title: Recommendation for a Council opinion on the updated stability programme of Cyprus, 2009-2013

text:
   EN
EN    EN
 ---pagebreak---      EUROPEAN COMMISSION
                                    Brussels, 12.5.2010
                                    SEC(2010) 595 final
                     Recommendation for a
                     COUNCIL OPINION
   on the updated stability programme of Cyprus, 2009-2013
EN                                                         EN
 ---pagebreak---                                    EXPLANATORY MEMORANDUM
   1.        GENERAL BACKGROUND
   The Stability and Growth Pact is based on the objective of sound government finances as a
   means of strengthening the conditions for price stability and for strong sustainable growth
   conducive to employment creation. The 2005 reform of the Pact acknowledged its usefulness
   in anchoring fiscal discipline but sought to strengthen its effectiveness and economic
   underpinnings as well as to safeguard the sustainability of the public finances in the long run.
   In particular, it introduced greater flexibility in the application of the rules governing the
   excessive deficit procedure, notably with regard to the definition of "exceptional
   circumstances" and the setting of deadlines for the correction of an excessive deficit.
   Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary
   positions and the surveillance and coordination of economic policies1, which is part of the
   Stability and Growth Pact, stipulates that each Member State has to submit, to the Council and
   the Commission, a stability or convergence programme and annual updates thereof. Member
   States that have already adopted the single currency submit (updated) stability programmes
   and Member States that have not yet adopted it submit (updated) convergence programmes.
   In accordance with the Regulation, the Council delivered an opinion on the first stability
   programme of Cyprus on 4 March 2008 on the basis of a recommendation from the
   Commission and after having consulted the Economic and Financial Committee. As regards
   updated stability and convergence programmes, the Regulation foresees that these are
   assessed by the Commission and examined by the Committee mentioned above and,
   following the same procedure as set out above, the updated programmes may be examined by
   the Council.
   2.        BACKGROUND FOR THE ASSESSMENT OF THE UPDATED PROGRAMME
   The Commission has examined the most recent update of the stability programme of Cyprus,
   submitted on 1 April 2010, and has adopted a recommendation for a Council Opinion on it.
   In order to set the scene against which the budgetary strategy in the updated stability
   programme is assessed, the following paragraphs summarise:
   (1)     the Commission Communication of 26 November 2008 (“A European Economic
           Recovery Plan”);
   (2)     the conclusions of the Economic and Financial Affairs Council of 20 October 2009 on
           the “Exit strategy”;
   (3)     the most recent assessment of the country’s position under the preventive arm of the
           Stability and Growth Pact (summary of the Council Opinion on the previous update of
           the stability programme).
   1
           OJ L 209, 2.8.1997, p. 1. The documents referred to in this text are available at:
           http://ec.europa.eu/economy_finance/sgp/index_en.htm.
EN                                                       2                                          EN
 ---pagebreak---    2.1.     The Commission Communication of 26 November 2008 (“A European
            Economic Recovery Plan”)
   In view of the unprecedented scale of the global crisis that hit financial markets and the world
   economy in 2008-2009, the European Commission had called for a European Economic
   Recovery Plan (EERP)2. The plan proposed a co-ordinated counter-cyclical macro-economic
   response to the crisis in the form of an ambitious set of actions to support the economy
   consisting of (i) an immediate budgetary impulse amounting to € 200 bn. (1.5% of EU GDP),
   made up of a budgetary expansion by Member States of € 170 bn. (around 1.2% of EU GDP)
   and EU funding in support of immediate actions of the order of € 30 bn. (around 0.3 % of EU
   GDP); and (ii) a number of priority actions grounded in the Lisbon Strategy and designed to
   adapt our economies to long-term challenges, continuing to implement structural reforms
   aimed at raising potential growth. The plan called for the fiscal stimulus to be differentiated
   across Member States in accordance with their positions in terms of sustainability of
   government finances and competitive positions. In particular, for Member States outside the
   euro area with significant external and internal imbalances, budgetary policy should
   essentially aim at correcting such imbalances. The plan was agreed by the European Council
   on 11 December 2008.
   2.2.     The conclusions of the Economic and Financial Affairs Council of 20 October
            2009 on the “Exit strategy”
   Following first signs of a recovery from the crisis, particularly the halt of the sharp decline in
   economic activity, the stabilisation of financial markets and the improvement in confidence,
   the Council concluded on 20 October 2009 that, while in view of the fragility of the recovery
   it was not yet time to withdraw the support governments provided to the economy and the
   financial sector, preparing a coordinated strategy for exiting from the broad-based policies of
   stimulus was needed. Such a strategy should strike a balance between stabilisation and
   sustainability concerns, take into account the interaction between the different policy
   instruments, as well as the discussion at global level. Early design and communication of such
   a strategy would contribute to underpinning confidence in medium-term policies and anchor
   expectations. Beyond the withdrawal of the stimulus measures of the European Economic
   Recovery Programme, substantial fiscal consolidation was required in order to halt and
   eventually reverse the increase in debt and restore sound fiscal positions. Increasing the
   efficiency and effectiveness of public finances and the intensification of structural reform
   were desirable even in the short term as they would contribute to fostering potential output
   growth and debt reductions. The Council agreed on the following principles of the fiscal exit
   strategy: (i) the strategy should be coordinated across countries in the framework of a
   consistent implementation of the Stability and Growth Pact; (ii) timely withdrawal of fiscal
   stimulus was needed, taking country-specific circumstances into account; (iii) the pace of
   consolidation should be ambitious, in most countries going well beyond the benchmark of
   0.5% of GDP per annum in structural terms; and (iv) the credibility of the strategy should be
   underpinned by measures to enhance the quality of public finances and ambitious structural
   reform efforts to raise employment and potential growth.
   2
           Communication from the Commission to the European Council of 26 November 2008.
EN                                                   3                                                EN
 ---pagebreak---    2.3.      The assessment in the Council Opinion on the previous update
   In its opinion of 3 April 2009, the Council summarised its assessment of the previous update
   of the stability programme, covering the period 2008-2012, as follows. The Council
   considered that "fiscal stance in 2009 will be expansionary due to the adoption of significant
   stimulus measures in 2009 in line with the EERP. In the subsequent years, the fiscal balance
   is projected to continue worsening. The implied fiscal loosening does not appear justified in
   view of the relatively good economic prospects and the existence of a large external
   imbalance. Moreover, against the background of a sharp deterioration in the global economic
   environment, the budgetary strategy is subject to significant downside risks, with the growth
   assumptions underlying the macroeconomic scenario of the programme being favourable. In
   the light of the high external imbalances, maintaining prudent policies and strengthening
   fiscal sustainability should be a major priority. Therefore, controlling current expenditure and
   avoiding procyclicality represents a major challenge for the fiscal policy in Cyprus. In
   addition, fostering the quality of public finances is important also with a view to underpinning
   a smooth adjustment of the economy in the light of the imbalances it is faced with". In view
   of this assessment, the Council invited Cyprus to "(i) implement the 2009 fiscal policy as
   planned in line with the EERP and within the framework of the SGP, while avoiding further
   deterioration of public finances in 2009 compared to the target; (ii) reverse the projected
   increase of the fiscal deficit in 2010 and beyond, by limiting the increase in expenditures in
   order to ensure a sound fiscal position in the medium term; (iii) in view of the projected
   impact of ageing on government expenditure, strengthen the long-term sustainability of public
   finances by pursuing the reform of the pension and health care systems".
EN                                                 4                                                EN
 ---pagebreak---                                             Recommendation for a
                                            COUNCIL OPINION
                       on the updated stability programme of Cyprus, 2009-2013
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union,
   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
   policies3, and in particular Article 5(3) (for SP) thereof,
   Having regard to the recommendation of the Commission,
   After consulting the Economic and Financial Committee,
   HAS DELIVERED THIS OPINION:
   (1)       On [DD Month 2010] the Council examined the updated stability programme of
             Cyprus, which covers the period 2009 to 2013.
   (2)       In 2009 economic activity contracted by 1.7%. This is the first time Cyprus has
             experienced negative growth in the last thirty-five years. Weak domestic demand and
             an adverse external environment weighed strongly on growth. In particular, high
             household indebtedness together with tight lending conditions, a worsening labour
             market outlook and negative confidence effects led to a decline in private
             consumption. In parallel, investment recorded a strong correction, amidst a fall in
             foreign demand for housing, low capacity utilisation and the restructuring of
             corporate balance sheets. Government consumption was the only demand component
             supporting economic activity, partly due to the 1½% of GDP stimulus package
             implemented in line with the EERP. In addition to these discretionary measures, the
             contraction of economic activity, the fading out of the asset boom and a less tax-rich
             growth pattern has put public finances under significant pressure. As a result,
             government finances turned into a deficit of 6.1% of GDP from a surplus of 0.9% of
             GDP in 2008. The crisis has also highlighted the accumulation of a high external
             imbalance, which reflects not only the low private sector net savings but also a
             deterioration of the net position of general government and competitiveness losses. A
             weak domestic demand and a sluggish external recovery are expected to weigh on
             recovery prospects. GDP growth is forecast to shrink further, although to a lesser
             extent, in 2010 and to recover mildly in 2011. Therefore, in the medium term,
             Cyprus is facing the challenge of enhancing growth, against the backdrop of a frail
   3
           OJ L 209, 2.8.1997, p. 1. The documents referred to in this text can be found at the following website:
           http://ec.europa.eu/economy_finance/sgp/index_en.htm.
EN                                                       5                                                         EN
 ---pagebreak---          global economic recovery, while addressing the existing macroeconomic imbalances
         through maintaining prudent fiscal policies. In the long term, the country is
         confronted with the need to strengthen the sustainability of public finances, in view
         of an ageing population.
   (3)   Although much of the observed decline in actual GDP in the context of the crisis is
         cyclical, the level of potential output has also been negatively affected. In addition,
         the crisis may also affect potential growth in the medium term through lower
         investment, constraints in credit availability and increasing structural unemployment.
         Moreover, the impact of the economic crisis compounds the negative effects of
