Council Opinion of 15 March 1999 on the stability programme of France, 1999 to 2002
C 124/2 EN Official Journal of the European Communities 5. 5. 1999 COUNCIL OPINION of 15 March 1999 on the stability programme of France, 1999 to 2002 (1999/C 124/02) 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: the Council examined the stability On 15 March 1999, programme of France which covers the period 1999 to 2002. From a formal point of view, the Council notes that the French authorities presented the programme pluriannuel de finances publiques as its stability programme. The Council notes that the objective of the programme is to reduce further the general government deficit and ensure that the debt ratio starts declining and continues to remain below the 60 % of GDP reference value. Moreover, the programme is consistent with the Broad Economic Policy Guidelines. the Council considers that stability programme presents The two macroeconomic scenarios for the period 1999 to 2002. Under a favourable scenario, the GDP growth rate is projected to rise to 3 %, on average for the period 2000 to 2002, from 2,7 % forecast for 1999. According to a more cautious scenario the growth rate is adjusted downwards to 2,4 % for 1999 and to 2,5 % on average, for the period 2000 to 2002. The general Government deficit is projected to decline at the end of 2002 to 0,8 % of GDP under the favourable scenario and to 1,2 % under the cautious scenario. The debt ratio is expected to fall to 57,1 % or 58,3 % of GDP, according to the alternative scenarios. The Council considers that the macroeconomic performance of French economy in recent years characterised by sound funda- mentals, strong domestic demand in a context of price stability and declining unemployment enhances the capacity of the economy to achieve the objectives of the stability programme. The Council notes that the more cautious macroeconomic scenario presents realistic GDP growth assumptions close to (1) OJ L 209, 2. 8. 1997, p. 1. growth potential growth projections based on the favourable scenario can be considered as the upper bound of a range of growth projections. and past performance; GDP to the entirely expected reduction attributable expenditure current primary The Council commends the fact that the Government deficit reduction over the period covered by the stability programme is in Government expenditure; this addresses the problem of the in France, very high level of Government particularly the expenditure. Moreover, for Council welcomes the adoption of a norm of restraint real Government expenditure as an anchor for fiscal consoli- dation; an annual increase of 1 % in real terms is the ceiling established for general Government spending as a whole, while central Government spending is limited at 0,3 % and social security and local Government spending at 1,5 %. To be successful, a strategy based on expenditure ceilings requires an effective scheme to rein in expenditure as soon as any slippage is detected. The Council welcomes the fact that the programme recognises the need for such a mechanism. The Council considers that the the respect of is expenditure the Government deficit objectives. The achievement of Council urges the French Government to define ways to maintain strict adherence to these norms, including the case of inflation lower than estimated in the programme. essential ceilings for The Council notes that the share of public investment in GDP is above the European average. It considers nevertheless that a more resolute restructuring of expenditure towards investment would be beneficial to potential growth and competitiveness, provided that it does not jeopardise the budgetary targets of the programme. The Council welcomes the fact that in parallel to budgetary consolidation, a key objective of the stability programme is the reduction in the tax burden, notably taxes on labour, in order to foster employment. to let The Council notes that the underlying Government deficit for the year 2002, under both macroeconomic scenarios, provides a safety margin allowing France, in the event of a normal cyclical downturn, the automatic stabilisers work without any large risk of exceeding the 3 % of GDP reference the value. medium-term budgetary situation in the programme is in line with the requirements of the Stability and Growth Pact. However, the Council considers that the safety margin provided by the projections of the stability programme should be wider in order to accommodate unforeseen developments in the the Council considers In this sense that 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