Finansudvalget 2011-12
FIU Alm.del Bilag 236
Offentligt
DG INTERNAL POLICIESDIRECTORATE FOR ECONOMIC & SCIENTIFIC POLICIESEconomic Governance Support Unit5 September 2012
Country Specific Recommendationsas adopted underthe European Semester Cycle in 2011 and 2012This table presents, for each Member State:The Country Specific Recommendations (CSR) for 2011/2012 as adopted by the Council in July 2011,The assessment of the implementation of CSRs, based mainly on theCommission Staff Working Paperspublished in May 2012 andCountry Specific Recommendations for 2012/2013 as adopted by the Council in July 2012.Specific recommendations for 2011/2012 and for 2012/2013 as adopted by the Council for the economic policies of the Member Stateswhose currency is the euro.
The Country Specific Recommendations for 2012/2013 are based on the Commission's assessment of the implementations of CSR 2011, thenational stability or convergence programme for 2012, the national reform programmes for 2012 as well as on an in-depth review of macro-economic aspects.In many cases it is specified in the recital of CSR, if a specific recommendation is linked to a specific EU policy instrument. For instance,recommendation 1 generally refers to fiscal policies, as presented by MSs in their stability or convergence programmes, and it could thereforetrigger further procedural steps either under the preventive arm or the corrective arm of the Stability and Growth Pact (in accordance withRegulations 1466/97 as amended, Regulation 1467/97 as amended, and Regulation 1173/2011). In other cases a recommendation may refer tothe assessment under the macro-economic imbalances procedure (in accordance with Regulations 1176/2011 and 1174/2011).CSR 2012 have been re-arranged in the presentation, when relevant, to allow an easier comparison of the topics dealt with. CSR andassessments for Member States under financial assistance programmes are highlight in grey.
BE
Country Specific Recommendations 2011
Assessment of implementation of CSR20111. At the moment Belgium has only partiallyimplemented the recommendation.InDecember 2009, the Council recommended thatBelgium should bring the deficit down below 3% of GDP. According to the Commissionservices' 2012 spring forecast, the generalgovernment deficit is expected to come out atabout 3 % of GDP in 2012, the officialobjective being 2.8 %. However, the currentestimate of the 2012 deficit is practically at the3 % threshold, and this only thanks to sizeableone-off measures. Moreover, under an"unchanged policy" assumption the deficit isexpected to rise again to 3.3 % of GDP in 2013.Government debt is still very high, at 98% ofGDP in 2011.2. Belgium has partially implemented the2011 recommendation.The recent reform ofBelgian old-age social security is expected tocontribute to the long-term sustainability ofpublic finances. Nevertheless, its impact willdepend crucially on the way of implementation,the monitoring arrangements that are put inplace and the extent to which potential abuse ofpossible is tackled. Also, in order to encourageactive ageing and longer working lives, themeasures in the area of pension reform would
Country Specific Recommendations 2012
1.Take advantage of the ongoing economicrecovery to accelerate the correction of theexcessive deficit.To this end, take thenecessary specified measures — mainly on theexpenditure side — by the time of the 2012budget to achieve an average annual fiscaleffort in line with the recommendations underthe EDP, thus bringing the high public debtratio on a declining path. This should bring thegovernment deficit well below the 3 % of theGDP reference value by 2012 at the latest.Ensure progress towards the medium-termobjective by at least 0.5 % of GDP annually.
1.Implement the budget for the year 2012 tomake sure that theexcessive deficitis correctedby 2012. Additionally, specify the measuresnecessary to ensure implementation of thebudgetary strategy for the year 2013 andbeyond, thereby ensuring that the excessivedeficit is corrected in a durable manner and thatsufficient progress is made towards the MTO,including meeting the expenditure benchmark,and ensure progress towards compliance withthe debt reduction benchmark. Adjust the fiscalframework to ensure that the budgetary targetsare binding at federal and sub-federal levels,and increase transparency of burden-sharing andaccountability across government layers.
2.Take steps to improve thelong-termsustainability of public finances.In line withthe framework of the three-pronged EUstrategy, the focus should be put on curbingage-related expenditure, notably by preventingearly exit from the labour market in order tomarkedly increase the effective retirement age.Measures such as linking the statutoryretirement age to life expectancy could beconsidered.
2.Continue to improvethe long-termsustainability of public financesby curbingage-related expenditure, including healthexpenditure. In particular, implement the reformof pre- retirement and pension schemes and takefurther steps to ensure an increase in theeffective retirement age, including throughlinking the statutory retirement age to lifeexpectancy.
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have to be accompanied by labour marketreforms that stimulate higher employment ratesamong older workers. Although the federalgovernment has already tabled severalinitiatives in this regard, not all have beenimplemented and the magnitude of thechallenge requires sustained efforts in comingyears.3.Address the structural weaknesses in thefinancial sector,in particular by finalisingrestructuring of the banks in need of anadequately funded and viable business model.3. Belgium has partially implemented therecommendation.Despite the initiatives takenby the government for enhanced supervision ofthe banking sector, Belgium needs to continueto make efforts to further restore confidence inthe banking sector. Nationalisation of DexiaBelgium and the guarantees provided by thegovernment should ensure that the collapse ofDexia does not have an impact on the realeconomy, while avoiding distortion ofcompetition.4. Belgium has not implemented therecommendation.The federal government hasno plans to reform the mechanism of wagebargaining or automatic wage indexation. Astrategy to boost the Belgian economy and toimprove competitiveness has been announced.3.Stimulate capital increase of the weakestbanks to underpin the strength of thebankingsectorso that it can play its normal role inlending to the economy.
4.Take steps to reform, in consultation with thesocial partners and in accordance with nationalpractice,the system of wage bargaining andwage indexation,to ensure that wage growthbetter reflects developments in labourproductivity and competitiveness.
4.To boost job creation and competitiveness,take steps to reform, in consultation with thesocial partners and in accordance with nationalpractice, thesystem of wage bargaining andwage indexation.As a first step, ensure thatwage growth better reflects developments inlabour productivity and competitiveness, by (i)ensuring the implementation ofex postcorrection mechanisms foreseen in the ‘wagenorm’ and promoting all-in agreements toimprove cost-competitiveness and (ii)
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facilitating the use of opt-out clauses fromsectoral collective agreements to better alignwage growth and labour productivitydevelopments at local level.5.Improveparticipation in the labour marketby reducing the high tax and social securityburden for the low-paid in a budgetary neutralway and by introducing a system in which thelevel of unemployment benefits decreasesgradually with the duration of unemployment.Take steps to shift the tax burden from labour toconsumption and to make the tax system moreenvironmentally friendly. Improve theeffectiveness of active labour policies bytargeting measures at older workers andvulnerable groups.5. Belgium has partially implemented therecommendation.The coalition agreement ofthe federal government contains a number ofmeasures in the various fields concerned,including reform of the unemployment system,improved activation policies for older workersand regionalisation of the social securityreductions to target the less favoured groups inthe various regional labour markets.Implementation is either already under way (asin the case of unemployment reform) or due totake place in the near future (as in the case ofthe extension of job search requirements toelderly workers). No real progress has beenmade as far as rebalancing of the tax burdenaway from labour to consumption or toenvironmental taxes is concerned, but fiscalconsolidation measures spared labour income.6. Belgium has partially implemented therecommendation.The new governmentannounced extra measures in December 2011,designed especially to enhance surveillance ofthe energy sector with the minimum objectiveof keeping inflation under control. Instead oftaking steps to control inflationary pressures bykeeping energy prices in check, it would be5.Significantly shift taxes from labour to lessgrowth-distortive taxes including for exampleenvironmental taxes. Pursue the initiated reformof the unemployment benefit system to reducedisincentives to work and strengthen the focusof employment support and activation policieson older workers and vulnerable groups, inparticular people with a migrant background.Take advantage of the planned furtherregionalisation oflabour marketcompetenciesto boost interregional labour mobility and tostrengthen the coherence between education,lifelong learning, vocational training andemployment policies. Extend existing activationefforts to all age groups.
6.Introduce measures toboost competitioninthe retail sector, by lowering barriers to entryand reducing operational restrictions; andintroduce measures to strengthen competition inthe electricity and gas markets by furtherimproving the effectiveness of the sectoralregulatory and competition authorities.
6.Continue tostrengthen competitionin theretail sector by lowering barriers and reducingoperational restrictions. Introduce measures tostrengthen competition in the network industriesby revising regulatory barriers and reinforcingthe institutional arrangements for effectiveenforcement of state aid rules.
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more effective to implement structural remediesso as to create a competitive market in theenergy sector. No substantive measures arebeing taken to improve competition in the retailsector.7.Take further measures to enhance theprogress towards reaching the targets forreducing greenhouse gas emissionsfrom non-ETS activities, in particular by ensuring asignificant contribution to this goal fromtransport.
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Country Specific Recommendations 2011BG1.Proceed with effective budgetimplementation so as to correct theexcessivedeficitin 2011, in line with the CouncilRecommendation of 13 July 2010 under theEDP. Specify the measures underpinning thebudgetary strategy for 2012-2014. Takeadvantage of the economic recovery to ensureadequate progress towards the medium-termobjective, primarily by keeping tight controlover expenditure growth, while prioritisinggrowth-enhancing expenditure.
Assessment of implementation of CSR20111. Bulgaria has implemented the CSR.Bulgaria has managed to correct its excessivedeficit in 2011, with the fiscal outcome decliningto 2.1% of GDP. The 2011 budget executionshows tight government control over expenditurein capital, compensation of employees andsubsidies. The budget law for 2012 sets a budgetdeficit target of 1.5 % of GDP for 2012.According to the Commission services’ springforecast, Bulgaria is expected to further reducethe general budget deficit in 2012 and 2013.
Country Specific Recommendations 2012
1.Continue with soundfiscal policiestoachieve the MTO by 2012. To this end,implement the budgetary strategy as envisaged,ensuring compliance with the expenditurebenchmark, and stand ready to take additionalmeasures in case risks to the budgetary scenariomaterialise. Strengthen efforts to enhance thequality of public spending, particularly in theeducation and health sectors and implement acomprehensive tax-compliance strategy tofurther improve tax revenue and address theshadow economy. Further improve the contentsof themedium-term budgetary frameworkand the quality of the reporting system.
2.Take further steps to improve thepredictability ofbudgetary planningand theimplementation control, including on anaccruals basis, in particular by strengtheningfiscal governance. To this end, design and put inplace binding fiscal rules and a well-definedmedium-term budgetary framework that ensurestransparency at all government levels.
2. Bulgaria has partially implemented theCSR.A requirement to keep the budget deficitbelow 2% and limiting government expenditureto 40 % of GDP were adopted as an amendmentto the Organic Budget Law, thus strengtheningthe binding nature of the fiscal framework.Going forward, efforts could be geared towardsfurther improving the content of the medium-term budgetary framework, including bystrengthening the budgetary process and thequality of reporting.3. Bulgaria has partially implemented the
3.Implement the agreed steps with social
2. Take further steps to reduce risks to the
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partners under the currentpension reform,advance some of its key measures that wouldhelp to increase the effective retirement age andreduce early exit, such as through the gradualincrease of the social insurance length ofservice, and strengthen policies to help olderworkers to stay longer in employment.
CSR.The government has considerablyaccelerated some of the pension reformmeasures, including those on the pensionableage for both men and women and on the lengthof service for army and police employees. Afurther review of special pension regimes andthe current rules for determining invaliditypensions will be needed, to raise the effectiveretirement age and reduce early retirement.4. Bulgaria has partially implemented theCSR.Wage growth slowed down after the crisisin Bulgaria, bringing it broadly into line withproductivity growth. Measures undertaken by thegovernment to freeze public sector wage bill in2010, 2011 and 2012 have been a relevant andadequate response, also contributing to bringingwage and labour costs closer to productivity.However, the main factor behind the increase inproductivity is the sharp decline in employment.5. Bulgaria has partially implemented theCSR.Implementation of labour marketprogrammes and measures in 2011 is positivebut insufficient. On public employmentservices, progress is unconvincing since therehave been no major improvements in theirinstitutional capacity. Education reform shouldfocus in particular on quality aspects, byurgently adopting the laws on school and high-school education and by introducingaccompanying measures to modernise teaching
sustainability and to improve adequacy ofthepension systemby making the statutoryretirement age the same for men and womenwith full career contributions. Introducestricter criteria and controls for theallocation of invalidity pensions.
4.Promote, in consultation with the socialpartners and in accordance with nationalpractices, policies to ensure thatwage growthbetter reflects developments in productivity andsustain competitiveness while paying attentionto on- going convergence.
5.Take steps to address the challenge ofcombating povertyand promoting socialinclusion, especially for vulnerable groupsfacing multiple barriers. Take measures formodernising public employment services toenhance their capacity to match skills profileswith labour market demand; and focusingsupport on young people with low skills.Advance theeducational reformby adopting aLaw on Pre-School and School Education and anew Higher Education Act by mid 2012.
3.Accelerate the implementation of the nationalYouth Employment Initiative. Ensure that theminimum thresholds for social securitycontributions do not discourage declared work.Step up efforts to improve the PublicEmployment Service’s performance. Toalleviate poverty,improve the effectiveness ofsocial transfers and the access to quality socialservices for children and the elderly andimplement the National Roma IntegrationStrategy.
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curricula and to improve higher educationgovernance.
4. Speed up the reform of relevant legal acts onschools and higher educationand ofaccompanying measures by focusing onmodernising curricula, improving teachertraining, and ensuring effective access toeducation for disadvantaged groups. Improvethe access to finance for start-ups and SMEs, inparticular those involved in innovativeactivities.5. Step up efforts toenhance administrativecapacityand reforms by reducing red tape andthe cost of tax compliance and collection, andfurther improving the absorption of EU funds,in particular in road and rail transport and watermanagement. Improve the quality andindependence of the judicial system and speedup the introduction of e- government.Strengthen public administrative capacity in keytransport sectors and regulatory authorities.6. Ensure sound implementation of publicprocurement legislation. Strengthen theprevention of irregularities and effectively applythe sanctions under thePublic ProcurementLaw and those of the Law on Conflict ofInterest.7. Take measures to removemarket barriers,guaranteed profit arrangements and pricecontrols. Ensure the independence oftransmission and distribution system operators;
6.Step up efforts toenhance administrativecapacityin key government functions andregulatory authorities, in order to make publicservices more effective in responding to theneeds of citizens and businesses; introduce andimplement effectively measures to checkpublicprocurementon the basis of risk assessments,strengthen the capacity of the authorities toprevent and sanction irregularities, in order toimprove quality and value-for-money in the useof public funds.
6. Bulgaria has partially implemented theCSR.Some progress has been made on a newremuneration system for civil servants and onimplementing the Action Plan for optimisingthe state administration, but it is too early tomake an assessment. The Structural andCohesion Funds implementation systemcontinues to struggle with unnecessarybureaucracy and poor understanding of soundfinancial management. Bulgaria adopted twoimportant pieces of legislation to help theauthorities monitor public procurement practiceand prevent and sanction irregularities.However, the adopted legislation is only thefirst step in ensuring sound and efficientprocurement practice.7. Bulgaria has partially implemented theCSR.One positive development is that theauthorities have decided to improve theprocedures and rules for allocating, controlling
7.Abolishbarriers to entry,guaranteed profitsarrangements and price controls and ensure fullindependence of the Bulgarian EnergyRegulator, in order to open up the electricity
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and gas markets to greater competition.Introduce incentives to upgrade the energyefficiency of buildings.
and metering heat consumption in multi-familyresidential buildings. However, substantialefforts are required from Bulgaria to ensure itsfull participation in creating a functioninginternal market for energy. Topics of particularconcern are the lack of electricity and gasexchanges and of a functioning balancingmarket, and regulated prices for finalconsumers.
complete the market design in particular for theenergy exchanges and balancing markets.Improve electricity and gas connections, boostenergy efficiency and enhance the capacity tocope with disruptions.