         demographic ageing on potential output and the sustainability of public finances.
         Against this background it will be essential to accelerate the pace of structural
         reforms with the aim of supporting potential growth. In particular, for Cyprus it is
         important to undertake reforms in the area of the labour market, especially to
         strengthen lifelong learning opportunities, in particular, with regard to the low-
         skilled, older workers and unemployed people as well as to ensure the timely and
         effective implementation of the planned reforms in technical and vocational
         education. Moreover, there is a need to better align wage growth with productivity,
         employment growth and competitiveness.
   (4)   The macroeconomic scenario underlying the programme envisages that real GDP
         growth will rise from -1.7% in 2009 to 0.5% in 2010, before recovering to an
         average rate of about 2.6% over the rest of the programme period. Assessed against
         currently available information4, this scenario appears to be based on favourable
         growth assumptions throughout the programme period. In particular, private
         consumption is expected to follow a favourable trend, driven by a somewhat
         optimistic employment and wage growth. The Programme projects real construction
         investment growth to remain negative in the short-term and to recover in the second
         half of the programme period. However, forward-looking indicators suggest a
         stronger correction path for the construction sector in the medium-term than the one
         projected by the programme. Moreover, despite the improving economic outlook, the
         fragility of recovery in Cyprus' main trading partners entails non-negligible downside
         risks to the macroeconomic scenario in the programme. Due to the contraction of
         economic activity in 2009 there was a significant, yet partial, correction of the
         external deficit, which nevertheless remains high, at 8.5% of GDP, and is projected
         in the programme to rise again sharply to 12.9% of GDP by 2013 as imports are
         expected to pick up. The external imbalance is likely to weigh on economic growth
         over the medium-term. High public sector dissavings would need to be financed by
         foreign debt or domestic private savings. Thus, the adjustment of the current account
         imbalance would require either higher cost of debt-financing or higher savings from
         the private sector. The latter would imply lower output growth through lower private
         consumption or investment (crowding-out effect). The programme's inflation
         projections appear realistic.
   (5)   According to the programme, the general government deficit deteriorated strongly in
         2009, reaching a deficit of 6.1% of GDP from a surplus of 0.9% of GDP in 2008,
         reflecting mainly the impact of the crisis on government finances but was also
   4
       The assessment notably takes into account the Commission services' spring 2010 forecast, but also other
       information that has become available since then.
EN                                                   6                                                         EN
 ---pagebreak---        brought about by stimulus measures amounting to 1½% of GDP which the
       government adopted in line with the European Economic Recovery Plan (EERP).
       According to the programme, fiscal policy is planned to be restrictive with a view to
       correcting the excessive deficit by 2013 under the assumed growth scenario.
   (6) According to the update, the budgetary target for 2010 is a deficit of 6% of GDP.
       The 2010 budget law (approved by the Parliament on 24 December 2009) targeted a
       deficit of 4.5% of GDP on the basis of an estimated outturn for the deficit in 2009 of
       about 3% of GDP. Given that the final outturn for 2009 was a deficit of 6% of GDP,
       the budget law would imply an even higher deficit. However, the programme
       includes measures which aim to stop further budgetary deterioration and stabilise the
       deficit at the same levels as in 2009. The update projects the revenue-to-GDP ratio to
       rise by about 1¼ percentage points in 2010 compared with the outturn of 2009.
       Public expenditure is expected to increase by 1¼ percentage points of GDP. Primary
       expenditure is planned to rise further mainly driven by a further rise in social
       transfers, subsidies and in the public wage bill. According to the update, interest
       payments are set to continue their declining trend, falling by a ¼ percentage point of
       GDP, despite the rising stock of debt. Public investment is planned to remain at 2009
       levels. Overall, the fiscal policy stance, as measured by the structural balance (i.e. in
       cyclically-adjusted terms net of one-off and other temporary measures), implied by
       the Programme will be tightening in 2010 of an order of ½% of GDP.
   (7) The main goal of the programme's medium-term budgetary strategy is to bring the
       general government balance below the 3% of GDP reference value by 2013. The
       programme projects the nominal budget deficit to decline to 4.5% of GDP in 2011
       (from 6.1% in the previous year) and 3.4% in 2012 before it eventually reaches 2.5%
       in 2013. The primary balance is expected to follow a similar pattern and reach a
       balanced position by the end of the period, from a deficit of 3.7% of GDP in 2010.
       The structural deficit, calculated according to the commonly agreed methodology,
       would continue to improve after 2010, to reach around 3½% of GDP in 2011, just
       below 3% in 2012 and 2¼% in 2013. The annual fiscal effort would average at 3/4%
       of GDP per year over the period 2010-2013. The adjustment appears front-loaded,
       although measures taken in 2010 will have their full effect only in 2011. Moreover,
       measures taken within the context of the EERP will only be phased out by the end of
       2010. Consolidation is planned to be achieved mainly from the revenue side of the
       budget, which is projected to increase by 2.6 pp. of GDP between 2010 and 2013,
       while expenditure retrenchment would contribute an additional percentage point of
       GDP. Revenue supporting measures include the fight against tax evasion, a town
       planning amnesty, harmonisation of the minimum excise duties on petroleum
       products and application of the reduced VAT on foodstuff and pharmaceutical
       products as well as dividend income from semi-governmental organisations. As
       regards expenditure measures, the bulk of the programme's adjustment comes from
       controlling operational expenditure and reducing current transfers. The programme
       lists the targeting of social transfers and the containment of size and the rate of
       growth of public wage bill as expenditure categories for consolidation when
       consensus would be reached among social partners. The update confirms the
       commitment to the country-specific medium-term budgetary objective (MTO), which
       is a balanced budgetary position in structural terms (i.e. in cyclically-adjusted terms
       net of one-off and other temporary measures). The MTO adequately reflects the
EN                                             7                                                 EN
 ---pagebreak---           objectives of the Pact. The structural balances corresponding to the programme’s
          deficit targets imply that the MTO will not be reached within the programme period.
   (8)    The budgetary outcomes could be worse than targeted in the programme. In
          particular, the macroeconomic scenario projected in the update appears to be based
          on favourable growth assumptions throughout the programme period. On the revenue
          side, risks for public finances, particularly in 2010-2011, are higher than in previous
          years and are associated with a possible sharper contraction and rebalancing of
          economic growth towards a less-tax rich composition of growth. In view of the
          expected moderate economic recovery and the pressure to stimulate domestic
          demand through increased public expenditure, the risks of potential overruns are non
          negligible. These risks are mainly associated to the practise of submitting
          expenditure-increasing supplementary budgets during the course of the year which,
          beyond the intended reallocation of funds, has implied an increase in current
          expenditure. Moreover, social transfers might turn higher than expected in view of
          the recent past track record and the absence of a targeting mechanism at place as well
          as of the somewhat optimistic employment (thus unemployment) growth projections.
   (9)    The government gross debt-to-GDP ratio is estimated at 56.2% of GDP in 2009, up
          from 48.4% in the year before. Apart from the increase in the deficit and the decline
          in GDP growth, a stock-flow adjustment accounting for 1 percentage point of GDP
          contributed to the rise in the debt ratio. The latter reflects an accumulation of
          government assets, due to over-financing at the end of 2009 in order to meet
          obligations arising early in January of 2010. The debt ratio is projected to increase
          over the programme period, mainly driven by continued although declining primary
          deficits. The debt ratio will breach the reference value of 60% of GDP in 2010 and is
          projected to remain above the reference value throughout the programme period. It is
          projected to increase to around 63% of GDP in 2011 and 2012, thereafter slightly
          declining. In view of the downward risks to the macroeconomic scenario and the
          budgetary targets, the evolution of the debt ratio may be less favourable than
          projected in the programme.
   (10)   The long-term budgetary impact of ageing is significantly above the EU average,
          mainly as a result of a relatively high increase in pension expenditure as a share of
          GDP over the coming decades partly due to the fact that the pension scheme is still in
          a maturing phase. The programme discusses a pension reform introduced in April
          2009 that is projected to slightly reduce the increase in pension expenditure and,
          more significantly, increase the social security contribution rates. The reform would
          improve the long-term balance of the pension system and reduce risks to
          sustainability, however without having an effect on the overall assessment. The
          budgetary position in 2009 as estimated in the programme compounds the budgetary
          impact of population ageing on the sustainability gap. Improving the primary balance
          over the medium term and implementing further measures aimed at curbing the
          substantial increase in age-related expenditure, especially pension and healthcare
          expenditure, would contribute to reducing the risks to the sustainability of public
          finances, which were assessed in the Commission 2009 Sustainability Report5 as
   5
        In the Council conclusions from 10 November 2009 on sustainability of public finances "the Council
        calls on Member States to focus attention to sustainability-oriented strategies in their upcoming stability
        and convergence programmes" and further "invites the Commission, together with the Economic Policy
EN                                                     8                                                            EN
 ---pagebreak---           high. Medium-term debt projections that assume GDP growth rates to gradually
          recover to the values projected before the crisis, tax ratios to return to pre-crisis
          levels, and include the projected increase in age-related expenditure show that the
          budgetary strategy envisaged in the programme, taken at face value and with no
          further policy change, would almost be enough to stabilise the debt-to-GDP ratio by
          2020.
   (11)   In recent years, Cyprus has over-achieved its budgetary targets, albeit in a context of
          buoyant economic activity and tax-rich composition of growth. In the recent past, the
          budgetary framework has been improved by the adoption of the Financial
          Management Accounting System (FIMAS), the gradual introduction of a three-year
          medium-term budgetary framework (MTBF) and of Programme and Performance
          Budgeting (PPB). However, the practice of adopting supplementary budgets during
          the course of the year has implied an increase in current expenditure beyond the
          intended reallocation of funds. According to the Programme, the new budgeting
          framework is expected to cease this practice when fully implemented and lead to a
