21 Stability and Growth Pact: Excessive
deficit procedure
| (a)
(35008)
—
COM(13) 381
(b)
(35014)
10563/13
—
(c)
(35017)
10476/13
+ ADD 1
COM(13) 391
(d)
(35018)
10483/13
COM(13) 385
(e)
(35019)
10485/13
+ ADD 1
COM(13) 393
(f)
(35023)
10549/13
+ ADD 1
COM(13) 382
(g)
(35024)
10550/13
C (13) 3338
(h)
(35086)
10484/13
COM(13) 383
(i)
(35087)
10486/13
+ ADD 1
COM(13) 394
(j)
(35088)
10487/13
+ ADD 1
COM(13) 396
(k)
(35089)
10488/13
+ ADD 1
COM(13) 388
(l)
(35090)
10489/13
COM(13) 387
(m)
(35091)
10490/13
COM(13) 386
(n)
(35092)
10545/13
COM(13) 390
(o)
(35093)
10546/13
+ ADD 1
COM(13) 384
(p)
(35094)
10548/13
COM(13) 392
(q)
(35100)
11421/13
COM(13) 294
(r)
(35477)
10567/13
—
(s)
(35478)
10558/13
—
(t)
(35479)
10559/13
—
(u)
(35480)
10560/13)
—
(v)
(35481)
10561/13
—
(w)
(35482)
10562/13
—
(x)
(35483)
10564/13
—
(y)
(35484)
10565/13
—
(z)
(35485)
10566/13
—
(aa)
(35486)
10569/13
—
(bb)
(35487)
10571/13
—
(cc)
(35572)
10572/13
—
|
Draft Council Decision establishing that no effective action has been taken by Belgium in response to the Council Recommendation of 2 December 2009
Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in Slovenia
Draft Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in Malta
Draft Council Decision abrogating Decision 2010/286/EU on existence of an excessive deficit in Italy
Draft Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in Poland
Draft Council Decision giving notice to Belgium to take measures for the deficit reduction judged necessary in order to remedy the situation of excessive deficit
Commission Opinion of 29.5.2013 on the existence of an excessive deficit in Malta
Draft Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in Spain
Draft Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in Portugal
Draft Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in Slovenia
Draft Council Decision abrogating Decision 2004/918/EC on the existence of an excessive deficit in Hungary
Draft Council Decision abrogating Decision 2009/588/EC on the existence of an excessive deficit in Lithuania
Draft Council Decision abrogating Decision 2009/591/EC on the existence of an excessive deficit in Latvia
Draft Council Decision on the existence of an excessive deficit in Malta
Draft Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in France
Draft Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in the Netherlands
Commission Report: Malta: Report prepared in accordance with Article 126(3) of the Treaty
Council Decision abrogating Decision 2009/590/EC on the existence of an excessive deficit in Romania
Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in Malta
Council Decision abrogating Decision 2010/286/EU on the existence of an excessive deficit in Italy
Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in Spain
Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in Poland
Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in Portugal
Council Decision abrogating Decision 2004/918/EC on the existence of an excessive deficit in Hungary
Council Decision abrogating Decision 2009/588/EC on the existence of an excessive deficit in Lithuania
Council Decision abrogating Decision 2009/591/EC on the existence of an excessive deficit in Latvia
Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in France
Council Recommendation with a view to bringing an end to the situation of an excessive government deficit in the Netherlands
Council Decision giving notice to Belgium to take measures for the deficit reduction judged necessary in order to remedy the situation of excessive deficit
|
| Legal base | (g) and (q) —
(a)-(f), (h)-(p) and (r)-(cc) Article 126 TFEU; —; QMV of Member States, except the addressee
|
| Documents originated
| (a), (c) and (m)-(n) 29 May 2013
(q) 21 May 2013
|
| Deposited in Parliament
| (a) 6 June 2013
(b) 20 November 2013
(c)-(f) 10 June 2013
(g) 11 June 2013
(h)-(p) 26 June 2013
(q) 21 May 2013
(r)-(bb) 8 November 2013
(cc) 29 November 2012
|
| Department | HM Treasury
|
| Basis of consideration
| EM of 18 November 2013
|
| Previous Committee Report
| None |
| Discussion in Council
| 21 June 2013 |
| Committee's assessment
Committee's decision
| Politically important
Cleared
|
Background
21.1 The Stability and Growth Pact adopted by the
Amsterdam European Council in June 1997 emphasised the obligation
of Member States to avoid excessive government deficits, defined
as the ratio of a planned or actual deficit to gross domestic
product (GDP) at market prices in excess of a "reference
value" of 3%.[60]
Each year the Council of Economic and Finance Ministers (ECOFIN)
issues an Opinion on the updated stability or convergence programme
of each Member State.[61]
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
current economic forecasts. If a Member State's programme is found
wanting, it may be invited by ECOFIN, in a Recommendation, to
make adjustments to its economic policies, though such Recommendations
are likewise not binding on Member States. This whole procedure
is essentially the Pact's preventative arm.