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CZ
Country Specific Recommendations 2011
Assessment of implementation of CSR20111. The Czech authorities have adopted andimplemented all the planned consolidationmeasures.The measures planned for 2013 on therevenue side are sufficiently specific andquantified. Some measures on the expenditureside take the form of across-the-board cuts in thebudget, which affects growth-enhancingexpenditure items such as education. Thesignificant drop in public investment in the lasttwo years likewise appears to militate againstprotecting growth-enhancing expenditure. TheCzech authorities are counting on the significantimprovements in the efficiency of public.However, the budgeted savings will dependcrucially on the actual implementation of thereforms, full details of which are not fullyspecified in the convergence programme.Concerning taxation, the authorities approved anincrease in the reduced VAT rate, in exciseduties on tobacco and a new tax on lotterycompanies. Significant changes to the tax systemare planned over the period 2013-2015.Nevertheless, several issues that limit theefficiency and equity of the current tax systemhave not been addressed fully and further effortswill be needed. The average annual fiscal effortover the period 2010-2013 based on the
Country Specific Recommendations 2012
1.Implement the planned consolidation in 2011and take countervailing measures of apermanent nature as needed in case of anyrevenue shortfalls or expenditure slippages.Adopt fiscal measures as planned in theConvergence Programme for 2012 and underpinthe target for 2013 by more specific measures;subject to this, avoid cutting expenditure ongrowth-enhancing items. Improve the efficiencyof public investments, and continue efforts toexploit the available space for increases inindirect tax revenue to shift taxes away fromlabour, improve tax compliance, and reduce taxevasion. Ensure an average fiscal effort over theperiod 2010-2013 of 1 % of GDP, in line withthe Council recommendationson correctingthe excessive deficit,which will allow meetingthe EDP deadline with a sufficient margin in2013.
1.Ensure planned progress towards the timelycorrection of the excessive deficit.To this end,fully implement the 2012 budget and specifymeasures of a durable nature necessary for theyear 2013 so as to achieve the annual averagestructural adjustment specified in the Councilrecommendation under the excessive deficitprocedure. Thereafter, ensure an adequatestructural adjustment effort to make sufficientprogress towards the MTO, including meetingthe expenditure benchmark. In this context,avoid across-the- board cuts, safeguard growth-enhancing expenditure and step up efforts toimprove the efficiency of public spending.Exploit the available space for increases in taxesleast detrimental to growth. Shift the high levelof taxation on labour to housing andenvironmental taxation. Reduce thediscrepancies in the tax treatment of employeesand the self-employed. Take measures toimprove tax collection, reduce tax evasion andimprove tax compliance, including byimplementing the Single Collection Point for alltaxes.
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recalculated structural balance adds up to 0.9%,which is slightly below the recommendedstructural effort of 1%.2. Implement theplanned pension reforminorder to improve the long-term sustainability ofpublic finances and to ensure the futureadequacy of pensions. Additional efforts shouldfocus on further changes to the public pillar toensure that the system is not a source of fiscalimbalances in the future, and on thedevelopment of private savings. With a view toraising the effective retirement age, measuressuch as a link between the statutory retirementage and life expectancy could be considered.Ensure that the envisaged funded schemeattracts broad participation, and is designed tokeep administrative costs transparent and low.2. The CSR has been partly implemented.Thegovernment has implemented a reform of thepublic pension system, but the projected fiscalimbalances in the pension system are still highand an explicit link between the retirement ageand life expectancy was not included in thereform. A reform introducing a new fully fundedpension scheme was approved in 2011, togetherwith an overhaul of the existing pension savingsscheme. Both reforms are planned to beimplemented from 2013, but their effectivenessis limited by the lack of measures to stimulateparticipation in the new scheme and inadequateguidance for savers. Moreover, the new earlyretirement scheme proposed by the governmentundermines the credibility and ambition of thesereforms.3. The CSR has been partly implemented.Thegovernment eased the technical requirements forsetting up company-based kindergartens andenvisages providing tax incentives for a greatertake-up of new forms of private childcare.However, the impact of these measures is likelyto be limited to persons either employed withlarge enterprises and/or on above-averagesalaries.2. Introduce further changes to thepublicpension schemeto ensure its long-termsustainability. Reconsider plans to allow anearlier exit from the labour market. Promoteeffective participation of younger workers in theenvisaged funded scheme to improve adequacyof pensions.
3.Enhance participation in the labour market byreducing the barriers for parents with youngchildren to re-enter the labour market throughincreased availability and access to affordablechildcare facilities.Increase the attractivenessand availability of more flexible forms ofworking arrangements, such as part-time jobs.
3.Take additional measures to significantlyincrease the availability of affordable andquality pre-schoolchildcare.
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4.Improve the performance of thepublicemployment servicein order to increase thequality and effectiveness of training, job searchassistance and individualised services, linkingfunding of the programmes to results. Incooperation with stakeholders, extend tailor-made training programmes, for older workers,young people, low-skilled workers and othervulnerable groups.
4. The CSR has been partly implemented.Some reforms have been adopted, whichimproved the efficiency of the publicemployment service, but do not address thequality and effectiveness of the labour officeprogrammes or linking funding of programmesto results. Jobseekers have been given a choiceof training programme; however, no steps havebeen taken to develop tailor made programmesor to provide additional funding targeted atspecific groups.5. The CSR has been partially implemented.There has been some progress with introducinge-government services and reducing theadministrative burden for businesses. Withrespect to the anti-corruption strategy, adoptionof the new Public Procurement Act has been themain achievement. Nevertheless, properenforcement and implementation will be crucialfor the credibility and effectiveness of thereform. Adoption of the Public Servants Act hasbeen postponed numerous times, which had asignificantly negative impact on implementationof the EU funds. A new draft act should bepresented to the government in September 2012but it is not expected to enter into force before2014. The issue of anonymous shareholding hasnot been fully addressed yet.
4.StrengthenPESby increasing the quality andeffectiveness of training, job search assistanceand individualised services, including ofoutsourced services.
5.Take the necessary measures to improve thequality of public servicesin areas essential forthe business environment. In this context speedup the implementation of theanti-corruptionstrategyin line with the identified targets,adopt the Public Servants Act to promotestability and effectiveness of the publicadministration and take steps to address theissue of anonymous share holding.
5.Adopt and implement as a matter of urgencythe Public Servants Act to promotestabilityand effectiveness of the public administrationin avoiding irregularities. Ensure adequateimplementation of the new Public ProcurementAct. Address the issue of anonymous shareholding. Ensure correct implementation of EUFunds and step up thefight against corruption.
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6.Establish a transparent system ofqualityevaluation of academic institutionsand link itto its funding in order to improve theperformance of tertiary education.
6. The CSR has been partly implemented.The government has introduced a set of qualityindicators but its link to funding is fairly looseand there is no clear evidence that it has animpact on improving the quality of output. Thegovernment has proposed measures relevant toimproving the performance of higher educationinstitutions; however it is vague on the keyissue of quality evaluation standards and lacksthe support of the academic community. Nomeasures have been adopted yet.
6.Adopt the necessary legislation to establish atransparent and clearly defined system forquality evaluation of higher educationandresearch institutions. Ensure that the funding issustainable and linked to the outcome of thequality assessment. Establish an improvement-oriented evaluation framework in compulsoryeducation.
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DK
Country Specific Recommendations 2011
Assessment of implementation of CSR20111.Expenditure projectionsseem to ensure therequired adjustmentof the excessive deficit in2013. The second part of the recommendation,regarding expenditure control,has been fullyimplemented.
Country Specific Recommendations 2012
1.Implement fiscal consolidation measures in2011, 2012 and 2013 and ensure an averageannual fiscal effort of 0,5 % of GDP over theperiod 2011-2013 as planned andcorrect theexcessive deficitby 2013 in line with theCouncil recommendation under the EDP.Thereafter ensure, as planned, an appropriateadjustment path towards the medium-termobjective. Accelerate the reduction of thegeneral government deficit if economicconditions turn out better than currentlyexpected.Strengthen expenditure controlbyadopting binding multiannual spending ceilingsfor local, regional and central governmentwhich are consistent with the overall medium-term general budget targets.2.In order to strengthen employment and thesustainability of public finances, take furthersteps to increase long-term labour supply, byimplementing the recently concluded reform onthe voluntary early retirementpension(VERP)scheme, reforming the disability pension andbetter targetingsubsidised employmentschemes(the ‘flex-job’ system) towards themost vulnerable groups.
1.Implement the budgetary strategy asenvisaged, to ensure acorrection of theexcessive deficitby 2013 and achieve theannual average structural adjustment effortspecified in the Council recommendations underthe excessive deficit procedure. Thereafter,ensure an adequate structural adjustment effortto make sufficient progress towards the MTO,including meeting the expenditure benchmark.
Agreements on legal acts aimed atstrengthening management of publicexpenditure in Denmark has recently beenconcluded, and the independent DanishEconomic Council will be given the task ofassessing the long-term sustainability of publicfinances, the medium-term development of thebudget balance and whether the expenditureceilings are aligned with fiscal targets.
2.Take further steps to enhance long-termlabour supply by reforming the disabilitypension,better targetingsubsidisedemployment schemes(the ‘flex-job’ system)towards people with reduced work capacity, andimproving the employability of people with amigrant background.
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3.Speed up the implementation of reforms toimprove the quality of theeducation system.Reduce drop-out rates, particularly in thevocational education sector, and increase thenumber of apprenticeship places available.
2. Denmark has so far partially implementedthis CSR.The reform of the voluntary earlyretirement scheme has been adopted in line withCSR 2 and a proposal to reform the disabilitypension and flex-job scheme has been putforward. The proposal heads in the rightdirection when it comes to implementing therecommendation, but no reform has yet beenadopted.3. This CSR is considered to be only partiallyimplemented.Denmark has set out a number oftargets and plans for education and intends toput forward a range of initiatives aimed atpreventing drop-outs from youth education andincreasing the number of apprenticeshipsavailable. Nevertheless, Denmark still facessome challenges in the upper secondaryeducational system.4. This CSR can be regarded as only partiallyaddressed,as measures for some sectors havestill not been implemented. Significant barriersto entry in the services sector were to someextent addressed by a Competition Packageadopted in 2011. The matter of publicprocurement is to be dealt with in negotiationswith regional and local governments.5. Overall, the CSR has been partiallyimplemented.Closer oversight of the debt leveland different mortgage types is planned.
3.Implement announced measures, withoutdelay, to improve the cost-effectiveness of theeducation system,reduce drop- out rates, inparticular within vocational education, andincrease the number of apprenticeships.
4.Take steps to removeobstacles tocompetition,in particular in local services andthe retail sector, by reviewing legislation onland use and opening up procurement inmunicipalities and regions.
4.Continue efforts to removeobstacles tocompetition,in particular in local services, theretail and construction sector, including byfurther opening the municipal and regionalprocurement of services to competition andensuring that competition law sanctions have asufficiently deterrent effect.
5.While supporting the ongoing stabilisation ofthereal-estate marketfollowing the recentprice correction, consider preventive action tostrengthen the medium-term stability of thehousing market and the financial systemincluding reviewing the functioning of themortgage and property tax systems.
5.Consider further preventive measures tostrengthen the stability of thehousing marketand financial system in the medium term,including by taking account of the results of theongoing study by the Ministry of Business andGrowth on the distribution of assets andliabilities across households and by reviewingthe property value tax system and the municipalland value tax system.
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Although risks in terms of financial stability arenot clear, measures to prevent future housingbubbles, in particular unfreezing property taxesin nominal terms are relevant. The governmenthas ruled out any changes to property taxationduring its current four-year term.
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DE
Country Specific Recommendations 2011
Assessment of implementation of CSR2011
Country Specific Recommendations 2012
1. Implement thebudgetary strategyfor theyear 2012 and beyond as envisaged, thusbringing the high public debt ratio on adownward path,in line with the Councilrecommendations under the EDP. Ensure anadequate structural adjustment effort towardsthe medium-term objective thereafter. Completethe implementation of thebudgetary rule attheLänderleveland further strengthen thecorresponding monitoring and sanctioningmechanism. Maintain a growth-friendlyconsolidation course, in particular bysafeguarding adequate expenditure on educationand by further enhancing the efficiency ofpublic spending on health-care and long-termcare.
Germany has partially implemented 2011CSRs. Most progress has been made in thefield of fiscal policy.Germany brought its fiscal deficit below the 3%of GDP reference value two years ahead of thedeadline set by the Council, which thusabrogated its Decision on excessive deficit of2010.The implementation of the debt break at theLänderlevel remains incomplete due toinadequate monitoring indicators.Although Germany adopted reforms on longterm care and health care, these remaininsufficient to cope with foreseen future increasein costs.As to banks, similar recommendation remains for2011 and 2012 since a long term vision for theentireLandesbankensector is needed, togetherwith a more forward looking macroprudentialsupervisory framework for the financial services
1. Continue with sound fiscal policies to achievethe MTO by 2012. To this end, implement thebudgetary strategyas envisaged,ensuringcompliance with the expenditure benchmark aswell as sufficientprogress towardscompliance with the debt reductionbenchmark.Continue the growth-friendlyconsolidation course through additional effortsto enhance the efficiency of public spending onhealthcare and long-term care, and by usinguntapped potential to improve the efficiency ofthe tax system; use available scope for increasedand more efficient growth-enhancing spendingon education and research at all levels ofgovernment. Complete theimplementation ofthe debt brake in a consistent manner acrossallLänder,ensuring timely and relevantmonitoring procedures and correctionmechanisms.2. Address the remaining structural weaknessesin thefinancial sector,inter aliaby furtherrestructuring of thoseLandesbankenwhich arein need of an adequately funded viable businessmodel while avoiding excessive deleveraging.
2. Address the structural weaknesses in thefinancial sector,in particular by restructuringLandesbankenwhich are in need of anadequately funded viable business model.
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sector.3. Enhanceparticipation in the labour marketby improving equitable access to education andtraining systems and by taking further steps toreduce the high tax wedge in a budgetaryneutral way and improve work incentives forpersons with low income perspectives. Increasethe number of fulltime childcare facilities andall-day schools. Closely monitor the effects ofrecent reform measures to reduce taxdisincentives for second earners and take furthermeasures in case disincentives remain.There has been some progress on provision ofequal opportunities in education.In the labour market, despite pension and longterm care contribution reform, the tax wedgeremains too high, especially for low incomeearners.In 2012, but not 2011, it is recommended forwages to grow in line with productivity (i.e.faster).Progress on improving all day childcare facilitiesand schools is slow, as are reform measures toreduce tax disincentives for second earners(foreseen introduction of childcare allowancecould be another disincentive for both parents towork).4. Remove unjustified restrictions on certainprofessional services and on certain crafts. Toimprovecompetitionin network industries,strengthen the supervisory role of the FederalNetwork Agency in the rail sector; and, in thecontext of the announced nationalEnergyConcept, focus on improving the long-termcost-effectiveness of the Renewable EnergyAct, ensuring the effective independence ofenergy production and transmission, andimproving cross- border interconnections.Even with new legislation, problems in therailways sector remain, since the separationbetween the infrastructure manager and therailway holding has not been abolished.Electricity grid has not been expandingsatisfactorily and gas transport capacity is stilltoo low.In 2012, construction sector has been mentionedspecifically as one of the professional serviceslacking competition.3. Reduce the high tax wedge in a budgetaryneutral way, in particular for low-wage earners,and maintain appropriate activation andintegration measures, in particular for the long-termunemployed.Create the conditions forwages to grow in line with productivity. Takemeasures to raise the educational achievementof disadvantaged groups, in particular throughensuring equal opportunities in the educationand training system. Phase out the fiscaldisincentives for second earners, and increasethe availability of fulltime childcare facilitiesand all-day schools.
4. Continue efforts to keep the overall economiccosts of transforming theenergysystem to aminimum, including by accelerating theexpansion of the national and cross-borderelectricity and gas networks. Ensure that theinstitutional set-up guarantees effectivecompetitionin railway markets. Take measuresto further stimulate competition in the servicessectors, including professional services andcertain crafts, in particular in the constructionsector.
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EE
Country Specific Recommendations 2011
Assessment of implementation of CSR20111. Estonia has partly implemented the CSR:the 2012 programme forecasts a deficit of 2.6%of GDP in 2012, bigger than projected.The deterioration is a result of weaker revenueand of higher-than-expected expenditure on theone-off investment. The structural balance isexpected to improve by 0.3% of GDP in 2013reaching a balanced position according to theprogramme.
