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Europaudvalget 2004-05 (2. samling), Finansudvalget 2004-05 (2. samling), Det Politisk-Økonomiske Udvalg 2004-05 (2. samling)
EUU Alm.del Bilag 81, FIU Alm.del Bilag 39, PØU Alm.del Bilag 25
Offentligt

emmerne af Folketingets Europaudvalg

res stedfortrædere

Journalnummer

400.C.2-0

Kontor

EUK

31. marts 2005

Til underretning for Folketingets Europaudvalg vedlægges Finansministeriets

redegørelse inkl. bilag fra mødet i den udvidede eurogruppe og ECOFIN den

20. marts 2005.

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30. marts 2005

Referat fra mødet i den udvidede eurogruppe og ECOFIN den 20.

marts 2005

Dagsordenspunkt:

ECOFIN’s rapport til Det Europæiske Råd om ’for-

bedring af implementeringen af Stabilitets- og

Vækstpagten’

Den udvidede eurogruppe med deltagelse af alle 25 EU-lande opnåede på et møde

den 20. marts enighed om en aftale om ’forbedring af implementeringen af Stabi-

litets- og Vækstpagten’ i form af en rapport (vedlagt) m.h.p. endossering på Det

Europæiske Råd den 22.-23. marts 2005.

Aftalen sigter på en balance mellem dels øget fokus på fremskridt mod de mel-

lemfristede budgetmålsætninger, især styrket budgetkonsolidering i gode tider,

samt gældsreduktion og holdbarhed, og dels øget fleksibilitet i proceduren for

uforholdsmæssigt store underskud, især i tilfælde af lav vækst.

Rapporten skal efterfølgende udmøntes i konkrete justeringer af Pagtens forord-

ninger mv. på grundlag af forslag fra Kommissionen, som skal vedtages af ECO-

FIN.

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Vedlagt: ECOFIN’s rapport om ’forbedring af implementeringen af Stabilitets- og

Vækstpagten’ og redegørelse herom.

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21. marts 2005

f12 / RDE

Redegørelse for ECOFIN’s rapport til Det Europæiske Råd om ’forbedring af imple-

menteringen af Stabilitets- og Vækstpagten’

Den udvidede eurogruppe med deltagelse af alle 25 EU-lande opnåede på et møde den 20.

marts enighed om en aftale om Stabilitets- og Vækstpagten i form af en rapport m.h.p. en-

dossering på Det Europæiske Råd den 22.-23. marts 2005.

Rapporten indeholder følgende hovedelementer:

Styrket governance

Rapporten fastslår en række vejledende principper for styrket ’governance’ med fokus på

styrket samarbejde og kommunikation mellem Rådet, Kommissionen og EU-landene, samt

styrket kvalitet af statistik og prognoser.

2.1

Styrkelse af den præventive del af Stabilitets- og Vækstpagten

Den mellemfristede målsætning (MTO) om en budgetsaldo ’tæt på balance eller i over-

skud’

De mellemfristede budgetmålsætninger differentieres og kan afvige fra princippet om ’bud-

getter tæt på balance eller i overskud’, idet MTO vil være lempeligere, desto lavere gæld og

desto højere potentiel vækst. MTO bør altid indebære en tilstrækkelig sikkerhedsmargin i

forhold til 3-procentsgrænsen for det faktiske underskud i det enkelte år. Landenes MTO’er

kan revideres hvert fjerde år.

For eurolande og ERMII-lande gælder der, at lande med høj gæld eller lav potentiel vækst

skal sigte på ’balance eller overskud’, mens lande med lav gæld eller høj potentiel vækst

kan have underskud på op til ca. 1% af BNP.

MTO bør inddrage fremtidige udgifter relateret til aldring, således at MTO fastlægges i lyset af den

samlede finanspolitiske holdbarhed på lang sigt, når Rådet senere måtte træffe beslutning herom på

grundlag af en Kommissions-rapport ultimo 2006.

2.2 Tilpasning til den mellemfristede målsætning (MTO)

EU-landene bør tage skridt til at overholde deres mellemfristede målsætning; indsatsen bør

være større i gode tider, men kan være mere begrænset i dårlige tider.

Eurolande og ERM-II-lande bør sigte mod en årlig forbedring af den konjunkturrensede sal-

do på som udgangspunkt 0,5 pct. af BNP. Gode tider defineres som udgangspunkt som pe-

rioder, hvor output overstiger sit potentielle niveau.

Lande, der ikke følger denne tilpasning til MTO skal forklare årsagerne til deres afvigelse i

deres stabilitets- og konvergensprogrammer. Kommissionen vil udstede direkte politikanbe-

falinger for at opfordre landene til at overholde princippet for tilpasning til MTO. Politikan-

befalingerne erstattes af (’early warnings’) i overensstemmelse med Forfatningstraktaten,

når den træder i kraft.

