               EUROPEAN COMMISSION
            Brussels, 2.6.2021
            COM(2021) 507 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            delivering a Council opinion on the 2021 Stability Programme of Ireland
            {SWD(2021) 501 final}

               Recommendation for a

               COUNCIL RECOMMENDATION

               delivering a Council opinion on the 2021 Stability Programme of Ireland

               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 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,

               After consulting the Economic and Financial Committee,

               Whereas:

               (1)On 20 March 2020, the Commission adopted a Communication on the activation of the general escape clause
                  2
                of the Stability and Growth Pact.
                  3
                In its Communication, the Commission set out its view that, given the expected severe economic downturn resulting from the COVID-19 outbreak, the conditions to activate the general escape clause were met. On 23 March 2020, the Ministers of Finance of the Member States agreed with the assessment of the Commission. The general escape clause has granted Member States budgetary flexibility to deal with the crisis. It has facilitated the coordination of budgetary policies in times of severe economic downturn. Its activation allows for a temporary departure from the adjustment path towards the medium-term budgetary objective of each Member State, provided this does not endanger fiscal sustainability in the medium term. On 17 September 2020, in its Annual Sustainable Growth Strategy, the Commission announced that the general escape clause would remain active in 2021.
                  4

               (2)On 20 July 2020, the Council recommended Ireland
                  5
                to take all necessary measures, in line with the general escape clause, to effectively address the pandemic, sustain the economy and support the ensuing recovery. It also recommended Ireland to pursue, when economic conditions allow, fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment.

               (3)The Council Recommendation on the economic policy of the euro area indicates that fiscal policies remain supportive in all euro area Member States throughout 2021 and that policy measures should be tailored to country-specific circumstances and be timely, temporary and targeted.
                  6
                When the epidemiological and economic conditions allow, emergency measures should be phased out, while combatting the social and labour-market impact of the crisis. Fiscal policies should be pursued that are aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment. Member States should pursue reforms that strengthen the coverage, adequacy, and sustainability of health and social protection systems for all.

               (4)On 18 November 2020, the Commission adopted its Opinions on the 2021 Draft Budgetary Plans of the euro area Member States, which were based on a qualitative assessment of the fiscal measures. The Commission was of the opinion that the Draft Budgetary Plan of Ireland was overall in line with the fiscal policy recommendations adopted by the Council on 20 July 2020, and that most of the measures included in the plan supported economic activity against the background of considerable uncertainty.

               (5)Next Generation EU, including the Recovery and Resilience Facility, will ensure a sustainable, inclusive and fair recovery. Regulation (EU) 2021/241 establishing the Recovery and Resilience Facility
                  7
                came into force on 19 February 2021. This Facility will provide financial support for the implementation of reforms and investment, entailing a fiscal impulse financed by the EU. It will contribute to the economic recovery, to the implementation of sustainable and growth-enhancing reforms and investment, notably to promote the green and digital transitions, and it will strengthen the economies’ resilience and potential growth. In turn, it will also help public finances to return to more favourable positions in the near term and will contribute to strengthening sustainable public finances, growth and job creation in the medium and long term.

               (6)On 3 March 2021, the Commission adopted a Communication providing further policy orientations to facilitate the coordination of fiscal policies and the preparation of Member States’ Stability and Convergence Programmes.
                  8
                The overall fiscal stance, taking into account national budgets and the Recovery and Resilience Facility, should remain supportive in 2021 and 2022. At the same time, given the expectation of economic activity gradually normalising in the second half of 2021, Member States’ fiscal policies should become more differentiated in 2022. Member States’ fiscal policies should take into account the state of the recovery, fiscal sustainability and the need to reduce economic, social and territorial divergences. In view of the need to support a sustainable recovery for the EU, Member States with low sustainability risks should gear their budgets towards maintaining a supportive fiscal policy in 2022, taking into account the impact of the Recovery and Resilience Facility. Member States with high debt levels should pursue prudent fiscal policies, while preserving nationally financed investment and making use of grants under the Recovery and Resilience Facility to fund additional high-quality investment projects and structural reforms. For the period beyond 2022, fiscal policies should continue to take into account the strength of the recovery, the degree of economic uncertainty and fiscal sustainability considerations. A refocusing of fiscal policies towards achieving prudent medium-term fiscal positions, including by phasing out support measures in due course, will contribute to ensuring fiscal sustainability in the medium term.

               (7)The Communication of 3 March 2021 also announced the Commission’s view that the decision on the deactivation or continued application of the general escape clause should be taken as an overall assessment of the state of the economy, with the level of economic activity in the EU or euro area compared to pre-crisis levels (end-2019) as key quantitative criterion. On the basis of the Commission’s 2021 spring forecast, on 2 June the Commission considered that the conditions to continue to apply the general escape clause in 2022 and to deactivate it as of 2023 were met. Country-specific situations will continue to be taken into account after the deactivation of the general escape clause.
                  9

               (8)On 30 April 2021, Ireland submitted its 2021 Stability Programme, in line with Article 4 of Regulation (EC) No 1466/97.

               (9)In 2020, based on data validated by Eurostat, Ireland’s general government deficit was 5.0% of GDP, while general government debt increased to 59.5% of GDP. The annual change in the primary budget balance amounted to -5.7% of GDP, including discretionary budgetary measures of 3.9% in support of the economy and the operation of automatic stabilisers. Ireland also provided liquidity support to companies and households (such as guarantees and tax deferrals, which do not have a direct and immediate budgetary impact) estimated at 1.2% of GDP.

               On 2 June 2021, the Commission issued a report under Article 126(3) TFEU. This report discusses the budgetary situation of Ireland, as its general government deficit in 2020 exceeded the 3% of GDP Treaty reference value. The report concluded that the deficit criterion was not fulfilled.

               (10)The macroeconomic scenario underpinning the budgetary projections is realistic in 2021 and 2022. Following real GDP growth of 3.4% in 2020, the Stability Programme expects growth of 4.5% in 2021, in line with the Commission’s 2021 spring forecast. In 2022, both the programme and the Commission project annual real GDP growth at 5.0%.

               (11)In its 2021 Stability Programme, the government plans a decrease of the general government deficit from 5.0% of GDP in 2020 to 4.7% of GDP in 2021, while the debt ratio is planned to increase to 62.2% of GDP. According to the programme, the deterioration in the primary budget balance in 2021 compared with the pre-crisis level (2019) is set to amount to 5.4% of GDP in 2021, reflecting discretionary budgetary measures of 3.5% of GDP in support of the economy and the operation of automatic stabilisers. These projections are in line with the Commission’s 2021 spring forecast.

               (12)In response to the COVID-19 pandemic and related economic downturn, Ireland has adopted budgetary measures to strengthen the capacity of its health system, contain the pandemic and provide relief to those individuals and sectors that have been particularly affected. This forceful policy response has cushioned the contraction in GDP, which, in turn, curtailed the increase in government deficit and public debt. Fiscal measures should maximise support to the recovery without pre-empting future fiscal trajectories. Therefore, measures should avoid creating a permanent burden on public finances. When Member States introduce permanent measures, they should properly fund them to ensure budgetary neutrality in the medium term. The measures taken by Ireland in 2020 and 2021 have been in line with the Council Recommendation of 20 July 2020. The discretionary budgetary measures adopted by the government in 2020 and 2021 are mostly temporary or matched by offsetting measures.

               (13)The 2021 Stability Programme assumes investment and reforms financed by grants under the Recovery and Resilience Facility amounting to 0.02% of GDP in 2022, 0.07% in 2023, 0.06% in 2024 and 0.04% in 2025. The Commission’s spring forecast assumes a simplified and linear integration of Recovery and Resilience Facility-financed expenditure amounting to 0.06% in 2021 and 0.04% in 2022.

               (14)The established indicators of fiscal adjustment set out in Regulation (EC) No 1466/97 need to be considered in the context of the current circumstances. First, there is significant uncertainty surrounding output gap estimates. Second, there is a need for fiscal policy to stand ready to rapidly adapt to the evolution of the pandemic, shifting from emergency relief to more targeted measures once health risks diminish. Third, the current context is characterised by a significant policy response to support economic activity. In the presence of sizeable transfers from the EU budget (such as those from the Recovery and Resilience Facility), the established indicators do not capture the full impulse provided by fiscal policies to the economy. Against this background, the structural balance does not appear adequate in the current circumstances. The expenditure benchmark, in turn, needs to be adapted
                  10
                and complemented with additional information in order to fully gauge the fiscal policy orientation.

               First, similarly to the approach pursed in the assessment of the 2021 Draft Budgetary Plans, temporary emergency measures have been excluded from the expenditure aggregate. These crisis-related temporary emergency measures support health systems and compensate workers and firms for the losses in income due to lockdowns and supply chain disruptions; their reversal by the public authorities is contingent on the return of the public health and economic situation to normality.