Country Specific Recommendations 2012
1.Achieve structural surplus by 2013 at thelatest, whilelimiting deficit in 2012to at most2.1 % of GDP, keeping tight control overexpenditure and enhancing the efficiency ofpublic spending.
1.Preserve a sound fiscal position byimplementing budgetary plans as envisaged,ensuring achievement of the MTO by 2013atthe latest, and compliance with the expenditurebenchmark. Complement the planned budgetrule with more binding multiannual expenditurerules within the medium-term budgetaryframework, continue enhancing the efficiencyof public spending and implementing measuresto improve tax compliance.2.Improveincentives to workby streamliningthe social benefits system and increasingflexibility in the allocation of disability,unemployment and parental benefits, whileensuring adequate social protection. Improvedelivery of social services, while better targetingfamily and parental benefits and removingdistortionary income tax exemptions related tochildren. Increase the participation of the youngand the long-term unemployed in the labourmarket.4. Improve energy efficiency,in particular inbuildings and transport, and strengthenenvironmental incentives concerning vehiclesand waste, including by considering incentivessuch as the taxation of vehicles. Fosterrenewable energy use, including through
2.Take steps tosupport labour demand andto reduce the risk of poverty,by reducing thetax and social security burden in a budgetaryneutral way, as well as through improving theeffectiveness of active labour market policies,including by targeting measures on youngpeople and the long-term unemployed,especially in areas of high unemployment.
2. Estonia has partly implemented the CSR:anumber of steps have been taken in the area oflabour taxation. However, the rising take-up ofdisability and incapacity-for-work benefits hasnot been addressed. Efforts are being made toreduce the high unemployment, but long-termand youth unemployment are still high andskills levels are expected.
3.Ensure implementation of planned incentivesto reduce energy intensity andimprove theenergy efficiencyof the economy, targeted onthe buildings and transportation sectors,including by ensuring better market functioning.
3. Estonia has partly implemented the CSR:the measures in the National Energy EfficiencyAction Plan are fully relevant, but areinsufficient given the modal shift away frompublic transport. Also, the new cars fleet is themost energy-intensive in the EU. Finally, fuel
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excise duties are insufficient to shift consumerpatterns. Therefore, the challenge still appliesand the CSR needs to be repeated.4.While implementing theeducation systemreform, give priority to measures improving theavailability of pre- school education, andenhance the quality and availability ofprofessional education. Focus educationoutcomes more on labour market needs, andprovide opportunities for low- skilled workersto take part in lifelong learning.4. Estonia has partly implemented the CSR:the quality and availability of vocationaleducation have improved and more measuresare planned. Participation in lifelong learning ispicking up, but with insufficient focus on low-skilled workers. Problems with matchingeducation outcomes to labour market needs arecontinuing. There is an urgent need to reformthe upper-secondary education/school system.Further attention needs to be paid to provisionof public services by local authorities. Overall,the CSR needs to be repeated and adjusted.
upgraded infrastructure and legislation.Continue the development of cross-borderconnections to end relative market isolation.3. Link training and education moreeffectivelyto the needs of the labour market,and enhance cooperation between businessesand academia. Increase opportunities for low-skilled workers to improve their access tolifelong learning. Foster prioritisation andinternationalisation of the research andinnovation systems.
5.Enhancefiscal sustainability ofmunicipalitieswhile improving efficiency oflocal governments and ensure effective serviceprovision, notably through stronger incentivesfor the merger of or increased cooperationbetween municipalities. Relevant reformproposals should be put in place within areasonable timeframe.
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IE
Country Specific Recommendations 2011
Assessment of implementation of CSR2011Ireland has been granted by the EU and the IMFfinancial assistance, which amounts to €85bn.The financial assistance programme lasts forthree years from 2010 to 2013. According to thelatest review that took place in the beginning ofJuly,Ireland's policy implementationremains on track despite challengingmacroeconomic conditions.The mainfindings of the review mission are thefollowing:Growth prospectsfor the remainder of2012 and into 2013 remain modest.Decline inbond yieldsunderlines theincreasing confidence in Ireland’s strongcapacity to implement adjustment policies.The authorities continue to advancereforms to restore the health of the Irishfinancial sector.The downsizing of bankbalance sheets has progressed well.Fiscal targetsfor the first half of 2012were met, and the budget deficit is on track tobe within the 8.6 percent of GDP target for2012. However, Ireland's budget deficit remainsthe largest in the euro area.Ireland’sunemploymentremains veryhigh.
Country Specific Recommendations 2012
Implement the measures laid down inImplementing Decision 2011/77/EU, asamended by Implementing Decision2011/326/EU, and further specified in theMemorandum of Understanding of 16December 2010 and its update of 18 May 2011.
Implement the measures laid down inImplementing Decision 2011/77/EU and furtherspecified in the Memorandum of Understandingof 16 December 2010 and its subsequentsupplements.
21
EL
Country Specific Recommendations 2011
Assessment of implementation of CSR2011Greece made mixed progress towards achievingthe ambitious objectives of the first adjustmentprogramme and important fiscal targets werenot met. The programme strategy has thereforebeen adjusted.Fiscal targetsfor 2012 and subsequent yearshave been revised. In early 2012, thegovernment adopted a package of fiscalmeasures. However, current projections point towide fiscal gaps in 2013–14. In Greeceinsufficient progress has been achieved intaxpolicy and tax administration reforms.Thescaled-up official financing and the exchange ofdebt held by the private sector will improvedebt sustainability prospects. Progress inprivatisationhas been slower than planned, onaccount of adverse market conditions andtechnical and legal hurdles in preparing assetsfor sale. Greece has begun to implement acomprehensive strategy to recapitalise banksand to restructure thebanking sector,involvinga number of supervisory and regulatorymeasures. Greece’s medium-term economicperformance will very much depend on theimplementation of structural reforms.The government has adopted an ambitious set oflabour marketmeasures that complement the
Country Specific Recommendations 2012
Fully implement the measures laid down in theDecision 2010/320/EU, as amended byDecision 2011/257/EU, and as further specifiedin the Memorandum of Understanding of 3 May2010 and its subsequent supplements, inparticular the last supplement of 2 July 2011.
Implement the measures laid down in Decision2011/734/EU, as amended on 8 November 2011and 13 March 2012, and the Memorandum ofUnderstanding on Specific Economic PolicyConditionality, which was signed on 14 March2012.
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reforms passed in 2010 and 2011.Greece has made insufficient progress withregard to thereform of public procurement.Greece has undertaken a number of importantcommitments to reform itsjudicial system.
23
ES
Country Specific Recommendations 2011
Assessment of implementation of CSRs2011
Country Specific Recommendations 2012
1. Implement the budgetary strategy in 2011 and2012 and correct the excessive deficit in the year2013 in line with the Council recommendationunder the EDP, ensuring the achievement ofdeficit targets at all levels of government,including by strictly applying the existing deficitand debt control mechanisms for regionalgovernments; adopt further measures in casebudgetary and economic developments do notturn out as expected; take any opportunityincluding from better economic conditions toaccelerate the deficit reduction; set out concretemeasures to fully underpin the targets for 2013and 2014 which should bring the high publicdebt ratio on a downward path and ensureadequate progress towards the medium-termobjective. Keep public expenditure growth belowthe rate of medium-term GDP growth, byintroducing a binding expenditure rule at alllevels of government, as envisaged. Furtherimprove the provision of information in relationto regional and local government budgets andtheir execution.
1. Deliver an annual average structural fiscaleffort of above 1,5 % of GDP over the period2010-13 as required by the Councilrecommendation under the EDP byimplementing the measures adopted in the 2012Given the fiscal deficit being was worse thanbudget and adopting the announced multiannualexpected in 2011 (8.5% compared with the target budget plan for 2013-14 by end July 2012.of 6% of GDP) and with the latest projection for Adopt and implement measures at regional level2012 of 6.3% instead of 5.3% of GDP, Spain was in line with the approved rebalancing plans andgiven an extension of deadline for one year, i.e.strictly apply the new provisions of theby 2014 to correct its excessive deficit.Budgetary Stability Law regarding transparencyand control of budget execution and continueAs requested in 2011 Spain has adopted theimproving the timeliness and accuracy ofBudgetary Stability Law, setting out expenditure budgetary reporting at all levels of government.rule across all levels of government.Establish an independent fiscal institution toprovide analysis, advice and monitor fiscalpolicy. Implement reforms in the public sectorto improve the efficiency and quality of publicexpenditure at all government levels.Spain has partially implemented 2011 CSRs.Most progress was made in pension reformand some in financial services sector andlabour market.
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2. Adopt the proposed pension reform to extendthe statutory retirement age and increase thenumber of working years for the calculation ofpensions as planned; regularly review pensionparameters in line with changes to lifeexpectancy, as planned, and develop furthermeasures to improve lifelong learning for olderworkers.3. Monitor closely the ongoing restructuring ofthe financial sector, in particular as regardssavings banks, with a view to finalising it by 30September 2011 as envisaged.
Although Spain has implemented thisrecommendation, further concrete measures needto be undertaken.
2. Ensure that the retirement age is rising in linewith life expectancy when regulating thesustainability factor foreseen in the recentpension reform and underpin the GlobalEmployment Strategy for Older Workers withconcrete measures to develop lifelong learningfurther, improve working conditions and fosterthe reincorporation of this group in the jobmarket.4. Implement the reform of the financial sector,in particular complement the on-goingrestructuring of the banking sector byaddressing the situation of remaining weakinstitutions, put forward a comprehensivestrategy to deal effectively with the legacyassets on the banks' balance sheets, and define aclear stance on the funding and use of backstopfacilities.3. Introduce a taxation system consistent withthe fiscal consolidation efforts and moresupportive of growth, including a shift awayfrom labour towards consumption andenvironmental taxation. In particular, addressthe low VAT revenue ratio by broadening thetax base for VAT. Ensure less tax-induced biastowards indebtedness and homeownership (asopposed to renting).
In the meantime Spain was grantedEU financialassistance of €100 bn (EFSF)forrecapitalisation and restructuring of its financialsector.
4. Explore the scope for improving the efficiencyof the tax system, for example through a moveaway from labour towards consumption andenvironmental taxes while ensuring fiscalconsolidation plans.
Spain has adopted measures going in a differentdirection as recommended. It has increased directtax with higher burden on labour and capitalinstead of broadening the VAT base.
5. Following consultation with social partnersand in accordance with national practice,
Collective bargaining reform has beenimplemented in February 2012.
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complete the adoption and proceed with theimplementation of a comprehensive reform ofthe collective bargaining process and the wageindexation system to ensure that wage growthbetter reflects productivity developments as wellas local- and firm-level conditions and to grantfirms enough flexibility to internally adaptworking conditions to changes in the economicenvironment.6. Assess, by the end of 2011, the impacts of thelabour market reforms of September 2010 and ofthe reform of active labour market policies ofFebruary 2011, accompanied, if necessary, byproposals for further reforms to reduce labourmarket segmentation, and to improveemployment opportunities for young people;ensure a close monitoring of the effectiveness ofthe measures set out in the National ReformProgramme to reduce early school leaving,including through prevention policies, andfacilitate the transition to vocational educationand training.Recommendation on active, targeted labourmarket policy has been repeated in 2012.As part of labour market reform, Spain has triedto limit the use of temporary contracts; there ishowever a risk that the probationary period forpermanent contracts is misused as quasitemporary contract with no termination costs.Moreover, dismissal of employees on permanentcontracts is still too burdensome.Early school leaving rate remains high; with28.4% in 2010 still far from the Europe 2020target of 15% .Expenditure on R&D was only at 1.39% of GDPin 2010, thus far from Europe 2020 3% target.5. Implement the labour market reforms andtake additional measures to increase theeffectiveness of active labour market policies byimproving their targeting, by increasing the useof training, advisory and job matching services,by strengthening their links with passivepolicies, and by strengthening coordinationbetween the national and regional publicemployment services, including sharinginformation about job vacancies.6. Review spending priorities and reallocatefunds to support access to finance for small andmedium-sized enterprises (SMEs), research,innovation and young people. Implement theYouth Action Plan, in particular as regards thequality and labour market relevance ofvocational training and education, and reinforceefforts to reduce early school-leaving andincrease participation in vocational educationand training through prevention, intervention
26
and compensation measures.7. Further open up professional services andenact the planned legislation in order to redesignthe regulatory framework and eliminate currentrestrictions to competition, efficiency andinnovation; implement the Law on SustainableEconomy, notably measures aimed at improvingthe business environment and enhancingcompetition in the product and service markets,at all levels of government; and improvecoordination between regional and nationaladministrations to reduce the administrativeburden for enterprises.Spain made no progress to present new law onprofessional services, which was part of its 2011commitments.It has set up the Advisory Commission onCompetitiveness.Spain also needs to carry on with privatisationprocess and reduce administrative burden forenterprises.
27
FR
Country Specific Recommendations 2011
Assessment of implementation of CSR20111. Overall, the country-specificrecommendation has been partlyimplemented.Consolidation measures wereadopted to adjust to lower-than-expectedgrowth, but measures backing the consolidationstrategy from 2013 onwards still need to bespecified, especially on the expenditure side,and additional efforts may be needed to bringthe deficit below 3% of GDP by 2013 andensure an average annual fiscal effort of above1% of GDP over 2010-2013. Concerning thelong-term sustainability of public finances, the2010 pension reform is being gradually applied;however, it cannot be ensured that the systemwill be balanced by 2018.2. Overall, the recommendation has beenpartly implemented.Limited reforms havebeen carried out to address labour marketsegmentation. Measures have been taken thatseek to provide flexible work arrangement forcompanies facing temporary difficulties, andeconomic dismissals were facilitated forcompanies with fewer than 1000 employees.These measures increase the flexibility of thelabour market, but do not specifically addressthe segmentation of the labour market.
Country Specific Recommendations 2012
1.Ensure the recommended average annualfiscal effort of more than 1 % of GDP over theperiod 2010-2013 and implement thecorrection of the excessive deficit by 2013,inline with the Council recommendations underthe EDP, thus bringing the high public debtratio on a downward path, and ensure adequateprogress to the medium-term objectivethereafter; specify the necessary correspondingmeasures for 2012 onwards, take additionalmeasures if needed and use any windfallrevenues to accelerate the deficit and debtreduction as planned; continue to review thesustainability of thepension systemand takeadditional measures if needed.2.Undertake renewed efforts, in accordancewith national practices of consultation with thesocial partners, to combatlabour marketsegmentationby reviewing selected aspects ofemployment protection legislation whileimproving human capital and upwardtransitions; ensure that any development in theminimum wage is supportive of job creation.
1. Reinforce and implement the budgetarystrategy, supported by sufficiently specifiedmeasures, notably on the expenditure side, forthe year 2012 and beyond to ensure acorrection of the excessive deficit by 2013andthe achievement of the structural adjustmenteffort specified in the Council recommendationsunder the excessive deficit procedure.Thereafter, ensure an adequate structuraladjustment effort to make sufficient progresstowards the MTO, including meeting theexpenditure benchmark, and ensure sufficientprogress towards compliance with the debtreduction benchmark. Continue to review thesustainability and adequacy of thepensionsystemand take additional measures if needed.2.Introduce further reforms to combatlabourmarket segmentationby reviewing selectedaspects of employment protection legislation, inconsultation with the social partners inaccordance with national practices, in particularrelated to dismissals; continue to ensure that anydevelopment in the minimum wage issupportive of job creation and competitiveness;take actions to increase adult participation in
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lifelong learning.3. Overall, the recommendation has been3.Encourage access to lifelong learning in orderpartly implemented.Adopted plans for seniorto help maintain older workers in employmentworkers generally lack ambition. Theand enhance measures to support return todevelopment of financial incentives for low-employment. Step up activelabour marketskilled job seekers aged more than 45 hadpoliciesand introduce measures to improve the modest impact.organisation, decision-making, and proceduresThe resources available to public employmentof the public employment service to strengthenservices are unlikely to be sufficient to improveservices and individualised support provided to significantly the quality of the services offered.those at risk of long-term unemployment.A more ambitious strategy is needed in the fieldof adult learning.4. Overall, the recommendation has been4.Increase theefficiency of the tax system,partly implemented.France adopted anincluding for example through a move awayincrease in VAT and in social levies on capitalfrom labour towards environmental andincome and gains to compensate for lowerconsumption taxes, and implementation of theplanned reduction in the number and cost of tax employers' social contributions. The ambition ofthis measure seems limited, given its narrowand social security exemptions (includingfocus and the developments on measures‘niches fiscales’).increasing the tax burden on labour. No specificmeasures have been taken to raise VATefficiency, except for certain categories ofgoods and services. Efforts have been made toreduce tax expenditures; however, they havealso been accompanied by rate rises that tend toincrease the already high tax burden on labour.No major move from labour towardsenvironmental taxes has been proposed so far.5.Take further steps toremove unjustified5. Overall, the recommendation has beenpartly implemented.France undertook reformsrestrictions on regulated trades andto remove restrictions on selected trades andprofessions,in particular in services and the3.Adoptlabour market measuresto ensurethat older workers stay in employment longer;improve youth employability especially forthose most at risk of unemployment, byproviding for example more and betterapprenticeship schemes which effectivelyaddress their needs; step up active labour marketpolicies and ensure that public employmentservices are more effective in deliveringindividualised support.4. Take further steps to introduce amore simpleand balanced taxation system,shifting the taxburden from labour to other forms of taxationthat weigh less on growth and externalcompetitiveness, in particular environmentaland consumption taxes; continue efforts toreduce and streamline tax expenditures (inparticular those providing incentives toindebtedness); review the effectiveness of thecurrent reduced VAT rates in support of growthand job creation.
