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Europaudvalget 2011-12
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EUROPEAN COMMISSION

Brussels, 30.5.2012

COM(2012) 304 final

Recommendation for a

COUNCIL RECOMMENDATION

on Denmark’s 2012 national reform programme

and delivering a Council opinion on Denmark’s convergence programme for 2012-2015

{SWD(2012) 304 final}

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Recommendation for a

COUNCIL RECOMMENDATION

on Denmark’s 2012 national reform programme

and delivering a Council opinion on Denmark’s convergence programme for 2012-2015

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular

Articles 121(2) and 148(4) thereof,

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of

the surveillance of budgetary positions and the surveillance and coordination of economic

policies

, and in particular Article 5(2) thereof,

Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the

Council of 16 November on the prevention and correction of macroeconomic imbalances

and in particular Article 6(1) thereof,

Having regard to the recommendation of the European Commission

Having regard to the resolutions of the European Parliament,

Having regard to the conclusions of the European Council,

Having regard to the opinion of the Employment Committee,

After consulting the Economic and Financial Committee,

Whereas:

(1)

On 26 March 2010, the European Council agreed to the European Commission’s

proposal to launch a new strategy for jobs and growth, Europe 2020, based on

enhanced coordination of economic policies, which will focus on the key areas where

action is needed to boost Europe’s potential for sustainable growth and

competitiveness.

On 13 July 2010, the Council adopted a recommendation on the broad guidelines for

the economic policies of the Member States and the Union (2010 to 2014) and, on 21

October 2010, adopted a decision on guidelines for the employment policies of the

(2)

OJ L 209, 02.08.1997, p. 1

OJ L 306, 23.11.2011, p. 25

COM(2012)304 final

P7_TA(2012)0048 and P7_TA(2012)0047

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Member States

, which together form the ‘integrated guidelines’. Member States were

invited to take the integrated guidelines into account in their national economic and

employment policies.

(3)

On 12 July 2011, the Council adopted a recommendation on Denmark’s national

reform programme for 2011 and delivered its opinion on Denmark’s updated

convergence programme for 2011-2014.

On 23 November 2011, the Commission adopted the second Annual Growth Survey,

marking the start of the second European Semester of ex-ante and integrated policy

coordination, which is anchored in the Europe 2020 strategy. On 14 February 2012,

the Commission, on the basis of Regulation (EU) No 1176/2011, adopted the Alert

Mechanism Report

, in which it identified Denmark as one of the Member States for

which an in-depth review would be carried out.

On 2 March 2012, the European Council endorsed the priorities for ensuring financial

stability, fiscal consolidation and action to foster growth. It underscored the need to

pursue differentiated, growth-friendly fiscal consolidation, to restore normal lending

conditions to the economy, to promote growth and competitiveness, to tackle

unemployment and the social consequences of the crisis, and to modernise public

administration.

On 2 March 2012, the European Council also invited the Member States participating

in the Euro Plus Pact to present their commitments in time for inclusion in their

stability or convergence programmes and their national reform programmes.

On 30 April 2012, Denmark submitted its convergence programme for the period

2012-2015 and its 2012 national reform programme. In order to take account of their

interlinkages, the two programmes have been assessed at the same time. The

Commission concluded in its in-depth review

, under Article 5 of Regulation (EU) No

1176/2011, that Denmark is experiencing an internal and external imbalance, although

not excessive.

Based on the assessment of the 2012 convergence programme pursuant to Council

Regulation (EC) No 1466/97, the Council is of the opinion that the macroeconomic

scenario underpinning the budgetary projections in the programme is plausible. The

scenario projecting GDP growth at 1.2 and 1.5% in 2012 and 2013 is broadly in line

with the Commission's 2012 spring forecast of 1.1 and 1.4%. Accordingly, the

government deficits are slightly smaller in the convergence programme (4.0 and 1.8%

of GDP in 2012 and 2013 respectively, compared with 4.1 and 2.0% of GDP in the

Commission's 2012 spring forecast). The objective of the budgetary strategy outlined

in the programme is to correct the excessive deficit by 2013 and achieving the medium

term budgetary objective (MTO) of

a structural deficit of no more than 0.5 percent of

GDP and

at least a structurally balanced budget in 2020. The programme thereby

confirms the previous MTO, which adequately reflects the requirements of the

Stability and Growth Pact. The planned headline deficit in 2013 is consistent with a

timely correction of the excessive government deficit and, based on the (recalculated)

Council Decision 2012/238/EU of 26 April 2012

COM(2012) 68 final

SWD(2012)153 final

(4)

(5)

(6)

(7)

(8)

Kommentar [twa1]:

DK: This is to reflect the Danish

MTO, which was not clearly

specified in the convergence

programme.