2.3 Strukturreformer

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Der tillades en midlertidig afvigelse fra MTO – eller afvigelse fra tilpasningen til MTO – for

lande, der gennemfører visse strukturreformer, nemlig større reformer, der har direkte posi-

tive budgeteffekter på længere sigt, herunder ved at styrke vækstpotentialet. Der tages sær-

ligt hensyn til pensionsreformer med omlægninger fra offentlige skattefinansierede til

fondsbaserede ordninger. Der bør altid være en sikkerhedsmargin i forhold til 3-

procentsgrænsen.

Forbedret gennemførelse af proceduren vedrørende uforholdsmæssigt store underskud

(EDP):

3.1

Kommissionens rapport vedr. iværksættelse af proceduren (artikel 104.3)

Rådet og Kommissionen er fast besluttet på at fastholde 3-procentskriteriet for underskuddet

og 60-procentskriteriet for gælden. Traktaten (artikel 104.3) indebærer i tilfælde af en over-

skridelse af 3-procentskriteriet, at Kommissionen udarbejder en rapport, hvor der skal tages

hensyn til alle ’relevante faktorer’. Rådet foreslår en klargøring af konceptet ’alle andre re-

levante faktorer’.

3.2 ’Alvorligt økonomisk tilbageslag’

Definitionen på et exceptionelt økonomisk tilbageslag ændres, så et land kan få en undtagel-

se fra proceduren for uforholdsmæssigt store underskud, hvis der er en negativ real BNP-

vækst eller et akkumuleret tab af output som følge af en længere periode, hvor væksten er

lav i forhold til den potentielle vækst (den eksisterende regel indebærer undtagelse ved

vækst på –2%, og mulig undtagelse ved vækst på -0,75%), idet underskuddet stadig skal

være tæt på 3 pct. af BNP og overskridelsen midlertidig.

3.3’Alle

andre relevante faktorer’

Traktaten (artikel 104.3) indebærer i tilfælde af en overskridelse af 3-procentskriteriet, at ”i

Kommissionens rapport tages der ligeledes hensyn til, om det offentlige underskud oversti-

ger de offentlige investeringsudgifter, samt til alle andre relevante forhold, herunder med-

lemsstatens økonomiske og budgetmæssige situation på mellemlang sigt”.

Rapporten slår fast, at alle disse ’relevante faktorer’ skal med i en balanceret overordnet

vurdering.

Rapporten slår endvidere fast, at Kommissionens rapport skal tage hensyn til landets mel-

lemfristede økonomiske situation (især potentiel vækst, konjunkturforhold, politikker på

Lissabon-dagsordenen og politikker til fremme af R&D og innovation) og budgetmæssige

situation (især indsats for budgetkonsolidering i gode tider, holdbarhed, offentlige investe-

ringer og 'kvaliteten' af offentlige udgifter). Der vil endvidere blive taget hensyn til andre

faktorer, som efter det pågældende lands opfattelse er relevante for en omfattende kvalitativ

vurdering af overskridelsen af 3-procentsgrænsen. Der skal tages særligt hensyn til budget-

mæssigt indsats for at øge eller fastholde et højt niveau for finansielle bidrag til fremme af

international solidaritet og opnåelse af europæiske politikmål, herunder i særlig grad Euro-

pas samling, hvis den har en negativ effekt på vækst og de finanspolitiske byrder for en

medlemsstat.

Der skal klart ikke laves nogen ny definition af referenceværdien for budgetunderskuddet

via fratrækning af bestemte udgiftsposter.

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Hensyntagen til de ’relevante faktorer’ i de skridt i proceduren, der leder frem til beslutnin-

gen om, at der foreligger et uforholdsmæssigt stort underskud (fra 104.3 til 104.6) er fuldt

betinget af – før der tages højde for andre relevante faktorer – det overordnede princip om,

at overskridelsen skal være midlertidig og at underskuddet fortsat er tæt på 3 pct. af BNP.

De ’relevante faktorer’ vil også blive vurderet i de videre trin i EDP, bortset fra 104.12, hvor

Rådet beslutter, om landet har korrigeret det uforholdsmæssigt store underskud og ophæver

proceduren.

3.4 Pensionsreformer

Rådet og Kommissionen vil, i vurderingen af, om et uforholdsmæssigt stort underskud er

blevet korrigeret, vurdere underskuddet under hensyntagen til kortsigtede nettoomkostnin-

ger ved pensionsreformer med omlægninger fra offentlige skattefinansierede til fondsbase-

rede ordninger. Vurderingen af underskuddet vil tage hensyn til omkostningerne i fem år,

eller fem år efter 2004 for lande, der allerede har lavet sådanne reformer, med gradvis årlig

udfasning, idet der tages hensyn til hhv. 100, 80, 60, 40 og 20 pct. af omkostningerne.

3. 5 Øget fokus på gæld og holdbarhed

Rapporten slår fast, at der sættes øget fokus på Traktat-kriteriet om, at gælden ikke må over-

stige 60 pct. af BNP, medmindre den ”mindskes tilstrækkeligt og nærmer sig referencevær-

dien med tilfredsstillende hastighed”. Rådet vil give anbefalinger om gældsreduktion i sine

udtalelser om stabilitets- og konvergensprogrammer.