          more effective and efficient budgeting process, contributing to containing
          expenditure. At the same time, the new budgeting process would set a sound basis
          for reallocating expenditure in favour of growth-enhancing activities consistent with
          the priorities set by the National Reform Programme. However, the new framework
          is still at an early stage of implementation and is only foreseen to be fully in place in
          2012. Therefore, its impact could become effective only in the medium-term. The
          new framework's timely implementation would be critical for a successful and lasting
          consolidation of the public finances.
   (12)   As regards the quality of public finances, the programme acknowledges its
          importance as a means to support potential growth and to ensure the long-term
          sustainability of public finances. In particular, the programme notes the impact the
          MTBF and PPB budgeting will have upon full implementation on the better
          allocation of resources to high-priority, growth enhancing areas in tandem with better
          control of non-productive expenditure. On the expenditure side, the programme
          includes a review of recent projects aimed at enhancing infrastructure, through
          Private Public Partnerships (PPP), as well as measures to improve education, through
          the increased use of computers in primary and secondary education and
          improvements in research and academic institutions. The update also includes the
          allocation of funds to restructure public hospitals into autonomous units and the
          adoption of a National Health Scheme, with the aim of improving effectiveness via
          regulated competition and cost containment. This seems essential as a means to
          control the anticipated expenditure increases associated to an ageing population. On
          the revenue side, the programme emphasizes the positive impact the introduction of
          the MTBF would have on improving the accuracy and sensitivity of revenue
          forecasts over the medium-term. The authorities note that given the volatility of tax
          elasticities in recent years due to the asset boom, revenue projections were adapted to
          take into account the impact of asset prices and the composition of GDP growth. The
          programme also notes the constant monitoring of the tax-benefit system by the
        Committee and the Economic and Financial Committee, to further develop methodologies for assessing
        the long-term sustainability of public finances in time for the next Sustainability report", which is
        foreseen in 2012.
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 ---pagebreak---             authorities in order to endure that work pays while ensuring the support to vulnerable
            social groups.
   (13)     Overall, taking into account the risks to the budgetary targets mentioned above, the
            strategy to maintain supportive fiscal policies also in 2010 can be considered in line
            with the EERP. However, following the negative effects of the economic crisis, the
            general government deficit is to remain at 6% of GDP in 2010, gradually abating
            below the 3% reference value thereafter. While the programme's strategy foresees an
            average annual fiscal effort of ¾ percentage points of GDP over the period 2010-
            2013, this is subject to downside risks. Therefore, in view of the risks, the fiscal
            effort may not be sufficient to bring the deficit below the 3% of GDP reference value
            by 2013 as planned. Moreover, the composition of the consolidation strategy of the
            programme appears to be based largely on revenue-increasing measures with
            expenditure retrenchment being minimal. In fact, the programme projects the
            expenditure-to-GDP ratio to stabilise at a higher level in 2013 than the 2009 outturn.
            Measures that could reverse this situation are still under discussion with the social
            partners and, thus, subject to risks regarding the modalities and the timing of their
            implementation. As a result, the evolution of the debt ratio, which is planned to
            exceed 60% of GDP from 2010 onward, may also be less favourable than projected
            in the update.
   (14)     As regards the data requirements specified in the code of conduct for stability and
            convergence programmes, the programme provides all required and optional data.
   The overall conclusion is that Cyprus' public finances deteriorated significantly as a result of
   the economic downturn and an expansionary fiscal stance due to the adoption of significant
   stimulus measures in line with the EERP. As a result, the budgetary balance turned to a deficit
   of 6.1% of GDP in 2009 from a surplus of 0.9% of GDP in 2008. The programme outlines a
   consolidation path starting in 2010 which aims to bring the general government balance below
   the 3% of GDP reference value by 2013. However, the adjustment is planned to be achieved
   mainly from the revenue side of the budget while the expenditure-to-GDP ratio remains at
   historically high levels. Moreover, against the background of a frail global economic
   recovery, the budgetary strategy is subject to significant downside risks, as the growth
   assumptions underlying the macroeconomic scenario of the programme are favourable. In the
   light of the high domestic and external imbalances, maintaining prudent policies and
   strengthening fiscal sustainability should be a priority. Therefore, controlling current
   expenditure through the implementation of an effective multi-annual budgetary framework
   would be an essential instrument to support the achievement of the consolidation plans and
   budgetary targets. In addition, fostering the quality of public finances is important also with a
   view to underpinning a smooth adjustment of the economy in the light of the imbalances it is
   faced with, notably by lifting potential GDP, enhancing competitiveness and further
   narrowing the external imbalance.
   In view of the above assessment, Cyprus is invited to:
   (i)      limit the 2010 deficit to at most 6% of GDP, if necessary by reinforcing the
            consolidation measures, notably in case macroeconomic developments proves less
            favourable than the programme scenario, and take timely action to define a more
            expenditure-driven consolidation strategy; seize opportunities beyond the announced
            fiscal effort to accelerate fiscal consolidation and the reduction of the gross debt ratio
            back below the reference value;
EN                                                  10                                                 EN
 ---pagebreak---    (ii)  implement, as envisaged, an effective multi-annual budgetary framework in order to
         ensure the adherence to the budgetary targets and to firmly contain expenditure over
         the medium-term;
   (iii) improve the long-term sustainability of public finances by implementing reform
         measures to control pension and health care expenditure in order to curb the
         projected increase in age-related expenditure.
EN                                            11                                              EN
 ---pagebreak---                      Comparison of key macroeconomic and budgetary projections
                                                               2008       2009       2010      2011       2012       2013
                                          SP Apr 2010            3.6       -1.7        0.5       1.5        3.0        3.2
                Real GDP
                                         COM May 2010            3.6       -1.7       -0.4       1.3       n.a.       n.a.
               (% change)
                                          SP Feb 2009            3.8        2.1        2.4       3.0        3.2       n.a.
                                          SP Apr 2010            4.4        0.2        2.7       2.0        2.0        2.0
             HICP inflation
                                         COM May 2010            4.4        0.2        2.7       2.5       n.a.       n.a.
                   (%)
                                          SP Feb 2009            4.4        2.0        2.5       2.5        2.5       n.a.
                                          SP Apr 2010            2.9       -1.3       -2.4      -2.5       -1.6       -0.5
               Output gap1
                                         COM May 2010            3.4       -0.7       -2.1      -1.6       n.a.       n.a.
         (% of potential GDP)
                                          SP Feb 2009            0.8       -0.1       -0.6      -0.5       -0.2       n.a.
    Net lending/borrowing vis-à-          SP Apr 2010          -17.7       -8.5      -11.5     -12.2      -12.6      -12.9
        vis the rest of the world        COM May 2010          -17.6       -8.2       -6.8      -6.7       n.a.       n.a.
              (% of GDP)                  SP Feb 2009          -12.4      -12.1      -11.5     -10.9      -10.2       n.a.
                                          SP Apr 2010           43.5       40.3       41.6      42.8       43.6       44.2
    General government revenue
                                         COM May 2010           43.5       40.3       41.2      41.3       n.a.       n.a.
              (% of GDP)
                                          SP Feb 2009           45.3       43.8       44.0      44.4       44.8       n.a.
          General government              SP Apr 2010           42.6       46.4       47.6      47.2       47.0       46.7
               expenditure               COM May 2010           42.6       46.4       48.3      49.0       n.a.       n.a.
              (% of GDP)                  SP Feb 2009           44.3       44.6       45.5      46.3       47.1       n.a.
                                          SP Apr 2010            0.9       -6.1       -6.0      -4.5       -3.4       -2.5
    General government balance
                                         COM May 2010            0.9       -6.1       -7.1      -7.7       n.a.       n.a.
              (% of GDP)
                                          SP Feb 2009            1.0       -0.8       -1.4      -1.9       -2.2       n.a.
                                          SP Apr 2010            3.7       -3.6       -3.7      -2.1       -1.0        0.1
            Primary balance
                                         COM May 2010            3.7       -3.6       -4.4      -4.8       n.a.       n.a.
              (% of GDP)
                                          SP Feb 2009            3.9        1.5        0.8       0.2       -0.2       n.a.
                                          SP Apr 2010           -0.2       -5.6       -5.1      -3.5       -2.8       -2.3
     Cyclically-adjusted balance1
                                         COM May 2010           -0.4       -5.8       -6.3      -7.1       n.a.       n.a.
              (% of GDP)
                                          SP Feb 2009            0.7       -0.8       -1.2      -1.7       -2.1       n.a.
                                          SP Apr 2010           -0.2       -5.6       -5.2      -3.6       -2.9       -2.3
           Structural balance3
                                         COM May 2010           -0.4       -5.8       -6.3      -7.1       n.a.       n.a.
              (% of GDP)
                                          SP Feb 2009            0.7       -0.8       -1.2      -1.7       -2.1       n.a.
                                          SP Apr 2010           48.4       56.2       61.0      63.2       63.1       62.3
        Government gross debt
                                         COM May 2010           48.4       56.2       62.3      67.6       n.a.       n.a.
              (% of GDP)
                                          SP Feb 2009           49.3       46.8       45.4      44.2       44.2       n.a.
   Notes:
   1
     Output gaps and cyclically-adjusted balances from the programmes as recalculated by Commission services on the basis
   of the information in the programmes.
   2
     Based on estimated potential growth of 2.0%, 2.8%, 2.8%, 2.8% and 2.8% respectively in the period 2009-2013.
   3
     Cyclically-adjusted balance excluding one-off and other temporary measures. One-off and other temporary measures are
   0.1% in years 2010, 2011 and 2012(all deficit reducing) according to the most recent programme. There are no one-off and
   other temporary measures in the Commission services' spring 2010 forecast.
     Source:
     Stability programme (SP); Commission services’ spring 2010 forecasts (COM); Commission services’ calculations.
EN                                                             12                                                           EN