21.2 On the other hand, the Pact also endorsed a
dissuasive or corrective arm involving action in cases of an excessive
government deficit — the excessive deficit procedure provided
for in Article 126 TFEU and the relevant Protocol. This procedure
consists of Commission reports followed by a stepped series of
Council Recommendations (the final two steps do not apply to non-members
of the eurozone). Failure to comply with the final stage of Recommendations
allows ECOFIN to require publication of additional information
by the Member State concerned before issuing bonds and securities,
to invite the European Investment Bank to reconsider its lending
policy for the Member State concerned, to require a non-interest-bearing
deposit from the Member State concerned whilst its deficit remains
uncorrected, or to impose appropriate fines on the Member State
concerned.
The documents
21.3 On 29 May, the Commission published its assessment
of the progress made by the countries with respect to their excessive
budgetary targets on the basis of the 2013 Spring Forecast and
subsequent budgetary measures. Based on the updated forecast,
the Commission issued a number of draft Recommendations or Decisions,
related to fiscal policy, documents which were included as part
of the broader Country Specific Recommendations. For a number
of Member States, based on the Commission Recommendation, the
Council then adopted, on 21 June, a revised excessive deficit
procedure Recommendation. (Article 3(5) of Regulation (EC) No.
1467/97, allows the Council to adopt a revised Recommendation,
if effective action has been taken and unexpected adverse economic
events with major unfavourable consequences for government finances
occurred after the adoption of the initial Recommendation.) For
other Member States Decisions were adopted abrogating the excessive
deficit procedure. These Recommendation and Decisions, and some
of the background to them, are summarised in the following paragraphs.
Italy — documents (d) and (t)
21.4 In December 2009, the Council, based on a recommendation
from the Commission, addressed a Recommendation to Italy with
a view to bringing Italy's excessive deficit situation to an end
by 2012 at the latest. After peaking at 5.5% of GDP in 2009, Italy's
general government deficit was steadily brought down and reached
3.0% of GDP in 2012, which was the deadline set by the Council.
The improvement was driven by significant fiscal consolidation,
while in 2012 interest expenditure was 0.8 percentage points of
GDP higher than in 2009 and the composition of economic activity
was tax poorer. The stability programme for 2013-17, adopted
by the Italian government in April and endorsed by Parliament
on 7 May, plans the deficit to decline slightly to 2.9% of GDP
in 2013 and then fall to 1.8% of GDP in 2014. Based on a no-policy-change
assumption, the Commission's 2013 Spring Forecast projects a deficit
of 2.9% of GDP in 2013 and 2.5% of GDP in 2014. The debt-to-GDP
ratio rose by 10.6 percentage points between 2009 and 2012, to
127%, also due to Italy's contribution to financial assistance
to eurozone Member States. As cyclical conditions remain negative,
the gross government debt is forecast to increase to 131.4% of
GDP in 2013 and 132.2% in 2014 also due to the 2.5 percentage
points of GDP settlement of trade debt arrears planned over 2013-14.
In the view of the Council, the excessive deficit in Italy has
been corrected and the procedure should, therefore, be abrogated.
The Council recalls that, starting in 2013, which is the year
following the correction of the excessive deficit, Italy should
progress towards its medium-term objective at an appropriate pace,
including respecting the expenditure benchmark, and making sufficient
progress towards compliance with the debt criterion.
Latvia — documents (m)-(z)
21.5 In February 2009, the Council, based on a recommendation
from the Commission, addressed a Recommendation to Latvia with
a view to bringing its excessive deficit situation to an end by
2012 at the latest. Latvia's general government deficit rapidly
declined to 3.6% of GDP in 2011, following high deficits of 9.8%
in 2009 and 8.1% in 2010, which was partly a result of measures
to stabilise the financial sector. The reduction of the deficit
reflected sizeable and broad-based fiscal consolidation implemented
over 2009-11 as part of the economic adjustment programme, supported
by balance-of-payments assistance and improving cyclical conditions.
