STABILITY AND CONVERGENCE PROGRAMMES
Austria Council Opinion on the updated Stability Programme, 2002-2005.
Belgium Council Opinion on the updated Stability Programme, 2002-2005.
Finland Council Opinion on the updated Stability Programme, 2001-2004.
Netherlands Council Opinion on the updated Stability Programme.
Luxembourg Council Opinion on the updated Stability Programme.
Sweden Council Opinion on the updated Convergence Programme.
France Council Opinion on the updated Stability Programme, 2003-2005.
Germany Council Opinion on the updated Stability Programme, 2001-2005.
Greece Council Opinion on the updated Stability Programme, 2001-2004.
Ireland Council Opinion on the updated Stability Programme, 2002-2004.
Italy Council Opinion on the updated Stability Programme, 2001-2005.
Portugal Council Opinion on the updated Stability Programme, 2001-2005.
Spain Council Opinion on the updated Stability Programme, 2001-2005.
Official Journal C51/7
UK Council Opinion on the updated Convergence Programme, 2000/1 - 2006/7.
Denmark Council Opinion on the updated Convergence Programme, 2001-2005.
Council Statement on the Budgetary Situation of Germany.
Council Statement on the Budgetary Situation of Portugal.
|Legal base:||Articles 99(3), 99(5), and 104 EC; qualified majority voting
|Basis of consideration:
||(a) - (f): EM of 11 February 2001|
(g) - (n), (p) and (q): EM of 12 March 2002
(o): EM of 26 March 2002
|Previous Committee Report:
|Discussed in Council:
||22 January 2002 |
|Committee's assessment:||Politically important
|Committee's decision:||(All) For debate in European Standing Committee B
3.1 The Council of Economic and Finance Ministers (ECOFIN)
issues an Opinion on the stability and convergence programme (SCP)
of each Member State.
These Opinions, which are not binding on Member States, are based
on a recommendation from the Commission. The economic content
of the programmes is assessed with reference to the Commission's
autumn economic forecasts. If a Member State's programme is found
wanting, it may be invited by ECOFIN to make adjustments to its
economic policies, as Ireland was in 2001.
3.2 The documents provide the Council's Opinion on the
SCP of each of the Member States and the Council's Statements
on the budgetary situation in Germany and Portugal. A summary
of the Council's Opinion for each Member State is provided by
the Minister in several helpful Explanatory Memoranda, as follows:
"Austria Council Opinion on the updated Stability
"For Austria, the Council's Opinion notes that the 2000
deficit of 1.1% of GDP is expected to move to balance in 20013,
and a small surplus thereafter. Government gross debt is expected
to decrease from 61 .8% of GDP in 2001 to 52.1% in 2005. The Opinion
welcomes important structural savings measures in pensions and
public administration which contributed to balanced government
accounts in 2001 and will continue to produce downward pressure
on spending over the programme period. The annual average growth
projection of 2.25% is considered to be feasible. The budgetary
position is expected to be close to balance or in surplus for
the programme period in line with the requirements of the Stability
and Growth Pact (SGP). The Opinion encourages "a stronger
than planned reduction in the revenue ratio", through a decline
in the tax burden. It also encourages continued structural reforms,
particularly in the pension and health care systems.
"Belgium Council Opinion on the updated Stability
"For Belgium, the Council's Opinion notes strong growth
of 4% in 2000, a general government surplus and a reduction in
government debt by 5.7 percentage points to 109.3% of GDP. The
temporary departure from the budgetary adjustment path projected
in the 2000 stability programme is noted but is not considered
significant, although the Opinion urges a return to the previously
projected budgetary adjustment path in 2003. Given the high level
of debt, the Opinion recommends that all additional revenues be
allocated to debt reduction and that a high level of primary surplus
is maintained throughout the programme period. The Opinion notes
that the general government accounts are projected to be in conformity
with the SGP throughout the period. It recommends firm adherence
to the 1.5% limit for real expenditure increases in the federal
government and social security.