5.Pursue efforts toremove unjustifiedrestrictions on regulated trades andprofessions,in particular in services and the
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retail sector.
professions. However, no horizontal review hasbeen conducted and these measures will have amarginal impact. In the retail sector, the reformsprovided for the draft law strengthening therights, the protection and information ofconsumers would have a marginal impact andlack ambition.
retail sector; take further steps to liberalisenetwork industries, in particular in theelectricity wholesale market, develop energyinterconnection capacity and facilitate the entryof new operators into the rail freight andinternational passenger transport sectors.
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IT
Country Specific Recommendations 2011
Assessment of implementation of CSR20111. Italy has partially implemented the CSR.Three packages were adopted in 2011 on fiscalconsolidation. The Italian Parliament hasadopted a balanced budget rule in the ItalianConstitution. Effective ordinary legislation willneed to be designed, specifying the balance tobe considered, application arrangements (e.g.cyclical conditions) and appropriate correctionmechanisms, as required by the fiscal compact.
Country Specific Recommendations 2012
1.Implement the planned fiscal consolidation in2011 and 2012 to ensurecorrection of theexcessive deficitin line with the Councilrecommendations under the EDP, thus bringingthe high public debt ratio on a downward path.Building on recently approved legislation, fullyexploit any better-than-expected economic orbudgetary developments for faster deficit anddebt reductionand stand ready to preventslippages in budgetary implementation. Back upthe targets for 2013-2014 and the plannedachievement of the medium-term objective by2014 with concrete measures by October 2011as provided for in the new multi-annualbudgetary framework. Further strengthen theframework by introducing enforceable ceilingson expenditure andimproving monitoringacross all government subsectors.
1.Implement the budgetary strategy as planned,and ensure that theexcessive deficit iscorrected in 2012.Ensure the plannedstructural primary surpluses so as to put thedebt- to-GDP ratio on a declining path by2013.Ensure adequate progress towards theMTO, while meeting the expenditurebenchmark and making sufficient progresstowards compliance with the debt reductionbenchmark.2.Ensure that the specification in theimplementing legislation of the key features ofthe balanced budget rule set out in theConstitution, including appropriatecoordination across levels of government,isconsistent with the EU framework. Pursue adurable improvement of the efficiency andquality of public expenditure through theplanned spending review and theimplementation of the 2011 Cohesion ActionPlan leading to improving the absorption andmanagement of EU funds, in particular in theSouth of Italy.
2.Reinforce measures tocombat segmentationin the labour market,also by reviewing
2. Italy has partially implemented the CSR.Itdid not adopt key policies to fight undeclared
4.Adopt thelabour market reformas apriority to tackle the segmentation of the labour
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selected aspects of employment protectionlegislation including the dismissal rules andprocedures and reviewing the currentlyfragmented unemployment benefit systemtaking into account the budgetary constraints.Step up efforts tofight undeclared work.Inaddition, take steps to promote greaterparticipation of women in the labour market, byincreasing the availability of care facilitiesthroughout the country and providing financialincentives to second earners to take up work ina budgetary neutral way.3.Take further steps, based on the 2009agreementreforming the collectivebargaining frameworkand in consultationwith the social partners in accordance withnational practices, to ensure that wage growthbetter reflects productivity developments aswell as local and firm conditions, includingclauses that could allow firm level bargaining toproceed in this direction.4.Extend the process ofopening up theservices sector to further competition,including in the field of professional services.Adopt in 2011 the Annual Law on Competition,taking into account the recommendationspresented by the Anti-trust Authority. Reducethe length of contract law enforcementprocedures. Further strengthen actions topromote the access of SMEs to capital markets
work and provided limited support for femaleemployment. The labour market reformpresented by the government aims tocomprehensively address the rigidities andasymmetries of employment protectionlegislation while moving towards a moreintegrated unemployment benefit scheme. Thisshould improve the balance between flexibilityof entry into and exit from the labour market.
market and establish an integratedunemployment benefit scheme. Take furtheraction to incentivise labour market participationof women, in particular through the provision ofchildcare and elderly care. Monitor and ifneeded reinforce the implementation of the newwage setting frameworkin order to contributeto the alignment of wage growth andproductivity at sector and company level.
3. Italy has partially implemented the CSR.A social partners’ agreement was reached inJune, allowing firm-level bargaining to derogatefrom labour law (including on dismissalprocedures and type of contracts to be used inthe firm). Implementation of the agreement oncollective bargaining will crucially depend onthe behaviour of the social partners.
4. Italy has partially implemented the CSR.Rules were adopted to liberalise local publicservices, lift rigidities in professional services,strengthen the Antitrust Authority’s powers andabolish disproportionate bans, restrictions andauthorisations on economic activity from 2012(this requires further legislative measures to betaken by the end of 2012). Sectoralliberalisation was launched, and reforms of the
6.Implement the adoptedliberalisation andsimplification measures in the services sector.Take further measures to improve market accessin network industries, as well as infrastructurecapacity and interconnections. Simplify furtherthe regulatory framework for businesses andenhance administrative capacity. Improveaccess to financial instruments, in particularequity, to finance growing businesses and
32
byremoving regulatory obstaclesandreducing costs.
judicial system were adopted, to improve itsefficiency by reducing case-handling durationand backlogs.5. Italy has partially implemented the CSR.Some measures have been taken, notably therefinancing of the tax credit for research forcompanies. The level of ambition andeffectiveness is, however, insufficient. Therehas been no significant improvement onpromoting venture capital.6. Italy has partially implemented the CSR.Measures to speed up the absorption ofstructural funds started in March 2011 andculminated in the November Cohesion ActionPlan. Major deficiencies in the capacity of thepublic administration continue to hamperprogramme implementation, notably in theconvergence regions.
innovation. Implement the plannedreorganisation of the civil justice system, andpromote the use of alternative dispute settlementmechanisms.
5.Improve the framework for private sectorinvestment in research and innovationbyextending current fiscal incentives, improvingconditions for venture capital and supportinginnovative procurement schemes.
6.Take steps to accelerate in a cost-effectivewaygrowth-enhancing expenditureco-financed by cohesion policy funds in order toreduce the persistent disparities betweenregions, by improving administrative capacityand political governance. Respect thecommitments made in the national StrategicReference Framework in terms of the amount ofresources and quality of expenditure.
5.Pursue thefight against tax evasion.Pursuethe shadow economy and undeclared work, forinstance by stepping up checks and controls.Take measures to reduce the scope of taxexemptions, allowances and reduced VAT ratesand simplify the tax code. Take further action toshift thetax burden away from capital andlabour to property and consumption as wellas environment.3. Take further action toaddress youth
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unemployment,including by improving thelabour-market relevance of education andfacilitating transition to work, also throughincentives for business start-ups and for hiringemployees. Enforce nation-wide recognition ofskills and qualifications topromote labourmobility.Take measures toreduce tertiaryeducation dropout ratesand fight early schoolleaving.
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CY
Country Specific Recommendations 2011
Assessment of implementation of CSR20111.Cyprus has implemented CSR 1 onlypartially.Effective action has been taken tocorrect the excessive budget deficit in a timelyand sustainable manner, by 2012. However, anenforceable multiannual budgetary frameworklaw has not yet adopted, although the Cypriotauthorities committed to adopt it by May 2012.
Country Specific Recommendations 2012
1.Adopt the necessary measures of a permanentnature to achieve the budgetary target in 2011and the correction of theexcessive deficitby2012, in line with the Council recommendationsunder the EDP. Take measures to keep tightcontrol over expenditure and make use of anybetter- than-expected budgetary developmentsfor faster deficit and debt reduction. Ensureprogress towards the medium-term objective byat least 0,5 % of GDP annually and bring thepublic debt ratio on a downward path.Accelerate the phasing-in of an enforceablemultiannual budgetary framework with abinding statutory basis and correctivemechanisms, as from the preparation of the2012 budget. The programme and performancebudgeting should be implemented as soon aspossible.2.Strengthen further the prudential frameworkforsupervision of banksand cooperative creditsocieties to ensure early detection of risks.
1.Take additional measures to achieve adurable correction of theexcessive deficitin2012. Rigorously implement the budgetarystrategy, supported by sufficiently specifiedmeasures, for the year 2013 and beyond toensure the achievement of the MTO by 2014and compliance with the expenditure benchmarkand ensure sufficient progress with the debtreduction benchmark. Accelerate the phasing-inof an enforceable multiannual budgetaryframework with a binding statutory basis andcorrective mechanism. Take measures to keeptight control over expenditure and implementprogramme and performance budgeting as soonas possible. Improve tax compliance and fightagainst tax evasion.
2. Cyprus has implemented CSR 2 onlypartially.Effective action was taken with the adoption oftwo legal instruments to strengthen theresilience of the banking system againstfinancial crises.
2.Further harmonise thesupervisory and theregulatory framework for the cooperativecredit societies in line with the standardsapplied for the commercial banks.Strengthenregulatory provisions for the efficientrecapitalisation of the financial institutions inorder to limit exposure of the financial sector toexternal shocks.
35
3.Improve thelong-term sustainabilityofpublic finances by implementing reformmeasures to control pension and healthcareexpenditure in order to curb the projectedincrease in age-related expenditure. Forpensions, extend years of contribution, linkretirement age with life expectancy or adoptother measures with an equivalent budgetaryeffect, while taking care to address the high at-risk-of-poverty rate for the elderly. Forhealthcare, take further steps to accelerateimplementation of thenational healthinsurance system.4.Take steps to reform, in consultation withsocial partners and in accordance with nationalpractices,the system of wage bargaining andwage indexationto ensure that wage growthbetter reflects developments in labourproductivity and competitiveness.5. Take further steps, within the reformsplanned for thevocational education andtraining system,to match education outcomesto labour market needs better, including bysetting up post-secondary vocational educationand training institutes. Take measures toincrease the effectiveness of the vocationaltraining system by increasing the incentives forand improving access to vocational educationand training, especially for low-skilled workers,women and older workers.
3. Cyprus has implemented CSR 3 onlypartially:On pension system sustainability and povertyrisk for the elderly, a series of measures havebeen taken in the framework of fiscalconsolidation to control pension expenditure.However, there is a lack of ambition and long-term vision. Measures addressing the risk ofpoverty for the elderly need to be monitored. Onthe health insurance system, Cyprus has notimplemented the recommendation: no progresswas observed in the direction of implementationof the national health insurance system.4. Cyprus has implemented CSR 4 onlypartially.On the wage indexation system, atwo-year freeze of the cost of living allowancewas decided, also bringing about a downwardshift in the public wage bill. A social dialogue iscurrently under way regarding reform of thewage indexation system.5. Cyprus has implemented CSR 5 onlypartially.A draft policy proposal for setting up Post-Secondary Institutes for Vocational Educationand Training has been prepared, pendingapproval by the Ministerial Council.Following its approval, four Institutes will berunning as of September 2012. The gradualintroduction of new curricula from primary tothe first year of upper secondary education isproceeding, having started in September 2011.
3.Further improve thelong-term sustainabilityand adequacy of the pensions system andaddress the high at-risk-of-poverty rate for theelderly. Ensure an increase in the effectiveretirement age, including through aligning thestatutory retirement age with the increase in lifeexpectancy.4.Complete and implement thenationalhealthcare systemwithout delay, on the basisof a roadmap, which should ensure its financialsustainability while providing universalcoverage.7.Improve competitiveness, including throughthereform of the system of wage indexation,in consultation with social partners and in linewith national practices, to better reflectproductivity developments. Take steps todiversify the structure of the economy. Redressthe fiscal balance by restraining expenditure.5. Improve theskills of the workforcetoreinforce their occupational mobility towardsactivities of high growth and high value added.Take further measures to address youthunemployment, with emphasis on workplacements in companies and promotion of self-employment. Take appropriate policy measureson the demand side to stimulate businessinnovation.
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There is still a need to strengthen theappropriate re-skilling and up-skilling trainingschemes targeted at the indicated groups (low-skilled, unemployed, and older workers).6.Abolishremaining obstacles to theestablishment and free provision of servicesin sector-specific legislation by December 2011in order to create more opportunities for growthand jobs in the services sector.6. Cyprus has implemented CSR 6 onlypartially.Cyprus transposed the ServicesDirective by way of horizontal law. However, insome sectors such as retailing, tourism, andconstruction services, sector-specific legislationand a firm timetable for adoption are stillawaited.7. Cyprus has implemented CSR 7 onlypartially.To date, Cyprus has not submitted itsProgress Report due in December 2011 (asrequired by the Renewable Energy Directive) toallow the Commission to assess and monitorprogress in meeting the national target (13 %)of diversifying its energy mix and expandingthe use of renewable sources. Cyprus adoptedits River Management Plan on 9 June 2011, andit is currently being assessed by theCommission. The Plan also includes waterpricing policies as indicated by the Directive,and seems to be in line with the CSR.6.Removeunjustified obstacles in servicesmarkets,in particular by improving theimplementation of the Services Directive inservice sectors with the most growth potential(including tourism) and by opening up theprovision of professional services.
7.Introduce measures toincrease the diversityof the energy mix and the expansion ofrenewable energy sources.Establish, by 2012,a water management plan and a price- settingscheme reflecting cost efficiency and equityconcerns in order to ensure more sustainablemanagement of water resources.
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LV
Country Specific Recommendations 2011
Assessment of CSR 2011 and comparisonCSRs 2011/2012Latvia was granted in 2009 financial assistance,which amounted to €7.5bn. Latvia successfullyimplemented stringent austerity measures and inJanuary 2012 when the financial assistanceprogramme ended, it returned to the markets.According to the Commission's 2012 StaffWorking Paper, Latvia has almost fullyimplemented the 2011 commitments in the fiscaland fiscal governance field, in particular asregards strong and front-loaded fiscal adjustmentwhich should allow the country to exit theExcessive Deficit Procedure in spring 2013. Onthe down side, there have been some delays asregards the Fiscal Discipline Law.Concerning tax measures, Latvia's commitmentshave been implemented partly. The governmenthas proposed to start reducing the tax wedge onlabour (personal income tax rate and non-taxablethresholds) from January 2013 but it remains tobe seen how ambitious the reforms will be.There have been some steps towards improvingthe business environment but much remains to bedone as regards tax compliance procedures,ensuring fair procurement, skilled labour force,
Country Specific Recommendations 2012
Implement the measures laid down in Decision2009/290/EC, as amended by Decision2009/592/EC, and further specified in theMemorandum of Understanding of 20 January2009 and its subsequent supplements, inparticular the last supplement of 7 June 2011.