               Second, to assess the overall fiscal stance at the current juncture, the sizeable transfers from the EU budget (such as those from the Recovery and Resilience Facility) should be included in the relevant expenditure aggregate. Therefore, the fiscal stance is then measured by the change in primary expenditure (net of discretionary revenue measures and excluding crisis-related temporary emergency measures) including expenditure financed by grants under the Recovery and Resilience Facility and other EU funds.

               Going beyond the overall fiscal stance, the analysis also aims at assessing whether national fiscal policy is prudent and its composition is conducive to a sustainable recovery consistent with the green and digital transitions. For that reason, particular attention is paid to the evolution of nationally financed primary current expenditure and investment.

               (15)In its 2021 Stability Programme, Ireland’s general government deficit is planned to decrease to 2.8% of GDP in 2022, mainly due to a discontinuation of the temporary support measures adopted in 2020 and 2021. The general government debt ratio is planned to decrease to 60.2% of GDP in 2022. These projections are in line with the Commission’s 2021 spring forecast.

               Based on the Commission’s forecast, the overall fiscal stance as defined above – also including the impact on aggregate demand in 2022 from investment financed by both the national and the EU budgets, notably the Recovery and Resilience Facility – is estimated at -0.4% of GDP
                  11
               . The positive contribution of expenditure financed by Recovery and Resilience Facility grants and other EU funds is projected to increase by 0.2 percentage points of GDP. Nationally financed investment is projected to provide a contractionary contribution of 0.2 percentage points of GDP.
                  12
                Nationally financed primary current expenditure (net of discretionary revenue measures) is projected to provide an expansionary contribution of 0.2 percentage points of GDP.

               (16)The quality of Member States’ budgetary measures appears particularly important. Fiscal structural reforms aimed at improving the composition of national budgets can support potential growth, create much-needed fiscal space and help ensuring fiscal sustainability over the longer term, including in view of climate change and health challenges. On the revenue side, the COVID-19 crisis has reinforced the importance of reforms for more efficient and fairer public revenue systems. On the expenditure side, it has made it even more crucial to increase the level and quality of sustainable and growth-enhancing  investments, consistent with serving the objectives of enhancing growth potential, economic and social resilience and the green and digital twin transition. The Recovery and Resilience Plans will allow to improve the composition of national budgets.

               (17)According to the programme’s medium-term budgetary plans, the general government deficit is planned to decrease from 1.2% of GDP in 2023 to 0.7% of GDP in 2024 and 0.2% of GDP in 2025.

               Based on the programme, the overall fiscal stance – also including the impact on aggregate demand from investment financed by both the national and the EU budgets, notably the Recovery and Resilience Facility – is estimated at 1.6% of GDP in 2023 and 2024 on average. The positive contribution of expenditure financed by Recovery and Resilience Facility grants and other EU funds is projected to remain unchanged. Nationally financed investment is projected to provide an expansionary contribution of 0.1 percentage point of GDP.
                  13
                Nationally financed primary current expenditure (net of discretionary revenue measures) is projected to provide a contractionary contribution of 1.4 percentage points of GDP.

               The current estimate of the 10-year average nominal potential growth is 6½ %
                  14
               . However, this estimate does not include the impact of the reforms that are part of the Recovery and Resilience Plan and can boost Ireland’s potential growth.

               (18)The general government debt ratio is planned in the stability programme to decrease from 59.0% of GDP in 2023 to 57.7% of GDP in 2024. Ireland is considered to face low fiscal sustainability risks over the medium term, as per the latest debt sustainability analysis
                  15
               .

               (19)In view of the currently still exceptionally high degree of uncertainty, the fiscal policy guidance should remain predominantly qualitative. More precise quantified guidance for the later years should be provided in 2022, if the degree of uncertainty has sufficiently declined by then.

               The Council has assessed the 2021 Stability Programme and the follow-up by Ireland to the Council Recommendation of 20 July 2020.

               HEREBY RECOMMENDS IRELAND TO:

               1.In 2022, pursue a supportive fiscal stance, including the impulse provided by the Recovery and Resilience Facility, and preserve nationally financed investment.

               2.When economic conditions allow, pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions and ensuring fiscal sustainability in the medium term. At the same time, enhance investment to boost growth potential.

               3.Pay particular attention to the composition of public finances, both on the revenue and expenditure sides of the budget, and to the quality of budgetary measures, to ensure a sustainable and inclusive recovery. Prioritise sustainable and growth-enhancing investment, notably supporting the green and digital transition. Give priority to fiscal structural reforms that will help provide financing for public policy priorities and contribute to the long-term sustainability of public finances, including by strengthening the coverage, adequacy, and sustainability of health and social protection systems for all.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        OJ L 209, 2.8.1997, p. 1.

                     (2)

                        The clause, as set out in Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and Articles 3(5) and 5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in times of severe economic downturn.

                     (3)

                        Communication from the Commission to the Council on the activation of the general escape clause of   the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final.

                     (4)

                        Communication from the Commission on Annual Sustainable Growth Strategy 2021, Brussels, 17.9.2020, COM(2020) 575 final.

                     (5)

                        Council Recommendation of 20 July 2020 on the National Reform Programme of Ireland and delivering a Council opinion on the 2020 Stability Programme of Ireland, OJ C 282, 26.8.2020, p. 39.

                     (6)

                        Pending final adoption by the Council, after endorsement by the European Council. The text agreed by the Eurogroup on 16 December 2020 is available at:
                  https://data.consilium.europa.eu/doc/document/ST-14356-2020-INIT/en/pdf

                     (7)

                     OJ
                      L57, 18.2.2021, p.17.

                     (8)

                        Communication from the Commission to the Council on one year since the outbreak of COVID-19: fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final.

                     (9)

                        Communication from the Commission on Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our economy, Brussels, 2.6.2021, COM(2021)500 final.

                     (10)

                        In particular, the 4-year smoothing of investment used in the expenditure benchmark does not allow assessing properly the fiscal support to the recovery provided by nationally financed investments.

                     (11)

                        A negative sign of the indicator corresponds to an excess of the primary expenditure growth compared with medium-term economic growth, which indicates an expansionary fiscal policy.

                     (12)

                        Other nationally financed capital expenditure is projected to provide an expansionary contribution of 0.1 percentage points of GDP.

                     (13)

                        Other nationally financed capital expenditure is projected to provide a contractionary contribution of 0.3 percentage points of GDP.

                     (14)

                        Estimated by the Commission, following the commonly agreed methodology.

                     (15)

                        See Commission Staff Working Document – Statistical Annex providing background data relevant for the assessment of the 2021 Stability and Convergence Programmes


               EUROPEAN COMMISSION
            Brussels, 2.6.2021
            COM(2021) 508 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            delivering a Council opinion on the 2021 Stability Programme of Greece
            {SWD(2021) 501 final}

               Recommendation for a

               COUNCIL RECOMMENDATION

               delivering a Council opinion on the 2021 Stability Programme of Greece

               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 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,

               After consulting the Economic and Financial Committee,

               Whereas:

               (1)On 20 March 2020, the Commission adopted a Communication on the activation of the general escape clause
                  2
                of the Stability and Growth Pact.
                  3
                In its Communication, the Commission set out its view that, given the expected severe economic downturn resulting from the COVID-19 outbreak, the conditions to activate the general escape clause were met. On 23 March 2020, the Ministers of Finance of the Member States agreed with the assessment of the Commission. The general escape clause has granted Member States budgetary flexibility to deal with the crisis. It has facilitated the coordination of budgetary policies in times of severe economic downturn. Its activation allows for a temporary departure from the adjustment path towards the medium-term budgetary objective of each Member State, provided this does not endanger fiscal sustainability in the medium term. On 17 September 2020, in its Annual Sustainable Growth Strategy, the Commission announced that the general escape clause would remain active in 2021.
                  4

               (2)On 20 July 2020, the Council recommended Greece
                  5
                to take all necessary measures, in line with the general escape clause, to effectively address the pandemic, sustain the economy and support the ensuing recovery. It also recommended Greece to pursue, when economic conditions allow, fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment.

               (3)The Council Recommendation on the economic policy of the euro area indicates that fiscal policies remain supportive in all euro area Member States throughout 2021 and that policy measures should be tailored to country-specific circumstances and be timely, temporary and targeted
                  6
               . When the epidemiological and economic conditions allow, emergency measures should be phased out, while combatting the social and labour-market impact of the crisis. Fiscal policies should be pursued that are aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment. Member States should pursue reforms that strengthen the coverage, adequacy, and sustainability of health and social protection systems for all.

