Council Opinion of 15 March 1999 on the stability programme of Luxembourg, 1999 to 2002
5. 5. 1999 EN Official Journal of the European Communities C 124/5 the measures of permanent nature already adopted will continue to provide a sufficient yield; this policy option seems credible to the Council. fluctuations. Therefore, The Council considers that the underlying budgetary position corresponding to a deficit of 0,3 % of GDP for the year 2002 is sufficient to provide a safety margin to prevent the deficit from breaching the 3 % of GDP threshold as a result of normal cyclical the budgetary medium-term the Belgian stability programme is in conformity target of with the requirements of the Stability and Growth Pact. However, fiscal consolidation in Belgium needs to be pursued beyond the horizon of the programme in order to ensure the continuation of the decline in the debt ratio and to respond to longer term issues in particular those stemming from the ageing of population. the The Council commends the affirmed determination of Belgian Government to adopt corrective measures in case any deviation from the norm set for the primary surplus should occur; it also notes that the stability programme defines a realistic rule for accelerating the deficit reduction in case of higher than expected growth. It urges the Belgian authorities to monitor the situation of public finance and take all necessary measures in order to ensure the achievement, at levels, of the objectives set in this area. federal and regional the planned fiscal The Council notes with satisfaction that consolidation effort will be accompanied by measures aimed at reducing the overall tax burden and labour costs, through the indexation of income tax brackets and the reduction in social security contributions paid by employers. However, the Council considers that efforts should be pursued in order to further alleviate the tax burden in Belgium. It also notes that the stability programme provides for a margin for an annual increase in real primary expenditure of 1,5 %. The Council acknowledges that increased resources to the current low level of government investment would enhance the potential of Belgian economy. It encourages the Belgian authorities to proceed further in introducing and implementing the necessary structural reforms in order to improve the functioning of labour and product markets and the quality of public expenditure. the allocation of The Council notes that the successful implementation of the stability programme hinges on the close coordination of actions at all it encourages the auth- orities in Belgium to continue their close cooperation to this end. levels of government; COUNCIL OPINION of 15 March 1999 on the stability programme of Luxembourg, 1999 to 2002 (1999/C 124/05) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to Council Regulaltion (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(1) and (2) thereof, Having regard to the recommendation of the Commission, After consulting the Economic and Financial Committee, HAS DELIVERED THIS OPINION: On 15 March 1999, the Council examined the stability programme of the period the 1999-2002. The Council notes with satisfaction that government financial accounts will continue te be in surplus throughout the period covered by the programme, while the Luxembourg, which covers (1) OJ L 209, 2. 8. 1997, p. 1. government gross debt to GDP ratio will remain very low. The Council notes that, from a formal point of view, the stability programme is only partially in line with the agreed code of conduct on the content and format of stability and convergence programmes. The Council considers that the programme is consistent with the Broad Economic Policy Guidelines. as takes stability programme presents three macroeconomic The scenarios for the period 1999 to 2002. Under the central macroeconomic scenario, which for reasons of prudence the programme finance projections, real GDP growth is estimated at 3,4 % for 1999 rising to 3,7 %, on average, for the period 2000 to 2002. The least favourable scenario forecasts GDP growth of 2,8 % for 1999 and 3,0 % for the period 2000 to 2002, while growth under the most favourable scenario is projected to reach 4,0 % in 1999 and 4,5 % during 2000 to 2002. the public the basis for The Council considers that the macroeconomic framework presents, under the three alternative scenarios, a range of plausible assumptions for GDP growth, which are in line with the record of past performance and the long-term C 124/6 EN Official Journal of the European Communities 5. 5. 1999 the economy of Luxembourg. The general potential of government accounts, expected to remain in surplus over the period under all three scenarios, is estimated at 1,7 % of GDP in 2002, under the central scenario, and at 1 % and 2,5 % of GDP under scenarios, respectively. and most favourable least the strategy of The Council notes that the performance of the economy in recent years and sound policies have been the basis of the healthy public finances situation achieved by Luxembourg. It commends the approach of the programme to pursue further the joint sound public finance management, together with the effort to improve the functioning of the economy through structural reforms and other appropriate policy measures. The Council welcomes in this respect the planned government action involving active employment and equal opportunities policies, enterprise initiative and professional training. development of The Council shares the analysis of the programme that a small open economy such as that of Luxembourg may be subject to wide variations of economic acivity and, therefore, should dispose of an adequate safety margin in order to cope with fluctuations while being able to maintain a sound cyclical budgetary position and puruse active policies. The Council considers that the projected surplus in the general government accounts provides an adequate safety margin in order to avoid breaching the 3 % of GDP reference value for the deficit, under normal cyclical movements. Moreover, the very low level of government debt ratio enhances this safety margin. Therefore, the of Luxembourg are in conformity with the requirements of the Stability and Growth Pact. The Council welcomes the readiness of the government to take the necessary measures to ensure respect of than projected economic growth. the budgetary targets in case of weaker stability programme targets of budgetary the to control expenditure that the effort should continue; The Council notes, however, the in this growth of public respect, the decision of the government to extend over the next five years the limit on the growth of central government expenditure, in place since 1994, is appropriate. The Council considers that vigilance must also be exercised regarding the in particular social other components of public expenditure, security spending, the budgetary cost of policies undertaken in this area; such expenditure control, underpinned by the necessary reforms, is also necessary to prepare for the challenge of population ageing. taking account of