1.Ensure planned progress towardsthetimelycorrection of the excessive deficit.Tothis end, implement the budget for the year 2012as envisaged and achieve the fiscal effortspecified in the Council recommendation underthe excessive deficit procedure. Thereafter,implementabudgetary strategy,supported bysufficiently specified structural measures, forthe year 2013 and beyond, to make sufficientprogress towards the MTO, and to respect theexpenditure benchmark.Use better thanexpected cyclical revenue to reducegovernment debt.
38
and more efficient use of EU funds.In terms of strengthening the supervision of thefinancial system, commitments have not beenimplemented fully, though follow-up actionshould further improve the stability of thefinancial system. In particular, closer relationswith neighbouring financial sector regulators areimportant to avert future cross-border crises.2. Implement measures toshift taxation awayfrom labourto consumption, property, and useof natural and other resources while improvingthe structural balance;ensure adoption of theFiscal Discipline Lawand develop a mediumterm budgetary framework law to support thelong-term sustainability of public finances;restore contributions to the mandatoryfunded private pension scheme at 6 % ofgross wagesfrom 2013.3. Take measures toreduce long-term andyouth unemploymentby fighting early schoolleaving, promoting more efficient vocationaleducation and training and its apprenticeshipcomponent, enhancing the quality, coverage andeffectiveness of active labour market policy andits training component and through an effectivewage subsidy scheme.4. Tackle high rates of poverty and socialexclusion byreforming the social assistance
39
systemto make it more efficient, while betterprotecting the poor. Ensure better targeting andincrease incentives to work.5. Furtherencourage energy efficiencybyimplementing measures and providingincentives for reducing energy costs and shiftingconsumption towards energy-efficient products,including vehicles, buildings and heatingsystems. Promote competition in major energynetworks and improve connectivity with EUenergy networks.6. Take measures toimprove management andefficiency of the judiciary,in particular toreduce the backlog and length of procedures.Take steps to improve the insolvency regimeand the mediation laws.7.Continue reforms in higher education,interalia, by implementing a new financing modelthat rewards quality, strengthens links withmarket needs and research institutions, andavoids fragmentation of budget resources.Design and implement an effective research andinnovation policy encouraging companies toinnovate, including via tax incentives,upgrading infrastructure and rationalisingresearch institutions.
40
LT
Country Specific Recommendations 2011
Assessment of implementation of CSR2011Lithuania has overall partially implementedthe 2011 CSRs.The 2012 budget targets a general governmentdeficit of 3% of GDP, which is consistent withthe aim to correct the excessive deficit by 2012if fully implemented.The medium-term objective of a structuralsurplus of 0.5% of GDP is not expected to beachieved until 2014. Measures have yet to bespecified and structural reforms accelerated.
Country Specific Recommendations 2012
1. Adopt additional fiscal measures of apermanent nature by the time of the 2012budget tocorrect the excessive deficitin linewith the Council recommendations under theEDP. Reinforce tax compliance and take fulladvantage of the economic recovery to furtheraccelerate deficit reduction and ensure progresstowards the medium-term objective by at least0,5 % of GDP annually. Strengthen thefiscalframework,in particular by introducingenforceable and binding expenditure ceilings inthe medium-term budgetary framework.
2. Adopt the proposed implementing legislationonPension System Reform.In order toenhanceparticipation in the labour market,remove fiscal disincentives to work, especiallyfor people at pensionable age.
No significant changes to the labour legislationwere made in 2011.
1. Ensure planned progress towards the timelycorrection of the excessive deficit.To this end,fully implement the budget for the year 2012and achieve the structural adjustment effortspecified in the Council recommendation underthe excessive deficit procedure. Thereafter,specify the measures necessary to ensureimplementation of thebudgetary strategyforthe year 2013 and beyond as envisaged,ensuring an adequate structural adjustmenteffort to make sufficient progress towards theMTO, including meeting the expenditurebenchmark, while minimising cuts in growth-enhancing expenditure. In that respect, reviewand consider increasing thosetaxesthat areleast detrimental to growth, such as housing andenvironmental taxation, including introducingcar taxation, while reinforcing tax compliance.Strengthen the fiscal framework, in particular byintroducing enforceable and bindingexpenditure ceilings in the medium-termbudgetary framework.2. Adopt legislation on a comprehensivepension system reform.Align the statutoryretirement age with life expectancy, establishclear rules for the indexation of pensions, andimprove complementary savings schemes.
41
Underpin pension reform with active ageingmeasures.3. Enhancelabour market flexibilitybyamending the labour legislation to make it moreflexible and to allow better use of fixed-termcontracts. Amend the relevant legislation toensure that the social assistance system does notcontain disincentives to work.3. Tackle highunemployment,in particularamong youth, low-skilled and long-termunemployed, by focusing resources on activelabour market policies while improving theirefficiency. Enhance the effectiveness ofapprenticeship schemes. Amend the labourlegislation with regard to flexible contractagreements, dismissal provisions and flexibleworking time arrangements.4. Increase work incentives and strengthen thelinks between thesocial assistance reform andactivation measures,in particular for the mostvulnerable, to reduce poverty and socialexclusion.4. Implement all aspects of theState-ownedenterprise reform packageby the end of 2011,ensuring a separation of ownership andregulatory functions, clear enterprise objectives,enhanced transparency and a separation ofcommercial and non-commercial activities.5. Implement all aspects of thereform packageof state-owned enterprisesand in particularensure a separation of ownership and regulatoryfunctions and a separation of commercial andnon-commercial activities. Install appropriatemonitoring tools to assess the effectiveness ofthe reforms and ensure compliance of all state-owned enterprises with the requirements of thereform.Minor measures were implemented regardingshifting taxation towards energy use.6. Step up measures to improve theenergyefficiencyof buildings, including throughremoving disincentives and a rapidimplementation of the holding fund. Promote
5. Improve theenergy efficiencyof buildings,including through a rapid implementation of theHolding Fund, and take steps to shift taxationtowards energy use.
42
6. Take steps to improve start-up conditions andthe delivery of construction permits, and tostrengthencompetition in the energy andretail sectors.
Lithuania has fully implemented itscommitments to improve business conditions,while it partially implemented measures tostrengthen competition especially in the energyand retail sector.
competition in energy networksby improvinginterconnectivity with the Member States forboth electricity and gas.
43
LU
Country Specific Recommendations 2011
Assessment of implementation of CSR2011By using unexpected revenues to reduce thedeficit,Luxembourg implemented part of2011 recommendations.With a structural balance of around 0.4% ofGDP in 2011, Luxembourg broadly reached itsmedium-term objective. However, a significantdeviation from the adjustment path towards theMTO is to be expected from 2012 onwards.
Country Specific Recommendations 2012
1. Take advantage of the improving cyclicalconditions, strengthen thefiscal effortand useunexpected additional revenue in order tofurther reduce the headlinedeficitand reach themedium-term objective in 2012.
1. Preserve a sound fiscal position bycorrecting any departure from a MTOthatensures the long-term sustainability of publicfinances, in particular taking into accountimplicit liabilities related to ageing. To this end,reinforce and rigorously implement thebudgetary strategy,supported by sufficientlyspecified measures, for the year 2013 andbeyond, including meeting the expenditurebenchmark.2. Strengthen the proposedpension reformbytaking additional measures to increase theparticipation rate of older workers, in particularby preventing early retirement, and by takingfurther steps to increase the effectiveretirement age,including through linking thestatutory retirement age to life expectancy, inorder to ensure the long-term sustainability ofthe pension system.3. Take further steps to reform, in consultationwith the social partners and in accordance withnational practice, thewage bargaining andwage indexation system,with a view topreserve the competitiveness of theLuxembourg economy in the longer term, as a
2. Propose and implement a broadpensionreformto ensure the long-term sustainability ofthe pension system, starting with measures thatwill increase the participation rate of olderworkers, in particular by discouraging earlyretirement. With a view to rising the effectiveretirement age,measures such as a linkbetween the statutory retirement age and lifeexpectancy, could be considered.3. Take steps to reform, in consultation withsocial partners and in accordance with nationalpractices, thesystem of wage bargaining andwage indexation,to ensure that wage growthbetter reflects developments in labourproductivity and competitiveness.
Regarding pension reform, Luxembourg istaking steps in the right direction but the reformdoes not seem to constitute a sufficientguarantee for the long-term sustainability of thesystem.
Concerning the system of wage bargaining andwage indexation, Luxembourg partiallyimplemented the recommendations. Apermanent revision of the wage setting system,in consultation with social partners and inaccordance with national practises, is necessary
44
to preserve competitiveness in the longer term.Interval beyond 2014 and by reducing theimpact of energy and other volatile items on thereference index.4. Take steps to reduceyouth unemploymentby reinforcing training and education measuresaimed at better matching young people'squalifications to labour demand.A series of measures in the area of educationand training have been adopted. Luxembourghas clearly taken steps to tackle the relativelyhigh youth unemployment but there is still needfor a coherent strategy, stronger cooperationwith municipalities, more efficient use ofemployment services and more investment intraining and education.
first step by maintaining the current one-yearindexation.
4. Continue efforts to reduceyouthunemploymentby reinforcing stakeholders'involvement, and by strengthening training andeducation measures, in particular for those withlow education levels, with the aim of bettermatching young people's skills andqualifications to labour demand.5. Ensure that the targets forreducinggreenhouse gas emissionsfrom non-ETS(Emissions Trading System) activities will bemet, in particular by increasing taxation onenergy products.
45
HU
Country Specific Recommendations 2011
Assessment of implementation of CSR2011Overall, Hungary has partially implementedthe 2011 CSRs.The government has achieved considerableprogress regarding the implementation of theconsolidation and structural reform measuresincluded in the 2011 convergence programmeand further saving measures adopted as part othe 2012 budget.Whereas no effort was made to avoid thestructural deterioration in 2011the fiscaladjustment is assessed to be sufficient to attainthe official 2012 deficit target thanks to astructural improvement of over 2% of GDP. For2013, the 2012 Spring Forecast projects adeficit of 2.9% of GDP, which could even besomewhat better based on most recentinformation.New regulations have been adopted related tothe operationalisation aspects of the newconstitutional fiscal governance framework butsome weaknesses pertaining to its designfeatures can be identified.The analytical remit and the necessary resources
Country Specific Recommendations 2012
1. Strengthen the fiscal effort in order to complywith the Council recommendation tocorrectthe excessive deficitin a sustainable manner,inter alia by avoiding the structural deteriorationin 2011 implicit in the planned 2 % of GDPbudget surplus and ensure that the budgetdeficit is kept safely below the 3 % of GDPthreshold in 2012 and beyond, contributing tothereduction of the high public debt ratio.Fully implement the announced fiscal measuresand adopt additional measures of a permanentnature if needed at the latest in the 2012 budgetto secure the budgetary target for that year. The2012 budget should also identify the additionalmeasures in order to attain the 2013 target in theconvergence programme. Ensure progresstowards the medium-term objective (MTO) byat least 0,5 % of GDP annually until the MTO isreached and use possible windfall revenues toaccelerate the fiscal consolidation.2. Adopt and implement regulations specifyingthe operational aspects of the new constitutionalfiscal governance framework,including, interalia, thenumerical rulesthat will beimplemented at the central and local level untilthe debt ratio has declined to below 50 % of
1.Correct the excessive deficitby 2012 in adurable manner, by implementing the 2012budget and the subsequently approvedconsolidation measures, while reducing thereliance on one-off measures. Thereafter, specifyall structural measures necessary to ensure adurable correction of the excessive deficit and tomake sufficient progress towards the MTO,including meeting the expenditure benchmark,and ensure sufficient progress towardscompliance with thedebt reductionbenchmark.Also to help mitigate the accumulatedmacroeconomic imbalances, put the public debtratio on a firm downward path.
2. Revise the cardinal law on economic stabilityby putting the newnumerical rulesinto abinding medium-term budgetary framework.Continue to broaden the analytical remit of theFiscal Council,with a view to increasing thetransparency of public finances.
46
GDP. Regarding the fiscal framework,implement and strengthen multiannual fiscalplanning, improve the transparency of publicfinances and broaden the remit of theFiscalCouncil.3. Enhanceparticipation in the labour marketby alleviating the impact of the tax reform onlow earners in a budget-neutral manner.Strengthen measures to encourage women'sparticipation in the labour market by expandingchildcare and pre- school facilities.
of the Fiscal Council are not commensurate toits newly granted strong veto power.
The policy responses have only been partiallyrelevant to the extent that the instrumentschosen to address the impact of the tax reformon low earners have been suboptimal, while themeasures to strengthen women's participation inthe labour market are too limited, thusconstitute a very small step in the rightdirection. The policy instruments cannot beconsidered ambitious.There has been no progress towards meeting therecommendation regarding the PublicEmployment Service. Some of the measuresaiming to provide tailor-made services fordisadvantaged groups are relevant (the ESFprogrammes), others are ambitious insofar asthe activation of some disadvantaged groups isconcerned, but unlikely to be effective inimproving the placement of participants in theopen job market (public works).In general, apart from the tax area, theenvisaged measures are relevant and go in theright direction. The very comprehensive publicconsultation procedure prior adopting theprogram also reflects good practice. Progresstowards meeting this part of the fifth 2011 CSR,
3. Make thetaxation of labourmoreemployment-friendly by alleviating the impact ofthe 2011 and 2012 tax changes on low earners ina sustainable, budget-neutral manner, forexample by shifting part of the tax burden toenergy taxes and recurrent taxes on property.Strengthen measures to encourage women'sparticipation in the labour market,particularlyby expanding childcare and pre-school facilities.4. Strengthen the capacity of thePublicEmployment Serviceto increase the qualityand effectiveness of training, job searchassistance and individualised services, withparticular regard for disadvantaged groups.Strengthen the activation element in the publicwork scheme through effective training and jobsearch assistance. Implement the NationalSocial (Roma) Inclusion Strategy, andmainstream it with other policies.5. Implement measures envisaged to reduce theadministrative burden.Ensure that publicprocurement and the legislative process supportmarket competition and ensure a stableregulatory andbusiness-friendly environmentfor financial and non-financial enterprises,
4. Take steps to strengthen the capacity of thePublic Employment Serviceand otherproviders to increase the quality andeffectiveness of training, job search assistanceand individualised services. Reinforce activelabour market measures delivering positiveevidence-based results. In consultation withstakeholders, introduce tailor-madeprogrammes, for the low-skilled and otherparticularly disadvantaged groups.5. Improve thebusiness environmentbyimplementing all the measures envisaged forregulatory reform and lowering administrativeburdens in the national reform programme;assess the effectiveness of current SME supportpolicies and adjust public programmes in order
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to improve access to non-bank funding.
therefore, has been encouraging although notuniformly.Efforts to improve access to non-bank fundinghave been relevant, but they lack in ambitioncompared to the current scope of the problem,in the context of contracting credit to thecorporate sector.
including foreign direct investors. Reduce taxcompliance costs and establish a stable, lawfuland non-distortive framework for corporatetaxation. Remove unjustifiable restrictions onthe establishment of large-scale retail premises.Provide specific well-targeted incentiveschemes to support innovative SMEs in the newinnovation strategy.6. Prepare and implement anational strategyon early school-leavingby ensuring adequatefinancing. Ensure that the implementation of thehigher education reformimproves access toeducation for disadvantaged groups.7. Reform thepublic transport systemto makeit more cost efficient. Increase the cross-bordercapacities of the electricity network, ensure theindependence of theenergy regulatorandgradually abolish regulated energy prices.
48
MT
Country Specific Recommendations 2011
Assessment of implementation of CSR2011The 2011 CSRs has been partiallyimplemented by Malta.The deficit is reported to have been below 3%of GDP in 2011 and the 2012 target is fullyunderpinned by measures but the broadmeasures underpinning the strategy from 2013onwards are not all outlined in the programme.No improvements were made to the budgetaryframework but the political debate has started.
Country Specific Recommendations 2012
1. Ensurecorrection of the excessive deficitin2011, in line with the EDP recommendations,standing ready to take additional measures so asto prevent possible slippages, and adoptconcrete measures to back up the 2012 deficittarget.Bring the high public debt ratio on adownward pathand ensure adequate progresstowards the MTO. With a view to strengtheningthe credibility of the medium-termconsolidation strategy, define the required broadmeasures from 2013 onwards, embed the fiscaltargets in a binding, rule-based multi-annualfiscal framework and improve the monitoring ofbudgetary execution.