3.6 Tidsfristerne for at gennemføre budgettiltag

Fristen for Rådets beslutning om eksistens af et uforholdsmæssigt stort underskud udskydes,

så beslutningen skal træffes inden for fire måneder (i stedet for tre måneder) efter landenes

indberetninger om offentlige finanser. Tidsfrist for at gennemføre budgettiltag i opfølgning

på henstillinger under Traktatens 104.7 forlænges fra 4 til 6 måneder, Rådets frist for at føl-

ge en beslutning under Traktatens 104.8 (om efterlevelse af en henstilling) op med et pålæg

under Traktatens 104.9 forlænges fra 1 til 2 måneder, og tidsfrist for tiltag i opfølgning på et

pålæg under Traktatens 104.9 forlænges fra 2 til 4 måneder.

3.7 Tidsfrist for korrektion af et uforholdsmæssigt stort underskud

Der indføres mulighed for, at en henstillings tidsfrist for at bringe et underskud ned under 3

pct. af BNP gøres afhængig af alle andre relevante faktorer og som udgangspunkt fortsat

fastsættes til ’året efter’, eller ét år senere, afhængig ’særlige omstændigheder’.

Lande med uforholdsmæssigt store underskud bør som udgangspunkt sikre en årlig forbed-

ring af den konjunkturrensede saldo på mindst 0,5 pct. af BNP, og tidsfristen vil tage højde

herfor.

3.8 Revision af tidsfrister

Der indføres mulighed for, at Rådet – hvis et land har leveret de anbefalede budgettiltag,

men ikke det anbefalede resultat på saldoen p.g.a. uventet lav vækst – kan vedtage en ny

henstilling eller et nyt pålæg med en ny frist i stedet for at gå videre til næste trin i procedu-

ren.

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COUNCIL OF

THE EUROPEAN UNION

Brussels, 21 March 2005

7423/05

UEM 97

ECOFIN 104

REPORT

From :

To :

Subject :

Council (ECOFIN)

European Council, 22-23 March 2005

Improving the implementation of the Stability and Growth Pact

Delegations will find attached the (ECOFIN) Council's report to the European Council "Improving

the implementation of the Stability and Growth Pact" adopted at the extraordinary ECOFIN meeting

on 20 March 2005.

__________

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Annex

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ANNEX

Improving the implementation of the

Stability and Growth Pact

- Council Report to the European Council –

This report presents proposals for strengthening and clarifying the implementation

of the Stability and Growth Pact, with the aim of improving the coordination and

monitoring of economic policies according to Article 99 of the Treaty and of avo-

iding excessive deficits as required by Article 104(1) of the Treaty.

The Council confirms that the Stability and Growth Pact, built on Treaty Articles

99 and 104, is an essential part of the macroeconomic framework of the Economic

and Monetary Union. By requesting Member States to coordinate their budgetary

policies and to avoid excessive deficits, it contributes to achieving macroeconomic

stability in the EU and plays a key role in securing low inflation and low interest

rates, which are essential contributions for delivering sustainable economic growth

and job creation.

The Council recalls the Declaration on Article III-184 (annexed to the Final Act of

the Constitution), which reaffirmed the European Council’s commitment to the

goals of the Lisbon Strategy - job creation, structural reforms, and social cohesion –

and which stated on budgetary policy : “The Union aims at achieving balanced eco-

nomic growth and price stability. Economic and budgetary policies thus need to set

the right priorities towards economic reforms, innovation, competitiveness and

strengthening of private investment and consumption in phases of weak economic

growth. This should be reflected in the orientations of budgetary decisions at the

national and Union level in particular through restructuring of public revenue and

expenditure while respecting budgetary discipline in accordance with the Constitu-

tion and the Stability and Growth Pact.”

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The two nominal anchors of the Pact - the 3% of GDP reference value for the de-

ficit ratio and the 60% of GDP reference value for the debt ratio - have proven

their value and continue to be the centrepiece of multilateral surveillance. However,

the European Council noted in June 2004 the need to strengthen and to clarify the

implementation of the Stability and Growth Pact, in order to foster transparency

and national ownership of the EU fiscal framework and to improve enforcement of

its rules and provisions.

The Pact has to be applied across countries in a fair and consistent way and be un-

derstood by public opinion. The Council reaffirms that a rules-based system is the

best guarantee for commitments to be enforced and for all Member States to be

treated equally. In strengthening and clarifying the Pact it is essential to secure a

proper balance between the higher degree of economic judgement and policy

discretion in the surveillance and co-ordination of budgetary policies and the need

for keeping the rules-based framework simple, transparent and enforceable.