"Finland Council Opinion on the updated Stability
"For Finland, the Council's Opinion notes with satisfaction
that general government surpluses are projected to remain at a
fairly high level throughout the programme period. The government
debt to GDP ratio is expected to continue to decline. The assumption
of a revival in growth from 2002 on is considered plausible, but
it hinges on an upturn in employment growth, which requires wage
moderation in order to materialise. The Opinion recommends that
spending ceilings 'are firmly adhered to' in coming years. High
government surpluses are required because of Finland's particular
exposure to expenditure pressures related to population ageing.
The Opinion notes that the projected surplus in government accounts
is fully in line with the SGP and welcomes the commitment to continued
"Luxembourg Council Opinion on the updated Stability
"For Luxembourg, the Council's Opinion notes strong GDP
growth, a government surplus of 6.2% of GDP in 2000 and projected
budget surpluses over the period of the programme. The public
finance projections are considered to be in compliance with the
requirements of the SGP. The Council notes that current government
expenditure continued to grow rapidly in 2001; it is considered
that the rigidity of current expenditure might become a risk factor
should growth slow significantly. The preparedness of Luxembourg
to meet the budgetary consequences of an ageing population is
noted, as is the low level of the government debt ratio resulting
from healthy public finances.
"The Netherlands Council Opinion on the updated
Stability Programme, 2000-2004
"For the Netherlands, the Council's Opinion notes a sharp
deceleration in GDP growth from 3.5% in 2000 to about 1% in 2001
and a deterioration in the government balance from 1.5% to 0.7%
of GDP. However, the ratio of government debt to GDP continued
to decrease due to developments in nominal GDP. Despite the slowdown,
the Council notes that a general government surplus is projected
for 2002: it expects that surpluses will continue to be projected
for the remaining years of the programme, in line with the SGP.
The Opinion welcomes structural reforms underway in the health
and education sectors as well as in social infrastructure. It
also welcomes the strategy in place to meet the consequences of
population ageing and it encourages the government to maintain
the effort towards reducing the debt ratio in order to achieve
"Sweden Council Opinion on the updated Convergence
"For Sweden, the Council's Opinion notes with satisfaction
that the Convergence programme envisages continued government
budget surpluses throughout the period to 2004. The debt ratio
fell below the reference value of 60% of GDP in 2000 and is expected
to continue to fall substantially over the remainder of the programme
period. The programme's forecasts of GDP growth at 1.7% in 2001
and 2.4% in 2002 are judged optimistic given the worsening of
the global outlook, but the projections for 2003 and 2004 are
said to appear sensible. Sweden 'continues to fully respect' the
SGP ... The need for exchange rate stability is reiterated and
the Council 'expects Sweden to decide to join the ERM2 in due
course.' The Opinion welcomes structural reforms, including the
lowering of the tax burden."
"France Council Opinion on the updated Stability
Programme, 2003- 2005
"For France, the Council's Opinion notes that under the
cautious scenario the government deficit should decline to 1.3%
of GDP in 2003 and 0.5% of GDP in 2004; balance is expected to
be attained in 2005. The Opinion considers that the macroeconomic
projections encompass downside risks in the short term, and that
the 2002 deficit is thus likely to be less favourable than initially
expected. The Opinion notes that balance is reached in 2005, one
year later than was recommended last year; it therefore urges
France to use every opportunity to reach balance in 2004. The
budgetary objectives are considered to respect the SGP's requirements
in 2004 and 2005. The Opinion notes that 2002 spending is planned
to rise more quickly than was recommended in the 2001 Broad Economic
Policy Guidelines (BEPGs) and encourages France to fully respect
the spending norm for the period 20035. Finally, the Opinion
notes that the strategy to deal with population ageing lacks ambition,
and considers further progress in pensions reform necessary.
"Germany Council Opinion on the updated Stability
"For Germany, the Opinion notes that the estimated deficit
outcome for 2001 (2.6% of GDP) is clearly above the 2000 projection,
although this can be explained by the economic downturn. It notes
that the government now considers the lowergrowth scenario
in the programme to be realistic, and concurs that it is plausible.
It considers that the deficit could be above 2.6% in 2002, and
thus welcomes the government's determination to ensure that the
deficit will not exceed 3% of GDP. The Opinion thinks that a budgetary
position of close to balance by 2004 may ultimately require discretionary
measures in addition to those included in the stability programme.