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structural budget balance

, the planned fiscal effort in that year complies with the

Council recommendation issued under the Excessive Deficit Procedure in July 2010.

From a bottom-up perspective, net discretionary measures are estimated to yield a

consolidation of around 1.5% of GDP over the period 2011-13.

The consolidation path

has become more back-loaded than previously planned and a sizeable effort is needed

in 2013 to ensure the required structural adjustment. Risks of falling short of the 3% of

GDP reference value in 2013 are limited; the Commission's 2012 spring forecast sees

the government deficit at 2.0% of GDP.

Denmark is expected to reach its MTO in

2013. However, based exclusively

on the (recalculated) structural budget balance,

this

is not the case

from 2013 onwards,

and

the estimated budgetary improvement in the

structural budget balance falls short of the 0.5% of GDP required by the Stability and

Growth Pact. At the same time, the growth rate of government expenditure, taking into

account discretionary revenue measures, is expected to be in line with the expenditure

benchmark of the Stability and Growth Pact. Part of the budget deficits will be

financed by reducing the government's account with Denmark's Nationalbank.

Denmark's gross public debt is projected to fall from 46.5% of GDP in 2011 to

42.1%

in 2015, well below 60% of GDP.

(9)

Increasing labour supply is a key priority for Denmark in order to ensure future

welfare and fiscal sustainability. In 2011, Denmark concluded an ambitious reform of

the voluntary early retirement pension scheme and brought forward the previously

planned increase in the statutory retirement age and its link to life expectancy. The

focus now needs to shift to reforming the disability pension and subsidised

employment (flex-job) schemes. The government has presented a proposal for reform

in this area, which should be implemented without delay. The widening gap in

employment outcomes between people with a migrant background and the rest of the

working population also needs to be addressed.

Labour productivity growth in Denmark has slowed down over the last decades, one of

the causes being a relatively weak education performance. Despite a high level of

spending on education, the quality of Danish school education — as measured by the

OECD’s PISA survey — is only average. Furthermore, students generally finish their

studies at a later age than in other Member States and the drop-out rates from

vocational education institutions are relatively high. To respond to the challenges in

this field, the government has announced a number of new measures for both

compulsory and secondary education. The 2012 budget also supports the introduction

of social clauses in public procurement calls and measures to make it financially

beneficial for private companies to offer apprenticeships, in order to increase the

number of available places. Increasing the provision of apprenticeships will also be

addressed in tripartite negotiations and in the work of an inter-ministerial Committee.

Another potential reason for slow productivity growth is the relatively weak degree of

competition in Denmark. In 2011, a competition package was adopted, mainly

targeting the construction sector, the retail sector, and health and public sector

services. Competition for taxis and transportation services as well as the liberalisation

of pharmacies are under investigation, in view of possible new measures. The issue of

Kommentar [twa2]:

DK: The opinion has to mention a

bottom-up measures of fiscal

policy, notably consolidation over

the EDP recommendation period

2011-2013 (either the total in or

the average annual improvement),

in line with previous years’

opinions, the Commission’s staff

working document, and the

Commission’s 2012 spring

forecast (the suggested amendment

is the exact quote from the spring

forecast).

Slettet:

Based

Kommentar [twa3]:

DK:

Concerning the suggested

amendment “exclusively”:

A conclusion that the structural

improvement falls short of the

requirements would need to be

based on an overall assessment,

not only the recalculated structural

budget balance.

Kommentar [twa4]:

DK: These amendments reflects

the clearer statement of Denmark’s

MTO i.e. -0.5 and balance in 2020,

cf. above.

Denmark reaches a structural

deficit of 0.3% of GDP in 2013

according to the (recalculated)

structural balance, thus complying

with the MTO.

Slettet:

Kommentar [twa5]:

DK: The figure now reflects the

information in the Staff Working

Document as well.

Slettet:

(10)

(11)

Cyclically adjusted balance net of one-off and temporary measures, recalculated by the Commission

services on the basis of the information provided in the programme, using the commonly agreed

methodology.

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increasing public procurement in municipalities and regions is currently being

negotiated with regional and local governments. In this context, a government

committee recently concluded that the Danish competition law is in need of

reinforcement, and that sanctions for infringements are currently too low to serve as a

deterrent. Given that only limited concrete initiatives have been taken in this area over

the past year, further steps are needed to adequately address this challenge.