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

text:
               29.7.2014

               EN

               Official Journal of the European Union

               C 247/88

         COUNCIL RECOMMENDATION
   of 8 July 2014
   on the National Reform Programme 2014 of the Netherlands and delivering a Council opinion on the Stability Programme of the Netherlands, 2014
   2014/C 247/17
   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 the Netherland's National Reform Programme for 2013 and delivered its opinion on the Netherlands' 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 the Netherlands' 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 the Netherlands 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 the Netherlands, under Article 5 of Regulation (EU) No 1176/2011. The Commission's analysis leads it to conclude that the Netherlands continues to experience macroeconomic imbalances, which require monitoring and policy action. In particular, macroeconomic developments regarding private sector debt and ongoing deleveraging, coupled with remaining inefficiencies in the housing market, deserve attention. Although the large current account surplus does not pose risks similar to large deficits, and is partly linked to the need for deleveraging, the Commission will follow current account developments in the Netherlands in the context of the European Semester.

               (8)

               On 29 April 2014, the Netherlands submitted its 2014 National Reform Programme and, on 30 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 that the correction of the excessive deficit in 2013 is sustainable, and to reach a budgetary position close to the medium‐term objective by 2015. The medium‐term objective is a structural deficit of no more than 0,5 % of GDP, reflecting the requirements of the Stability and Growth Pact. Additional sizeable fiscal measures were implemented, but the (recalculated) structural balance in 2014 is planned to remain constant compared to 2013, which points to a significant deviation from the required minimum adjustment of 0,5 % of GDP. In 2015, the (recalculated) structural balance is planned to improve by 0,3 percentage points of GDP. Expenditure would grow at a pace consistent with the expenditure benchmark both in 2014 and 2015. Following an overall assessment of the Netherland's budgetary strategy, the adjustment path towards the medium‐term objective is partly in line with the requirements of the Stability and Growth Pact. According to the Stability Programme, general government gross debt is stabilising in 2015 and decreasing thereafter. The macroeconomic scenario underpinning the budgetary projections in the Stability Programme is plausible, and was prepared by the independent Netherlands Bureau for Economic Policy Analysis. Risks to the budgetary targets appear to be sizeable but broadly balanced. The Commission services 2014 spring forecast expects a stabilisation of the structural balance in 2014 and an improvement of 0,5 % of GDP in 2015. According to the Commission forecast, the Netherlands would comply with the expenditure benchmark in 2014, but not in 2015. In order to enhance the growth potential of the Netherlands, it is of paramount importance that the required consolidation safeguards growth‐enhancing expenditure, such as innovation and research, including fundamental research, education and training. Based on its assessment of the Stability Programme and the Commission forecast, pursuant to Regulation (EC) No 1466/97, the Council is of the opinion that the Netherlands has brought its general government deficit sustainably below 3 % of GDP in 2013, but is at risk of significantly deviating from the requirements of the preventive arm as from 2014.

               (10)

               A key challenge lies in the housing market, where rigidities and distortive incentives have built up over decades to shape house financing and sectoral savings patterns. Households' tendency to leverage up gross mortgage debt against housing wealth largely reflects long‐standing fiscal incentives, in particular the full tax deductibility of mortgage interest. Since April 2012, a series of measures have been implemented to partly address these incentives. Some of these involve adjustments to the fiscal treatment of housing finance. The gradual move to limit mortgage interest tax deductibility and increase the incentive to amortise is warranted, but the phasing‐in of this measure is too slow to significantly influence amortising behaviour. The loan‐to‐value ratio of 100 %, to be reached in 2018, is still high. The rental market is restrained by regulation and the presence of a very large social housing sector that also has to cope with long waiting lists. The recent introduction of more income‐based rent differentiation in the social housing sector is a step in the right direction, but its impact is limited. Social housing corporations are still allowed to build dwellings with a monthly rent above the social rent ceiling. Even though the 2013 recommendations called for a focus on support for households most in need, this redirection is work in progress. Therefore, while the proposed measures are steps in the right direction, the overall pace of reforms is slow in addressing underlying problems and thus needs to be stepped up when the economy allows for it, while continuing to ensure that social housing is available to disadvantaged citizens unable to obtain housing at market conditions, including in high demand locations.

               (11)

               The long‐term sustainability of the pension system has been improved through the gradual increase in the statutory retirement age from 65 years in 2012 to 67 years in 2023. The Netherlands has initiated comprehensive reforms in the public‐ and private‐funded pillars of the pension system and in the long‐term care system. This is complemented by reforms encouraging older workers to work longer and increase labour market mobility. Long‐term care reforms shifted responsibilities to municipalities, with a reduction in overall expenditure and a focus on efficiency gains. Parts of these substantial reforms still have to be adopted. Remaining challenges include an appropriate intra‐ and inter‐generational distribution of costs and risks, and the quality and accessibility of long‐term care needs to be monitored. Implementation of the plans to reform long‐term care would help curb the fast‐rising costs of ageing and thus support the sustainability of public finances. In this regard, the quality and accessibility of long‐term care should be maintained at an adequate level.