               (4)On 18 November 2020, the Commission adopted its Opinions on the 2021 Draft Budgetary Plans of the euro area Member States, which were based on a qualitative assessment of the fiscal measures. The Commission was of the opinion that the Draft Budgetary Plan of Greece was overall in line with the fiscal policy recommendations adopted by the Council on 20 July 2020, and that most of the measures included in the plan supported economic activity against the background of considerable uncertainty.

               (5)Next Generation EU, including the Recovery and Resilience Facility, will ensure a sustainable, inclusive and fair recovery. Regulation (EU) 2021/241 establishing the Recovery and Resilience Facility
                  7
                came into force on 19 February 2021. This Facility will provide financial support for the implementation of reforms and investment, entailing a fiscal impulse financed by the EU. It will contribute to the economic recovery, to the implementation of sustainable and growth-enhancing reforms and investment, notably to promote the green and digital transitions, and it will strengthen the economies’ resilience and potential growth. In turn, it will also help public finances to return to more favourable positions in the near term and will contribute to strengthening sustainable public finances, growth and job creation in the medium and long term.

               (6)On 3 March 2021, the Commission adopted a Communication providing further policy orientations to facilitate the coordination of fiscal policies and the preparation of Member States’ Stability and Convergence Programmes.
                  8
                The overall fiscal stance, taking into account national budgets and the Recovery and Resilience Facility, should remain supportive in 2021 and 2022. At the same time, given the expectation of economic activity gradually normalising in the second half of 2021, Member States’ fiscal policies should become more differentiated in 2022. Member States’ fiscal policies should take into account the state of the recovery, fiscal sustainability and the need to reduce economic, social and territorial divergences. In view of the need to support a sustainable recovery for the EU, Member States with low sustainability risks should gear their budgets towards maintaining a supportive fiscal policy in 2022, taking into account the impact of the Recovery and Resilience Facility. Member States with high debt levels should pursue prudent fiscal policies, while preserving nationally financed investment and making use of grants under the Recovery and Resilience Facility to fund additional high-quality investment projects and structural reforms. For the period beyond 2022, fiscal policies should continue to take into account the strength of the recovery, the degree of economic uncertainty and fiscal sustainability considerations. A refocusing of fiscal policies towards achieving prudent medium-term fiscal positions, including by phasing out support measures in due course, will contribute to ensuring fiscal sustainability in the medium term.

               (7)The Communication of 3 March 2021 also announced the Commission’s view that the decision on the deactivation or continued application of the general escape clause should be taken as an overall assessment of the state of the economy, with the level of economic activity in the EU or euro area compared to pre-crisis levels (end-2019) as key quantitative criterion. On the basis of the Commission’s 2021 spring forecast, on 2 June the Commission considered that the conditions to continue to apply the general escape clause in 2022 and to deactivate it as of 2023 were met. Country-specific situations will continue to be taken into account after the deactivation of the general escape clause.
                  9

               (8)Following its successful completion of the financial assistance programme under the European Stability Mechanism in 2018, Greece is subject to enhanced surveillance in accordance with Regulation (EU) No 472/2013. The activation of enhanced surveillance for Greece
                  10
                acknowledges the fact that over the medium term, Greece needs to continue adopting measures to address the potential sources of macroeconomic imbalances, while implementing structural reforms to support robust and sustainable economic growth. Greece made a commitment in the Eurogroup of 22 June 2018 to continue all key reforms adopted under the programme until they are fully completed. Greece also committed to implementing specific measures related to fiscal and fiscal-structural policies, social welfare, financial stability, labour and product markets, privatisation, functioning of the justice system, public administration and anti-corruption. These structural reforms are increasingly important to Greece’s efforts to restart its economy. The successful implementation and completion of these reforms should significantly help support Greece’s growth in the medium- and long-term. Greece is subject to quarterly reporting on its progress in implementing its commitments under enhanced surveillance. A favourable report can, on semiannual basis, pave the way for the release of debt relief measures worth 0.7% of GDP per year. The release of the first four instalments of policy-contingent debt measures worth in total EUR 3.252 million and was agreed by the Eurogroup in April 2019, December 2019, June 2020 and November 2020 respectively. The tenth enhanced surveillance report assessing Greece’s progress in implementing its commitments was published on 2 June 2021.

               (9)On 29 April 2021, Greece submitted its 2021 Stability Programme, in line with Article 4 of Regulation (EC) No 1466/97.

               (10)In 2020, based on data validated by Eurostat, Greece’s general government deficit was 9.7% of GDP, while general government debt increased to 205.6% of GDP. The annual change in the primary budget balance amounted to 11.3% of GDP, including discretionary budgetary measures of 5.9% of GDP in support of the economy and the operation of automatic stabilisers. Greece also provided liquidity support to companies and households (such as guarantees and tax deferrals, which do not have a direct and immediate budgetary impact) unless and until the guarantees are called, estimated at 2.2% of GDP.

               On 2 June 2021, the Commission issued a report under Article 126(3) TFEU. This report discusses the budgetary situation of Greece, as its general government deficit in 2020 exceeded the 3% of GDP Treaty reference value, while its general government debt exceeded the 60% of GDP Treaty reference value and did not diminish at a satisfactory pace. The report concluded that the deficit criterion was not fulfilled and the debt criterion was not complied with.

               (11)The macroeconomic scenario underpinning the Stability Programme’s budgetary projections is cautious in 2021 and expects real GDP growth to be around 0.5 percentage points lower than the Commission 2021 spring forecast. This difference is due to different assumptions on the development of the pandemic, the uptake of funds under the Recovery and Resilience Facility, and the pace of recovery of the tourism sector. The macroeconomic projections under the Stability Programme for 2022 are closely aligned with the Commission 2021 spring forecast.

               (12)In its 2021 Stability Programme, the government plans an increase of the general government deficit from 9.7% of GDP in 2020 to 9.9% of GDP in 2021, while the debt ratio is planned to decrease to 204.8% of GDP in 2021. According to the programme, the decrease in the primary budget balance in 2021 compared with the pre-crisis level (2019) is set to amount to 11.7% of GDP, reflecting the discretionary budgetary measures of 6.4% of GDP in support of the economy and the operation of automatic stabilisers. Projections of the general government deficit are in line with the Commission 2021 spring forecast. Regarding the debt ratio, the projections presented in the Stability Programme are below the Commission 2021 spring forecast, which expects the debt ratio to reach 208.8% of GDP. The difference reflects different assumptions on privatisation proceeds, net accumulation of financial assets and cash-accrual adjustments.

               (13)In response to the COVID-19 pandemic and related economic downturn, Greece has adopted budgetary measures to strengthen the capacity of its health system, contain the pandemic and provide relief to those individuals and sectors that have been particularly affected. This forceful policy response has cushioned the contraction in GDP, which, in turn, curtailed the increase in government deficit and public debt. Fiscal measures should maximise support to the recovery without pre-empting future fiscal trajectories. Therefore, measures should avoid creating a permanent burden on public finances. When Member States introduce permanent measures, they should properly fund them to ensure budgetary neutrality in the medium term. The measures taken by Greece in 2020 and 2021 have been in line with the Council Recommendation of 20 July 2020. The discretionary budgetary measures adopted by the government in 2020 and 2021 and announced for 2022 are temporary or matched by offsetting measures.

               (14)The 2021 Stability Programme assumes investment and reforms financed by grants under the Recovery and Resilience Facility amounting to 0.9% of GDP in 2021, 1.7% of GDP in 2022, 1.6% of GDP in 2023, 1.6% of GDP in 2024, 1.5% of GDP in 2025 and 1.5% of GDP in 2026. The programme also assumes loans under the Recovery and Resilience Facility amounting to 1.4% of GDP in 2021, 1.4% of GDP in 2022, 1.1% of GDP in 2024, 1.1% of GDP in 2025 and 0.5% in 2026. The Commission spring forecast includes these grants in its budgetary projections, while for the loans it assumes a lower amount in 2022 based on a uniform annual disbursement after 2021.

               (15)The established indicators of fiscal adjustment set out in Regulation (EC) No 1466/97 need to be considered in the context of the current circumstances. First, there is significant uncertainty surrounding output gap estimates. Second, there is a need for fiscal policy to stand ready to rapidly adapt to the evolution of the pandemic, shifting from emergency relief to more targeted measures once health risks diminish. Third, the current context is characterised by a significant policy response to support economic activity. In the presence of sizeable transfers from the EU budget (such as those from the Recovery and Resilience Facility), the established indicators do not capture the full impulse provided by fiscal policies to the economy. Against this background, the structural balance does not appear adequate in the current circumstances. The expenditure benchmark, in turn, needs to be adapted
                  11
                and complemented with additional information in order to fully gauge the fiscal policy orientation.

               First, and similarly to the approach pursued in the assessment of the 2021 Draft Budgetary Plans, temporary emergency measures have been excluded from the expenditure aggregate. These crisis-related temporary emergency measures support health systems and compensate workers and firms for the losses in income due to lockdowns and supply chain disruptions; their reversal by the public authorities is contingent on the return of the public health and economic situation to normality.

