporting of results of quality assurance (see point 6.2).6.2. The results of quality assurance should be adequately published.Publication of quality assurance results is another means of adding public credibility to the quality assurance systems. Publication of aggregated results of the quality assurance without naming individual audit firms is considered to be adequate. Public credibility would be enhanced if the reporting also includes recommendations for professional and/or regulatory actions, follow-up to recommendations and sanctions.7. DISCIPLINARY SANCTIONSIt is necessary to have a systematic link between negative outcomes of quality reviews and initiating sanctions under the disciplinary system. The disciplinary system should include the possibility of removal of the statutory auditor from the audit register.Quality assurance is not in itself the only tool for disciplinary sanctions. Quality assurance aims at enforcing, demonstrating and improving audit quality. The link between quality reviews and disciplinary sanctions is adding public credibility and is also logical because quality assurance can be seen as an enforcement tool. The possibility of removal from the register is particularly relevant for countries where the registration of certified auditors is separated from the professional body carrying out the quality assurance system.8. CONFIDENTIALITY8.1. The statutory auditor should be exempted from confidentiality clauses concerning audit files of clients for quality assurance reviews.Most Member States with a quality assurance system have exempted the handing over of audit working files to reviewers from the normal rules on auditor confidentiality. This implies that handing over audit files to the reviewer cannot be a breach of confidentiality and therefore cannot lead to liability actions.8.2. The reviewer should be subject to confidentiality rules similar to those that statutory auditors have to comply with. Nevertheless, when giving the regulator or competent authority access to the files of the reviewer (see point 5.2) this cannot constitute a breach of confidentiality.Most Member States with a quality assurance system have included rules on the confidentiality of the reviewer identical to the confidentiality rules that statutory auditors have to comply with when performing statutory audits.8.3. It should be provided for that all persons who work or who have worked for the relevant regulators or competent authorities responsible for administrating and maintaining the quality assurance system, as well as the members of the public oversight board, shall be bound by the obligation of professional secrecy.Ultimately depending on national legislation, professional secrecy in this context implies that persons concerned may not divulge confidential information which has been received in the course of their duties to any person or authority whatsoever, save in summary or aggregate form such that the reviewer or the statutory auditor subjected to the quality review, and the audit client to whom the reviewed files relate and the related parties of this audit client cannot be individually identified.9. QUALITY OF REVIEWERThe quality assurance system should ensure that the persons, either peers or employees of a monitoring organisation, who carry out quality reviews should have appropriate professional education and relevant experience combined with specific training on quality assurance reviews.In several countries only professionals active in public practice can be appointed as a peer-reviewer. The relevant experience can also relate to sector specific experience.10. INDEPENDENCE AND OBJECTIVITY OF REVIEWERThe quality assurance system should ensure that for the selection of reviewers for individual review assignments possible conflicts of interest are adequately taken into account. The reviewers should be subjected to the independence requirements applicable to statutory auditors.The selection of reviewers for individual quality reviews should be based on criteria ensuring the reviewer's independence and objectivity in fact and appearance. The actual application of selection criteria for reviewers could be monitored by the public oversight board.11. RESOURCESAdequate resources (input) should be allocated to quality assurance systems in order to give them a realistic impact in the light of public credibility.It will be clear that quality assurance systems cost money and should therefore be as efficient and effective as possible in order to fulfil the realistic requirements of the public and regulators. If a system of quality assurance is applied in an even-handed way to all statutory auditors in the European Union it will not effect the level playing field of competition in this area.There are apparent differences in resources used for quality assurance. For a meaningful comparison the total resources should be related to the number of statutory audits, taking into account the (lack of) public interest entity clients of statutory auditors (see also point 3.4, full cycle of coverage). Publication of the resources allocated to external quality assurance will add public credibility.12. FINAL PROVISIONThis Recommendation is addressed to the Member States.Done at Brussels, 15 November 2000.For the CommissionFrederik BolkesteinMember of the Commission(1) OJ L 126, 12.5.1984, p. 20.(2) OJ C 321, 28.10.1996, p. 1.(3) OJ C 143, 8.5.1998, p. 12.(4) COM(2000) 359 final, 13 June 2000.