6.2.2014 Official Journal of the European Union L 36/13 DECISIONS COUNCIL DECISION of 28 January 2014 on the existence of an excessive deficit in Croatia (2014/56/EU) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 126(6) thereof, Having regard to the proposal from the European Commission, Having regard to the observations made by Croatia, Whereas: 1 According to Article 126 of the Treaty on the Func- tioning of the European Union (TFEU) Member States are to avoid excessive government deficits. 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. The excessive deficit procedure (EDP) under Article 126 TFEU, as clarified by Council Regulation (EC) No 1467/97 (), which is part of the SGP, provides for a Council decision on the existence of an excessive deficit. The Protocol No 12 on the excessive deficit procedure, annexed to the Treaty on European Union and TFEU sets out further provisions relating to the implementation of the EDP. Council Regulation (EC) No 479/2009 (%) lays down detailed rules and definitions for the application of those provisions. According to Article 126(5) TFEU, if the Commission considers that an excessive deficit in a Member State exists or may occur, it is to address an opinion to the Member State concerned and is to inform the Council accordingly. (") Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure (O] L 209, 2.8.1997, p. 6). (3 Council Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the European Community (O] L 145, 10.6.2009, p. 1). () = Having taken into account its report under Article 126(3) TFEU and having regard to the opinion of the Economic and  Financial Committee in accordance with Article 126(4) TFEU, the Commission concluded that an excessive deficit existed in Croatia. The Commission therefore addressed such an opinion to Croatia and informed the Council on 10 December 2013 (%) accord- ingly. Article 126(6) TFEU provides that the Council is to consider any observations which the Member State concerned may wish to make before deciding, after an overall assessment, whether an excessive deficit exists. In the case of Croatia, this overall assessment leads to the following conclusions. According to the revision of the 2013 budget and the draft 2014 budget () adopted by the Croatian Government and sent to the Croatian Parliament on 14 November 2013, the Croatian authorities envisage a general government deficit of 5,5 % of GDP for 2013, after 5 % of GDP in 2012, and expect the ratio to remain unchanged in 2014 and to decrease only gradually in 2015 and 2016. The Commission services 2013 autumn forecast, released on 5 November 2013, projects the general government deficit to be significantly above the 3 % of GDP Treaty reference value already in 2013, rising to above 6 % of GDP in the 2013-2015 period in the absence of countervailing measures. As indicated in the Commission report prepared pursuant to Article 126(3) TFEU, the planned and forecast deficits are above, and not close to, the Treaty reference value. The excess over the reference value can be considered as exceptional within the meaning of the SGP. In particular, it results in part from a severe economic downturn in the sense of the SGP. Economic activity is estimated to have contracted by almost 12 % since the peak in 2008. Real GDP is projected to contract further in 2013, with a slight recovery expected only in 2014. Potential output growth, as estimated by the () All EDP-related documents for Croatia can be found on the following website: http://ec.europa.eu/economy_finance/economic_ governance/sgp|/deficit/countries/croatia_en.htm The draft budget is not prepared according to the ESA 95 methodology (ESA95). Deficit estimates for 2009-2012 based on ESA95 are between 1.5 and 3.3 percentage points higher than those reported according to the national methodology. Differences stem mainly from the fact that deficit figures according to ESA95 include certain guarantees payments, debt assumptions and the repayment of the debt to pensioners.