It welcomes the intention to make every effort to ensure strict
budgetary implementation at all levels of government, through
agreements with the regional authorities. The Opinion 'notes with
satisfaction' that the authorities will continue to attempt to
bring the debt level down below 60% of GDP, but states that a
balanced budget position must be reached as soon as possible if
debt reduction is to contribute significantly to meeting the costs
of population ageing. Sustaining and maintaining a position of
budget balance is seen as Germany's key challenge, though reforms
of pensions and labour markets are also important.
"The Council statement on Germany's budgetary situation says
that the Commission acted in accordance with the provisions of
the Stability and Growth Pact in recommending the warning. It
welcomes the commitments of the German government; the government:
confirms its endeavour to ensure that the 3% of GDP reference
value will not be breached; will implement budgetary plans carefully,
using any room for manoeuvre to reduce the deficit; confirms that
a close to balance position will be reached by 2004; notes that
the debt ratio is projected to decline over the period of the
programme. It considers that in light of these commitments, an
effective response has been made to the Commission recommendation,
so no early warning is necessary.
"Greece Council Opinion on the updated Stability
"The Council Opinion notes that the budgetary projections
remain in surplus throughout the period of the programme in both
actual and cyclicallyadjusted terms and that they respected
the close to balance or surplus requirement of the Stability and
Growth Pact. The projected real GDP growth of around 4% for the
period 20022004 is considered to be attainable. The expected
reduction of the government debt ratio from 99.6% of GDP in 2001
to 90.0% of GDP by 2004 is noted, although it is also noted that
current debt reduction plans are less than warranted by expected
GDP growth. The Opinion encourages the Greek Government to proceed
to the necessary structural reforms rapidly and notes the risk
of future imbalances due to the ageing population.
"Ireland Council Opinion on the updated Stability
"The Opinion notes the deceleration in GDP growth from
11.5% in 2000 to just under 7% in 2001. It notes the general government
surplus in 2001 and the move into small deficits in 2003 and 2004,
as well as the low debt level. The Council urges the Irish authorities
to ensure that compliance with the Pact is continued throughout
the programme period. The Opinion welcomes the further progress
in tax reform and infrastructural investment and notes that Ireland
is in a good position to meet the budgetary costs of ageing populations.
"Italy Council Opinion on the updated Stability
"The Council Opinion notes the balanced budget objective
in 2003 and the postponement by one year in the reduction of the
debt ratio below 100%. It notes that the external assumptions
do not sufficiently reflect the deterioration in the global outlook,
and that the risks are mainly on the downside. The Opinion refers
to the role of oneoff measures in achieving the budgetary
targets, and remarks that these should be complemented by measures
aimed at restraining primary expenditures. The Opinion recommends
that Italy adopt a more effective monitoring and control of current
outlays and that fiscal consolidation is kept on course if the
trend growth assumptions are not met. The Opinion encourages Italy
to accelerate the implementation of pensions reform and notes
the key role of labour market reforms.
"Portugal Council Opinion on the updated Stability
"The Council Opinion notes the move from a deficit of
2.2% of GDP in 2001 to a small surplus by 2005, and a decrease
in debt from 55.9% of GDP in 2001 to 51.9% in 2005. The Opinion
notes that the deficit outcome is higher than previously projected,
which can only partly be explained by lower growth.
"It notes that measures taken in a corrective budget were
insufficient to offset the shortfall in tax revenues in order
to meet the deficit target set in the previous programme update.
The macroeconomic scenario is said to be realistic and the
cautious line taken regarding the mediumterm outlook is
said to appear appropriate. The Opinion notes that once economic
recovery is established, the government should strengthen its
efforts to move towards the zero deficit target by 2004. The Opinion
notes that any revenue shortfall other than that explained by
slower economic growth should be compensated for by additional
measures. It also notes that the sustainability of government
finances should be strengthened in the light of the budgetary
costs of ageing populations. The main challenges noted are to
complete the process of pension reform and to continue with reforms
to the health sector.
"The Council statement on Portugal's budgetary situation
says that the Commission acted in accordance with the provisions
of the Stability and Growth Pact in recommending an early warning.