               Second, to assess the overall fiscal stance at the current juncture, the sizeable transfers from the EU budget (such as those from the Recovery and Resilience Facility) should be included in the relevant expenditure aggregate.

               Therefore, the fiscal stance is then measured by the change in primary expenditure (net of discretionary revenue measures and excluding crisis-related temporary emergency measures) including expenditure financed by grants under the Recovery and Resilience Facility and other EU funds.

               Going beyond the overall fiscal stance, the analysis also aims at assessing whether national fiscal policy is prudent and its composition is conducive to a sustainable recovery consistent with the green and digital transitions. For that reason, particular attention is paid to the evolution of nationally financed primary current expenditure and investment.

               (16)In its 2021 Stability Programme, Greece’s general government deficit is planned to decrease to 2.9% of GDP in 2022, mainly due to the expected economic recovery and the discontinuation of the temporary support measures adopted in 2020 and 2021. The general government debt ratio is planned to decrease to 189.5% of GDP in 2022. The projections of the general government deficit are in line with the Commission 2021 spring forecast. Regarding the debt ratio, the projections presented in the Stability Programme are below the Commission 2021 spring forecast. The difference is explained by different assumptions on cash balance, on privatization proceeds and net accumulation of financial assets.

               Based on the Commission’s forecast, the overall fiscal stance as defined above – also including the impact on aggregate demand in 2022 from investment financed by both the national and the EU budgets, notably the Recovery and Resilience Facility – is projected at -2.4% of GDP.
                  12
                The positive contribution of expenditure financed by Recovery and Resilience Facility grants and other EU funds is projected to provide an increase by 0.3 percentage points of GDP. Nationally financed investment is projected to provide an expansionary contribution of 0.9 percentage points of GDP.
                  13
                Nationally financed primary current expenditure (net of discretionary revenue measures) is projected to provide an expansionary contribution of 0.3 percentage points of GDP.

               (17)The quality of Member States’ budgetary measures appears particularly important. Fiscal structural reforms aimed at improving the composition of national budgets can support potential growth, create much-needed fiscal space and help ensuring fiscal sustainability over the longer term, including in view of climate change and health challenges. On the revenue side, the COVID-19 crisis has reinforced the importance of reforms for more efficient and fairer public revenue systems. On the expenditure side, it has made even more crucial to increase the level and quality of sustainable and growth-enhancing investments, consistent with serving the objectives of enhancing growth potential, economic and social resilience and the green and digital twin transition. The Recovery and Resilience Plans will allow to improve the composition of national budgets.

               (18)According to the programme’s medium-term budgetary plans, the general government deficit is planned to reach 0.4% of GDP in 2023 and turn into a surplus of 0.6% of GDP in 2024.

               Based on the programme, the overall fiscal stance – also including the impact on aggregate demand from investment financed by both the national and the EU budgets, notably the Recovery and Resilience Facility – is estimated at 0.6% of GDP in 2023 and 2024 on average.
                  14
                The positive contribution of expenditure financed by Recovery and Resilience Facility grants and other EU funds is projected to decrease by 0.1 percentage points of GDP. Nationally financed investment is projected to provide a neutral contribution.
                  15
                Nationally financed primary current expenditure (net of discretionary revenue measures) is projected to provide a contractionary contribution of 0.6 percentage points of GDP.

               The current estimate of the 10-year average nominal potential growth is 1¼%.
                  16
                However, this estimate does not include the impact of the reforms that are part of the Recovery and Resilience Plan and can boost Greece’s potential growth.

               (19)The general government debt ratio is planned to decrease from 176.7% of GDP in 2023 to 166.1% of GDP in 2024. In light of Greece’s high debt ratio, which is projected to only gradually fall over time, Greece is considered to face high fiscal sustainability risks over the medium term, as per the latest debt sustainability analysis.
                  17
                The 10th enhanced surveillance report points to other factors relevant for an overall assessment of debt sustainability, namely that  the composition and maturity profile of government debt mitigates debt vulnerabilities, while contingent liabilities are an additional risk.

               (20)In view of the currently still exceptionally high degree of uncertainty, the fiscal policy guidance should remain predominantly qualitative. More precise quantified guidance for the later years should be provided in 2022, if the degree of uncertainty has sufficiently declined by then.

               The Council has assessed the 2021 Stability Programme and the follow-up by Greece to the Council Recommendation of 20 July 2020.

               HEREBY RECOMMENDS GREECE TO:

               1.In 2022, use the Recovery and Resilience Facility to finance additional investment in support of the recovery while pursuing a prudent fiscal policy. Preserve nationally financed investment.

               2.When economic conditions allow, pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions and ensuring fiscal sustainability in the medium term. At the same time, enhance investment to boost growth potential.

               3.Pay particular attention to the composition of public finances, both on the revenue and expenditure sides of the budget, and to the quality of budgetary measures, to ensure a sustainable and inclusive recovery. Prioritise sustainable and growth-enhancing investment, notably supporting the green and digital transition. Give priority to fiscal structural reforms that will help provide financing for public policy priorities and contribute to the long-term sustainability of public finances, including by strengthening the coverage, adequacy, and sustainability of health and social protection systems for all.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        OJ L 209, 2.8.1997, p. 1.

                     (2)

                        The clause, as set out in Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and Articles 3(5) and 5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in times of severe economic downturn.

                     (3)

                        Communication from the Commission to the Council on the activation of the general escape clause of   the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final.

                     (4)

                        Communication from the Commission on Annual Sustainable Growth Strategy 2021, Brussels, 17.9.2020, COM(2020) 575 final.

                     (5)

                        Council Recommendation of 20 July 2020 on the National Reform Programme of Greece and delivering a Council opinion on the 2020 Stability Programme of Greece, OJ C 282, 26.8.2020, p. 46.

                     (6)

                        Pending final adoption by the Council, after endorsement by the European Council. The text agreed by the Eurogroup on 16 December 2020 is available at: https://data.consilium.europa.eu/doc/document/ST-14356-2020-INIT/en/pdf

                     (7)

                     OJ
                      L57, 18.2.2021, p.17.

                     (8)

                        Communication from the Commission to the Council on one year since the outbreak of COVID-19: fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final.

                     (9)

                        Communication from the Commission on Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our economy, Brussels, 2.6.2021, COM(2021)500 final.

                     (10)

                        Commission Implementing Decision (EU) 2018/1192 of 11 July 2018 on the activation of enhanced surveillance for Greece, OJ L 211, 22.8.2018, p. 1, and Commission Implementing Decision (EU) 2021/271 of 17 February 2021 on the prolongation of enhanced surveillance for Greece, OJ L 61, 22.2.2021.

                     (11)

                        In particular, the 4-year smoothing of investment used in the expenditure benchmark does not allow assessing properly the fiscal support to the recovery provided by nationally financed investments.

                     (12)

                        A negative sign of the indicator corresponds to an excess of the primary expenditure growth compared with medium-term economic growth, which indicates an expansionary fiscal policy

                     (13)

                        Other nationally financed capital expenditure is projected to provide an expansionary contribution of 0.9 percentage points of GDP.

                     (14)

                        The figure is estimated at 0.6% of GDP

                     (15)

                        Other nationally financed capital expenditure is projected to provide an expansionary contribution of 0.1 percentage points of GDP.

                     (16)

                        Estimated by the Commission, following the commonly agreed methodology.

                     (17)

                        See Commission Staff Working Document – Statistical Annex providing background data relevant for the assessment of the 2021 Stability and Convergence Programmes.


               EUROPEAN COMMISSION
            Brussels, 2.6.2021
            COM(2021) 501 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            delivering a Council opinion on the 2021 Stability Programme of Belgium
            {SWD(2021) 501 final}

               Recommendation for a

               COUNCIL RECOMMENDATION

               delivering a Council opinion on the 2021 Stability Programme of Belgium

               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 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,

               After consulting the Economic and Financial Committee,

               Whereas:

               (1)On 20 March 2020, the Commission adopted a Communication on the activation of the general escape clause
                  2
                of the Stability and Growth Pact.
                  3
                In its Communication, the Commission set out its view that, given the expected severe economic downturn resulting from the COVID-19 outbreak, the conditions to activate the general escape clause were met. On 23 March 2020, the Ministers of Finance of the Member States agreed with the assessment of the Commission. The general escape clause has granted Member States budgetary flexibility to deal with the crisis. It has facilitated the coordination of budgetary policies in times of severe economic downturn. Its activation allows for a temporary departure from the adjustment path towards the medium-term budgetary objective of each Member State, provided this does not endanger fiscal sustainability in the medium term. On 17 September 2020, in its Annual Sustainable Growth Strategy, the Commission announced that the general escape clause would remain active in 2021.
                  4

               (2)On 20 July 2020, the Council recommended Belgium
                  5
                to take all necessary measures, in line with the general escape clause, to effectively address the pandemic, sustain the economy and support the ensuing recovery. It also recommended Belgium to pursue, when economic conditions allow, fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment.

