35 Stability and Growth Pact
| Committee's assessment
| Politically important |
| Committee's decision | Cleared from scrutiny
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| Document details | (a) Draft Council Recommendation on ending an excessive deficit in France (b)-(d) Commission Reports about Belgium, Italy and Finland avoiding an excessive deficit
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| Legal base | (a) Article 126(7) TFEU; —; QMV of eurozone Member states, excluding the country in question
(b)-(d) —
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| Department
Document numbers
| HM Treasury
(a) (36698), 6644/15 + ADD 1, COM(15) 115
(b) (36701), 6733/15, COM(15) 112 (c) (36706), 6734/15, COM(15) 113 (d) (36707), 6736/15, COM(15) 114
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Summary and Committee's conclusions
35.1 The Stability and Growth Pact requires the Commission to
initiate the Excessive Deficit Procedure whenever a Member State
might or does exceed the Treaty deficit or debt reference values.
35.2 With a draft Council Recommendation for France
the Commission follows on from its assessment of the progress
made in implementing the Council Recommendation of June 2013 on
taking effective action to remedy the excessive deficit. It suggests
that the Council recommend that France should put an end to the
present excessive deficit situation by 2017 at the latest.
35.3 In three Reports the Commission assesses that
the deficit and debt positions of Belgium, Italy and Finland do
not presently require Excessive Deficit Procedure Council Recommendations.
35.4 The Government notes that these documents have
no direct implications for non-eurozone Member States, such as
the UK.
35.5 Whilst clearing these documents from scrutiny,
we draw them to the attention of the House because of the information
they give about the economic situation of some Member States.
Full details of
the documents: (a)
Draft Council Recommendation with a view to bringing an end to
the excessive government deficit in France: (36698), 6644/15 +
ADD 1, COM(15) 115; (b) Commission Report: Belgium Report prepared
in accordance with Article 126(3) of the Treaty: (36701),
6733/15, COM(15) 112; (c) Commission Report: Italy Report prepared
in accordance with Article 126(3) of the Treaty: (36706),
6734/15, COM(15) 113; (d) Commission Report: Finland Report
prepared in accordance with Article 126(3) of the Treaty:
(36707), 6736/15, COM(15) 114.
Background
35.6 The Stability and Growth Pact (SGP) requires
the Commission to initiate the Excessive Deficit Procedure (EDP)
whenever the deficit of a Member State might or does exceed the
3% of GDP deficit reference value or the 60% of GDP debt reference
value.
35.7 Depending on their timing Commission EDP Reports
or draft Recommendations may be included in its draft Country
Specific Recommendations for the annual European Semesters.
The documents
35.8 With its draft Council Recommendation for France,
document (a), based on its 2015 winter economic forecast the Commission
follows on from its assessment of the progress made in implementing
the Council Recommendation of June 2013 on taking effective action
to remedy the excessive deficit.[108]
35.9 The Commission suggests that the Council recommend
that France should put an end to the present excessive deficit
situation by 2017 at the latest. Its 2015 winter forecast expects
France's deficit to be 4.1% this year and 4.1% next. So the Commission
recommends to the Council that efforts should be made so that
France runs a headline deficit of 4.0% in 2015, 3.4% in 2016,
and 2.8% in 2017 — this would require additional measures
of 0.2% of GDP in 2015, 1.2% of GDP in 2016 and 1.3% of GDP in
2017 (based on the Commission's winter forecast). The Commission
recommends to the Council that a deadline of 10 June 2015 should
be set for France to take effective action and report in detail
a consolidation strategy to achieve its targets — it would
then be required to submit a reports on progress every six months
starting in December 2015. The Commission stipulates that the
December 2015 report should detail the French authorities' response
to the Commission's opinion on the coming year's draft budgetary
plan and the June 2016 report should update and further specify
the consolidation efforts undertaken to meet the structural balance
targets.
35.10 A Commission Staff Working Document accompanying
the draft Council Recommendation contains the analysis and forecasts
that underpin the draft.
35.11 The Commission Reports concerning Belgium,
Italy and Finland, documents (b)-(d), provide an assessment of
developments in each country with regards to meeting the debt
and deficit targets under the SGP, also based on its 2015 winter
economic forecast.
35.12 Belgium's general government deficit is estimated
by the Commission's 2015 winter forecast to be 3.2% of GDP in
2014, above but close to the 3% of GDP SGP reference value. However,
the Commission considers the breach of the reference value to
be exceptional and temporary because it is due to unexpected revenue
shortfalls and lower than expected inflation. Therefore, it suggests
that Belgium should currently be considered as complying with
the deficit criterion.
35.13 Belgium's general government debt reached 104.5%
of GDP in 2013, above the 60% of GDP SGP reference value. Based
on the Commission 2015 winter forecast, Belgium is not projected
to make sufficient consolidation efforts, suggesting that the
debt criterion is not being fulfilled. However the Commission
takes the following factors into account to explain the deviation:
unfavourable economic conditions, the fact that Belgium is not
expected to deviate significantly from its path towards its Medium
Term Objective (MTO) in 2014 and 2015 and the government's announcement
of an ambitious growth enhancing structural reform plan. Given
these factors, the Commission suggests that Belgium should currently
be considered as complying with the debt criterion.
35.14 The Commission's 2015 winter forecast indicates
that Italy's general government balance is expected to be 2.6%
in 2015, below the 3% SGP reference value. Therefore, the Commission
suggests that Italy should currently be considered as complying
with the deficit criterion. The debt level is forecast to have
increased from 131.9% of GDP in 2014 to 133% of GDP in 2015, above
the 60% of GDP SGP reference value. This would initially suggest
that the debt criterion is not being fulfilled, however the Commission
has taken the following factors into account: unfavourable economic
conditions, the additional structural adjustment needed to meet
the targets would have negative growth implications given current
economic circumstances, Italy is expected to comply with the required
adjustment towards its MTO in 2014 and 2015 and the government
has committed to implementing an ambitious structural reform agenda.
Given these factors, the Commission suggests that Italy should
currently be considered as complying with the debt criterion.
35.15 Finland's general government debt is expected
to reach 61.2% of GDP in 2015, above the 60% of GDP SGP reference
value. However, the Commission considers that the planned increase
in debt is fully explained by Finland's financial support to Member
States to safeguard wider financial stability, without which government
debt would be below 60% of GDP. Therefore, the Commission suggests
that Finland should currently be considered as complying with
the debt criterion.
The Government's view
35.16 In his Explanatory Memorandum of 16 March 2015
the Financial Secretary to the Treasury (Mr David Gauke) says
that:
· under
the rules of the SGP, the UK and other non-eurozone Member States
do not participate in voting on the EDP of eurozone countries;
· an assessment
of the UK's compliance with the SGP will be conducted later this
year as part of the European Semester; and
· there
are no direct financial implications to the UK arising from these
documents.
Previous Committee Reports
None.
108 See Council Recommendation. Back
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