               (12)

               The labour market reforms proposed by the Government aim to increase labour market participation and mobility. The Participation Act aims at boosting labour market participation. However, the reforms are not yet enshrined in law. In addition, further measures are needed to reduce fiscal disincentives to work and to improve the employability of people at the margin of the labour market, including women, people with a migrant background, people with a disability and the elderly. The Netherlands has announced reforms to the unemployment benefit scheme and its relatively strict employment protection legislation, including a tax incentive to increase participation. However, while these measures point in the right direction, they cannot be fully assessed until actually implemented. Accelerating the removal of remaining disincentives for second earners to increase the number of hours worked has the potential of further alleviating future labour supply shortages. Finally, making better use of existing flexibility in the institutional framework for more differentiated wage increases can support overall household income and thus domestic demand without damaging competitiveness.

               (13)

               In the context of the European Semester, the Commission has carried out a comprehensive analysis of the Netherlands' 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 the Netherlands 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.

               (14)

               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.

               (15)

               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 (2)and (4) below.

               (16)

               In the context of the European Semester, the Commission has also carried out an analysis of the economic policy of the euro area as a whole. On this basis, the Council has issued specific recommendations addressed to the Member States whose currency is the euro (7). As a country whose currency is the euro, the Netherlands should also ensure the full and timely implementation of those recommendations,

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

               1.

               Following the correction of the excessive deficit, reinforce the budgetary measures for 2014 in the light of the emerging gap of 0,5 % of GDP based on the Commission services 2014 spring forecast, pointing to a risk of significant deviation relative to the preventive arm of the Stability and Growth Pact requirements. In 2015, significantly strengthen the budgetary strategy to ensure reaching the medium‐term objective and maintain it thereafter, and ensure that the debt rule is met in order to keep the general government debt ratio on a sustained downward path. Protect expenditure in areas directly relevant for growth such as education, innovation and research.

               2.

               When the economic environment allows, step up efforts to reform the housing market by accelerating the reduction in mortgage interest tax deductibility, by providing for a more market‐oriented pricing mechanism in the rental market, and by further relating rents to household income in the social housing sector. Monitor the effects of the social housing reforms in terms of accessibility and affordability for low‐income households. Continue efforts to refocus social housing policies to support households most in need.

               3.

               Implement reforms of the second pillar of the pension system, ensuring an appropriate intra‐ and inter‐generational distribution of costs and risks. Underpin the gradual increase of the statutory retirement age with measures to improve the employability of older workers. Implement the envisaged reform in the area of long‐term care with a view to ensure sustainability, while ensuring fair access and the quality of services and monitor its effects.

               4.

               Take further measures to enhance labour market participation particularly among people at the margins of the labour market and to reduce tax disincentives on labour. Implement reforms of employment protection legislation and the unemployment benefit system, and further address labour market rigidities. In consultation with the social partners and in accordance with national practice, allow for more differentiated wage increases by making full use of the existing institutional 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. 89.

      (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.


title: Council Recommendation of 11 July 2017 on the 2017 National Reform Programme of Slovakia and delivering a Council opinion on the 2017 Stability Programme of Slovakia

text:
               9.8.2017

               EN

               Official Journal of the European Union

               C 261/110

         COUNCIL RECOMMENDATION
   of 11 July 2017
   on the 2017 National Reform Programme of Slovakia and delivering a Council opinion on the 2017 Stability Programme of Slovakia
   (2017/C 261/24)
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,
   Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (1), and in particular Article 5(2) thereof,
   Having regard to the recommendation of the European Commission,
   Having regard to the resolutions of the European Parliament,
   Having regard to the conclusions of the European Council,
   Having regard to the opinion of the Employment Committee,
   Having regard to the opinion of the Economic and Financial Committee,
   Having regard to the opinion of the Social Protection Committee,
   Having regard to the opinion of the Economic Policy Committee,
   Whereas:

               (1)

               On 16 November 2016, the Commission adopted the Annual Growth Survey, marking the start of the 2017 European Semester for economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 9-10 March 2017. On 16 November 2016, 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 did not identify Slovakia as one of the Member States for which an in-depth review would be carried out. On the same date, the Commission also adopted a recommendation for a Council Recommendation on the economic policy of the euro area, which was endorsed by the European Council on 9-10 March 2017. On 21 March 2017, the Council adopted the Recommendation on the economic policy of the euro area (‘Recommendation for the euro area’) (3).

               (2)

               As a Member State whose currency is the euro and in view of the close interlinkages between the economies in the economic and monetary union, Slovakia should ensure the full and timely implementation of the Recommendation for the euro area, as reflected in recommendations (1) to (2) below.

               (3)

               The 2017 country report for Slovakia was published on 22 February 2017. It assessed Slovakia’s progress in addressing the country-specific recommendations adopted by the Council on 12 July 2016, the follow-up given to the country-specific recommendations adopted in previous years and Slovakia’s progress towards its national Europe 2020 targets.

               (4)

               On 26 April 2017, Slovakia submitted its 2017 National Reform Programme and its 2017 Stability Programme. In order to take account of their interlinkages, the two programmes have been assessed at the same time.

               (5)

               Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds (ESI Funds) for the 2014-2020 period. As provided for in Article 23 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council (4), 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 that provision in guidelines on the application of the measures linking effectiveness of the ESI Funds to sound economic governance.

               (6)

               Slovakia is currently in the preventive arm of the Stability and Growth Pact. In its 2017 Stability Programme, the Government plans to improve the headline deficit to 1,3 % of GDP in 2017, and gradually further to 0 % of GDP in 2019 and 2020. The medium-term budgetary objective — a structural deficit of 0,5 % of GDP — is expected to be reached in 2018. According to the 2017 Stability Programme, the general government debt-to-GDP ratio is expected to gradually decline to 46 % by 2020. The macroeconomic scenario underpinning those budgetary projections is plausible.

               (7)

               On 12 July 2016, the Council recommended Slovakia to achieve an annual fiscal adjustment of 0,5 % of GDP towards the medium-term budgetary objective in 2017. Based on the Commission spring 2017 forecast, there is a risk of some deviation from that recommendation in 2017.

               (8)

               In 2018, in the light of its fiscal situation, Slovakia is expected to further adjust towards its medium-term budgetary objective of a structural deficit of 0,5 % of GDP. According to the commonly agreed adjustment matrix under the Stability and Growth Pact, that adjustment translates into a requirement of a nominal growth rate of net primary government expenditure (5) which does not exceed 2,9 %. It would correspond to a structural adjustment of 0,5 % of GDP. Under unchanged policies, there is a risk of significant deviation from that requirement over the period 2017-2018 taken together. Overall, the Council is of the opinion that Slovakia needs to stand ready to take further measures to ensure compliance in 2017 and that further measures will be needed in 2018 to comply with the provisions of the Stability and Growth Pact. However, as foreseen in Regulation (EC) No 1466/97, the assessment of the budgetary plans and outcomes should take account of the Member State’s budgetary balance in the light of the cyclical conditions. As recalled in the Commission Communication on the 2017 European Semester accompanying these country-specific recommendations, the assessment of the 2018 Draft Budgetary Plan and subsequent assessment of 2018 budget outcomes will need to take due account of the goal of achieving a fiscal stance that contributes to both strengthening the ongoing recovery and ensuring the sustainability of Slovakia’s public finances. In that context, the Council notes that the Commission intends to carry out an overall assessment in line with Regulation (EC) No 1466/97, in particular in the light of the cyclical situation of Slovakia.

               (9)

               Slovakia’s public finances still face risks in the long term. Healthcare expenditure continues to pose a risk to the long-term sustainability of public finances as increasing the cost-effectiveness of healthcare in Slovakia remains a challenge. Some steps have been taken to rationalise hospital care and lower costs, but concrete results are not yet visible. The 2016 spending review has identified potential savings. Nevertheless, progress on the ground in delivering a comprehensive healthcare and health spending reform has been to date protracted with the introduction of the diagnosis-related groups system for payments and the launching of e-health systems making only slow progress. Meanwhile, the deficit of the public pension system is projected to double in the long term, and the retirement age in Slovakia is among the lowest in the Union. Recent adjustments in the pension system have largely been ad hoc and short-term.