               (3)The Council Recommendation on the economic policy of the euro area indicates that fiscal policies remain supportive in all euro area Member States throughout 2021 and that policy measures should be tailored to country-specific circumstances and be timely, temporary and targeted.
                  6
                When the epidemiological and economic conditions allow, emergency measures should be phased out, while combatting the social and labour-market impact of the crisis. Fiscal policies should be pursued that are aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment. Member States should pursue reforms that strengthen the coverage, adequacy, and sustainability of health and social protection systems for all.

               (4)On 18 November 2020, the Commission adopted its Opinions on the 2021 Draft Budgetary Plans of the euro area Member States, which were based on a qualitative assessment of the fiscal measures. The Commission was of the opinion that the Draft Budgetary Plan of Belgium was overall in line with the fiscal policy recommendations adopted by the Council on 20 July 2020, and that most of the measures included in the plans supported economic activity against the background of considerable uncertainty. However, some measures did not appear to be temporary or matched by offsetting measures.

               (5)Next Generation EU, including the Recovery and Resilience Facility, will ensure a sustainable, inclusive and fair recovery. Regulation (EU) 2021/241 establishing the Recovery and Resilience Facility
                  7
                came into force on 19 February 2021. This Facility will provide financial support for the implementation of reforms and investment, entailing a fiscal impulse financed by the EU. It will contribute to the economic recovery, to the implementation of sustainable and growth-enhancing reforms and investment, notably to promote the green and digital transitions, and it will strengthen the economies’ resilience and potential growth. In turn, it will also help public finances to return to more favourable positions in the near term and will contribute to strengthening sustainable public finances, growth and job creation in the medium and long term.

               (6)On 3 March 2021, the Commission adopted a Communication providing further policy orientations to facilitate the coordination of fiscal policies and the preparation of Member States’ Stability and Convergence Programmes.
                  8
                The overall fiscal stance, taking into account national budgets and the Recovery and Resilience Facility, should remain supportive in 2021 and 2022. At the same time, given the expectation of economic activity gradually normalising in the second half of 2021, Member States’ fiscal policies should become more differentiated in 2022. Member States’ fiscal policies should take into account the state of the recovery, fiscal sustainability and the need to reduce economic, social and territorial divergences. In view of the need to support a sustainable recovery for the EU, Member States with low sustainability risks should gear their budgets towards maintaining a supportive fiscal policy in 2022, taking into account the impact of the Recovery and Resilience Facility. Member States with high debt levels should pursue prudent fiscal policies, while preserving nationally financed investment and making use of grants under the Recovery and Resilience Facility to fund additional high-quality investment projects and structural reforms. For the period beyond 2022, fiscal policies should continue to take into account the strength of the recovery, the degree of economic uncertainty and fiscal sustainability considerations. A refocusing of fiscal policies towards achieving prudent medium-term fiscal positions, including by phasing out support measures in due course, will contribute to ensuring fiscal sustainability in the medium term.

               (7)The Communication of 3 March 2021 also announced the Commission’s view that the decision on the deactivation or continued application of the general escape clause should be taken as an overall assessment of the state of the economy, with the level of economic activity in the EU or euro area compared to pre-crisis levels (end-2019) as key quantitative criterion. On the basis of the Commission’s 2021 spring forecast, on 2 June the Commission considered that the conditions to continue to apply the general escape clause in 2022 and to deactivate it as of 2023 were met. Country-specific situations will continue to be taken into account after the deactivation of the general escape clause. .
                  9

               (8)On 30 April 2021, Belgium submitted its 2021 Stability Programme, in line with Article 4 of Regulation (EC) No 1466/97.

               (9)In 2020, based on data validated by Eurostat, Belgium’s general government deficit was 9.4% of GDP, while general government debt increased to 114.1% of GDP. The annual change in the primary budget balance amounted to -7.5% of GDP, including discretionary budgetary measures of 4.5% of GDP in support of the economy and the operation of automatic stabilisers. Belgium also provided liquidity support to companies and households (such as guarantees and tax deferrals, which do not have a direct and immediate budgetary impact), estimated at 11.8% of GDP.

               On 2 June 2021, the Commission issued a report under Article 126(3) TFEU. This report discusses the budgetary situation of Belgium, as its general government deficit in 2020 exceeded the 3% of GDP Treaty reference value, while its general government debt exceeded the 60% of GDP Treaty reference value and did not diminish at a satisfactory pace. The report concluded that the deficit criterion was not fulfilled and the debt criterion was not complied with.

               (10)The macroeconomic scenario underpinning the budgetary projections is realistic in 2021 and 2022. The Stability Programme projects real GDP to grow by 4.1% and 3.5% in 2021 and 2022, respectively. The Commission’s 2021 spring forecast projects slightly higher real growth in 2021 and 2022, at 4.5% and 3.7% respectively, driven by higher investment.

               (11)In its 2021 Stability Programme, the government plans a decrease in the general government deficit from 9.4% of GDP in 2020 to 7.7% of GDP in 2021, while the debt ratio is planned to increase to 116.4% of GDP in 2021, from 114.1 % in 2020. According to the programme, the change in the primary budget balance in 2021 compared with the pre-crisis level (2019) is set to amount to -6.1% GDP, reflecting discretionary budgetary measures of 2.7% of GDP in support of the economy and the operation of automatic stabilisers. These projections are in line with the Commission’s 2021 spring forecast.

               (12)In response to the COVID-19 pandemic and related economic downturn, Belgium has adopted budgetary measures to strengthen the capacity of its health system, contain the pandemic and provide relief to those individuals and sectors that have been particularly affected. This forceful policy response has cushioned the contraction in GDP, which, in turn, curtailed the increase in government deficit and public debt. Fiscal measures should maximise support to the recovery without pre-empting future fiscal trajectories. Therefore, measures should avoid creating a permanent burden on public finances. When Member States introduce permanent measures, they should properly fund them to ensure budgetary neutrality in the medium term. The measures taken by Belgium in 2020 and 2021 have been in line with the Council Recommendation of 20 July 2020. The discretionary budgetary measures adopted by the government in 2020 and 2021 are mostly temporary or matched by offsetting measures.

               (13)The 2021 Stability Programme does not include yet receipts of grants under the Recovery and Resilience Facility. Meanwhile, the Commission forecast assumes investments and reforms financed by grants under the Recovery and Resilience Facility amounting to 0.2% of GDP in 2021 and 0.3% of GDP in 2022, following the same hypothesis as used by the Belgian Federal Planning Bureau in its macroeconomic evaluation of the Recovery and Resilience Facility.

               (14)The established indicators of fiscal adjustment set out in Regulation (EC) No 1466/97 need to be considered in the context of the current circumstances. First, there is significant uncertainty surrounding output gap estimates. Second, there is a need for fiscal policy to stand ready to rapidly adapt to the evolution of the pandemic, shifting from emergency relief to more targeted measures once health risks diminish. Third, the current context is characterised by a significant policy response to support economic activity. In the presence of sizeable transfers from the EU budget (such as those from the Recovery and Resilience Facility), the established indicators do not capture the full impulse provided by fiscal policies to the economy. Against this background, the structural balance does not appear adequate in the current circumstances. The expenditure benchmark, in turn, needs to be adapted
                  10
                and complemented with additional information in order to fully gauge the fiscal policy orientation.

               First, and similarly to the approach pursued in the assessment of the 2021 Draft Budgetary Plans, temporary emergency measures have been excluded from the expenditure aggregate. These crisis-related temporary emergency measures support health systems and compensate workers and firms for the losses in income due to lockdowns and supply chain disruptions; their reversal by the public authorities is contingent on the return of the public health and economic situation to normality.

               Second, to assess the overall fiscal stance at the current juncture, the sizeable transfers from the EU budget (such as those from the Recovery and Resilience Facility) should be included in the relevant expenditure aggregate.

               Therefore, the fiscal stance is then measured by the change in primary expenditure (net of discretionary revenue measures and excluding crisis-related temporary emergency measures) including expenditure financed by grants under the Recovery and Resilience Facility and other EU funds.

               Going beyond the overall fiscal stance, the analysis also aims at assessing whether national fiscal policy is prudent and its composition is conducive to a sustainable recovery consistent with the green and digital transitions. For that reason, particular attention is paid to the evolution of nationally financed primary current expenditure and investment.