1. Reinforce thebudgetary strategyin 2012with additional permanent measures so as toensure adequate progress towards the MTO andkeep thedeficitbelow 3 % of GDP withoutrecourse to one-offs. Continue fiscalconsolidation at an appropriate pace thereafter,so as to make sufficient progress towards theMTO, including meeting the expenditurebenchmark, and towards compliance with thedebt reductionbenchmark, by specifying theconcrete measures to back up the deficit targetsfrom 2013, while standing ready to takeadditional measures in case of slippages.Implement, by end-2012 at the latest, a binding,rule-based multi-annual fiscal framework.Increasetaxcompliance and fight tax evasion,and reduce incentives towards indebtedness incorporate taxation.2. Take action, without further delay, to ensurethe long-term sustainability of thepensionsystem,comprising an increase in the effectiveretirement age, including through a significantacceleration of the progressive increase in thestatutoryretirementage compared to currentlegislation and through a clear link between thestatutory retirement age and life expectancy, and
2. Take action to ensure the sustainability of thepension systemsuch as by accelerating theprogressive increase in theretirement ageandby linking it to life expectancy. Accompany thehigher statutory retirement age with acomprehensive active ageing strategy,discourage the use of early retirement schemesand encourage private pension savings.
The CSR has not been implemented. Thegovernment has still not announced its positionon the proposals for pension reform submittedby an independent Pensions Working Group inDecember 2010. In addition, there is still nocomprehensive active ageing strategy in place.
49
measures to encourage private pension savings.Take measures to increase the participation ofolder workers in the labour force and discouragethe use of early retirement schemes.3. Focuseducationoutcomes more onlabourmarketneeds, notably by making additionalefforts to improve access to higher educationand by strengthening the effectiveness of thevocational training system. Take furthermeasures to reduceearly school-leavingbyidentifying, analysing and measuring its causesby 2012 and by setting up a regular monitoringand reporting mechanism on the success rate ofthe measures.4. Review and take the necessary steps toreform, in consultation with social partners andin accordance with national practices, thesystem of wage bargaining and wageindexationto ensure that wage growth betterreflects developments in labour productivityand competitiveness.5. Strengthen efforts to reduceMalta'sdependence on imported oil,by bringingforward investments in renewable energies andmaking full use of available EU funds toupgrade infrastructure and promote energyefficiency.The CSR has been partially implemented. Thepolicy response has been adequate only in theareas of tertiary educational attainment andvocational training. The challenge of earlyschool leaving has still to be adequatelyaddressed.3. Take steps to reduce the high rate ofearlyschool leaving.Pursue policy efforts in theeducation systemto match the skills requiredby thelabour market.Enhance the provisionand affordability of more childcare and out-of-school centres, with the aim of reducing thegender employment gap.
The CSR has not been implemented yet. Thegovernment has undertaken a study of theimpact of the wage indexation mechanism, butthe results are not available yet.
4. Take the necessary further steps to reform, inconsultation with social partners and inaccordance with national practices, thesystemof wage bargaining and wage indexation,soas to better reflect developments in labourproductivity and reduce the impact of prices ofimports on the index.5. In order to reduceMalta's dependence onimported oil,step up efforts to promote energyefficiency and increase the share of energyproduced from renewable sources by carefullymonitoring the existing incentivisingmechanisms and by prioritising the furtherdevelopment of infrastructure, including bycompleting the electricity link with Sicily.
The CSR has been partially implemented. Thegovernment has taken relevant and ambitiousmeasures to promote the use of energy fromrenewable sources and improve energyefficiency but their impact cannot be assessed atthis stage because they are still in an early phaseof implementation.
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6. To strengthen thebanking sector,takemeasures to mitigate potential risks arising fromthe large exposure to the real estate market.Take measures to further strengthen theprovisions for loan impairment losses.
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NL
Country Specific Recommendations 2011
Assessment of implementation of CSR2011Overall, the Netherlands has partiallyimplemented the 2011 CSRs.The government has broadly adhered to thefirst element,as expenditure targets have beenbroadly met in absolute levels. However,expenditure plans for 2012 and 2013 containseveral cuts in areas directly relevant forgrowth, notably fundamental research andeducation. Progress towards the medium-termobjective also does not appear to be secured.
Country Specific Recommendations 2012
1. Implement thebudgetary strategyfor theyear 2012, in line with the Councilrecommendations oncorrecting the excessivedeficit, setting the high public debt ratio on adownward path.Thereafter, progress towardsthe medium- term objective in line with theStability and Growth Pact requirements,respecting the overall spending ceilings andconsolidation requirements, thereby ensuringthat consolidation is sustainable and growth-friendly, by protecting expenditure in areasdirectly relevant for growth such as researchand innovation, education and training.
1. Ensure timely and durablecorrection of theexcessive deficit.To this end, fully implementthebudgetary strategyfor 2012 as envisaged.Specify the measures necessary to ensureimplementation of the 2013 budget with a viewto ensuring the structural adjustment effortspecified in the Council recommendations underthe excessive deficit procedure. Thereafter,ensure an adequate structural adjustment effortto make sufficient progress towards the MTO,including meeting the expenditure benchmark,and ensure sufficient progress towardscompliance with thedebt reductionbenchmarkwhilst protecting expenditure in areas directlyrelevant for growth such as research andinnovation, education and training. To this end,after the formation of a new Government,submit an update of the 2012 StabilityProgrammewith substantiated targets andmeasures for the period beyond 2013.2. Take measures to increase the statutoryretirement age,including linking it to lifeexpectancy, and underpin these with labourmarket measures to support raising the effectiveretirement age, whilst improving the long-termsustainability of public finances. Adjust the
2. Take measures to increase the statutoryretirement ageby linking it to life expectancy,and underpin these measures with others toraise the effective retirement age and toimprove the long-term sustainability of publicfinances. Prepare a blueprint for reforming
The Netherlands has implemented this CSRonly partially.The government reached an agreement to raisethe statutory retirement age in steps to 66 in2019, to 67 in 2024 and to link it to lifeexpectancy afterwards, but this has not yet been
52
long-term carein view of an ageingpopulation.
matched by an agreement among social partnerson the reform of the second pillar. With regardto long-term care, the Dutch government hasprovided a blueprint for an ambitious reform,although the measures are not fully specifiedand implementation has so far been only partial.
secondpension pillarto mirror the increase inthe statutory retirement age, while ensuring anappropriate intra- and inter-generationaldivision of costs and risks. Implement theplanned reform inlong-term careandcomplement it with further measures to containthe increase in costs, in view of an ageingpopulation.3. Enhanceparticipation in the labourmarket,particularly of older people, women,and people with disabilities and migrants,including by further reducing tax disincentivesfor second-income earners, fostering labourmarket transitions, and addressing rigidities.
3. Enhanceparticipation in the labour marketby reducing fiscal disincentives for second-income earners to work and draw up measuresto support the most vulnerable groups and helpthem to re-integrate within the labour market.
The Netherlands has implemented this CSRonly partially:With respect to reducing fiscal disincentives forsecond-income earners, the policy response iseffective but could have been speeded up. Themost significant measure concerning vulnerablegroups is the intended reform of the socialassistance schemes (introduction of the WorkCapacity Act). The act is expected to come intoforce on 1 January 2013.Although the measures taken so far under thispolicy are relevant, it is too early to judgewhether they are effective in addressing thechallenge.
4. Promoteinnovation,privateR&Dinvestment and closer science-business links byproviding suitable incentives in the context ofthe new enterprise policy (‘Naar de top’).
4. Promoteinnovation,privateR&Dinvestment and closer science-business links, aswell as foster industrial renewal by providingsuitable incentives in the context of theenterprise policy, while safeguardingaccessibility beyond the strict definition of topsectors and preserving fundamental research.5. Take steps to gradually reform thehousingmarket,including by: (i) modifying thefavourable tax treatment of home ownership,including by phasing out mortgage interestdeductibility and/or through the system of
53
imputed rents, (ii) providing for a more market-oriented pricing mechanism in the rental market,and (iii) for social housing, aligning rents withhousehold income.
54
AT
Country Specific Recommendations 2011
Assessment of implementation of CSRs2011Austria has partially implemented 2011 CSRs.Although Austria is on a good path to reduce thefiscal deficit to below 3% by 2013, the annualaverage fiscal effort of 0,75 % of GDP over theperiod 2011-2013 in line with the Councilrecommendations under the EDP has not beendelivered.
Country Specific Recommendations 2012
1. Accelerate the correction of the excessivedeficit, which is planned mainly on theexpenditure side, thus bringing the high publicdebt ratio on a downward path, taking advantageof the ongoing economic recovery, in order toensure an average annual fiscal effort of 0,75 %of GDP over the period 2011-2013 in line withthe Council recommendations under the EDP. Tothis end, adopt and implement the necessarymeasures, including at the subnational level.Specify measures as needed to ensure adequateprogress towards the medium-term objective inline with the Stability and Growth Pact (SGP)after correction of the excessive deficit.2. Take steps to further strengthen the nationalbudgetary framework by aligning legislative,administrative, revenue- raising and spendingresponsibilities across the different levels ofgovernment, in particular in the area of healthcare.
1. Implement the 2012 budget as envisaged andreinforce and rigorously implement the budgetarystrategy for the year 2013 and beyond;sufficiently specify measures (in particular at thesub-national level), to ensure a timely correctionof the excessive deficit and the achievement ofthe average annual structural adjustment effortspecified in the Council Recommendations underthe EDP. Thereafter, ensure an adequatestructural adjustment effort to make sufficientprogress towards the MTO, including meetingthe expenditure benchmark.
Although the consolidation package to strengthenbudgetary framework has been adopted,operational details need to be agreed by federaland regional governments in order to implementit; especially the reorganisation of health caresector financing expected to save 0.2% GDP by2016.While reforms to invalidity pension schemeshave been implemented, the rest of the reforms
2. Take further steps to strengthen the nationalbudgetary framework by aligning responsibilitiesacross the federal, regional and local levels ofgovernment, in particular by implementingconcrete reforms aimed at improving theorganisation, financing and efficiency ofhealthcare and education.3. Bring forward the harmonisation of thestatutory retirement age between men and
3. In consultation with the social partners andaccording to national practices, take steps to
55
further limit access to the current early retirement called for in 2011 have not been tackled.scheme for people with long insurance periodsand take steps to reduce the transition period forharmonisation of the statutory retirement agebetween men and women to ensure thesustainability and adequacy of the pensionsystem. Apply strictly the conditions for accessto the invalidity pension scheme.4. Take measures to enhance participation in thelabour market, including the following: reduce,in a budgetary neutral way, the effective tax andsocial security burden on labour, especially forlow- and medium-income earners; implement theNational Action Plan on the equal treatment ofwomen and men in the labour market, includingimprovements in the availability of care servicesand of all-day school places to increase theoptions for women to work full-time and in thehigh gender pay gap; take steps to improveeducational outcomes and prevent school drop-out.There were limited steps taken to reduce highgender pay gap and provide for more careservices for dependants, however not sufficient.The shift towards real estate and environmentaltax has not been implemented, moreover,consolidation package for national budget isincreasing tax burden on labour for some groups.As to education, 2012 CSR have a specificrecommendation as to disadvantage youth andhigher education drop outs, but the early schoolleaving Europe 2020 target has been achieved,however a big gap between migrants and nativesstill persists.With 75.2% employment rate for people 20-64years of age in 2011, Austria has made goodprogress in towards achieving its 2020employment target rate of 77-78%.5. Take further steps to foster competition, inparticular in the services sectors, by relaxingServices Directive has been transposed.However, lack of progress on market entry and
women; enhance older workers' employabilityand monitor closely the implementation of therecent reforms restricting access to early exitchannels in order to ensure that the effectiveretirement age is rising including through linkingthe statutory retirement age to life expectancy.
4. Take steps to reduce the effective tax andsocial security burden on labour especially forlow income earners with a view to increasingemployment rates for older persons and womengiven the need to counteract the impact ofdemographic change on the working population.Shift the tax burden in a budgetary neutral way,towards real estate taxes, and environmentaltaxes. Reduce the high gender pay gap andenhance full-time employment opportunities forwomen, in particular through the provision ofadditional care services for dependants.
5. Continue to implement measures to improveeducational outcomes, especially of
56
barriers to entry, removing unjustifiedrestrictions on some professions, as well asenhancing the powers of the competitionauthority.Accelerate the adoption of the outstanding‘horizontal law’ implementing the ServicesDirective.
other restrictions.
disadvantaged young people. Take measures toreduce drop-outs from higher education.
New recommendation.Capital transfers due to government participationin struggling banks reached 0.6% of GDP in2012, having impact on the expenditure side.
6. Take further steps to foster competition, in theservices sectors, by removing barriers to marketentry in the communications, transport andenergy retail markets. Where unjustifiedrestrictions on access to liberal professions exist,they should be removed. Enhance the powers ofthe federal competition authority and speed upthe implementation of the competition lawreform.7. Further restructure and continue to monitorthose banks that benefited from public support,while avoiding excessive deleveraging. Furtherimprove the cooperation and coordination ofnational policy decisions with financial sectorsupervisors in other countries.
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PL
Country Specific Recommendations 2011
Assessment of implementation of CSR2011Poland has partially implemented the CSR.Poland has managed to reduce its generalgovernment deficit close to the recommended 3% threshold in 2012 (, while furtherconsolidation effort is required to ensureadequate progress towards the MTO. In thisregard, plans provided lack ambition and are notclear enough.
Country Specific Recommendations 2012
1. Implement the measures announced in thedraft 2012 Budget Law and take additionalmeasures of a permanent nature if needed toreduce the general government deficittobelow 3 % of GDP in 2012, in line with theCouncil recommendations under the EDP.While ensuring adequate progress towards themedium-term objective, minimise cuts ingrowth-enhancing expenditure in the future.
1. Ensure planned progress towards thecorrection of the excessive deficit.To this end,fully implement the budget for the year 2012and achieve the structural adjustment effortspecified in the Council recommendations underthe EDP. Thereafter, specify the measuresnecessary to ensure implementation of thebudgetary strategyfor the year 2013 andbeyond as envisaged, ensuring an adequatestructural adjustment effort to make sufficientprogress towards the MTO, including meetingthe expenditure benchmark. Minimise cuts ingrowth-enhancing expenditure in the future andimprove tax compliance.2. Speed up the reform of the fiscal frameworkby enacting legislation with a view tointroducing apermanent expenditure ruleby2013. This rule should be consistent with theESA. Take measures to strengthen themechanisms of coordination among thedifferent levels of governmentin the medium-term and annual budgetary processes.4. Reinforce efforts to increase thelabourmarket participation of womenand raise
2. Enact legislation with a view to introducing apermanent expenditure ruleby 2013. Thisrule should be based on sufficiently broadbudgetary aggregates and should be consistentwith the European system of accounts.Moreover, take measures to strengthen themechanisms of coordination among thedifferent levels of governmentin the medium-term and annual budgetary processes.3. Raise as planned the statutoryretirementagefor uniformed services, continue steps to
Poland has not implemented the CSR.All measures covered by this recommendation,the expenditure rule, the consistency with ESA95 as well as the deficit rule for localgovernments have not yet advanced beyond thenegotiation stage.