               (10)

               Tax evasion and tax avoidance have fallen, and efforts are being made to raise voluntary compliance. Improvements in tax collection have significantly reduced what was, in the past, a high VAT gap. Limiting VAT fraud appears to have also had a positive impact on the collection of corporate income tax. The financial administration adopts a focus on improving VAT compliance, especially through auditing. At the same time, non-audit activities to strengthen voluntary tax compliance are being explored.

               (11)

               Despite improvements in the labour market resulting from robust economic recovery and strong job creation, long-term unemployment remains a problem. The long-term unemployment rate continues to be one of the highest in the Union. It particularly affects marginalised Roma, the low-skilled and young people. In addition, regional disparities persist — the unemployment rate in eastern Slovakia is still twice that in Bratislava. Adult participation in lifelong learning and second-chance education remains low. Despite measures encouraging low-wage earners to work and an ongoing public employment services reform, there are still difficulties in introducing individualised support to the long-term unemployed and to vulnerable groups due among others to a high caseload. The Slovak action plan on the integration of the long-term unemployed, largely financed by the European Social Fund, seeks to remedy this via a comprehensive approach to personalised services. This will be achieved by providing specialised counselling, a new profiling system, cooperation with private employment agencies and the delivery of targeted training programmes designed by employers based on regional labour market needs. Roma participation in the Slovak labour market remains very low and progress in increasing their employment rate is slow. Low levels of education and skills and discrimination are factors contributing to their poor labour market outcomes. The low employment rate of women of childbearing age reflects the long parental leave (up to three years) rarely taken up by men, shortage of childcare facilities, especially for children under the age of three, and a low uptake of flexible working-time arrangements.

               (12)

               The education system is insufficiently geared to increasing Slovakia’s economic potential. Educational outcomes and the level of basic skills remain disappointing by international standards and have deteriorated further in 2012-2015. Moreover, strong regional differences persist. Poor performance is primarily linked to a strong impact of the socioeconomic and ethnic background of students, to issues of equity, access and inclusiveness as well as to the relatively low attractiveness of the teaching profession. Despite the two-step salary increase for teachers in 2016 (4 % in January and 6 % in September) and further increases planned for 2017-2020, uncompetitive salary conditions and limited continuous teacher training are among the factors that make the profession still largely unattractive, especially to prospective young teachers and those residing in the more developed regions of the country. The recently adopted anti-segregation legislation, on the marginalised Roma community, has yet to be fully implemented to bring about positive change and increase their participation in inclusive mainstream education, with a special focus on early childhood education and care as well as pre-school education.

               (13)

               Slovakia’s public administration is being modernised, but corruption remains a challenge. Perceptions of corruption remain high and act as a major business impediment. Control mechanisms and the enforcement of anti-corruption rules still appear inadequate, and policy initiatives on whistleblowing and letterbox companies may not be enough to resolve the problem. In addition, public procurement practices fall short of best practices in many areas. Training measures are being developed to equip staff to run a more efficient procurement system. However, conflicts of interest, tailor-made tender specifications and excessive use of the lowest price award criteria remain a concern and result in limited quality-based competition. Weaknesses in public procurement are persistently reported as affecting the efficiency of public-resource allocation.

               (14)

               A frequently changing legislative environment makes it difficult and costly for companies to comply with legislation and legislative and regulatory processes, and insolvency arrangements are often viewed as insufficiently business-friendly. An interministerial working group for doing business, led by the State Secretary of the Ministry of Economy, was recently set up and is expected to present by June 2017 proposals for measures to improve the business environment. High regulatory barriers remain in the business services sector in Slovakia. Specific guidance per profession to address this issue was provided in January 2017, in a Communication from the Commission on reform recommendations for regulation in professional services, as part of a package of measures to tackle barriers in services markets.

               (15)

               Improving the effectiveness, including the independence of the justice system, remains a challenge for Slovakia, although efforts are being made to address the shortcomings. However, concerns about the efficiency and independence of the judiciary remain. In addition, public administration is still burdened by inefficiency, insufficient capacity and fragmentation. The adoption of the strategy on Human Resource Management in October 2015 and the recent adoption of the Civil Service Act are positive steps forward. The new, politically independent Civil Service Council will supervise the implementation of the principles of the Civil Service Act as well as the Code of Ethics for Civil Servants. The complex, opaque regulatory framework complicates relations between interested parties in the energy market. Recent changes in setting distribution tariffs indicate continued political and business influence. Independence of the energy price regulator is expected to decrease following the adoption of legislation that grants the Government an exclusive right to name the regulator’s chair and grants the Ministries for the Economy and the Environment the right to step into price-setting proceedings.

               (16)

               In the context of the 2017 European Semester, the Commission has carried out a comprehensive analysis of Slovakia’s economic policy and published it in the 2017 country report. It has also assessed the 2017 Stability Programme, the 2017 National Reform Programme and the follow-up given to the recommendations addressed to Slovakia in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Slovakia, but also their compliance with Union rules and guidance, given the need to strengthen the Union’s overall economic governance by providing Union-level input into future national decisions.

               (17)

               In the light of this assessment, the Council has examined the 2017 Stability Programme and its opinion (6) is reflected in particular in recommendation (1) below,

         HEREBY RECOMMENDS that Slovakia take action in 2017 and 2018 to:

               1.

               Pursue a substantial fiscal effort in 2018 in line with the requirements of the preventive arm of the Stability and Growth Pact, taking into account the need to strengthen the ongoing recovery and to ensure the sustainability of Slovakia’s public finances. Improve the cost-effectiveness of the healthcare system, including by implementing the value-for-money project.

               2.

               Improve activation measures for disadvantaged groups, including by implementing the action plan for the long-term unemployed and by providing individualised services and targeted training. Enhance employment opportunities for women, especially by extending affordable, quality childcare. Improve the quality of education and increase the participation of Roma in inclusive mainstream education.

               3.

               Improve competition and transparency in public procurement operations and step up the fight against corruption by stronger enforcement of existing legislation. Adopt and implement a comprehensive plan to lower administrative and regulatory barriers for businesses. Improve the effectiveness of the justice system, including a reduction in the length of civil and commercial cases.

      Done at Brussels, 11 July 2017.

            For the Council

            The President

         T. TÕNISTE

      (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)  OJ C 92, 24.3.2017, p. 1.

      (4)  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).

      (5)  Net government expenditure comprises total government expenditure excluding interest expenditure, expenditure on Union programmes fully matched by Union funds revenue and non-discretionary changes in unemployment benefit expenditure. Nationally financed gross fixed capital formation is smoothed over a 4-year period. Discretionary revenue measures or revenue increases mandated by law are factored in. One-off measures on both the revenue and expenditure sides are netted out.

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


title: Council Recommendation of 21 June 2013 with a view to bringing an end to the situation of an excessive government deficit in Spain

text:
               26.6.2013

               EN

               Official Journal of the European Union

               C 180/4

         COUNCIL RECOMMENDATION
   of 21 June 2013
   with a view to bringing an end to the situation of an excessive government deficit in Spain
   2013/C 180/02
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union and in particular Article 126(7) thereof,
   Having regard to the recommendation from the European Commission,
   Whereas:

               (1)

               According to Article 126 of the Treaty on the Functioning of the European Union (TFEU) Member States are to avoid excessive government deficits.

               (2)

               The Stability and Growth Pact is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation.

               (3)

               On 27 April 2009, the Council decided, in accordance with Article 104(6) of the Treaty establishing the European Community (TEC), that an excessive deficit existed in Spain and issued a recommendation to correct the excessive deficit by 2012 (1) (the Council Recommendation of 27 April 2009), in accordance with Article 104(7) TEC and Article 3 of Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure (2).

               (4)

               On 2 December 2009, the Council decided, in accordance with Article 3(5) of Regulation (EC) No 1467/97, that effective action had been taken by Spain and that unexpected adverse economic events with major unfavourable consequences for government finances had occurred after the adoption of Council Recommendation of 27 April 2009. In particular, the sharp deterioration in the growth outlook in the wake of the global economic and financial crisis had major negative budgetary implications. As a result, the Council decided to adopt a revised recommendation under Article 126(7) TFEU (the Council Recommendation of 2 December 2009) to correct the excessive deficit by 2013 at the latest in a credible and sustainable manner by taking action in a medium-term framework.

               (5)

               On 15 June 2010, the Commission concluded that Spain had taken effective action in compliance with the Council Recommendation of 2 December 2009 to bring its government deficit below the 3 %-of-GDP reference value and considered that no additional step in the excessive deficit procedure (EDP) was therefore necessary.