               (15)In its 2021 Stability Programme, Belgium’s general government deficit is planned to decrease to 4.5% of GDP in 2022, mainly due to a discontinuation of most of the temporary support measures adopted in 2020 and 2021 and to higher government revenue as a result of the improving macroeconomic situation. The general government debt ratio is planned to stabilise at 116% of GDP in 2022. These projections are in line with the Commission’s 2021 spring forecast.

               Based on the Commision’s forecast, the overall fiscal stance as defined above – also including the impact on aggregate demand in 2022 from investment financed by both the national and the EU budgets, notably the Recovery and Resilience Facility – is estimated at –0.4% of GDP
                  11
               . The positive contribution of expenditure financed by Recovery and Resilience Facility grants and other EU funds is projected to increase by 0.1 percentage points of GDP. Nationally financed investment is projected to provide a contractionary contribution of 0.1 percentage points of GDP.
                  12
                Nationally financed primary current expenditure (net of discretionary revenue measures) is projected to provide an expansionary contribution of 0.4 percentage points of GDP.

               (16)The quality of Member States’ budgetary measures appears particularly important. Fiscal structural reforms aimed at improving the composition of national budgets can support potential growth, create much-needed fiscal space and help ensuring fiscal sustainability over the longer term, including in view of climate change and health challenges. On the revenue side, the COVID-19 crisis has reinforced the importance of reforms for more efficient and fairer public revenue systems. On the expenditure side, it has made even more crucial to increase the level and quality of sustainable and growth-enhancing investments, consistent with serving the objectives of enhancing growth potential, economic and social resilience and the green and digital twin transition. The Recovery and Resilience Plans will allow to improve the composition of national budgets.

               (17)According to the programme’s medium-term budgetary plans, the general government deficit is planned to decrease from 4% in 2023 to 3.7% of GDP in 2024. The general government deficit is not planned to return below 3% of GDP over the programme’s horizon. The programme does not include the information required to estimate the overall fiscal stance in 2023 and 2024.

               The current estimate of the 10-year average nominal potential growth is 2 ¾ %
                  13
               . However, this estimate does not include the impact of the reforms that are part of the Recovery and Resilience Plan and can boost Belgium’s potential growth.

               (18)The general government debt ratio is planned to increase from 116.7% of GDP in 2023 to 117.4% of GDP in 2024, entirely due to stock-flow adjustments. In light of the high debt ratio, which is projected to only gradually fall over time, Belgium is considered to face high fiscal sustainability risks over the medium term, as per the latest debt sustainability analysis.
                  14

               (19)In view of the currently still exceptionally high degree of uncertainty, the fiscal policy guidance should remain predominantly qualitative. More precise quantified guidance for the later years should be provided in 2022, if the degree of uncertainty has sufficiently declined by then.

               The Council has assessed the 2021 Stability Programme and the follow-up by the Belgium to the Council Recommendation of 20 July 2020.

               HEREBY RECOMMENDS BELGIUM TO:

               1.In 2022, use the Recovery and Resilience Facility to finance additional investment in support of the recovery while pursuing a prudent fiscal policy. Preserve nationally financed investment.

               2.When economic conditions allow, pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions and ensuring fiscal sustainability in the medium term. At the same time, enhance investment to boost growth potential.

               3.Pay particular attention to the composition of public finances, both on the revenue and expenditure sides of the budget, and to the quality of budgetary measures, to ensure a sustainable and inclusive recovery. Prioritise sustainable and growth-enhancing investment, notably supporting the green and digital transition. Give priority to fiscal structural reforms that will help provide financing for public policy priorities and contribute to the long-term sustainability of public finances, including by strengthening the coverage, adequacy, and sustainability of health and social protection systems for all.

               Done at Brussels, 2.6.2021

                     For the Council

                     The President

                     (1)

                        OJ L 209, 2.8.1997, p. 1.

                     (2)

                        The clause, as set out in Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and Articles 3(5) and 5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in times of severe economic downturn.

                     (3)

                        Communication from the Commission to the Council on the activation of the general escape clause of   the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final.

                     (4)

                        Communication from the Commission on Annual Sustainable Growth Strategy 2021, Brussels, 17.9.2020, COM(2020) 575 final.

                     (5)

                        Council Recommendation of 20 July 2020 on the National Reform Programme of Belgium and delivering a Council opinion on the 2020 Stability Programme of Belgium, OJ C 282, 26.8.2020, p. 1.

                     (6)

                        Pending final adoption by the Council, after endorsement by the European Council. The text agreed by the Eurogroup on 16 December 2020 is available at: https://data.consilium.europa.eu/doc/document/ST-14356-2020-INIT/en/pdf

                     (7)

                     OJ
                      L57, 18.2
                     .2021, p.17.

                     (8)

                        Communication from the Commission to the Council on one year since the outbreak of COVID-19: fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final.

                     (9)

                        Communication from the Commission on Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our economy, Brussels, 2.6.2021, COM(2021)500 final.

                     (10)

                        In particular, the 4-year smoothing of investment used in the expenditure benchmark does not allow assessing properly the fiscal support to the recovery provided by nationally financed investments.

                     (11)

                        A negative sign of the indicator corresponds to an excess of the primary expenditure growth compared with medium-term economic growth, which indicates an expansionary fiscal policy.

                     (12)

                        Other nationally financed capital expenditure is projected to provide a neutral contribution.

                     (13)

                        Estimated by the Commission, following the commonly agreed methodology.

                     (14)

                        See Commission Staff Working Document – Statistical Annex providing background data relevant for the assessment of the 2021 Stability and Convergence.


               EUROPEAN COMMISSION
            Brussels, 23.10.2019
            COM(2019) 491 final
            Recommendation for a
            COUNCIL DECISION
            authorising the opening of negotiations on behalf of the European Union for the conclusion of a  Sustainable Fisheries Partnership Agreement and a Protocol with the Government of Denmark and the Home Rule Government of Greenland
            {SWD(2019) 385 final} - {SWD(2019) 386 final}

               EXPLANATORY MEMORANDUM

               1.
                     CONTEXT OF THE RECOMMENDATION

               •Reasons for and objectives of the proposal

               The Commission proposes negotiating a new sustainable fisheries partnership agreement (SFPA) and protocol with Greenland that meet the needs of the Union fleet and are in line with Regulation (EU) No 1380/2013
                  1
                on the common fisheries policy (CFP) and the 19 March 2012 Council conclusions on the Commission’s Communication on the External dimension of the common fisheries policy.

               •Consistency with existing policy provisions in the policy area

                  The current EU‑Greenland fisheries partnership agreement (FPA)
                     2
                   was signed on 28 June 2007
                     3
                  . It is proposed that a new SFPA be negotiated to integrate certain provisions of Regulation (EU) No 1380/2013
                     4
                   that the FPA does not cover.

                  The current 5-year protocol
                     5
                   to the FPA entered into application on 1 January 2016
                     6
                   and will expire on 31 December 2020. It establishes fishing opportunities for the Union fleet and the corresponding financial contribution to be paid by the Union and EU ship‑owners.

               The current protocol allows the EU fleet to fish in Greenlandic waters for cod, pelagic and demersal redfish, Greenland halibut, shrimp, grenadier and capelin, for indicative annual fishing opportunities of 42,726 tonnes. Vessels from eight Member States (Denmark, Estonia, France, Germany, Latvia, Lithuania, Sweden and the United Kingdom) are involved in the fisheries. The EU also transfers part of the agreed quota to Norway and the Faroe Islands, in exchange for EU vessels’ access to their waters. In addition to the fees paid to Greenland by the Union fleet, the EU pays annual compensation of EUR 13,168,978 (calculated on the basis of reference prices for each species), including a financial reserve of EUR 1,700,000 for possible additional quantities. The EU budget also provides for an amount of EUR 2,931,999 to support Greenland’s sectoral fisheries policy.

                  This is an agreement dealing with mixed species. The allocation of quotas to the Member States is subject to total allowable catch and quota regulation provisions
                     7
                  . SFPAs help to promote the CFP objectives internationally, ensuring that Union fishing activities outside Union waters are based on the same principles and standards as those applicable under Union law. In addition, they foster scientific cooperation between the EU and its partners, promote transparency and sustainability for better management of fishing resources and encourage governance by supporting the monitoring, control and surveillance of national and foreign fleets’ activities and providing funding to fight illegal, unreported and unregulated fishing. SFPAs contribute to the sustainable development of local fishing industries and the promotion of growth and decent work linked to maritime activity. They strengthen the EU’s position in international and regional fishing organisations (in particular, in the case of Greenland, the International Council for the Exploration of the Sea and the Northwest Atlantic Fisheries Organisation)
                     8
                  .

               •Consistency with other Union policies

                  The negotiation of a new agreement and protocol with Greenland is in line with the EU’s external action vis-à-vis overseas countries and territories (OCTs), and in particular with its objectives as regards democratic principles and human rights.