Poland has partially implemented the CSR.While efforts have been undertaken to limit
58
increase the effective retirement age, such aslinking it to life expectancy. Establish atimetable to further improve the rules forfarmers' contributions to thesocial securityfund (KRUS)to better reflect individualincomes.
favourable retirement conditions for uniformedservices and an increase in the generalretirement age for men and women is planned,these measures should have been moreambitious, The time span over which theretirement age for women is to be raised isoverly long (until 2040).
enrolment rates of children in both earlychildcare and pre-school education, by ensuringstable funding and investment in publicinfrastructure, the provision of qualified staff,and affordable access. Tackle entrenchedpractices of earlyretirementto increase exitages from the labour market. Phase out thespecial pension scheme for miners with a view tointegrating them into the general scheme. Takemore ambitious, permanent steps to reform theKRUSto better reflect individual incomes.3. To reduceyouth unemployment,increasethe availability of apprenticeships and work-based learning, improve the quality ofvocational training and adopt the proposedlifelong learning strategy.Better matcheducationoutcomes with the needs of thelabour market and improve the quality ofteaching. To combatlabour marketsegmentationand in-work poverty, limitexcessive use of civil law contracts and extendthe probationary period to permanent contracts.4. Reinforce efforts to increase thelabourmarket participation of womenand raiseenrolment rates of children in both earlychildcare and pre-school education, by ensuringstable funding and investment in publicinfrastructure, the provision of qualified staff,and affordable access. Tackle entrenchedpractices of earlyretirementto increase exit
4. Implement the proposedlifelong learningstrategy,enhance apprenticeships anddedicated vocational training and educationprogrammes for older workers and low-skilledworkers. Strengthen links between science andindustry by implementing the ‘We build onKnowledge’ programme (‘Budujemy naWiedzy’). Implement the highereducationreform programme ‘Partnership for Knowledge’(‘Partnerstwo dla Wiedzy’) so as to better aligneducational provision with labour market needs.5. Increasefemale labour marketparticipationby taking measures to ensurestable funding for pre-school child-carearrangements, to increase enrolment rates ofchildren under three years.
Poland has partially implemented the CSR.Poland has introduced several reforms in theareas of education, training and lifelonglearning, which are all relevant to tackle thechallenges identified in the CSR. There needs tobe more effort to reduce the skills mismatch,and more cooperation between companies andhigher education institutions and betweenscience and industry.Poland has partially implemented the CSR.Raising the number of places in child careinstitutions by 4500 seems insufficient toincrease the female labour participation ratesignificantly. Moreover, funds for pre-schoolchild-care institutions are reduced in the 2012budget.
59
ages from the labour market. Phase out thespecial pension scheme for miners with a viewto integrating them into the general scheme.Take more ambitious, permanent steps to reformtheKRUSto better reflect individual incomes.6. Take measures to improve incentives forinvestment in energy generation capacitywith a view to encouraging low-carbon emittingtechnologies, and to further developcross-border electricity grid interconnections;develop a multiannual plan forinvestment inrailway infrastructureand implement the railtransport master plan.Poland has partially implemented the CSR.Some progress has been made in relation to thediversification of energy supply, but progress islimited in transportation, i.e. rail andimplementation of the transport master plan.6. Step up efforts to improve incentives forinvestment in energy generation capacityandenergy efficiency in the whole energy chain,speed up the development of theelectricitygrid, including cross-borderinterconnections,eliminate obstacles inelectricity cross border exchange, andstrengthencompetition in the gas sectorbyphasing out regulated prices and by creating agas trading platform. Strengthen the role andresources of the railway market regulator andensure effective and swift implementation ofrailway investmentprojects. Reducerestrictions on professional services andsimplify contract enforcement and requirementsfor construction permits.
7. Take steps to simplifylegal proceduresinvolved in enforcing contracts; reviseconstruction and zoning legislation, with a viewto streamlining appeal procedures and speedingup administrative procedures.
Poland has partially implemented the CSR.Despite recent efforts, the administrative burdenremains high and administrative efficiencycould be improved. Only minor reforms havebeen introduced, which are not expected to havean impact sufficient to address the challenges.5. Take additional measures to ensure aninnovation-friendly business environment,byensuring better links between research,
60
innovation and industry, and by establishingcommon priority areas and instrumentssupporting the whole innovation cycle; improveaccess to finance for research and innovationactivities through guarantees and bridgefinancing.
61
PT
Country Specific Recommendations 2011
Assessment of implementation of CSRs 2011
Country Specific Recommendations 2012
Implement the measures as laid down inImplementing Decision 2011/344/EU and furtherspecified in the Memorandum of Understandingof 17 May 2011 and its subsequent supplements.
In its fourth review of July 2012, the IMFconcluded that thePortuguese program is ontrack and that the necessary adjustments tocorrect the macroeconomic imbalances areunderway.Fiscal targets remain within reach, although risksto their attainment have risen, particularly on taxrevenues. The shortfall in revenue does not relateto economic activity, which has been strongerthan expected, but mainly to composition effectsand stronger decline in employment, despitedeclining unit labour costs since 2010. Accordingto the CSR Commission Staff Document of 2012structural reforms in labour and product marketswith a view to reducing labour cost still need tobe implemented by increasing flexibility,lowering entry barriers and tackling profiteering.On the positive side, the IMF noted that astronger-than-expected decline in domesticdemand was more than compensated by a highercontribution of exports to growth, which led to afaster correction of the external imbalance. Theexport growth has been accompanied by a
Implement the measures as laid down inImplementing Decision 2011/344/EU and furtherspecified in the Memorandum of Understandingof 17 May 2011 and its subsequent supplements.
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diversification of export markets. Thedeleveraging process of the private sector hascontinued at a faster pace than initially foreseen,and the banking system is in a better positiontoday to support financing to the dynamic sectorsof the economy.Unfortunately, recent deterioration of theEuropean and global economic prospects couldsubstantially change the outlook for the rest ofthe year, in particular when taking into accountPortugal's strong exposure to Spain.
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RO
Country Specific Recommendations 2011
Assessment of implementation of CSR2011Romania has been granted by the EU and theIMF pre-cautionary financial assistance, whichamounts to €5bn. The financial assistanceprogramme lasts for two years from 2011 to2013. Thus far, no request was made by theRomanian authorities for disbursement from the€5bn.According to the sixth review of IMF, EC andWB, which took place in the beginning ofAugust 2012,Romania's policyimplementation remains broadly on track,despite challenging conditions.Real growthis projected at around 1 percent in2012 and 2½ percent in 2013. The subduedeconomic activity is mainly due to heightenedpolitical uncertainty and the slowdown in theeuro area.Inflationis expected to remainwithin the target band.Banksremainvulnerable to adverse developments in the euroarea but maintain reassuring capital buffers,while loan-loss provisions are adequate.The Junefiscal deficittarget was met and theambitious objective for the year as a whole(below 3 percent of GDP in accrual terms) is
Country Specific Recommendations 2012
Implement the measures laid down in Decision2009/459/EC as amended by Decision2010/183/EU, together with the measures laiddown in Decision 2011/288/EU and furtherspecified in the Memorandum of Understandingof 23 June 2009 and its subsequentsupplements, and in the Memorandum ofUnderstanding of 29 June 2011 and itssubsequent supplements.
Implement the measures laid down in Decision2009/459/EC, as amended by Decision2010/183/EU, together with the measures laiddown in Decision 2011/288/EU and furtherspecified in the Memorandum of Understandingof 23 June 2009 and its subsequentsupplements, and in the Memorandum ofUnderstanding of 29 June 2011 and itssubsequent supplements.
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achievable but will require continued spendingrestraint. For 2013, the authorities will facedifficult trade-offs in achieving a furtherconsolidation of at least 0.5 percent of GDP.Political determination is needed to ensure thatoverduestructural reformsfor instance in thearea of energy, health care and state-ownedenterprises will be put in place.
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SI
Country Specific Recommendations 2011
Assessment of implementation of CSRs2011
Country Specific Recommendations 2012
1. Achieve the 2011 deficit target, underpin the2012 deficit target with concrete measures andimplement the necessary consolidationrigorously, standing ready to adopt additionalmeasures to prevent possible slippages. Underpinthis required adjustment process over theprogramme period with additional measures toensure the average annual fiscal effort in linewith the Council recommendations under theEDP and adequate progress towards anappropriate medium-term objective. To thispurpose, use structural measures to containexpenditure and address identified inefficienciesand implement a more binding medium-termbudgetary framework. Accelerate the reductionof the deficit if economic or budgetaryconditions turn out better than currentlyexpected.2. Take the required steps to ensure the long-term sustainability of the pension system, whilepreserving the adequacy of pensions. Increasethe employment rate of older workers throughlater retirement, and by further developing active
Most of the CSRs 2011 have not beenimplemented.2011 deficit target was not achieved, and there isalso no appropriate MTO for budgetary position.
1. Implement the 2012 budget, and reinforce thebudgetary strategy for 2013 with sufficientlyspecified structural measures, standing ready totake additional measures so as to ensure acorrection of the excessive deficit in a sustainablemanner by 2013 and the achievement of thestructural adjustment effort specified in theCouncil recommendations under the excessivedeficit procedure. Thereafter, ensure an adequatestructural adjustment effort to make sufficientprogress towards an appropriate MTO for thebudgetary position, including meeting theexpenditure benchmark. Strengthen the medium-term budgetary framework, including theexpenditure rule, by making it more binding andtransparent.
Slovenia has not implemented policy measuresfor older workers.There remain too many early retirements, withneed for a new effective retirement age and new
2. Take urgent steps to ensure the long-termsustainability of the pension system, whilepreserving the adequacy of pensions, by: (i)equalising the statutory retirement age formen and women; (ii) ensuring an increase in
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labour market policies and lifelong learningmeasures.
indexation system for pensions.
the effective retirement age, includingthrough linking the statutory retirement ageto life expectancy; (iii) reducing earlyretirement possibilities; and (iv) reviewingthe indexation system for pensions. Increasethe employment rate of older workers alsoby further developing active labour marketpolicies and lifelong learning measures.3. Take the required steps to build sufficientcapital buffers in the banking sector andstrongly promote the cleaning of balancesheets so that appropriate lending toproductive activities can resume. Obtainfully-fledged third party verification ofsystemically important banks' stress loan-loss estimates.4. Adjust employment protection legislationas regards permanent contracts in order toreduce labour market segmentation, inconsultation with social partners and inaccordance with national practices. Furthertackle the parallel labour market caused bystudent work.5. Improve the matching of skills withlabour market demand, particularly of low-skilled workers and tertiary graduates, andcontinue reforms of vocational education
3. Take further measures in the banking sector,where appropriate, to strengthen the balancesheets and the loan portfolio, with a view ofenhancing the flow of credit to the real economy.
The banks remain undercapitalised.
4. Take steps, in consultation with the socialpartners and in accordance with nationalpractices, to reduce asymmetries in rights andobligations guaranteed under permanent andtemporary contracts. Renew efforts to tackle theparallel labour market resulting from ‘studentwork’.5. Set up a system to forecast skills andcompetencies needed to achieve a responsivelabour market. Evaluate the effectiveness of thepublic employment service, notably on careerguidance and counselling services, to improve
Although higher charges for parallel labourmarket of student work have been introduced,this issue needs to be tackled further.Permanent and temporary contracts have also notbeen aligned as recommended.
Education and training system remaininsufficiently responsive to labour marketdemands.
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the matching of skills with labour market needs.6. Streamline regulated professions and improvethe administrative capacity of the CompetitionProtection Office, in order to enhance thebusiness environment and attract investment.Slovenia has not undertaken any reform onregulated professions and competition protectionoffice remains unreformed.
and training.6. Take further steps to strengthen marketopening and speed up the reorganisation ofprofessional services. Improve the businessenvironment through: (i) implementing thereform of the Competition ProtectionOffice, (ii) establishing a framework forstate-owned enterprises guaranteeing arms-length management and high standards ofcorporate governance, and (iii) improvingbankruptcy procedures, in particular interms of timeliness and efficiency.7. Following consultation with socialpartners and in accordance with nationalpractice, ensure that wage growth, includingminimum wage adaptation, supportscompetitiveness and job creation.
New recommendation.
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SK
Country Specific Recommendation 2011
Assessment of implementation of CSRs2011Slovakia has partially implemented 2011CSRs.
Country Specific Recommendations 2012
1. Rigorously implement both the 2011 budget asenvisaged and the planned specific measures of apermanent nature in 2012 and 2013, to reducethe deficit below 3 % of GDP by 2013 in linewith Council recommendations on correcting theexcessive deficit and ensure adequate progresstowards the medium-term objective. Subject tothis, safeguard growth-enhancing expenditure,and use available room to increase revenuethrough environmental and property taxes and byincreasing the efficiency of VAT collection.
Although the deficit was significantly reduced,Slovakia still needs to continue with efforts inline with EDP.Tax compliance and VAT collections need to bestrengthened and further action taken on increaseof real estate and environmental taxation.
1. Take additional measures in 2012 and specifythe necessary measures in 2013, to correct theexcessive deficit in a sustainable manner andensure the structural adjustment effort specifiedin the Council recommendations under theexcessive deficit procedure. Implement targetedspending cuts, while safeguarding growth-enhancing expenditure, and step up efforts toimprove the efficiency of public spending.Thereafter, ensure an adequate structuraladjustment effort to make sufficient progresstowards the MTO, including meeting theexpenditure benchmark. Accelerate the setting upof the Fiscal Council and adopt rules onexpenditure ceilings.2. Increase tax compliance, in particular byimproving the efficiency of VAT collection;reduce distortions in taxation of labour acrossdifferent employment types, also by limiting taxdeductions; link real estate taxation to the marketvalue of property; make greater use ofenvironmental taxation.
2. Strengthen fiscal governance by adopting in2011 and implementing from 2012 bindingmulti-annual expenditure ceilings, covering thecentral government and the social securitysystem. In addition, introduce an independentFiscal Council and ensure timely publication ofbudgetary data at all levels of the government.3. Enhance the long-term sustainability of public
Expenditure ceilings still need to be addressed asdo systematic publication of budgetary data.
Adjustments of pay-as-you-go pillar have not
3. Further adjust the pay-as-you-go pension
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finances by further adjusting the pay-as-you-gopillar of the pension system also by changing theindexation mechanism and implement furthermeasures with a view to raising the effectiveretirement age, in particular by linking thepensionable age to life expectancy. Introduceincentives to ensure the viability of the fully-funded pension pillar so as to progress towardsfiscal sustainability while assuring adequatepensions.4. Take steps to increase employment and tosupport labour demand for the low-skilledunemployed by reducing the tax wedge for low-paid workers. In addition, introduce measures toimprove the administrative capacity of publicemployment services with a view to improvingtargeting, design and evaluation of active labourmarket policies, especially for the young andlong-term unemployed.
been carried out.
pillar, mainly by changing the indexationmechanism, introducing a direct linkbetween the statutory retirement age and lifeexpectancy and introducing a sustainabilityfactor in the pension calculation formulareflecting demographic change. Ensure thestability and viability also of the fullyfunded pillar.
There has been no change to active labourmarket policy and no reduction on tax wedge forlow paid workers.
4. Enhance the administrative capacity ofpublic employment services with a view toimproving the targeting, design andevaluation of active labour market policiesto ensure more individualised employmentservices for the young, the long-termunemployed, older workers and women.Ensure the provision of childcare facilities.Reduce the tax wedge for low-paid workersand adapt the benefit system.5. Adopt and implement the youth actionplan, in particular as regards the quality andlabour market relevance of education andvocational training, including through theintroduction of an apprenticeship scheme.Improve the quality of higher education bystrengthening quality assurance and resultorientation.
5. Speed up the implementation of plannedgeneral education, vocational education andtraining reforms and take steps to improve thequality of higher education and its relevance tomarket needs. Develop a framework ofincentives for both individuals and employers toencourage participation of the low-skilled inlifelong learning.
There were no changes in vocational training andeducation or lifelong learning, but somemeasured for adjusting higher education to thelabour market needs.
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Access to schooling for vulnerable groupsaddressed in 2012, but not 2011.
6. Take active measures to improve accessto and quality of schooling and pre-schooleducation of vulnerable groups, includingRoma. Ensure labour market reintegrationof adults through activation measures andtargeted employment services, second-chance education and short-cycle vocationaltraining.7. Strengthen the quality of the publicservice, including by improvingmanagement of human resources andstrengthening analytical capacities. Furthershorten the length of judicial proceedingsand strengthen the role of the PublicProcurement office as an independent body.
6. Ensure the implementation of plannedmeasures aimed at a more effective applicationof public procurement rules, a higherperformance and transparency of the judicialsystem.
Effective application of measures tacklingjudicial proceedings and public procurementneeds to be assured.Quality of public service was not addressed in2011, but in 2012.
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FI
Country Specific Recommendations 2011
Assessment of implementation of CSRs 2011
Country Specific Recommendations 2012
1. Continue the fiscal consolidation using anywindfall revenue to reduce the deficit, whiletaking additional measures to maintain the fiscalposition above the medium-term objective, inparticular through compliance with the medium-term expenditure benchmark.