               (6)

               On 10 July 2012, the Council decided, in accordance with Article 3(5) of Regulation (EC) No 1467/97 that effective action had been taken but that unexpected adverse economic events with major unfavourable consequences for government finances had occurred after the adoption of the Council Recommendation of 2 December 2009. In particular, a worsening in the growth outlook and the shift to a less tax-rich growth composition had major negative budgetary implications. The Council therefore adopted a revised Recommendation under Article 126(7) TFEU (the Council Recommendation of 10 July 2012) and recommended Spain to correct the excessive deficit by 2014 at the latest. In order to bring the headline government deficit below the 3 % of GDP reference value by 2014, Spain was recommended to deliver an improvement of the structural balance of 2,7 % of GDP in 2012, 2,5 % of GDP in 2013 and 1,9 % of GDP in 2014, based on the Commission services' update of the 2012 spring forecast. The headline deficit targets were set at 6,3 % of GDP for 2012, 4,5 % of GDP for 2013 and 2,8 % of GDP in 2014. Spain was also recommended to implement the measures adopted in the 2012 budget and in the Autonomous Communities’ rebalancing plans and to adopt the announced multi-annual budget plan for 2013-14 by the end of July 2012, including a medium-term budgetary strategy, which would fully specify the structural measures necessary to achieve the correction of the excessive deficit by 2014.

               (7)

               On 14 November 2012, the Commission concluded, based on the Commission services' 2012 autumn forecast, that Spain had taken effective action in compliance with the Council Recommendation of 10 July 2012 and that no further steps in the EDP were required.

               (8)

               According to Article 3(5) of Regulation (EC) No 1467/97, the Council may decide, on a recommendation from the Commission, to adopt a revised recommendation under Article 126(7) TFEU, if effective action has been taken and unexpected adverse economic events with major unfavourable consequences for government finances occur after the adoption of the original recommendation. Under Article 3(5) of that Regulation, the occurrence of unexpected adverse economic events with major unfavourable budgetary effects is to be assessed against the economic forecast underlying the Council Recommendation.

               (9)

               In accordance with Article 126(7) of the TFEU and Article 3 of Regulation (EC) No 1467/97, the Council is required to make recommendations to the Member State concerned with a view to bringing the situation of excessive deficit to an end within a given period. The Recommendation has to establish a maximum deadline of 6 months for effective action to be taken by the Member State concerned to correct the excessive deficit. Furthermore, in a recommendation to correct an excessive deficit the Council requests the achievement of annual budgetary targets which, on the basis of the forecast underpinning the recommendation, are consistent with a minimum annual improvement in the structural balance, namely, the cyclically-adjusted balance excluding one-off and other temporary measures, of at least 0,5 % of GDP as a benchmark. In accordance with Articles 9(1) and 17(2) of 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 (3), Spain should present an economic partnership programme.

               (10)

               After a short-lived recovery in 2011, the economy has slipped back into recession, recording negative quarterly real GDP growth since the third quarter of 2011. In annual terms, GDP fell by 1,4 % in 2012. According to the Commission services' 2013 spring forecast, the recession is set to continue in 2013, with positive net exports still not able to offset the ongoing contraction of domestic demand. Output is expected to stabilise only towards the end of 2013. Real GDP is thus projected to contract by 1,5 % in 2013, before growing by 0,9 % in 2014 (under a no-policy-change assumption). At the time of the last Council recommendation, real GDP was expected to contract by 1,9 % and 0,3 % in 2012 and 2013, respectively, and to grow by 1,1 % in 2014. The less negative growth outcome in 2012 was mainly due to somewhat more resilient domestic demand possibly also due to the liquidity injected through the repayment scheme for the commercial debt accumulated by the regions and local authorities before 1 January 2012 (EUR 27,4 billion, or 2,6 % of GDP). With regards to 2013 and 2014, the Commission services' 2013 spring forecast envisages a sharper contraction of real GDP in 2013 and a more subdued recovery in 2014. This includes a sharper drop in domestic demand in both years and a more protracted slump in employment. The deterioration in the macroeconomic outlook is partly linked to additional consolidation measures included in the 2013-14 budget plan and the 2013 budget being taken into account.

               (11)

               According to the Commission services' 2013 spring forecast, the general government deficit reached 10,6 % of GDP in 2012, compared with a government and EDP target of 6,3 % of GDP and a 9,4 % of GDP outcome in 2011. Adjusting for capital transfers to banks (which are considered as one-off operations), the corresponding deficits were 7,0 % and 9,0 % of GDP in 2012 and 2011, respectively. The decrease in the headline balance corresponds to an improvement in the primary balance of 2,4 percantage points (net of capital transfers into banks), against the background of a shrinking economy and a tax-weak growth composition. The Commission services' 2013 spring forecast points to an improvement in the structural deficit of 1,8 percantage points in 2012, compared with a recommended improvement of 2,7 percentage points. Correcting for the slight downward revision of potential output since the last Council Recommendation, the estimated fiscal effort remains unchanged. However, the estimated change in the structural balance was severely affected by unexpected revenue shortfalls, which amounted to around 1,0 percentage point Overall, taking these effects into account, the adjusted fiscal effort would increase to 2,9 percentage points, above the recommended effort under the Council Recommendation of 10 July 2012. Apart from recapitalisation measures, the budgetary deviation in 2012 is linked to a combination of weaker-than-expected revenues (taking into account the impact of discretionary measures and the base effect) and higher intermediate consumption and social transfers. The less tax-rich growth composition and a stronger deterioration in the labour market implied major revenue shortfalls, in particular of direct and indirect taxes, as well as higher social expenditure. Spain adopted sizeable consolidation measures during 2012, amounting to around 4 % of GDP, including around 1,5 % of GDP on the revenue side and 2,5 % of GDP on the expenditure side. Those measures partly compensated also for an underlying deterioration in the structural balance due to rising interest payments and higher social transfers.

               (12)

               For 2013, according to the Commission services' 2013 spring forecast, the government deficit is projected to decline to 6,5 % of GDP, compared to the EDP target of 4,5 % of GDP. The primary balance is expected to improve by 4,5 percentage points (0,9 percentage points net of capital transfers into banks). Following the last Council Recommendation, the Spanish government presented, in August 2012, a multi-annual budget plan for 2013-14, outlining some features of the consolidation strategy for the mediumterm. In total, the budgetary impact of discretionary measures in 2013 is estimated to be about 1 % of GDP on the expenditure side and about 1,5 % of GDP on the revenue side. The expected budgetary deviation of around 2 % of GDP compared with the EDP target is partly explained by the worse starting position. However, the main factor behind the deviation is the unfavourable growth composition, with private consumption contracting more strongly and the labour market performing worse than expected in the Council Recommendation of 10 July 2012. The Commission services' 2013 spring forecast projects the structural deficit to further narrow by 1,1 percentage points in 2013, compared with a recommended effort of 2,5 percentage points Correcting for the change in the estimated potential growth and for higher-than expected revenue shortfalls, the estimated fiscal effort improves by 1,4 percentage points, bringing the adjusted fiscal effort to 2,5 % of GDP, in line with the recommended effort in the Council Recommendation of 10 July 2012. In its 2013 Stability Programme, the Spanish government announced a general government deficit target of 6,3 % of GDP for 2013, to be underpinned by additional consolidation measures of around EUR 3 billion (0,3 % of GDP) still to be adopted and implemented this year.

               (13)

               According to the Commission services' 2013 spring forecast, for 2014, the headline deficit is expected to widen to 7,0 % of GDP compared to an EDP target of 2,8 % of GDP. The primary deficit would widen by 0,4 % of GDP. Apart from the base effect, the expected deviation mainly reflects the expiry of temporary measures taken in previous years and the fact that the planned consolidation measures for 2014 were not sufficiently specified in the August 2012 multi-annual budget plan to be included in the Commission services' forecast. Moreover, the composition of economic growth would continue to be tax-poor, with social contributions and indirect taxes not rising in full proportion to nominal GDP. Interest payments would also keep rising due to a higher debt stock. According to the Commission services' 2013 spring forecast, the structural deficit is projected to deteriorate by 1,1 percentage points, compared to a recommended improvement of 1,9 % of GDP. Correcting for the change in the estimated potential growth and unexpected revenue shortfalls, the gap increases by a further 0,2 percentage points.

               (14)

               As regards fiscal governance, major progress has been made in the reporting of budgetary execution at sub-central government levels. However, the provisions of the Budgetary Stability Law on early warning and corrective mechanisms to limit budgetary deviations have not been fully effective and the transparency of their implementation could be enhanced. Despite progress with respect to budgetary reporting at regional level, achieving higher fiscal transparency would require more comprehensive, consistent and timely reporting, also of budgetary plans, on a consolidated general government basis in line with the European System of Accounts. The establishment of a fiscal council, with full institutional and financial independence, is still pending.