               2.
                     LEGAL ELEMENTS OF THE RECOMMENDATION

               •Legal basis

                  The legal basis for the Decision is Article 218 of the Treaty on the Functioning of the European Union (TFEU), which sets out the procedure for negotiating and concluding international agreements.

               •Subsidiarity (for non-exclusive competence)

                  Not applicable (exclusive competence).

               •Proportionality

                  The Decision is proportional to the objective.

               •Choice of instrument

                  The instrument is provided for under Article 218(3) and (4) TFEU.

               3.RESULTS OF EX POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

               •Ex post evaluations/fitness checks of existing legislation

                  In 2019, the Commission has carried out an ex post evaluation of the current FPA and protocol with Greenland and an ex ante evaluation of their possible renewal. Its conclusions are set out in a separate staff working document.

                  The evaluation concluded that the EU fishing sector has a clear interest in fishing in Greenland and that renewal of the agreement and the protocol would contribute to improved governance of fisheries in the region.

                  For the EU, it is important to maintain an instrument allowing deep sectoral cooperation with a major player in ocean governance at sub-regional level, because of the extent of the fishing area under its jurisdiction. This will allow the EU to strengthen its role in the Nordic fisheries, thanks also to the exchanges of quotas with Norway and the Faroe Islands.

                  For EU vessels, this means maintaining access to an important fishing area for the deployment of harvesting strategies in a multiannual international legal framework.

                  For the Greenlandic authorities, the aim is to maintain relations with the EU with a view to strengthening ocean governance and benefiting from dedicated sectoral support that provides for multiannual funding support for fisheries management.

               •Stakeholder consultations

                  The Commission consulted the Member States, industry representatives, international civil society organisations and Greenland’s fisheries administration and civil society as part of the evaluation.

               •Collection and use of expertise

                  Not applicable.

               •Impact assessment

                  Not applicable.

               •Regulatory fitness and simplification

                  Not applicable.

               •Fundamental rights

                  The proposed negotiating directives (set out in an annex to the Decision) call for the Commission to negotiate the inclusion in the new SFPA of a clause on the consequences of violating human rights and democratic principles.

               4.
                     BUDGETARY IMPLICATIONS

               The new protocol provides for the payment of a financial contribution to Greenland. The relevant budgetary allocations in terms of commitment and payment appropriations will be included each year in the budget line for ‘sustainable fisheries partnership agreements’ (11 03 01) and be compatible with the financial programming of the relevant multiannual financial framework (MFF). The amounts for commitments and payments are established in the annual budgetary procedure, including the reserve line for protocols that have yet to enter into force at the beginning of the year
                  9
               .

               5.
                     OTHER ELEMENTS

               •Implementation plans and monitoring, evaluation and reporting arrangements

                  Negotiations are expected to start in the fourth quarter of 2019.

               •Detailed explanation of the specific provisions of the proposal

                  The Commission recommends that:

                  the Council authorise it to open and conduct negotiations for the conclusion of a new SFPA and protocol with Greenland;

                  the negotiations be conducted in consultation with the special committee, in accordance with the TFEU; and

                  the Council approve the negotiating directives annexed to this recommendation.

               Recommendation for a

               COUNCIL DECISION

               authorising the opening of negotiations  on a Sustainable Fisheries Partnership Agreement and  Protocol between the European Union and the Government of Denmark and the Home Rule Government of Greenland

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Article 218(3) and (4) thereof,

               Having regard to the recommendation from the European Commission,

               Whereas:

               A Fisheries Partnership Agreement between the European Community on the one hand, and the Government of Denmark and the Home Rule Government of Greenland, on the other hand (FPA) and a Protocol setting out the fishing opportunities and financial contribution provided for in the FPA
                  10
                 was signed on 28 June 2007.  Following the end of the validity of that Protocol, a new Protocol was signed and  entered into application on 1 January 2016
                  11
               . It will expire on 31 December 2020.

               The FPA does not cover certain provisions of Regulation (EU) 1380/2013 of the European Parliament and of the Council
                  12
               .   The fishing opportunities and financial contribution applicable as of 1 January 2021 should also be established following the impending expiry of the current Protocol. The Commission is therefore proposing the negotation of a new Agreement and Protocol that meets the needs of the Union fleet and is also in accordance with Regulation (EU) No 1380/2013.

               Negotiations should accordingly be opened with a view to concluding a new Sustainable Fisheries Partnership Agreement and Protocol with the Government of Denmark and the Home Rule Government of Greenland.

               HAS ADOPTED THIS DECISION:

               Article 1

               The Commission is hereby authorised to negotiate, on behalf of the Union, a new Sustainable Fisheries Partnership Agreement and Protocol with the Government of Denmark and the Home Rule Government of Greenland.

               Article 2

               The  negotiations shall be conducted in consultation with the Council Working Party on External Fisheries Policy and on the basis of the negotiating directives set out in the Annex to this Decision.

               Article 3

               This Decision is addressed to the Commission.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        Regulation (EU) No 1380/2013 of the European Parliament and of the Council of 11 December 2013 on the Common Fisheries Policy, amending Council Regulations (EC) No 1954/2003 and (EC) No 1224/2009 and repealing Council Regulations (EC) No 2371/2002 and (EC) No 639/2004 and Council Decision 2004/585/EC (OJ L 354, 28.12.2013, p. 22).

                     (2)

                        OJ L 172, 30.6.2007.

                     (3)

                  https://www.consilium.europa.eu/en/documents-publications/treaties-agreements/agreement/?id=2007046&DocLanguage=en

                     (4)

                        Part VI, Title II of Regulation (EU) No 1380/2013.

                     (5)

                        OJ L 305, 21.11.2015, p. 1.

                     (6)

                  https://www.consilium.europa.eu/en/documents-publications/treaties-agreements/agreement/?id=2015055&DocLanguage=en

                     (7)

                        Council Regulation (EU) 2019/124 of 30 January 2019 fixing for 2019 the fishing opportunities for certain fish stocks and groups of fish stocks, applicable in Union waters and, for Union vessels, in certain non-Union waters (OJ L 29, 31.1.2019, p. 1).

                     (8)

                  https://www.nafo.int/

                     (9)

                        Chapter 40 (reserve line 40 02 41), in line with the MFF interinstitutional agreement (2013/C 373/01).

                     (10)

                        OJ L 172, 30.6.2007

                     (11)

                        https://www.consilium.europa.eu/en/documents-publications/treaties-agreements/agreement/?id=2015055&DocLanguage=en.

                     (12)

                        Regulation (EU) No 1380/2013 of the European Parliament and of the Council of 11 December 2013 on the Common Fisheries Policy, amending Council Regulations (EC) No 1954/2003 and (EC) No 1224/2009 and repealing Council Regulations (EC) No 2371/2002 and (EC) No 639/2004 and Council Decision 2004/585/EC (OJ L 354, 28.12.2013, p. 22).

    ---documentbreak---

               EUROPEAN COMMISSION
            Brussels, 23.10.2019
            COM(2019) 491 final
            ANNEX
            to the
            Recommendation
            for a COUNCIL DECISION authorising the opening of negotiations on behalf of the European Union for the conclusion of  a Sustainable Ficheries Partnership Agreement and a Protocol with the Government of Denmark and the Home Rule Government of Greenland
            {SWD(2019) 385 final} - {SWD(2019) 386 final}

               ANNEX

               Directives for the negotiation of a Sustainable Fisheries Partnership Agreement and Protocol between the European Union and  the Government of Denmark and the Home Rule Government of Greenland

               (1)The objective of the negotiations is the conclusion of a Sustainable Fisheries Partnership Agreement (SFPA) and Protocol between the EU and Greenland in line with Regulation (EU) No 1380/2013 and the Council Conclusions of 19 March 2012 on a Communication from the Commission on the external dimension of the Common Fisheries Policy.

               (2)The SFPA should lay down the framework, general principles and objectives that will form the basis of the new partnership with Greenland. It should therefore contain a clause repealing the current fisheries partnership agreement between the parties.

               (3)The new partnership should promote sustainable and responsible fishing while ensuring mutual benefits for the EU and Greenland.  In particular, in the course of the negotiations, the Commission should aim to achieve the objectives set out in detail below:

               ·ensuring access to Greenland’s fishing zone and the necessary authorisations for  the EU fishing fleet to fish in that zone ;

               ·ensuring the environmental sustainability of fishing activities and promoting ocean governance at the international level, whilst taking into account the best available scientific advice and relevant management plans adopted by Regional Fisheries Management Organisations (RFMOs). Fishing activities should target only available resources, taking into account  the local fleet’s fishing capacity and paying special attention to the highly migratory nature of the stocks concerned;

               ·seeking an appropriate share of surplus fisheries resources fully commensurate with the interests of the EU fleet, where these resources are also of interest to third country  fleets;

               ·applying the same technical conditions to all third country fleets, taking into account the possible transfer to other Nordic countries of part of the agreed EU quotas;

               ·ensuring that the EU’s financial contribution for access to fisheries is based on the historical and expected future activity of the EU fleet in the region, in the light of the best and most up‑to‑date scientific assessments;

               ·establishing a dialogue to reinforce implementation of a responsible fisheries policy by Greenland, linked to its development objectives, in particular as regards fisheries governance, the fight against illegal, unreported and unregulated fishing, the control, monitoring and surveillance of fishing activities and the provision of scientific advice;

               ·including a clause on the consequences of violating human rights and democratic principles.