(12)

As confirmed in the in-depth review under Article 5 of Regulation (EU) No

1176/2011, while the high household gross debt to some extent is a structural feature

of the Danish economy, with household assets considerably exceeding liabilities,

concerns regarding high household debt arise as developments in the housing market

seem to have caused the debt to move beyond levels explained by

house prices in the

years before the crisis.

Furthermore, the composition of mortgage loans has changed

since 2003, with instalment-free and variable-rate loans gaining in popularity over

fixed-rate loans with instalment. For a given debt level, households are therefore more

sensitive to interest rates hikes and fluctuations in property prices now than they were

a decade ago. This poses higher potential risks in terms of financial and economic

stability. Relevant measures have been taken in Denmark to address vulnerabilities in

the mortgage system.

The

Ministry of Business and Growth is currently analysing the

composition

mortgage loans

across households

in light of income, labour market

history and other socieconomic variables. The aim is to determine households’

potential vulnerability in the event of different economic shocks,

including interest

rate fluctuations.

However, measures should also be considered to prevent pro-cyclical

developments in the housing market in the medium term, preferably by realigning the

property value tax with actual market values. Removing the ceiling of the annual

increase of the municipal land value tax could also prevent future pro-cyclical effects.

Such measures should be introduced gradually, taking into account the current need

for stabilisation in the housing market.

Denmark has made a number of commitments under the Euro Plus Pact. These

commitments, and the implementation of the commitments presented in 2011, relate to

fostering employment, improving competitiveness, enhancing sustainability of public

finances and reinforcing financial stability. The Commission has assessed the

implementation of the Euro Plus Pact commitments. The results of this assessment

have been taken into account in the recommendations.

In the context of the European Semester, the Commission has carried out a

comprehensive analysis of Denmark’s economic policy. It has assessed the

convergence programme and national reform programme, and presented an in-depth

review. It has taken into account not only their relevance for sustainable fiscal and

socio-economic policy in Denmark but also their compliance with EU rules and

guidance, given the need to reinforce the overall economic governance of the

European Union by providing EU-level input into future national decisions. Its

recommendations under the European Semester are reflected in recommendations (1)

to (5) below.

In the light of this assessment, the Council has examined Denmark’s convergence

programme, and its opinion

is reflected in particular in recommendation (1) below.

Slettet:

structural factors

Kommentar [twa6]:

DK: This

aims for a more clear explanation

of what is concluded in the in-

depth-review.

Slettet:

Moreover, t

Slettet:

distribution

Slettet:

assets and liabilities

Slettet:

and their

Kommentar [twa7]:

DK: This

description of the analysis is more

precise.

(13)

(14)

(15)

Under Article 9 (2) of Council Regulation (EC) No 1466/97.

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(16)

In the light of the results of the Commission’s in-depth review and this assessment, the

Council has examined Denmark’s 2012 national reform programme and Denmark’s

convergence programme. Its recommendations under Article 6 of Regulation (EU) No

1176/2011 are reflected in particular in recommendations (3), (4) and (5) below,

HEREBY RECOMMENDS that Denmark should take action within the period 2012-2013 to:

Implement the budgetary strategy as envisaged, to ensure a correction of the

excessive deficit by 2013 and achieve the annual average structural adjustment effort

specified in the Council recommendations under the Excessive Deficit Procedure.

Thereafter, ensure an adequate structural adjustment effort to make sufficient

progress towards the medium-term budgetary objective (MTO), including meeting

the expenditure benchmark.

Take further steps to enhance long-term labour supply by reforming the disability

pension, better targeting subsidised employment schemes (the ‘flex-job’ system)

towards people with reduced work capacity, and improving the employability of

people with migrant background.

Implement announced measures, without delay, to improve the cost-effectiveness of

the education system, reduce drop-out rates, in particular within vocational

education, and increase the number of apprenticeships.

Continue efforts to remove obstacles to competition, in particular in local services,

the retail and construction sector, including by further opening the municipal and

regional procurement of services to competition and ensuring that competition law

sanctions are sufficiently deterrent.

Consider further preventive measures to strengthen the stability of the housing

market and financial system in the medium-term, including by taking account of the

results of the ongoing study by the Ministry of Business and Growth on the

distribution of assets and liabilities across households and by reviewing the property

value and municipal land value tax system.

Done at Brussels,

For the Council

The President