Finland has partially implemented the 2011CSRs.In the field of public finance, therecommendations have been implemented. Fornominal central government expenditure aceiling has been introduced aiming at averagegrowth of 1% during 2012-16.
1. Preserve a sound fiscal position in 2012 andbeyond by correcting any departure from theMTO that ensures the long-term sustainability ofpublic finances. To this end, reinforce andrigorously implement the budgetary strategy,supported by sufficiently specified measures, forthe year 2013 and beyond, including meeting theexpenditure benchmark.Continue to carry out annual assessments of thesize of the ageing-related sustainability gap andadjust public revenue and expenditure inaccordance with the long-term objectives andneeds. Integrate the local government sectorbetter in the system of multi-annual fiscalframework including through measures to controlexpenditure.
2. Take further measures to achieve productivitygains and cost savings in public serviceprovision, including structural changes, in orderto respond to the challenges arising frompopulation ageing.
Public productivity programme is on the waywith targets for 2015.
2. Take further measures to achieve productivitygains and cost savings in public serviceprovision, including structural changes andefficiency-enhancing territorial administrativereforms, also in order to respond to thechallenges arising from an ageing population.
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3. Target active labour market measures better on The employment rate has declined since its peakin 2008 and Finland has not achieved its Europethe long- term unemployed and young people.2020 78% employment target rate.4. Take measures to improve the employabilityHowever, the early school leaving rate andof older workers and their participation intertiary education target are both well above EUlifelong learning. Take further steps, inaverage.consultation with social partners and inaccordance with national practices, to encourage As of 2013 all young people under 25 and allolder workers to stay in the labour market, byrecent graduates under 30 will be provided with ameasures to reduce early exit and increase thejob or training, workshop, rehabilitation or studyplacement, no later than 3 months intoeffective retirement age. In view of the alreadyexisting system of linking pension benefits to life unemployment.expectancy, consider a link between the statutoryAs to long term unemployed, individualretirement age and life expectancy.employment support will be transferred tomunicipalities after 12 months of unemployment,where progress will be actively monitored andindividually assessed.Pension reform is to be carried out by 2017, withincrease in effective retirement age by 2025.However, pension reforms should besupplemented by up-skilling of older workers.5. Take further measures to open up further theservice sector, by redesigning the regulatoryframework and removing restrictions in order tofacilitate new entry into service sector markets,especially in the retail sector.Despite the new competition law, there are stillstructural barriers to competition, especiallyregarding entry into retail services sector.
3. Implement the ongoing measures toimprove the labour market position ofyoung people and the long-termunemployed, with a particular focus onskills development. Take further steps toimprove the employment rate of olderworkers, including by reducing early exitpathways. Take measures to increase theeffective retirement age taking into accountthe improved life expectancy.
4. Continue enhancing competition inproduct and service markets, especially inthe retail sector, by ensuring the effectiveimplementation of the new Competition Actand the new programme on promotinghealthy competition. Continue to takemeasures to increase the efficiency of
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municipal service provision, includingincreasing, where appropriate, the share ofservices subject to competitive bidding, andto ensure competition neutrality betweenprivate and public undertakings. Takefurther steps to ensure that competition lawfines have a sufficiently deterrent effect.New recommendation.Europe 2020 R&D target is closed to beingreached; however, there is still over-dependenceon the investments by one firm/sector.
5. In order to strengthen productivity growthand external competitiveness, continueefforts to diversify the business structure, inparticular by hastening the introduction ofplanned measures to broaden the innovationbase while continuing to align wage andproductivity developments fully respectingthe role of social partners and in line withnational practices.
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SE
Country Specific Recommendations 2011
Assessment of implementation of CSR2011Sweden has partially implemented 2011CSRs.
Country Specific Recommendations 2012
1. Keep fiscal policy on a path that ensures thatthe medium- term objective continues to be met.
1. Preserve a sound fiscal position in 2012 andbeyond by implementing the budgetary strategyas envisaged and ensuring continuedAlthough 2012 Budget Bill is balanced, the MTOachievement of the MTO.was not achieved in 2011.Mortgage and housing markets have stabilised.Most measures were done on financial sectorresilience side, less on lending/financing side.There were some steps to ease renting regulation,more needs to be done.
2. Take preventive action to deal with themacroeconomic risks associated with risinghouse prices and household indebtedness. Abroad set of measures could be considered, suchas reviews of the mortgage system, including thecapital requirements of banks, rent regulation,property taxation and construction permits.
2. Take further preventive measures tostrengthen the stability of the housing andmortgage market in the medium term,including by fostering prudent lending,reducing the debt bias in the financing ofhousing investments, and tacklingconstraints in housing supply and rentregulations.3. Take further measures to improve thelabour market participation of youth andvulnerable groups, e.g. by improving theeffectiveness of active labour marketmeasures, facilitating the transition fromschool to work, promoting policies toincrease demand for vulnerable groups andimproving the functioning of the labourmarket. Review the effectiveness of thecurrent reduced VAT rate for restaurantsand catering services in support of job
3. Monitor and improve the labour marketparticipation of young people and othervulnerable groups.
Most of the reforms are being implemented in2012, thus impact is difficult to asses.The overall employment rate target of Europe2020 has been achieved (80%). The same goesfor early school leaving and tertiary educationtarget.
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creation.New recommendation. There was no progresstowards 4% GDP spending on R&D, due todecrease in business R&D expenditure.
4. Take further measures in the upcomingresearch and innovation bill to continueimproving the excellence in research and tofocus on improving the commercialisationof innovative products and the developmentof new technologies.
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UK
Country Specific Recommendations 2011
Assessment of implementation of CSR2011UK has partially implemented 2011 CSRs.Although the government has implemented the2011 recommendation on public finance, theEDP deadline (2014-15) is likely to be missedfor one year due to the weakening medium termoutlook for growth. The deficit remains one ofthe highest in the EU (8.4% in 2011-12).
Country Specific Recommendations 2012
1. Implement the planned fiscal consolidationaiming at a deficit of 6,2 % of GDP in 2012-2013, in line with Council recommendations oncorrecting the excessive deficit, and setting thehigh public debt ratio on a downward path whenthe excessive deficit is corrected by the end ofthe programme period. Ensure no slippage fromthe ambitious spending reduction targets, therebystrengthening long-term sustainability; and,subject to this, prioritise growth-enhancingexpenditure.
1. Fully implement the budgetary strategy for thefinancial year 2012-13 and beyond, supported bysufficiently specified measures, to ensure atimely correction of the excessive deficit in asustainable manner and the achievement of thestructural adjustment effort specified in theCouncil recommendations under the EDP and toset the high public debt ratio on a sustaineddownward path. Subject to reinforcing thebudgetary strategy for the financial year 2013-14and beyond, prioritise growth-enhancingexpenditure to avoid the risk that a furtherweakening of the medium-term outlook forgrowth will negatively impact on the long-termsustainability of public finances.
2. Develop a programme of reform whichaddresses the destabilising impact of the houseprice cycle on public finances, the financialsector and the economy, with a view toalleviating problems of affordability and the needfor state subsidy for housing. A broad set ofmeasures and policy instruments could beconsidered including reforms to the mortgagemarket, financial regulation, property tax and theplanning system in order to prevent excessive
Government housing strategy for England doesnot tackle the issue of taxation (regressivecouncil tax combined with progressivetransaction tax), which may also contribute tostrong housing cycles.Also if the new system in line with the adoptedstrategy reduces prices and increases housingsupply, it is still possible for the government toface lack of administrative capacity and local
2. Address the destabilising impact of highand volatile house prices and highhousehold debt by implementing acomprehensive housing reform programmeto increase housing supply and alleviateproblems of affordability and the need forstate subsidisation of housing. Pursuefurther reforms to the housing market,including the mortgage and rental markets,
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volatility.
political opposition in implementation of a morestreamlined planning system.
financial regulation and property taxation toprevent excessive volatility and distortionsin the housing market.3. Continue to improve the employability ofyoung people, in particular those not ineducation, employment or training,including by using the Youth Contract.Ensure that apprenticeship schemes aretaken up by more young people, have asufficient focus on advanced and higher-level skills, and involve more small andmedium-sized businesses. Take measures toreduce the high proportion of young peopleaged 18-24 with very poor basic skills.4. Step up measures to facilitate the labourmarket integration of people from joblesshouseholds. Ensure that planned welfarereforms do not translate into increased childpoverty. Fully implement measures aimingto facilitate access to childcare services.
3. Take steps by 2012 to ensure that a higherImplementation of many programmes has juststarted, so it is difficult to evaluate impact. Thusshare of young people enters the labour marketyouth unemployment continues to rise.with adequate skills and to improve theemployability of 18 to 24-year-olds who lefteducation or training without qualifications.Address skill shortages by increasing thenumbers attaining intermediate skills, in line withlabour market needs.
4. Take measures, within current budgetaryplans, to reduce the number of worklesshouseholds by targeting those who are inactivebecause of caring responsibilities, including loneparents.
Employment rate is not on the rise. In generalprivate sector employment has been growingmodestly, but not enough to offset decrease inpublic sector employment.The % of population of risk of poverty and socialexclusion is rising (23.1% in 2010).The government has a welfare reform agenda,but it needs to be fully implemented to bringemployment benefits. Access to childcare alsoremains a problem.
5. Implement measures already announced andcontinue to work to improve the availability ofbank and non-bank financing to the private
Although there were some initiatives undertaken,but with limited effect (like Project Merlinlending also to public enterprises), thus net
5. Further improve the availability of bankand non-bank financing to the privatesector, in particular to SMEs. Support
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sector and in particular to SMEs whilerecognising potential challenges on the demandside. Encourage competition within the bankingsector and explore with the market ways toimprove access to non- bank financing such asventure and risk capital and debt issued on publicmarkets.
lending remained negative in 2011. Significantshare of SMEs have thus remained creditconstrained.
competition within the banking sector, inparticular through measures to reducebarriers to entry, increase transparency andfacilitate switching between banks asrecommended by the IndependentCommission on Banking and explore waysto improve access to venture and risk capitaland other forms of non-bank lending.6. Pursue a long-term strategy for improvingthe capacity and quality of the UK'snetwork infrastructure, including measuresto address pressures in transport and energynetworks by promoting more efficient androbust planning and decision-makingprocesses, and harnessing appropriate publicor private financing arrangements.
New recommendation.
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EuroCouncil Recommendations 2011Area
Commission's assessment inStaffWorking Document 2012(Euro PlusPact)The Commission did not assess theimplementation of the 2011recommendations to the Euro area MSs.However, it assessed progress versus theEuro Plus Pact commitments,whichreferred to the following four areas:fostering competitiveness, fosteringemployment, enhancing the sustainability ofpublic finances and reinforcing financialstability.The Commission stated that in 2011,Member States took up many commitmentsin the policy areas identified in the Pact.However, the implementation of thecommitments varied considerably acrossthe Member States and policy areas. Only afew Member States met all theircommitments. In many cases thegovernment had made the relevantlegislative proposals, while the adoption oflegislation was delayed, e.g. due todiscussion in the national Parliament ofwith social partners.1.Strictly adhere to thebudgetary targetssetMember States delivered on theirout in their 2011 Stability Programmes as well ascommitments to strengthen the
Council Recommendations 2012
1. Strengthen the working methods of theEurogroupto allow it to take responsibility forthe aggregate policy stance in the euro area,effectively responding to changes in theeconomic environment, and to lead thecoordination of economic policy in the context ofthe strengthened surveillance framework whichapplies to the euro area Member States.
2. Intensify policy cooperation in theEurogroupby sharing information anddiscussing budgetary plans and the plans ofmajor reforms with potential spillovers effects onthe euro area. Ensure that such reforms areundertaken that are necessary for a stable androbust euro area, including the implementation ofthe recommendations which the Council hasaddressed to individual euro area Member Statesand which, in addition to addressing challengesat national level, have an impact on the euro areaas a whole.3. Strengthen fiscal discipline and fiscalinstitutionsat both national and sub-national
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the Memoranda of Understanding in MemberStates receiving EU/IMF financial assistanceand, where applicable, reinforce consolidationefforts in line with the opinion delivered by theCouncil. In particular, ensure adequate fiscalefforts with a view to correcting excessivedeficits and approaching medium-termbudgetary objectives. Use any fiscal windfalls toaccelerate adjustment. This should also help toimprove public debt dynamics.
levels to enhance market confidence in themedium and long-term sustainability of publicfinances in the euro area. Following theagreement by the euro area Heads of State orGovernment in July and October 2011 and on 2March 2012, advance the transposition ofMember States that had targeted certain deficit or Directive 2011/85/EU to the end of 2012 anddebt levels generally managed to meet theirstrengthenfiscal governancefurther, incommitments.particular by introducing in the nationallegislation of all euro area Member States therules for balanced budget in structural terms andthe automatic correction mechanisms.
sustainability of public financesand putforward legislative proposals on pensionsystems and national fiscal rules. In manycases, however, the adoption of newlegislation has been delayed and theimplementation postponed.
2.Ensure fiscal discipline at both national andsub-national levels, notably by introducing orreinforcing sufficientlystrong and bindingfiscal frameworks.3.Continue to implementreforms to socialsecurity systemsthat ensure fiscal sustainabilitywith due regard to the adequacy of pensions andsocial benefits, notably by aligning pensionsystems with the national demographic situation.
4.Based on the European Council Conclusionsof 1-2 March 2012,ensure a coherentaggregate fiscal stancein the euro area bypursuing fiscal consolidation as set out inCouncil recommendations and decisions, in linewith the rules of the Stability and Growth Pact,which take into account the country-specificmacro-financial situations. Member Statesaffected by significant and potentially risingrisk premia should limit deviations from thenominal balance targets even against worse-than-expected macroeconomic conditions; otherMember States should let the automaticstabilisers play along the adjustment pathassessed in structural terms and stand ready toreview the pace of consolidation shouldmacroeconomic conditions deteriorate further.
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Composition of government expenditure andrevenues should reflect the growth impact ofspending items and revenue sources. Inparticular, all the availablebudgetary marginsshould be used to foster public investment inthe euro area,including by taking into accountcross-country differences in the cost of funding.4.Improve the functioning and stability of thefinancial system,following up immediately onthe forthcoming EU-wide stress tests to ensurethat the banking sector continues to strengthenits resilience to possible further losses orfunding constraints and that non-viablefinancial institutions are able to restructure orexit the market without creating undue tensionson financial markets.5. Pursue furthertax reformswhich givepriority to growth- friendly sources of taxationwhile preserving overall tax revenues, inparticular by lowering taxes on labour to makework pay; when reducing public expenditure,protect growth-enhancing items such as spendingon research and development, education andenergy efficiency; where necessaryadjust wagesetting arrangements and indexationmechanisms,in consultation with social partnersand in accordance with national practices, so asto ensure that wages are evolving in line withFinancial sectorreforms were somewhat mixed,with only a few Member States increasing theefficiency of the regulation and supervision ofthe financial sector. Member States alsosafeguarded financial stability by takingmeasures to diversify the structure of theeconomy.5. Take action to improve the functioning andstability of thefinancial systemin the euro area.Accelerate the steps towards a more integratedfinancial architecture, comprising bankingsupervision and cross-border crisis resolution.
Most Member States met theircommitments to promoteeducation andinnovation.Less progress was made to enhancecompetition in services and to revisewagesetting mechanisms,either in the private orpublic sector.Member States also introduced reforms toincreaselabour participationand to lowerlabour taxes. Fewer measures were taken toimprove life-long learning and reduce undeclaredwork.
6. Implementstructural reforms, which alsopromote flexible wage adjustments,and which— together with a differentiated fiscal stance —would promote an orderly unwinding of intra-euro area macroeconomic imbalances and thusgrowth and jobs. This would include action atnational level which reflects the country-specificsituation and takes account of the Councilrecommendations to individual euro areaMember States.
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productivity, competitiveness and theemployment situation.6. Introduce further reforms toenhancecompetition in service sectors,in particular byremoving unjustified restrictions onprofessional services, retailing and networkindustries.7. Fully implement the commitments made intheEuro Plus Pactso as to enhance growth,competitiveness and employment within thearea.Most progress was made on reforms tofostercompetitiveness and in particular to improvebusiness environment.Member Statessimplified the administrative requirements forbusinesses and introduced new services.
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