               ·ensuring that the Protocol will contribute to the promotion of growth and decent work linked to maritime activity, taking into account relevant International Labour Organisation (ILO) conventions.

               (4)In particular, the protocol should lay down:

               ·the fishing opportunities, by category, to be granted to the EU fleet;

               ·the financial compensation  established for Greenland and the relevant payment conditions; and

               ·the amount to be paid in sectoral support and the mechanisms for implementing it.


               EUROPEAN COMMISSION
            Brussels, 4.3.2020
            COM(2020) 91 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            with a view to bringing an end to the situation of an excessive government deficit in Romania
            {SWD(2020) 53 final}

               Recommendation for a

               COUNCIL RECOMMENDATION

               with a view to bringing an end to the situation of an excessive government deficit in Romania

               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 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 (SGP) 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 [17 March] 2020, the Council decided, in accordance with Article 126(6) TFEU, that an excessive deficit existed in Romania.

               (4)In accordance with Article 126(7) TFEU and Article 3(4) of Council Regulation (EC) No 1467/97
                  1
               , 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 six 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 should request 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, i.e. the cyclically-adjusted balance excluding one-off and other temporary measures, of at least 0.5% of GDP as a benchmark.

               (5)According to the Commission 2020 winter forecast, extended with fiscal variables until 2022, real GDP growth is projected to have stood at 3.9% in 2019. Based on a no-policy-change assumption, real GDP growth is forecast by the Commission to moderate but remain robust at 3.8% in 2020 and at 3.5% in 2021 and 2022. On the one hand, the significant fiscal stimulus implied by current policies would continue giving some impetus to private consumption. On the other hand, a continued widening of the fiscal deficit would erode consumers’ and investors’ confidence in the sustainability of the economy’s growth trajectory. As a result, investment is expected to weaken, as private investors take account of increasing macroeconomic imbalances. The contribution of net exports is expected to remain negative over the forecast horizon, as exports continue to be affected by weak external demand while imports are supported by private consumption. This in turn would further worsen the already high current account deficit.

               (6)On 10 December 2019 the government adopted and sent to the Parliament its Fiscal-Budgetary Strategy for 2020-22 (the Fiscal Strategy), with a revised general government deficit target of 3.8% of GDP in 2019, above the 3% of GDP reference value. That revision, up from originally planned 2.8% of GDP in 2019, was based on budget execution data for the year to–date. The Fiscal Strategy was promulgated into law on 18 December 2019.

               (7)The Commission 2020 winter forecast, extended with fiscal variables until 2022, projects the general government deficit to remain above the 3% of GDP reference value for the entire forecast period. The Commission projects a general government deficit of 4.0% of GDP in 2019, 4.9% in 2020, 6.9% in 2021 and 7.7% in 2022 under a no policy change assumption. The structural deficit is projected to deteriorate by 1.0% of GDP in 2019, by further 1.9% of GDP in 2021 and by further 0.8% in 2022. The increase in the deficit projected by the Commission is mostly driven by significant pension increases enacted in summer 2019. The higher spending on pensions would contribute 0.9 pp. of GDP to the deficit increase in 2020, 1.7 pp. of GDP in 2021 and 1.1 pp. of GDP in 2022. The doubling of the child allowance, due to enter into force from August 2020, is estimated to have an annualised budgetary cost of 0.6% of GDP. In its Fiscal Strategy, the government projects a general government deficit of 3.6% of GDP in 2020, 3.4% in 2021 and 2.8% in 2022. Based on government estimates, this would lead to a structural adjustment of 0.3% in 2020, 0.2% in 2021 and 0.6% in 2022. The adjustment in the Fiscal Strategy is mostly expenditure based. In particular, the expenditures on compensation of employees, on goods and services and on non-EU-cofinanced capital spending are projected to decrease as a share of GDP. The lower deficit projection in the Fiscal Strategy, compared to the Commission’s forecast, stems from more optimistic underlying macroeconomic projections in the Fiscal Strategy and from the fact that the Fiscal Strategy does not take into account the fiscal impact of some enacted measures while the planned moderation of current expenditures is not fully supported by enacted, or credibly announced, measures and could therefore not be taken fully into account in the Commission forecast.

               (8)General government debt in Romania amounted to 34.7% of GDP in 2018. According to the Commission forecast, general government debt is projected to increase to 46.6% of GDP in 2022, thus remaining below the Treaty reference value.

               (9)According to Article 3(4) of Regulation (EC) No 1467/97, the correction of the excessive deficit should be completed in the year following its identification (in this case by 2021), unless there are special circumstances. The adjustment path should be determined in line with Regulation (EC) No 1467/97, taking into account the economic and fiscal position of the Member State.

               (10)In the present situation, such special circumstances exist in Romania. Correcting the excessive deficit by 2021 would require a too sharp fiscal adjustment and result in a significant output loss. A longer adjustment path, while still requiring substantial annual adjustments, would have a more gradual impact on growth and takes into account the fact that the budgetary year 2020 has already started. Structural reforms pursued in parallel with fiscal consolidation will contribute to ensure a durable correction of the excessive deficit. In light of this and taking into account the economic and fiscal situation in Romania, setting the deadline for the correction of the excessive deficit by 2022 is warranted.

               (11)A credible and sustainable adjustment path under this deadline would require Romania to reach a headline general government deficit target of 3.6% of GDP in 2020, 3.4% of GDP in 2021 and 2.8% of GDP in 2022 which, based on the Commission forecast, is consistent with a nominal growth rate of net primary government expenditure
                  2
                of  8.2% in 2020, 5.5% in 2021 and 5.5% in 2022. Such growth rate of net expenditure will be the primary indicator used to assess the fiscal effort if a careful analysis is needed. The corresponding annual adjustment in the structural balance is of 0.5% of GDP in 2020, 0.8% of GDP in 2021 and 0.8% of GDP in 2022. Based on the current forecast, those targets still allow for annual increases in real net expenditure. Achieving the targets will likely require reconsidering the large legislated pension increases and other recent measures which drive the sharp deterioration of the deficit in the baseline scenario.

               (12)Budgetary consolidation measures should secure a lasting correction, while being geared towards enhancing the quality of the public finances and reinforcing the growth potential of the economy.

               (13)Since 2016, Romania has systematically and repeatedly derogated from fiscal rules enshrined in the national fiscal framework, thereby rendering them largely ineffective. It is crucial that, in the future, Romania ensure the full application of the national fiscal framework.

               (14)In the medium and long term, risks to sound public finances appear high, driven by high fiscal deficits and costs of aging. The pension increases, enacted in summer 2019 and scheduled to enter into force over 2019-2021, play a large part in those risks. This confirms the urgent need to fully restore the long-term sustainability of public finances,

               HAS ADOPTED THIS RECOMMENDATION:

               (1)Romania should put an end to the present excessive deficit situation by 2022 at the latest.

               (2)Romania should reach a headline general government deficit target of 3.6% of GDP in 2020, 3.4% of GDP in 2021 and 2.8% of GDP in 2022 which is consistent with a nominal growth rate of net primary government expenditure of 8.2% in 2020, 5.5% in 2021 and 5.5% in 2022, corresponding to an annual structural adjustment of 0.5% of GDP in 2020, 0.8% of GDP in 2021 and 0.8% of GDP in 2022.

               (3)Romania should specify and rigorously implement the measures that are necessary to achieve the correction of its excessive deficit by 2022. Budgetary consolidation measures should secure a lasting correction in a growth-friendly manner. Romania should use any windfall gains for deficit reduction.

               (4)The Council establishes the deadline of 15 September 2020 for Romania 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. Thereafter the Romanian authorities should report on progress made in the implementation of these recommendations at least every six months until the excessive deficit has been corrected.

               Furthermore, the Romanian authorities should ensure the full application of its national fiscal framework. To ensure the success of the fiscal consolidation strategy, it will be also important to back the fiscal consolidation by comprehensive structural reforms, in line with the Council recommendations addressed to Romania in the context of the European Semester and in particular those related to the Macroeconomic Imbalance Procedure.

               This Recommendation is addressed to Romania.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        OJ L 209, 2.8.1997, p. 6.

                     (2)

                        Net primary 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.