The adjustment programme was successfully completed in January
2012. The deficit declined further to 1.2% of GDP in 2012, better
than the target of 2.1% set in the 2012 convergence programme
and well below the 3% of GDP Treaty reference value. On the revenue
side this reflected favourable cyclical conditions and improving
tax efficiency, while expenditure growth remained substantially
below nominal GDP growth. The 2013 convergence programme envisages
that the headline deficit will be 1.1% of GDP in 2013, stabilising
thereafter at 0.9% until 2016. The Commission's 2013 Spring Forecast
projects that the deficit will remain broadly unchanged in 2013
at 1.2% and will decrease to 0.9% in 2014, thus staying well below
the reference value of 3% of GDP. The general government debt
stood at 40.7% of GDP in 2012. The 2013 spring forecast projects
the debt to increase to 43.2% in 2013, as the government accumulates
assets for large debt repayments scheduled for 2014-15 before
declining again to around 40% in 2014, as these repayments take
effect. In the view of the Council, the excessive deficit in Latvia
has been corrected and the procedure should therefore be abrogated.
The Council also recalls that, starting from 2013, which is the
year following the correction of the excessive deficit, Latvia
should ensure compliance with the requirements of the preventive
arm of the Stability and Growth Pact, including respecting the
expenditure benchmark.
Lithuania — documents (l)-(y)
21.6 In May 2009, the Council, based on a recommendation
from the Commission, addressed a Recommendation to Lithuania with
a view to bringing its excessive deficit situation to an end by
2012 at the latest. Lithuania's general government deficit has
been brought down to 3.2% of GDP in 2012 from a peak of 9.4% in
2009. This improvement was driven by expenditure consolidation
measures, in particular a continued restriction of expenditure
growth and favourable cyclical conditions. Since the deficit of
3.2% can be considered to be close to the 3% reference value and
Lithuania's debt-to-GDP ratio is below the 60% of GDP reference
value in a sustained manner, Lithuania is eligible for the Stability
and Growth Pact provisions regarding systemic pension reform which
allows the direct net cost of pension reforms to be taken into
account when assessing the correction of the excessive deficit.
The net costs of Lithuania's systemic pension reform have been
confirmed by the Commission to be 0.2% of GDP in 2012, accounting
for the excess over the 3% reference value. The deficit is set
to remain below the reference value of 3% of GDP over the forecast
horizon. Lithuania's 2013 convergence programme projects the deficit
to fall to 2.5% of GDP in 2013 and to 1.5% in 2014, while the
Commission's 2013 Spring Forecast projects the deficit to be 2.9%
in 2013 and 2.4% in 2014, based on a no-policy-change assumption.
The Council recalls that, starting from 2013, which is the year
following the correction of the excessive deficit, Lithuania should
progress towards its medium-term objective at an appropriate pace,
including respecting the expenditure benchmark. In the view of
the Council, the excessive deficit in Lithuania has been corrected
and the procedure should therefore be abrogated. The Council also
recalls that, starting from 2013, which is the year following
the correction of the excessive deficit, Lithuania should ensure
compliance with the requirements of the preventive arm of the
Stability and Growth Pact, including respecting the expenditure
benchmark.
Hungary — documents (k) and (x)
21.7 In July 2004, the Council, based on a recommendation
from the Commission, addressed a Recommendation to Hungary with
a view to bringing its excessive deficit situation to an end by
2008 at the latest. The deadline for Hungary to correct its excessive
deficit situation was subsequently postponed due to the severe
economic downturn. In March 2012, the Council adopted a new Recommendation
for Hungary to bring the excessive deficit to an end by 2012.
The Hungarian authorities were asked to undertake, in particular,
the following steps: to put an end to the excessive deficit situation
by 2012 in a credible and sustainable manner, to undertake an
additional fiscal effort of at least a half percentage point of
GDP to ensure the attainment of the 2012 deficit target of 2.5%
of GDP and to take the necessary additional measures of a structural
nature to ensure that the deficit in 2013 remains well below the
3% of GDP threshold.
