Council Opinion of 28 February 2000 on the updated stability programme of Germany for the period 1999 to 2003
6. 4. 2000 EN Official Journal of the European Communities C 98/1 I (Information) COUNCIL COUNCIL OPINION of 28 February 2000 on the updated stability programme of Germany for the period 1999 to 2003 (2000/C 98/01) THE COUNCIL OF THE EUROPEAN UNION, German authorities provide this additional information, at the latest, in the next update of the stability programme. Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EEC) 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(3) thereof, Having regard to the recommendation of the Commission, After consulting the Economic and Financial Committee, HAS DELIVERED THIS OPINION: On 28 February 2000 the Council examined the updated stability programme of Germany which covers the period 1999 to 2003. The Council notes with satisfaction that the deficit outcomes both for 1998 and 1999 were clearly better than expected in the initial programme. This achievement in conditions of lower-than-expected economic growth has significantly advanced the objective of attaining a medium-term budgetary position of close to balance or in surplus, as required by the Stabiblity and Growth pact. The Council notes, however, that the better results in 1998 were almost exclusively due to the difficult-to-predict development of regional and local government finances. These developments, tend to underline the importance of an efficient therefore, cooperation on government to facilitate the planning and monitoring of the budgetary consoli- dation process. finances at national level that case as was the information provided in the The Council notes updated stability programme, the the previsous programme, does not in all respects comply with the code of conduct on the content and format of stability and convergance programmes. In particular, the programme lacks detailed information on the components of government revenue and expenditure and on the factors determining the debt ratio. The Council, therefore, repeats the request made in its opinion on the previous stability programme (2) that the for of macroeconomic The updated scenario programme (3)assumes that the German economy will enjoy average annual grown of som 2,5 % over the programme period. The Council considers this scenario realistic, provided that wage moderation and structural reforms on product and labour markets continue. the The updated programme foresees a decline in the general government deficit to 0,5 % of gross domestic product (GDP) by 2003, while the gross debt ratio is expected to decrease to 58,5 % of GDP over the same period. The Council considers it appropriate that 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 commends, in particular, the envisaged approach of controlling government expenditure by limiting its overall nominal increase to less than the expected nominal GDP growth. The Council recognises that the planned expenditure savings will create some room for tax relief in the framework of the reforms of income and corporate taxation which are welcome as they will lead to a desirable reduction in the high overall tax burden in Germany. The Council recommends, however, the reforms be implemented with greatest caution so as to minimise the risk of a lasting deterioration of the structural geovernment deficit. that The Council considers that the envisaged medium-term deficit objective of 0,5 % of GDP in 2003 is in conformity with the provisions of the Stability and Growth Pact, as is the objective for 2002. Moreover, Germany’s budget balance will remain close to the minimum benchmark position, which allows the automatic stabilisers the deficit to work without breaching the 3 % of GDP reference value, already from 1999 on. The Council recommends, however, in the event of higher growth than expected the fiscal gains be used to reduce the deficit below the targeted level with a view to widening the safety margin and creating additional room for the desirable further tax reductions planned beyond the programme’s horizon. Furthermore, available privatisation opportunities should be used at all levels of government in order to make sure that the debt ratio is firmly kept on a downward trend. risk of that (1) OJ L 209, 2. 8. 1997, p. 1. (2) OJ C 124, 5. 5. 1999, p. 3. (3) In its revised version as of 1 February 2000, addendum to the updated stability programme. i. e. including the C 98/2 EN Official Journal of the European Communities 6. 4. 2000 the budget The Council notes that, despite the programme’s intentions of a restructuring of government investment, the federal government plans to reduce investment spending in nominal terms from its current level. The Council reiterates its recommendation that the German Government review its investment plans without, however, joepardising the budgetary targets of the programme. in favour of The Council welcomes the reform measures announced in the programme, in particular in the domains of the pension and finances the reforms, health systems and in public administration, which are key to and employment growth. A sustainable public determined implementation of 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 stability programme. the objectives of achievement of the COUNCIL OPINION of 28 February 2000 on the updated stability programme of Italy for the period 1999 to 2003 (2000/C 98/02) 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(3) thereof, Having regard to the recommendation of the Commission, After consulting the Economic and Financial Committee, HAS DELIVERED THIS OPINION: (GDP) On 28 February 2000 the Council examined Italy’s updated stability programme, which covers the period 1999 to 2003. The Council notes with satisfaction that despite the cyclical the initial programme’s objective of a budget slowdown, deficit of 2,0 % of gross domestic product in 1999 appears to have been attained, as recommended in the Broad Economic Policy Guidelines. Lower than expected interest payments and higher than expected revenues, namely from improved tax collection, have contributed to this outcome. The decrease in the gross government debt/GDP ratio kept pace in 1999, as the negative impact of lower growth. The Council notes the confir- mation of the objectives for the net borrowing of the general government in 2000 and 2001 (respectively, 1,5 % and 1,0 % of GDP). It welcomes the commitment to further budgetary consolidation, which would support a decline by over three percentage points per year in the debt/GDP ratio, to reach the updated 100,0 % in 2003. The Council considers that programme is consistent with the Broad Economic Policy Guidelines. large privatisation receipts offset The macroeconomic projections in the updated stability programme assume a gradual acceleration in GDP growth, from an annual rate of 1,3 % in 1999 to nearly 3 % in 2002 such an acceleration to 2003. The Council notes that constitutes a realistic scenario and that the cyclical upswing in 2000 and 2001 could turn out stronger than assumed in the updated programme; on the other hand, the new assumptions on interest rates could be too optimistic in the light of recent developments in financial markets. The Council notes the continuation of the budgetary strategy outlined in the initial programme, aiming at pursuing the stabilisation of public finances and promoting growth and an equitable distribution of income. The strategy is based on keeping the primary surplus at a high level and on reducing current expenditure as a percentage of GDP, in parallel with some easing of the still heavy tax burden and an expansion of public investment, particularly in the South. The Council notes that the deficit targets are maintained even though the primary surplus is now planned to stabilise at the level of 5 % of GDP lower than in the initial programme. The Council notes the commitment of the Italian authorities to reduce non-interest current expenditures as a percentage of GDP from 37,9 % of GDP in 1999 to 36,2 % of GDP in 2003. The Council considers that the underlying budgetary position in 2000 should be sufficient to provide a safety margin against breaching the three percent of GDP deficit threshold in normal cyclical fluctuations; the proposed path of budgetary consoli- dation would widen such a safety margin, implying that Italy would continue to satisfy the requirements of the Stability and Growth Pact up to 2003. However, the Council reaffirms that Italy must secure a steady decline in its still high government debt ratio, and it considers that the budgetary objectives in the updated programme should be fulfilled in order to respect the commitment on the part of the Italian government to reduce the debt/GDP ratio to below 100 % by 2003. Should growth turn out stronger than projected in the updated programme, the Council expects Italy to achieve better budgetary outcomes than planned and thus accelerate the reduction in the debt/GDP ratio towards the 60 % reference value. Following its opinion (2) on the original stability programme, the Council urges the Italian government to address with deter- (1) OJ L 209, 2. 8. 1997, p. 1. (2) OJ C 68, 11. 3. 1999, p. 1