COUNCIL OPINION of 1 December 1998 on the Convergence programme of Denmark, 1998-2005jo1
6. 1. 1999 EN Official Journal of the European Communities C 3/1 I (Information) COUNCIL COUNCIL OPINION of 1 December 1998 on the Convergence programme of Denmark, 1998Ü2005 (1999/C 3/01) 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 9(1) and (2) thereof, Having Commission, regard to the recommendation of the After consulting the Monetary Committee, HAS DELIVERED THIS OPINION: the Council examined On 1 December 1998 the Convergence programme for Denmark which covers the period 1998Ü2005. The programme envisages a budget surplus of 2,6Ø% of GDP by 2001 and of 3,5Ø% of GDP by 2005. The Council considers it appropriate that the programme focuses on budgetary consolidation underÜ pinned by continued structural reform. Moreover, the Council considers that the programme is consistent with the Broad Economic Policy Guidelines. The programme is built upon a macro economic forecast showing a deceleration in the strong domestic demand led growth of recent years towards real GDP growth of slightly over 2Ø% towards the end of the projection period. For the macro economic scenario to materialise, and given the high capacity utilisation and tight labour market in Denmark, continued growth in labour supply essential. through labour market reform is The Council notes that the realisation of the growth scenario appears inter alia, continued reform of the supply side of the Danish economy. realistic but requires, is an towards the euro low With respect to inflation, Denmark continues to fulfil the convergence criterion with some margin. The fixed important exchange rate condition for maintaining inflation expectations. However, domestically induced underlying inflation has clearly been accelerating during 1998 and given Denmark’s advanced stage in the business cycle and the tight labour market, there are risks to the future inflation outlook. Any inflationary threats should be dampened via fiscal policy and, above all, through further structural improvements in the labour market. the credibility given by markets Denmark has met the convergence criterion on the long term interest rate for extended period of time. This the underlines exchange rate target of Danish monetary policy. The Council notes with satisfaction that Denmark’s particiÜ pation in the ERM2 will allow Denmark to further strengthen the credibility of its monetary policy. to The Council welcomes the programme’s strategy of increasing the general government budget surplus over the projection period towards a surplus of 2,6Ø% of GDP by 2001 and 3,5Ø% of GDP by 2005. This will be achieved via a moderate easing in the tax burden more than outweighed by a reduction in primary expenditure and reduced net interest payments. In this context the Council considers that stricter control of government expenditure is called for. (˛) OJ L 209, 2. 8. 1997, p. 1. The Council notes that the government gross debt ratio in Denmark is expected to fall below 60Ø% in 1998. The C 3/2 EN Official Journal of the European Communities 6. 1. 1999 Council welcomes the envisaged further reduction of the gross debt ratio to below 40Ø% of GDP by 2005. The Council notes with satisfaction that the reduction in the gross debt ratio will be brought about by significant surpluses in the primary balance. The Council notes with satisfaction that the current underlying budgetary position of Denmark is already consistent with the requirements of the Stability and further programme Growth Pact. The improvements thereby the government widening the safety margin, thus allowing room for the operation of the fairly large Danish automatic stabilizers. foresees surplus, in Denmark’s non participation might indeed call for such a wider safety margin. the single currency in The Council welcomes the structural reforms included in the programme. The tax reform, which will be impleÜ mented in the 1999Ü2002 period, should increase private savings and diminish distortions in the present tax system. Labour market reform, already proposed by the government, will be essential for further improving the labour market. The Council functioning of encourages further to measures if the proposed reforms should turn out to be insufficient. the Danish government take the COUNCIL OPINION of 1 December 1998 on the stability programme of the Netherlands 1999Ü2002 (1999/C 3/02) 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 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: On 1 December 1998, the Council examined the stability programme of the Netherlands, which covers the period 1999Ü2002. The Council notes that the programme builds on the significant progress towards fiscal consolidation (˛) OJ L 209, 2. 8. 1997, p. 1. in the four preceding years and aims at achieved reducing further the general government deficit and the debt GDP ratio. scenario The stability programme presents three macroeconomic scenarios for the period 1999Ü2002. For reasons of prudence the programme takes as a basis for the projections of the general government aggregates a cautious macroeconomic forecasting GDP growth rates of 2,25Ø% per year. Such a scenario assumes a significant slowdown in economic activity from its current levels due, mainly, to a fall in external demand. It is under this scenario that the government deficit is projected to decline to around 1Ø% of GDP in 2002. This will be the result of an extension of the double handed approach, consisting of reducing the government deficit and the tax burden followed during the period 1994Ü1998, covered by the second Dutch the Council programme. Moreover, convergence considers that the stability programme is consistent with the Broad Economic Policy Guidelines. The Council acknowledges that the Dutch authorities adopted a cautious scenario for their budget policy and therefore for the stability programme in order to be on a sound position. The middle scenario of the stability programme which is based on an annual GDP growth rate of 2,75Ø%, and which reflects past trends, brings the projected government deficit close to balance. Finally the stability programme presents a more favourable scenario