COUNCIL OPINION of 12 October 1998 on the stability programme of Finland, 1998-2002
2. 12. 98 EN Official Journal of the European Communities C 372/1 I (Information) COUNCIL COUNCIL OPINION of 12 October 1998 on the stability programme of Finland, 1998Ü2002 (98/C 372/01) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordiÜ nation of economic policiesØ(˛), and in particular Article 5(1) and (2) thereof, Having Commission, regard to the recommendation of the After consulting the Monetary Committee, HAS DELIVERED THIS OPINION: the covers On 12 October 1998, the Council examined Finland’s Stability Programme, which period 1998Ü2002. The Council notes with satisfaction that the Finnish government financial balance is targeted to turn into a surplus in 1998 and is expected to post surpluses above 2Ø% of GDP throughout the period 1999Ü2002 while the government debt to GDP ratio is projected to continue to decline. Moreover, the Council considers that the Broad the programme Economic Policy Guidelines. is consistent with The macroeconomic scenario presented in the Stability Programme is based on a prudent growth forecast in which GDP growth decelerates rapidly from the current strong rates. Projected GDP growth is mainly driven by in particular from the growth the current private comprehensive wage agreement, which secures wage moderation and low inflation until January 2000. Its success will help lower inflationary expectations and so would contribute to favourable expectations on wages and inflation in the subsequent years. in domestic demand, sector. The Council welcomes (˛) OJ L 209, 2. 8. 1997, p. 1. The Council commends the fiscal strategy of the Stability Programme which aims at reaching surpluses above 2Ø% of GDP through a reduction in government expenditure but at the same time reduces the tax burden. By the end of the projection period in 2002, government expenÜ diture is projected at 48Ø% of GDP, compared to 56Ø% in 1997. The tax to GDP ratio is expected to decline from the current 47Ø% to 44Ø% by 2002, mainly as a result of reductions in income related taxes, particularly on labour. the emphasis the The Council agrees with programme puts on fiscal consolidation in the central government given its still unbalanced position and the its debt ratio. It therefore need to reduce further to focus future recommends government consolidation accounts. the Finnish authorities efforts on central that the the budget proposal which was The Council notes that while the annual ceiling set on central government expenditure for 1999 was respected to in Parliament, the ceilings for the years 2000Ü2002 are a non binding guideline. The Council urges the Finnish Government to respect firmly these guidelines in the budget proposals for those years. submitted The underlying budgetary position corresponding to the surplus target of 2,3Ø% of GDP in 2002 is sufficient to provide a safety margin against breaching the 3Ø% of GDP deficit threshold as a result of normal cyclical flucÜ tuations. In this sense the programme is in line with the requirements of the Stability and Growth Pact. However, in view of the future effects of population ageing on the current surplus in the social security sector, the Council recommends a continued fiscal consolidation effort in order to improve further the government balance. The Council notes that the programme does not address the issue of structural reforms. However, the Council implementation of such reforms, considers labour markets, would mainly on the services and contribute the implementation of successful to a programme. that the