However, in a European Union of 25 countries, characterised by considerable

heterogeneity and diversity and given the experience of 5 years in EMU, an en-

riched common framework with a stronger emphasis on the economic rationale

of its rules would allow to better cater for differences in economic situations

across the EU. The objective is therefore to enhance the economic underpinnings

of the existing framework and thus strengthen credibility and enforcement. The

aim is not to increase the rigidity or flexibility of current rules but rather to make

them more effective.

On this basis, the reform aims at better responding to the shortcomings experien-

ced so far through greater emphasis to economic developments and an increased

focus on safeguarding the sustainability of public finances. Also, the instruments

for EU economic governance need to be better interlinked in order to enhance

the contribution of fiscal policy to economic growth and support progress to-

wards realising the Lisbon strategy.

Following the Commission Communication of 3 September 2004 on

“Strengthening economic governance and clarifying the implementa-

tion of the Stability and Growth Pact”, the Council has worked in order

to make concrete proposals for a reform of the Stability and Growth

Pact.

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The Council, in reviewing the Stability- and Growth-Pact provisions, detected

mainly five areas where improvements could be made:

(i)

(ii)

(iii)

(iv)

(v)

enhance the economic rationale of the budgetary rules to improve their

credibility and ownership;

improve “ownership” by national policy makers;

use more effectively periods when economies are growing above trend for

budgetary consolidation in order to avoid pro-cyclical policies;

take better account in Council recommendations of periods when economi-

es are growing below trend;

give sufficient attention in the surveillance of budgetary positions to debt

and sustainability.

In making the proposals for a reform of the Stability and Growth Pact, the Council

gave due consideration to enhance the governance and the national ownership of

the fiscal framework, to strengthen the economic underpinnings and the effective-

ness of the Pact, both in its preventive and corrective arms, to safeguard the sustai-

nability of public finances in the long run, to promote growth and to avoid impo-

sing excessive burdens on future generations.

In accordance with the Luxembourg Resolution on economic policy coordination,

the Council confirms that enhanced coordination of fiscal policies must adhere to

the Treaty principle of subsidiarity, respecting the prerogatives of national Gover-

nments in determining their structural and budgetary policies, while complying with

the provisions of the Treaty and the Stability and Growth Pact.

Ministers indicate in the present report the necessary legislative changes in order to

make operational their views on the reform of the Stability and Growth Pact. They

intend to keep changes to a minimum and look forward to proposals of the Com-

mission to put their views into effect.

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1. I

MPROVING GOVERNANCE

In order to increase the legitimacy of the EU fiscal framework and to strengthen

support for its goals and institutional arrangements, the Council considers that

Member States, the Commission and the Council, while avoiding any institutional

shift, must deliver on their respective responsibilities, in particular:

(1)

The Commission and the Council respect the Member States’ responsibility

to implement the policies of their choice within the limits set by the Treaty, in

particular by Articles 99 and 104, while the Member States have to comply

with the recommendations of the Council;

The Commission has to exercise its right of initiative in a timely manner and

apply the rules effectively, while the Council and the Member States respect

the Commission’s responsibility as guardian of the Treaty and its procedures;

The Council has to exercise responsibly its margin of discretion, while the

Member States and the Commission respect the Council’s responsibility for

the coordination of economic policies within the European Union and its ro-

le for the proper functioning of economic and monetary union;

The Member States, the Council and the Commission should reaffirm their

commitment to implement the Treaty and the Stability and Growth Pact in

an effective and timely manner, through peer support and peer pressure, and

to act in close and constructive cooperation in the process of economic and

fiscal surveillance, in order to guarantee certainty and effectiveness to the

rules of the Pact.

(2)

(3)

(4)

The Council emphasises the importance of improving governance and strengt-

hening national ownership of the fiscal framework through the proposals outlined

hereafter.

1.1. Cooperation and communication

The Council, the Commission and the Member States should apply the Treaty and

the Stability and Growth Pact in an effective and timely manner. Parties should act

in close and constructive cooperation in the process of economic and fiscal surveil-

lance in order to guarantee certainty and effectiveness to the rules of the Pact.

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In the spirit of transparency and accountability, due consideration should be given

to full and timely communication among institutions as well as with the general

public. In particular, in order to foster a frank and confidential exchange of views,

the Council, the Commission and the Member States should commit to exchange

advance information on their intentions at all stages of the budgetary monitoring

and excessive deficit procedure, without prejudice to their respective prerogatives.

1.2. Improving peer support and applying peer pressure

The Council agrees that increasing the effectiveness of peer support and peer pres-

sure is an integral part of a reformed Stability and Growth Pact. The Council and

the Commission should commit to motivate and to make public their positions and

decisions at all appropriate stages of the procedure of the Pact.

Peer support and peer pressure at euro area level should be given in the framework

of the coordination carried out in the Eurogroup and be based on a horizontal as-

sessment of national budgetary developments and their implications for the euro

area as a whole. Such an assessment should be done at least once a year before the

summer.