21.8 In May 2012, based on the 2012 convergence programme
and further specification of the savings measures, the Commission
concluded that Hungary had taken effective action regarding the
correction of the excessive deficit. In particular, the general
government deficit was expected to reach 2.5% of GDP in 2012 and
remained well below the 3% of GDP Treaty reference value in 2013
as recommended by the Council in March 2012.
21.9 The Commission 2013 Spring Forecast and the
assessment of additional corrective measures adopted on 13 May
2013 lead the Commission to conclude that: in 2012, on the basis
of a considerable fiscal effort and thanks to one-off revenues
amounting to three quarters of a percentage point of GDP; the
general government deficit reached 1.9% of GDP; that the deficit
is expected to remain below the Treaty reference value of 3% of
GDP over the forecast horizon with a deficit of 2.7% and 2.9%
in 2013 and 2014, respectively; that the cyclically-adjusted budget
balance, net of one-off and other temporary measures, will stand
at -0.75% and -1.5% of GDP in 2013 and 2014, and hence will be
consistent with the Hungarian medium-term objective of -1.7% of
GDP; and, finally, that the debt-to-GDP ratio will continue to
decline, falling to 78.1% and 77.2% in 2013 and 2014, respectively,
and remaining on a downward path thereafter.
21.10 Therefore, in the view of the Council, the
excessive deficit in Hungary has been corrected and the procedure
is to be abrogated. The Council also recalls that, starting from
2013, the year following the correction, of the excessive deficit,
Hungary should maintain a fiscal stance in line with its medium-term
objective, including respecting the expenditure benchmark, and
make sufficient progress towards compliance with the debt criterion.
Poland — documents (e) and (v)
21.11 In October 2009, the Council, based on a recommendation
from the Commission, addressed a Recommendation to Poland with
a view to bringing its excessive deficit situation to an end by
2012 at the latest. The Commission's 2013 Spring Forecast projects
the general government deficit at 3.9% of GDP in 2013 (against
Poland's deficit target for 2013 of 3.5% of GDP) and, under a
no-policy-change assumption, at 4.1% of GDP in 2014. Taking into
account additional measures contained in the 2013 update of the
Polish convergence programme, published after the cut-off date
of the Spring Forecast, the forecast has been updated with the
measures included in the convergence programme, which lead to
a downward revision of the 2014 deficit to 3.7% of GDP. Public
debt declined to 55.6% of GDP in 2012 from 56.2% of GDP in 2011,
on the back of sizeable stock-flow adjustment. The Spring Forecast
projects its increase to 57.5% of GDP in 2013 and, based on a
no-policy change assumption, to almost 59% of GDP in 2014. The
structural deficit decreased from 8.3% of GDP in 2010 to 5.4%
in 2011 and 3.8% in 2012. The average annual apparent fiscal effort
over the period 2010-12 is estimated at 1.5% of GDP.
21.12 When adjusted for the significant upward revision
in potential output growth since the time when the Recommendation
was issued and because of revenue unexpectedly growing at a lower
rate than would have been implied by the GDP growth based on standard
elasticities, the average annual adjusted structural effort (1.6%
of GDP) exceeds the recommended average annual fiscal effort (1.25%
of GDP) over 2010-12. In light of this, Poland has taken effective
action and fulfils the conditions for the extension of the deadline
for correcting the excessive general government deficit.
21.13 Therefore, based on the Commission assessment,
the Council adopts the Recommendation that Poland should bring
an end to the excessive deficit situation by 2014 at the latest;
reach a headline deficit target of 3.6% of GDP in 2013 and 3.0%
of GDP in 2014, which is consistent with an annual improvement
of the structural balance of at least 0.8% and 1.3% of GDP respectively
and rigorously implement the measures already adopted while complementing
them with additional measures sufficient to achieve a correction
of the excessive deficit in 2014 at the latest. The Council also
establishes the deadline of 1 October 2013 for Poland to take
effective action and to report in detail the consolidation strategy
that is envisaged to achieve the targets.
Romania — document (r)
21.14 The Council Decision abrogating the existence
of an excessive deficit in Romania confirms that it has successfully
corrected the excessive deficit. Romania reduced its budget deficit
from 9% of GDP in 2009 to just below 3% in 2012. A new precautionary
programme is in place to support further consolidation efforts
aimed at reaching the medium term objective of a structural budget
deficit of 1% of GDP by 2015 and maintaining it thereafter, in
line with the Stability and Growth Pact requirements.