               (15)

               General government gross debt rose to around 84 % of GDP in 2012 compared to 80,9 % of GDP projected in the updated Commission services' 2012 spring forecast. The increase in the debt ratio was due to a higher than expected deficit outcome, lower nominal GDP growth, costs of bank recapitalisation operations and the payment of public administration arrears. According to the Commission services' 2013 spring forecast, the debt-to-GDP ratio is expected to increase further and to exceed 95 % in 2014, based on a no-policy-change scenario, thus exceeding the Treaty reference value in all years.

               (16)

               On 10 April 2013, the Commission concluded, based on its 2013 in-depth review on Spain under the Macroeconomic Imbalances Procedure (4), that Spain is experiencing excessive macroeconomic imblances. The correction of these imbalances accumulated during the boom years, and in particular the absorption of very high private and external debt levels, are having major negative consequences on economic growth, financial stability and public finances. A sustainable correction of the excessive deficit in the medium-term requires simultaneous progress on ensuring the correction of macroeconomic imbalances, supported by structural reforms to boost growth and employment creation and to reduce structural rigidities that hamper the adjustment.

               (17)

               According to the Commission services' 2013 spring forecast, Spain will not meet the nominal budgetary targets established in the Council Recommendation of 10 July 2012. However, Spain has implemented a structural effort in 2012 and 2013 which, account taken of the unexpected adverse economic developments compared to when the Council Recommendation was issued, is in line with the Council Recommendation of 10 July 2012. Those unexpected adverse economic developments have entailed major unfavourable consequences for government finances. In particular, significant revenue shortfalls linked to the ongoing rebalancing of the economy towards a less tax-rich growth structure and associated negative effects on revenue elasticites have led to a substantial deterioration in the budgetary position. Moreover, the economic recession has affected employment in a very negative way and unemployment has risen sharply. Considering all these factors, consistent with the rules of the Stability and Growth Pact and including the need to correct excessive macroeconomic imbalances with major unfavourable consequences for public finance, an extension of the deadline for correcting the excessive deficit in Spain by two years to 2016 appears to be justified, rather than the one-year extension that the Stability and Growth Pact foresees as a rule.

               (18)

               Against the background of high uncertainties regarding economic and budgetary developments, the budgetary target recommended for the final year of the correction period should be set at a level clearly below the reference value, in order to guarantee an effective and lasting achievement of the correction within the requested deadline.

               (19)

               The intermediate headline deficit targets leading to the correction of the excessive deficit by 2016 are set at 6,5 % of GDP for 2013, 5,8 % of GDP for 2014, 4,2 % of GDP for 2015, and 2,8 % of GDP for 2016. Achieving those targets requires an annual improvement in the primary balance (net of one-off measures) of 1,3 % of GDP on average over the period 2013-16 and, on the basis of the Commission services' 2013 spring forecast extended to 2016, an improvement in the structural budget balance of 1,1 % of GDP in 2013, 0,8 % of GDP in 2014, 0,8 % of GDP in 2015, and 1,2 % of GDP in 2016. This more gradual adjustment path takes into account the current difficult economic environment and the ongoing major structural transformation of the Spanish economy and will have to be supported by ambitious structural reforms. As such, it is expected to support the unwinding of external and internal macroeconomic imbalances, mitigate the negative short-term impact of fiscal consolidation on economic growth, while still stabilising and reversing the upward trend in general government debt.

               (20)

               According to the Commission services' 2013 spring forecast extended to 2016, which is based on a no-policy-change assumption, no additional measures appear needed at this stage to achieve the recommended improvement in the structural balance for 2013 (and the new 6,5 % of GDP deficit target), but the budgetary plans at all levels of government will have to be strictly implemented. For the period 2014-16, bringing the deficit below the Treaty reference value on a sustainable basis will require considerable structural fiscal measures on top of those already included in the Commission services' 2013 spring forecast. Those measures, amounting to around 2 % of GDP in 2014, 1 % of GDP in 2015, and 1,5 % of GDP in 2016 should take into account the need to compensate for the negative second-round effects, negative potential output growth, as well as rising interest and social payments.

               (21)

               The 2013 Stability Programme envisages an adjustment path which is broadly consistent with the correction of the excessive deficit by 2016, targeting headline deficits of 6,3 % of GDP in 2013, 5,5 % in 2014, 4,1 % in 2015, and 2,7 % in 2016. For 2013, the target is based on additional consolidation measures of around EUR 3 billion envisaged in the Programme, which still need to be fully specified.

               (22)

               Budgetary consolidation measures should secure a lasting improvement in the general government balance, while being geared towards enhancing the quality of the public finances and reinforcing the growth potential of the economy.

               (23)

               Spain faces high risks to sustainability in a medium-term perspective and medium risks in the long run. Returning to a higher structural primary balance, around – 0,5 % of GDP as it was on average in the period 1998-2012, would help contain these risks. The 2013 reform of early retirement schemes is expected to contribute to the long-term sustainability of the social security system. However, further measures to contain age-related expenditure growth appears necessary, namely by means of the appropriate regulation of the sustainability factor foreseen by the 2011 reform of the pension system, including by providing that the retirement age will rise in line with gains in life expectancy.

               (24)

               In view of the decentralised nature of its public finances, Spain's fiscal adjustment path should be underpinned by a credible medium-term consolidation strategy that includes: (i) a detailed multi-annual budget plan with full specification of measures for 2014-16; (ii) further strengthening the effectiveness of the institutional framework (by raising further the transparency in implementation of the Budgetary Stability Law as well as by establishing an independent fiscal council); (iii) undertaking concrete steps to rein in the mounting structural deficit in the social security system; and (iv) giving a greater emphasis to the growth friendliness of the consolidation (including by conducting systematic expenditure reviews as well as reviews of the tax system).

               (25)

               In parallel to the regular reviews of the ESM Financial Assistance for the Recapitalisation of Financial Institutions in Spain (5) and as agreed in the Memorandum of Understanding signed on 23 July 2012, monitoring of progress on implementation of Spain's EDP commitments will be carried out on a quarterly basis.

               (26)

               Spain fulfils the conditions for the extension of the deadline for correcting the excessive general government deficit as laid down in Article 3(5) of Regulation (EC) No 1467/97,

         HAS ADOPTED THIS RECOMMENDATION:

               (1)

               Spain should put an end to the present excessive deficit situation by 2016.

               (2)

               Spain should reach a headline deficit target of 6,5 % of GDP in 2013, 5,8 % of GDP in 2014, 4,2 % of GDP in 2015, and 2,8 % of GDP in 2016, which is consistent with an improvement of the structural balance of 1,1 %, 0,8 %, 0,8 %, and 1,2 % of GDP in the years 2013-16 respectively based on the Commission services' 2013 spring forecast extended to 2016.

               (3)

               Spain should implement the measures adopted in the 2013 budget plans at all levels of government and stand ready to take corrective action in case of deviations from budgetary plans. The authorities should reinforce the medium-term budgetary strategy with well-specified structural measures for the years 2014-16 that are necessary to achieve the correction of the excessive deficit by 2016.

               (4)

               The Council establishes the deadline of 1 October 2013 for the Spanish government to take effective action and, in accordance with Article 3(4a) of Regulation (EC) No 1467/97, to report in detail the consolidation strategy that is envisaged to achieve the targets.

         Furthermore, Spain should:

               (a)

               strengthen the effectiveness of the institutional framework by raising further the transparency in implementation of the Budgetary Stability Law as well as by establishing an independent fiscal council to provide analysis, advice and monitor compliance of fiscal policy with national and Union fiscal rules;

               (b)

               undertake concrete steps to rein in the increasing structural deficit in the social security system; and

               (c)

               give a greater emphasis to the growth friendliness of the consolidation, including by conducting systematic reviews of expenditure and the tax system.

         Finally, to ensure the success of the fiscal consolidation strategy, it will be important to back the fiscal consolidation by comprehensive structural reforms, in line with the Council Recommendations addressed to Spain in the context of the European Semester and the Macroeconomic Imbalances Procedure.
   This Recommendation is addressed to the Kingdom of Spain.

      Done at Luxembourg, 21 June 2013.

            For the Council

            The President

         M. NOONAN

      (1)  All documents related to the excessive deficit procedure for Spain can be found online (http://ec.europa.eu/economy_finance/economic_governance/sgp/deficit/countries/spain_en.htm)

      (2)  OJ L 209, 2.8.1997, p. 6.

      (3)  OJ L 140, 27.5.2013, p. 11.

      (4)  http://ec.europa.eu/economy_finance/publications/occasional_paper/2013/op134_en.htm

      (5)  http://ec.europa.eu/economy_finance/assistance_eu_ms/spain/index_en.htm