1.3. Complementary national budgetary rules and institutions

The Council agrees that national budgetary rules should be complementary to the

Member States’ commitments under the Stability and Growth Pact. Conversely, at

EU level, incentives should be given and disincentives removed for national rules to

support the objectives of the Stability and Growth Pact. In this context, the Council

points out disincentives stemming from the impact in the fiscal framework of

certain ESA95 accounting and statistical rules.

The implementation of existing national rules (expenditure rules, etc.) could be

discussed in stability and convergence programmes, with due caution and as far as

they are relevant for the respect of EU budgetary rules, as Member States are

committed at European level to respect the latter, and compliance with EU budget-

ary rules constitutes the focus of the assessment of the stability and convergence

programmes.

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The Council considers that domestic governance arrangements should complement

the EU framework. National institutions could play a more prominent role in bud-

getary surveillance to strengthen national ownership, enhance enforcement through

national public opinion and complement the economic and policy analysis at EU

level.

1.4. A stability programme for the legislature

The Council invites Member States, when preparing the first update of

their stability/convergence programme after a new government has

taken office, to show continuity with respect to the budgetary targets

endorsed by the Council on the basis of the previous update of the sta-

bility/convergence programme and - with an outlook for the whole

legislature - to provide information on the means and instruments

which it intends to employ to reach these targets by setting out its

budgetary strategy.

1.5. Involvement of national Parliaments

The Council invites Member States’ governments to present stability/convergence

programmes and the Council opinions thereon to their national Parliaments. Nati-

onal Parliaments may wish to discuss the follow-up to recommendations in the

context of the early warning and the excessive deficit procedures.

1.6. Reliable macroeconomic forecasts

The Council recognises that it is important to base budgetary projections on reali-

stic and cautious macroeconomic forecasts. It also recognises the important contri-

bution that Commission forecasts can provide for the coordination of economic

and fiscal policies.

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In their macroeconomic and budgetary projections, Member States, in particular

euro area Member States and Members States participating in ERM II, should use

the “common external assumptions” if provided by the Commission in due time.

Member States are free to base their stability/convergence programmes on their

own projections. However, divergences between the national and the Commission

forecasts should be explained in some detail. This explanation will serve as a refe-

rence when assessing

a posteriori

forecast errors.

Given the inevitability of forecast errors, greater emphasis should be placed in the

stability/convergence programmes on conducting comprehensive sensitivity analy-

ses and/or developing alternative scenarios, in order to enable the Commission and

the Council to consider the complete range of possible fiscal outcomes.

1.7. Statistical governance

The Council agrees that the implementation of the fiscal framework and its credibi-

lity rely crucially on the quality, reliability and timeliness of fiscal statistics. Reliable

and timely statistics are not only essential for the assessment of government bud-

getary positions; full transparency of such statistics will also allow the financial mar-

kets to better assess the creditworthiness of the different Member States, providing

an important signalling function for policy errors.

The core issue remains to ensure adequate practices, resources and capabilities to

produce high quality statistics at the national and European level with a view to

ensuring the independence, integrity and accountability of both national statistical

offices and Eurostat. Furthermore, the focus must be on developing the operatio-

nal capacity, monitoring power, independence and accountability of Eurostat. The

Commission and the Council in the course of 2005 are dealing with the issue of

improving the governance of the European statistical system.

Member States and EU institutions should affirm their commitment to produce

high quality and reliable budgetary statistics and to ensure mutual cooperation to

achieve this goal. Imposing sanctions on a Member State should be considered

when there is infringement of the obligations to duly report government data.

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TRENGTHENING THE PREVENTIVE ARM

There is broad consensus that periods of growth above trend should be used for

budgetary consolidation in order to avoid pro-cyclical policies. The past failure to

reach the medium-term budgetary objective of ‘close to balance or in surplus’ calls

for a strengthening of the preventive arm of the Stability and Growth Pact, through

a renewed commitment by Member States to take the budgetary action necessary to

converge towards this objective and respect it.

2.1. Definition of the medium-term budgetary objective

The Stability and Growth Pact lays down the obligation for Member States to adhe-

re to the medium term objective (MTO) for their budgetary positions of “close to

balance or in surplus” (CTBOIS).

In light of the increased economic and budgetary heterogeneity in the EU of 25

Member States, the Council agrees that the MTO should be differentiated for indi-

vidual Member States to take into account the diversity of economic and budgetary

positions and developments as well as of fiscal risk to the sustainability of public

finances, also in the face of prospective demographic changes.

The Council therefore proposes developing medium-term objectives that, by taking

account of the characteristics of the economy of each Member State, pursue a triple

aim. They should firstly provide a safety margin with respect to the 3% deficit limit.

They should also ensure rapid progress towards sustainability. Taking this into ac-

count, they should allow room for budgetary manoeuvre, in particular taking into

account the needs for public investment.

MTOs should be differentiated and may diverge from CTBOIS for individual

Member States on the basis of their current debt ratio and potential growth, while

preserving sufficient margin below the reference value of -3% of GDP. The range

for the country-specific MTOs for euro area and ERM II Member States would

thus be, in cyclically adjusted terms, net of one-off and temporary measures, bet-

ween -1% of GDP for low debt/high potential growth countries and balance or

surplus for high debt/low potential growth countries.