Belgium — documents (a) and (f)
21.15 In October 2009, the Council, based on a recommendation
from the Commission, addressed a Recommendation to Belgium with
a view to bringing its excessive deficit situation to an end by
2012 at the latest. However, following elections in June 2010,
Belgium was without a government for most of 2010 and 2011 and
unable to pass a budget until December 2011. The general budget
deficit decreased during that period, from 5.6% of GDP in 2009
to 3.9% in 2012, with the 2012 outturn deficit being higher than
the 2.8% of GDP targeted under Belgium's 2012 budget, which was
due in part to the recapitalisation of Dexia bank (equivalent
to 0.8% of GDP) and the impact on the budget of lower-than-expected
growth. Although structural measures implemented by the previous
government reduced the structural balance by 0.5% in 2010, the
absence of a 2011 budget led to an increase in the structural
deficit of 0.1% of GDP. The budget for 2013 (and its subsequent
amendments) announced by the new government from December 2011
decreased the structural deficit by 0.5%, implying a total structural
tightening over the period 2010-12 of 0.9%, equivalent to 0.3%
a year. This is below the 0.75% of GDP annual structural effort
required by the Council's 2009 Recommendation.
21.16 On this basis the Council agrees that Belgium
has undertaken no effective action to address its excessive deficit.
Based on the Commission recommendation, the Council also agreed
that Belgium shall put an end to the excessive deficit situation
by 2013 and reduce the headline deficit to 2.7% of GDP in 2013,
an improvement consistent with a reduction in the structural deficit
of 1% of GDP in 2013. The budget for 2013 and its subsequent amendment
are estimated by the Commission to have a structural impact of
0.75% of GDP in 2013 — as such, the authorities are required
to introduce further structural measures with an impact in 2013
equivalent to 0.25% of GDP. Budgetary consolidation measures should
secure a lasting improvement in the general government structural
balance in a growth-friendly manner.
21.17 The Council also agrees that Belgium shall
submit to the Commission, by 21 September at the latest, a report
outlining the measures taken to comply with this Decision, further
quarterly reports to the Commission, examining progress made in
complying with this Decision, and a report by 31 December on the
intended implementation of the first recommendation issued under
the European Semester regarding the adoption of explicit coordination
arrangements to ensure that budgetary targets are binding at federal
level and sub-federal levels within a medium-term planning perspective
and shall present structural measures for 2014 which ensure a
sustainable correction of the excessive deficit and appropriate
progress towards its medium-term objective.
Portugal — documents (i) and (w)
21.18 The Council Recommendation for Portugal alters
the deficit targets contained in Portugal's assistance programme.
The Commission finds that Portugal will not meet the budgetary
targets established in the Council Recommendation of October 2012.
The growth outlook for Portugal has weakened in the interim compared
to that that underlined in that Recommendation. The Council may
decide to adopt a revised Recommendation if "effective action
has been taken and unexpected adverse economic events with major
unfavourable consequences for government finances occur after
the adoption of the recommendation" and Portugal is found
to have taken effective action that represents adequate progress
towards correcting the excessive deficit in 2012 and 2013 within
the limits specified by the Council in October 2012. Granting
an additional year for the correction of the excessive deficit
requires intermediate headline deficit targets of 5.5% of GDP
in 2013, 4.0. % of GDP in 2014 and 2.5% of GDP in 2015, compared
with targets of 4.5% of GDP in 2013 and 2.5% of GDP in 2014 associated
with the Council 2012 Recommendation.
The Netherlands — documents (p) and (bb)
21.19 In October 2009, the Council, based on a recommendation
from the Commission, addressed a Recommendation to the Netherlands
with a view to bringing its excessive deficit situation to an
end by 2013 at the latest. According to the 2012 Spring Forecast,
the general budget deficit is projected to decline to only 3.6%
of GDP in 2013 (from 4.1% in 2012), attributed to large consolidation
measures (particularly on revenue but with some expenditure measures)
which means the Netherlands is expected to miss the deadline to
correct its excessive deficit. However, growth outturns over the
period 2010-2013 have been far lower than the growth projections
underlying the Recommendation, which was the Commission's 2009
Autumn Forecast. At the time, GDP was expected to growth by 0.25%
in 2010 and 1.5% in 2011. While 2012 and 2013 were beyond the
forecast horizon, the Recommendation was based on the assumption
that growth would continue to improve after 2010 as the output
gap closed. However, outturn growth was 1.6% in 2010, 1.0% in
2011 and -1.0% in 2012, falling considerably short of the projections
of 2009 Autumn Forecast. The Commission's 2013 Spring Forecast
projects growth to be -0.8% in 2013 and 0.9% in 2014.
