Council Opinion of 15 March 1999 on the stability programme of Germany, 1998 to 2002
5. 5. 1999 EN Official Journal of the European Communities C 124/3 the commitment of coming years, such as, for example, the uncertain budgetary therefore impact of major structural reforms. The Council welcomes to pursue the public finance targets regarding public expenditures in the programme as rigorously as possible and to take any measures necessary to prevent or correct a deterioration of the consolidation path announced in the programme. the French authorities The Council welcomes the introduction of measures aimed at creating favourable conditions for employment and enhancing economic efficiency by promoting innovation, risk-taking and the modernisation of It encourages the French Government to proceed further in implementing the necessary reforms in order to enhance the performance of the economy. the public sector. COUNCIL OPINION of 15 March 1999 on the stability programme of Germany, 1998 to 2002 (1999/C 124/03) 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 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 for Germany which covers the period 1998 to 2002. The Council notes with satisfaction that the German authorities have been able to present the stability programme within the agreed deadlines, despite the short period available since the institution of the government at the end of October 1998. Due to these circumstances the information provided in the stability programme is not in all respects as detailed as would have been desirable, in particular regarding the quanti- tative effects of the the general government budget detailed components of balance. The Council welcomes the German authorities to provide this additional information by the next update of the stability programme. the envisaged budgetary measures or the commitment of of by the reunification. consequences is aware that fiscal policy in Germany is still The Council burdened The programme foresees a decline in the general government budget deficit to 1 % of GDP by 2002, while the gross debt ratio is expected to decrease to 59,5 % of GDP over the same period. The Council notes that the programme builds on the significant budgetary consolidation in the run-up to monetary union as well as the achievement of a further decline in the government deficit below the budget target to 2,0 % of GDP in 1998. (1) OJ L 209, 2. 8. 1997, p. 1. to downside risks. The programme is based upon a macroeconomic forecast forecast expecting output to grow by 2 % in 1999 and by 2,5 % per year during 2000 to 2002, implying average growth slightly above trend. The Council considers that the is scenario for growth appears realistic but notes that subject in the event of a international slowdown output continuation of growth in 1999 could be lower in the than expected; medium term, growth prospects and unemployment are stability closely linked. The Council welcomes programme aims at a marked reduction in unemployment and stresses the importance of moderate wage developments and structural policies in the fight against unemployment within a framework of policies for sustained growth. In particular, the current that the it it appropriate that The Council considers the budgetary consolidation envisaged in the programme is achieved by a decrease in the expenditure ratio which is only partially offset by a decline in the revenue ratio. The Council welcomes, in particular, the envisaged approach of controlling government expenditure by limiting its overall nominal increase to 2 % per year, which is 2 percentage points lower than the expected nominal GDP growth. The Council also notes with satisfaction that the planned tax reform provides tax relief, which is expected to reinforce the for a net employment generating capacity of the economy. The Council acknowledges that the envisaged medium-term deficit objective of 1 % of GDP would be sufficient to allow in a normal cyclical downturn the automatic stabilisers to work without any large risk of breaching the 3 % of GDP reference value. the the Council medium-term deficit target of the programme is in line with the provisions of the Stability and Growth Pact. concludes In this sense that The Council notes that the overall objective of a reduction in the general government deficit by 1,1 % of GDP and in the gross debt ratio by 1,5 % of GDP between 1998 and 2002 appears modest. The consolidation efforts are largely concen- trated towards the end of the period: due to the temporary weakening of the macroeconomic situation in 1999, hardly any improvement is planned for 1999 and 2000. The Council considers that the German authorities should aim to reduce the the deficit beyond the projected level at the end of C 124/4 EN Official Journal of the European Communities 5. 5. 1999 situation. An explicit programme period when growth is projected to have picked up. The recent ruling of the German Constitutional Court, requiring the indroduction of tax allowances for the children of married couples, constitutes a clear example of the existence of budgetary risk over and above those related to the commitment by the conjunctural such risks would be German government desirable in view of In addition, the Council considers that the German government should take any measures necessary to avoid a renewed increase in the government debt ratio and that it would be desirable to go beyond the 1 % deficit in 2002, particularly if economic growth is higher than expected. to counter the minimal position aimed for. level The Council notes that the successful implementation of the stability programme hinges on close coordination of actions at in all Germany to pay due regard to this callenge. levels of government; the authorities it encourges The Council notes that the programme envisages a restruc- turing of the budget in favour of government investment but intends to keep overall investment spending as a percentage of GDP unchaged at level. The Council encourages the German Government to give further attention jeopardising the budgetary to investment without, however, targets of the programme. current lowel its The Council welcomes the reform measures announced in the programme, in particular in the domains of the pension and health systems and in public administration, which are key to sustainable public finances and employment growth, but considers that they ough to be supported by further supply oriented policy measures. A determined implementation of the reforms, in combination with measures aimed at increasing the flexibility of product and labour markets, as recommended by the Broad Economic Policy Guidelines and envisaged in the German structural progress report for the Cardiff process, would be conducive to the achievement of the objectives of the stability programme. COUNCIL OPINION of 15 March 1999 on the stability programme of Belgium, 1999 to 2002 (1999/C 124/04) THE COUNCIL OF THE EUROPEAN UNION, the Council considers that the programme is consistent with the Broad Economic Policy Guidelines. 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 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 Belgium, which covers the period 1999 to 2002. The Council notes that the programme aims at further reducing the general government deficit and debt as percent of GDP, by maintaining the pace of the fiscal consolidation effort pursued under the second convergence programme. Moreover, (1) OJ L 209, 2. 8. 1997, p. 1. that the budgetary projections of the The Council notes programme are based on a prudent macroeconomic scenario forecasting real GDP growth of 2,4 % for 1999 and 2,3 % per year, for the period 2000 to 2002. Under this scenario, the general government deficit is projected to fall to 0,3 % of GDP in 2002 and the debt ratio is expected to decline by about 11 percentage points between 1998 and 2002. The considerable improvement in the macroeconomic performance realised in Belgium in recent years, characterised by low inflation, declining interest rates, wage moderation and good export performance, suggests that the projected growth rates should be attainable. The Council commends the emphasis given in the programme on maintaining annual primary surpluses at 6 % of GDP as a central element of the strategy for budgetary consolidation and debt reduction; the achievement of high primary surpluses has been the anchor of budgetary policy in Belgium in recent years and their contribution to further in particular the steady decline in government debt, will remain decisive in the medium-term. The Council notes that the stability programme considers that no additional discretionary measures will be necessary to achieve this target, assuming that fiscal consolidation,