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The long-term sustainability of public finances would be supported by the conver-

gence of debt ratios towards prudent levels.

Implicit liabilities (related to increasing expenditures in the light of ageing populati-

ons) should be taken into account, as soon as criteria and modalities for doing so

are appropriately established and agreed by the Council. By the end of 2006, the

Commission should report on progress achieved towards the methodology for

completing the analysis by incorporating such implicit liabilities.

The Council stresses however that fiscal policy cannot be expected in the short

term to cope with the full structural effects of demographic ageing and it invites

Member States to pursue their efforts in implementing structural reforms in the

areas related to the ageing of their populations as well as towards increasing em-

ployment and participation ratios.

Medium-term budgetary objectives could be revised when a major reform is im-

plemented and in any case every four years, in order to reflect developments in

government debt, potential growth and fiscal sustainability.

2.2. Adjustment path to the medium-term objective

The Council considers that a more symmetrical approach to fiscal policy over the

cycle through enhanced budgetary discipline in periods of economic recovery

should be achieved, with the objective to avoid pro-cyclical policies and to gradually

reach the medium term objective, thus creating the necessary room to accommo-

date economic downturns and reduce government debt at a satisfactory pace,

thereby contributing to the long-term sustainability of public finances.

Member States should commit at a European level to actively consolidate public

finances in good times. The presumption is to use unexpected extra revenues for

deficit and debt reduction.

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Member States that have not yet reached their MTO should take steps to achieve it

over the cycle. Their adjustment effort should be higher in good times; it could be

more limited in bad times. In order to reach their MTO, Member States of the euro

zone or of ERM-II should pursue an annual adjustment in cyclically adjusted terms,

net of one-offs and other temporary measures, of 0.5% of GDP as a benchmark.

“Good times” should be identified as periods where output exceeds its potential

level, taking into account tax elasticities.

Member States that do not follow the required adjustment path will explain the

reasons for the deviation in the annual update of the stability/convergence pro-

grammes. The Commission will issue policy advice to encourage Member States to

stick to their adjustment path. Such policy advice will be replaced by early warnings

in accordance with the Constitution as soon as it becomes applicable.

2.3. Taking structural reforms into account

The Council agrees that, in order to enhance the growth oriented nature of the

Pact, structural reforms will be taken into account when defining the adjustment

path to the medium-term objective for countries that have not yet reached this

objective and in allowing a temporary deviation from this objective for countries

that have already reached it, with the clear understanding that a safety margin to

ensure the respect of the 3% of GDP reference value for the deficit has to be

guaranteed and that the budgetary position would be expected to return to the

MTO within the programme period.

Only major reforms which have direct long-term cost-saving effects, including by

raising potential growth, and therefore a verifiable positive impact on the long-term

sustainability of public finances, will be taken into account. A detailed cost-benefit

analysis of those reforms from the budgetary point of view would need to be pro-

vided in the framework of the annual update of stability/convergence programmes.

These proposals should be introduced into Regulation 1466/97.

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Moreover, the Council is mindful that the respect of the budgetary tar-

gets of the Stability and Growth Pact should not hamper structural re-

forms that unequivocally improve the long-term sustainability of pub-

lic finances. The Council acknowledges that special attention must be

paid to pension reforms introducing a multi-pillar system that includes

a mandatory, fully funded pillar. Although these reforms entail a short-

term deterioration of public finances during the implementation peri-

od, the long-term sustainability of public finances is clearly improved.

The Council therefore agrees that Member States implementing such

reforms should be allowed to deviate from the adjustment path to-

wards the MTO, or from the MTO itself. The deviation from the MTO

should reflect the net cost of the reform to the publicly managed pillar,

provided the deviation remains temporary and an appropriate safety

margin to the reference value is preserved.

3. I

MPROVING

THE IMPLEMENTATION OF THE EXCESSIVE DEFICIT PROCEDU-

The excessive deficit procedure should remain simple, transparent and equitable.

Nevertheless, the experience of recent years shows possible scope for improvement

in its implementation.

The guiding principle for the application of the procedure is the prompt correction

of an excessive deficit.

The Council underlines that the purpose of the excessive deficit procedure is to

assist rather than to punish, and therefore to provide incentives for Member States

to pursue budgetary discipline, through enhanced surveillance, peer support and

peer pressure. Moreover, policy errors should be clearly distinguished from forecast

errors in the implementation of the excessive deficit procedure. If nevertheless a

Member State fails to comply with the recommendations addressed to it under the

excessive deficit procedure, the Council has the power to apply the available sanc-

tions.

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3.1. Preparing a Commission report under Article 104(3)

In order to avoid excessive government deficits, as called for by Article 104(1) of

the Treaty, the reports, prepared by the Commission according to Article 104(3) of

the Treaty as a result of its monitoring, form the basis of the EFC opinion, the

ensuing Commission assessment and ultimately the Council decision on the exi-

stence of an excessive deficit as well as on its recommendations, including on the

deadlines for the correction of the deficit.