21.20 In light of the changed economic outlook, the
Commission assesses that the structural deficit declined by around
0.7% a year over 2010-2013, according to the Spring Forecast 2013.
Taking into further consideration the decline in potential output
since the Commission's recommendation was made, the Commission
estimates that the average annual structural effort was 1.1% of
GDP. This exceeds the structural effort recommended by the Council
2009 Recommendation. Therefore, the Council judges that the Netherlands
fulfils the conditions for the extension of the deadline for correcting
the excessive general government deficit and recommends a new
deadline of 2014 for the Netherlands to correct its excessive
deficit. It also recommends that the Netherlands reaches a headline
deficit target of 3.6% in 2013 and 2.8% of GDP in 2014 and that
it implements the multiannual measures already adopted with the
2013 budget, while standing ready to implement additional measures
if needed to achieve a correction of the excessive deficit in
2014. Finally, the Council establishes the deadline of 1 October
for the Netherlands to take effective action and to report in
detail the consolidation strategy that is envisaged to achieve
the targets.
France — documents (o)-(aa)
21.21 In April 2009, the Council, based on a recommendation
from the Commission, addressed a Recommendation to France with
a view to bringing its excessive deficit situation to an end by
2012 at the latest. In December 2009, the Council decided that
unexpected adverse economic events with major unfavourable consequences
for government finances had occurred and, as a consequence,
it recommended that France correct its excessive deficit by 2013
at the latest. The economic scenario is much worse than the one
underpinning the December 2009 Recommendation and the cumulative
budgetary impact of measures taken by the French government in
2010-2013 amounts to about 5.25% of GDP, that is 1.3% of GDP per
year on average. The Council judges that France fulfils
the conditions for the extension of the deadline for correcting
the excessive general government deficit. The Council therefore
recommends that France should put an end to the present excessive
deficit situation by 2015 at the latest, reach a headline deficit
of 3.9% of GDP in 2013, 3.6% in 2014 and 2.8% in 2015, fully implement
the already adopted measures for 2013 (1.5% of GDP) and specify,
adopt and implement rapidly the necessary consolidation measures
for 2014 and 2015.
Slovenia — documents (b) and (j)
21.22 In 2 December 2009, the Council decided that
an excessive deficit existed in Slovenia and issued a Recommendation
to correct the excessive deficit by 2013 at the latest. Slovenia
was hit with unexpected adverse economic developments and the
economy is in a double dip recession projected to last into 2014.
The average annual adjusted structural effort between 2010 and
2013 is estimated at 1.1% of GDP, which is above the recommended
average annual fiscal effort of 0.75% of GDP. The Council considers
that Slovenia fulfils the conditions for the extension of the
deadline for correcting the excessive general government deficit.
21.23 The Council therefore recommends that Slovenia
should bring an end to the excessive deficit situation by 2015,
reach a general government deficit target of 4.9% of GDP in 2013,
3.3% in 2014 and 2.5% in 2015, implement rigorously the measures
already adopted and specify, adopt and implement new structural
consolidation measures, on top of those already included in the
Commission's updated 2013 Forecast. The Council establishes
the deadline of 1 October 2013 for Slovenia to take effective
action. Furthermore, the Council establishes that the Slovenian
authorities should accelerate the reduction of the headline deficit
in 2014 and 2015 if economic or budgetary conditions improve and
specify, adopt and implement structural consolidation measures
which gradually decrease the current expenditure ratio to GDP.
Finally, Slovenia should report on progress made on the implementation
of these recommendations at least every six months.
Spain — documents (h) and (u)
21.24 In April 2009, the Council decided that an
excessive deficit existed in Spain and issued a Recommendation
to correct it by 2012 at the latest. In July 2012, the Council
adopted a revised Recommendation giving Spain until 2014 at the
latest to correct the excessive deficit. Spain's deadline for
correction had previously been extended to 2013 by the Council
on in December 2009. After a short recovery in 2011, the Spanish
economy returned to recession in the first quarter of 2012. In
July 2012, due to the unexpected worsening of the economy, the
Council recommended that Spain should correct its excessive deficit
by 2014, an extension of two years on the original Recommendation
made in 2009.