It welcomes the governments commitments; the government: confirms
its endeavour to ensure that the 3% of GDP reference value for
the general government deficit will not be breached; will implement
budgetary plans carefully, compensating any revenue shortfall
by additional measures; confirms that a balanced budget position
will be reached by 2004; notes that the debt ratio is projected
to decline over the programme period. The statement considers
that in light of these commitments, an effective response has
been made to the Commission recommendation, so no early warning
"Spain Council Opinion on the updated Stability
"The Council Opinion notes that the target of a general
government balance in 2001 is expected to have been reached and
the debt ratio objective over-achieved. The outlook in the mediumterm
is described as plausible, although somewhat optimistic in the
shortterm. The mediumterm budgetary projections are
described as prudent, and the targets respect the 'close to balance
or surplus' objective of the Stability and Growth Pact. The Opinion
notes the risks posed by the pressures of population ageing, and
welcomes the role to be played by other structural policies, particularly
in the market for goods and services.
"UK Council Opinion on the updated Convergence
2000/1 - 2006/7
"The Council Opinion welcomes the UK's strategy of securing
macroeconomic stability through sound monetary and fiscal policies
and continued structural reform. It considers the programme's
macro-economic forecasts to be realistic. The Opinion also notes
that the UK is projected to move into deficit in the medium term,
but sees this as a result of the use of a cautious trend growth
assumption and of addressing the low level of government investment,
as suggested in the 2001 broad economic policy guidelines. It
notes that gross debt relative to GDP is expected to fall to the
low level of 36.3% by 2006/7, and considers that the UK is in
a good position to meet the consequences of ageing populations.
The Opinion notes with approval that the progress on economic
reforms should help to raise productivity performance and secure
further improvements in the labour market.
"Denmark Council Opinion on the updated Convergence
"The Opinion considers the programme's economic scenario
plausible, and notes with satisfaction Denmark's continued fulfilment
of the convergence criteria. It welcomes the programme's objective
of keeping surpluses between 1½% and 2½% of GDP, and
considers that Denmark continues to fulfil the Stability and Growth
Pact's requirement of a budgetary position 'close to balance or
in surplus'. The Opinion welcomes the governments commitment to
a tax freeze, but notes that it should not prevent a reduction
of marginal labour taxes. It notes that expenditure control has
had a mixed record recently, and invites the Danish government
to strengthen the institutional framework to avoid further slippage
in the future. The Opinion welcomes the programmes's focus on
longer-term sustainability, and considers the Danish economy to
be in a good position to deal with the problems caused by population
ageing. Finally, it encourages the authorities to proceed with
further labour market reforms to increase labour force participation
The Government's view
3.3 The Minister says:
"These Council Opinions set out the Council's views on
policy priorities for the coming years in other Member States.
They have no policy implications for the UK. In addition, they
are nonbinding on Member States; article 249 of the Treaty
states that 'recommendations and opinions shall have no binding
3.4 As regards the Council's Opinion on the UK, the Minister
says that the Opinion is consistent with the Government's fiscal
rules, and adds:
"The Government supports a prudent interpretation of
the Stability and Growth Pact which takes into account the economic
cycle, sustainability and the important role of public investment
(as specified in Article 104 of the Treaty). The UK continues
to discuss this with its EU partners."
3.5 We note with interest that, despite recommendations
from the Commission for early warnings to be issued to
Germany and Portugal concerning their budgetary situation, the
Council decided against issuing such warnings in either case.
3.6 We recognise that the process of subjecting the
stability and convergence programme of each Member State to a
critical peer-review serves a useful scrutinising purpose. However,
the credibility of the system of Council warnings is likely to
be brought into question if the Council does not issue justifiable
warnings or if, without good cause, countries simply ignore such
warnings. We note that, in this instance, both of the Governments
concerned gave a number of commitments.
3.7 We recommend that the documents be debated in
European Standing Committee B, since this will provide a timely
opportunity for the House to consider the stability and convergence
programmes and the procedures for ECOFIN to issue early warnings
to Member States.
twelve Member States that have adopted the euro have stability
programmes, whereas the other three Member States (UK, Denmark
and Sweden) produce convergence programmes. Back