The Council and the Commission are resolved to clearly preserve and uphold the

reference values of 3% and 60% of GDP as the anchors of the monitoring of the

development of the budgetary situation and of the ratio of government debt to

GDP in the Member States. The Commission will always prepare a report on the

basis of Article 104(3) of the Treaty. The Commission shall examine in its report if

one or more of the exceptions foreseen respectively in Article 104(2)(a) and (b)

apply. The Council hereafter proposes revisions or clarifications to the scope of

those exceptions.

As foreseen by the Treaty, the Commission shall moreover take into account in its

report whether the Member State’s government deficit exceeds government in-

vestment expenditure and take into account all other relevant factors, including the

medium-term economic and budgetary position of the Member State. The Council

hereafter proposes clarifications to the concept of “all other relevant factors”.

3.2. An “exceptional and temporary” excess of the deficit over the reference

value

The Treaty provides, in Article 104(2)(a) second indent, for an exception if an ex-

cess over the reference value is only exceptional and temporary and if the ratio

remains close to the reference value.

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Whereas, in order to benefit from that exception, the ratio has always to remain

close to the reference value, Regulation 1467/97 gives definitions as to when an

excess over the reference value, but still close to it, shall be considered exceptional

and temporary: in order to be considered as exceptional, the excess has to result

from an unusual event outside the control of the Member State and with a major

impact on the financial position of the general government, or it has to result from

a severe economic downturn. In order for the excess to be temporary, the Commis-

sion’s budgetary forecast must indicate that the deficit will fall below the reference

value following the end of the unusual event or the severe economic downturn.

A severe economic downturn is presently defined - as a rule - as an annual fall of

real GDP of at least 2%. Moreover, in the case of an annual fall of real GDP of less

than 2%, Regulation 1467/97 still allows the Council to decide that no excessive

deficit exists, in the light of further evidence, in particular on the abruptness of the

downturn or on the accumulated loss of output relative to past trends.

The Council considers that the current definition of “a severe economic downturn”

given in Article 2(2) of Regulation 1467/97 is too restrictive. The Council considers

that paragraphs (2) and (3) of Article 2 in Regulation 1467/97 need to be adapted in

order to allow both the Commission and the Council, when assessing and deciding

upon the existence of an excessive deficit, according to paragraphs (3) to (6) of

Article 104 of the Treaty, to consider as exceptional an excess over the reference

value which results from a negative growth rate or from the accumulated loss of

output during a protracted period of very low growth relative to potential growth.

3.3. “All other relevant factors”

Article 104(3) of the Treaty requests that, in preparing the report on the non-

fulfilment of the criteria for compliance with budgetary discipline, the Commission

“shall also take into account whether the government deficit exceeds government

investment expenditure and take into account all other relevant factors, including

the medium-term economic and budgetary position of the Member State”. A balan-

ced overall assessment has to encompass all these factors.

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The Council underlines that taking into account “other relevant fac-

tors” in the steps leading to the decision on the existence of an exces-

sive deficit (Article 104, paragraphs (4), (5) and (6)) must be fully con-

ditional on the overarching principle that - before other relevant factors

are taken into account - the excess over the reference value is tempora-

ry and the deficit remains close to the reference value.

The Council considers that the framework to take into account “all other relevant

factors” should be clarified. The Commission’s report under Article 104(3) should

appropriately reflect developments in the medium-term economic position (in par-

ticular potential growth, prevailing cyclical conditions, the implementation of poli-

cies in the context of the Lisbon agenda and policies to foster R&D and innovati-

on) and developments in the medium-term budgetary position (in particular, fiscal

consolidation efforts in “good times”, debt sustainability, public investment and the

overall quality of public finances). Furthermore, due consideration will be given to

any other factors, which in the opinion of the Member State concerned, are rele-

vant in order to comprehensively assess in qualitative terms the excess over the

reference value. In that context, special consideration will be given to budgetary

efforts towards increasing or maintaining at a high level financial contributions to

fostering international solidarity and to achieving European policy goals, notably

the unification of Europe if it has a detrimental effect on the growth and fiscal bur-

den of a Member State.

Clearly no redefinition of the Maastricht reference value for the deficit via the ex-

clusion of particular budgetary items should be pursued.

If the Council has decided, on the basis of Article 104(6), that an excessive deficit

exists in a Member State, the “other relevant factors” will also be considered in the

subsequent procedural steps of Article 104. However, they should not be taken into

account under Article 104(12), i.e. in the decision of the Council as to whether a

Member State has corrected its excessive deficit.

These proposals should be introduced into Regulation 1467/97.