21.25 At the time of the Council's last Recommendation,
the Commission forecast GDP growth of -1.9% in 2012, -0.3% in
2013 and 1.1% in 2014. The latest Commission forecast is for GDP
growth to be lower in 2013, at -1.5%, and 0.9% in 2014. Domestic
demand is forecast to drop along with a continued slump in employment,
both of which will have adverse impacts on government revenue.
Once the lower than expected growth rates and revenue shortfalls
are taken into account, the adjusted fiscal effort in 2013 stands
at 2.5% of GDP which is in line with the Council's 2012 Recommendation.
Therefore, the Council judges that Spain fulfils the conditions
for the extension of the deadline for correcting the excessive
general government deficit and recommends that Spain puts an end
to the present excessive deficit situation by 2016. The recommended
intermediate headline deficit targets for Spain are now 6.5% of
GDP in 2013, 5.8% of GDP in 2014, 4.2% of GDP in 2015 and 2.8%
of GDP in 2016.
21.26 According to the Commission's 2013 Spring Forecast,
if budgetary plans at all levels of government are implemented,
no further measures will be required in 2013 to meet the deficit
target of 6.5% of GDP. However, Spain should stand ready to take
corrective action in case of deviations from budgetary plans.
The authorities should reinforce the medium-term budgetary strategy
with well-specified structural measures for the years 2014-16
that are necessary to achieve the correction of the excessive
deficit by 2016. The Council establishes the deadline of 1 October
for the Spanish government to take effective action and report
in detail the consolidation strategy that is envisaged to achieve
the targets.
Malta — documents (c), (g), (n), (q) and
(s)
21.27 An excessive deficit procedure for Malta had
been abrogated in 2012 after the government's deficit-to-GDP ratio
was at 2.8% in 2011. But the general government deficit in Malta
reached 3.3% of GDP in 2012, thus exceeding the 3%-of-GDP reference
value of the Treaty. The general government gross debt stood at
72.1% of GDP in 2012. The Commission is of the opinion that an
excessive deficit exists in Malta. Even though the deficit was
close to the 3%-of-GDP reference value, the excess over the reference
value could not be qualified as exceptional within the meaning
of the Stability and Growth Pact. The increase in the deficit
is not a result of a severe economic downturn, as real GDP growth
was on average above 2% in 2010-11 and economic growth was positive
in 2012 (0.8%). The Commission forecasts that the deficit will
remain above 3% in 2013 (3.7%) and 2014 (3.6%). Therefore, based
on the Commission recommendation, the Council decided on 21 June
2013 that an excessive deficit existed in Malta. It also recommended
that Malta should put an end to the present excessive deficit
situation by 2014, reach a headline general government target
of 3.4% of GDP for 2013 and 2.7% of GDP in 2014, which is consistent
with an annual improvement of the structural balance of 0.7% of
GDP in 2013 and 0.7% of GDP in 2014, specify and rigorously implement
the measures that are necessary to achieve the correction of the
excessive deficit by 2014 and use all windfall gains for deficit
reduction. The Council establishes the deadline of 1 October for
Malta to take effective action and to report in detail the consolidation
strategy that is envisaged to achieve the targets.
The Government's view
21.28 The Economic Secretary to the Treasury (Nicky
Morgan) says that these documents have no policy or budgetary
implications for the UK and that the Government believes that
Member States should take forward fiscal consolidation as a priority
to reduce their deficit and support recovery. The Minister notes
that measures under Article 126(7) TFEU can only be made public
after the minutes of the particular Council meeting, in this case
ECOFIN on June 21, have been adopted by Council and that the minutes
were only signed off in October, leading to delayed deposit of
the substantive documents.
Conclusion
21.29 Whilst clearing these documents we draw
them to the attention of the House for the information they give
about the economic situation of the Member States concerned.
60 This obligation does not apply to Member States,
including the UK, whilst they remain outside the eurozone, but
they are required to endeavour to avoid excessive deficits. Back
61
The 17 Member States (Austria, Belgium, Cyprus, Estonia, Germany,
Greece, Finland, France, Ireland, Italy, Luxembourg, Malta, the
Netherlands, Portugal, Slovakia, Slovenia and Spain) that have
adopted the euro have Stability Programmes, whereas the other
11 Member States (including the UK) produce Convergence Programmes. Back
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