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3.4. Taking into account systemic pension reforms

The Council agrees that an excess close to the reference value which reflects the

implementation of pension reforms introducing a multi-pillar system that includes a

mandatory, fully funded pillar should be considered carefully. Although the imple-

mentation of these reforms leads to a short-term deterioration of the budgetary

position, the long-term sustainability of public finances clearly improves.

The Commission and the Council, in all budgetary assessments in the framework of

the EDP, will give due consideration to the implementation of these reforms.

In particular, when assessing under Article 104(12) whether the excessive deficit has

been corrected, the Commission and the Council will assess developments in EDP

deficit figures while also considering the net cost of the reform to the publicly man-

aged pillar. Consideration to the net cost of the reform will be given for the initial

five years after a Member State has introduced a mandatory fully-funded system, or

five years after 2004 for Member States that have already introduced such a system.

Furthermore, it will also be regressive, i.e. during a period of five years, considerati-

on will be given to 100, 80, 60, 40 and 20 percent of the net cost of the reform to

the publicly managed pillar.

3.5. Increasing the focus on debt and sustainability

In line with the provisions of the Treaty, the Commission has to examine compli-

ance with budgetary discipline on the basis of both the deficit and the debt criteri-

on. The Council agrees that there should be increased focus on debt and sustainabi-

lity, and reaffirms the need to reduce government debt to below 60 % of GDP at a

satisfactory pace, taking into account macroeconomic conditions. The higher the

debt to GDP ratios of Member States, the greater must be their efforts to reduce

them rapidly.

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The Council considers that the debt surveillance framework should be strengthened

by applying the concept of “sufficiently diminishing and approaching the reference

value at a satisfactory pace” for the debt ratio in qualitative terms, by taking into

account macroeconomic conditions and debt dynamics, including the pursuit of

appropriate levels of primary surpluses as well as other measures to reduce gross

debt and debt management strategies. For countries above the reference value, the

Council will formulate recommendations on the debt dynamics in its opinions on

the stability and convergence programmes.

No change to the existing Regulations is required to that effect.

3.6. Extending deadlines for taking effective action and measures

The Council considers that the deadline for adoption of a decision under Article

104(6) establishing the existence of an excessive deficit should be extended from

three to four months after the fiscal notification deadline. Moreover, the Council

considers that the timing for taking effective action following a recommendation to

correct the excessive deficit under Article 104(7) could be extended from 4 to 6

months, in order to allow the Member State to better frame the action within the

national budgetary procedure and to develop a more articulated package of measu-

res. This could facilitate the adoption of corrective packages of structural (as oppo-

sed to largely temporary) measures. Furthermore, with longer deadlines it would be

possible to take an updated Commission forecast into account, so that measures

taken and significant changes in growth conditions that could justify an extension

of the deadlines would be assessed together. For the same reasons, the one-month

deadline for the Council to take a decision to move from Article 104(8) to Article

104(9) should be extended to two months, and the two-month deadline under Ar-

ticle 104(9) should be extended to 4 months.

These proposals would require changes to the relevant Articles of Regulation

1467/97.

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3.7. Initial deadline for correcting the excessive deficit

The Council considers that, as a rule, the deadline for correcting an excessive deficit

should be the year after its identification and thus, normally, the second year after

its occurrence. The Council agrees however that the elements to be taken into ac-

count in setting the initial deadline for the correction of an excessive deficit should

be better specified and should include, in particular, an overall assessment of all the

factors mentioned in the report under Art. 104(3).

As a benchmark, countries in excessive deficit will be required to achieve an annual

minimum fiscal effort of at least 0.5 percent of GDP in cyclically adjusted terms,

net of one-off measures, and the initial deadline for the correction of the excessive

deficit should be set taking into account this minimum fiscal effort. If this effort

seems sufficient to correct the excessive deficit in the year following its identificati-

on, the initial deadline need not be set beyond that year.

However the Council agrees that in case of special circumstances, the initial dead-

line for correcting an excessive deficit could be set one year later, i.e. the second

year after its identification and thus normally the third year after its occurrence. The

determination of the existence of special circumstances will take into account a

balanced overall assessment of the factors mentioned in the report under Article

104(3).

The initial deadline will be set without prejudice to the taking into account of sy-

stemic pension reforms and without prejudice to deadlines applying to new and

future Member States.

3.8. Revising the deadlines for correcting the deficit

The Council agrees that deadlines for correcting the excessive deficit could be revi-

sed and extended if unexpected adverse economic events with major unfavourable

budgetary effects occur during the excessive deficit procedure. Repetition of a re-

commendation under Article 104(7) or a notice under Article 104(9) of the Treaty is

possible and should be used if effective action has been taken by the Member State

concerned in compliance with the initial recommendation or notice. This should be

specified in Regulation 1467/97.

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Member States would be required to give evidence of having taken effective action

following recommendations. If effective action was taken in response to previous

recommendations and unforeseeable growth developments justify a revision of the

deadlines for correcting the excessive deficit, the procedure would not move to the

next step. The growth forecast contained in the Council recommendation would be

the reference against which unforeseeable growth developments would be assessed.

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