Europese Commissie beoordeelt economieën van zes EU-lidstaten (en)
Having examined their respective updated programmes[1], the European Commission is of the opinion that Finland, Denmark and Sweden meet the requirements of the revised Stability and Growth Pact by maintaining appropriate medium-term objectives for their public finances. While Slovakia and the Czech Republic seem to be on track to correct their excessive deficits by 2007 and 2008 respectively, as recommended by the Council, they are invited to strengthen the fiscal adjustment effort, also in the light of their favourable economic prospects.
As regards the Hungarian programme, the Commission recommends that Hungary be invited to present - by 1 September - a revised update in which concrete and structural measures are identified that are fully consistent with the medium-term deficit reduction path. The Commission's recommendations for a Council opinion on each of the six programmes will be on the agenda of the European Union finance ministers meeting on 24 January.
"I am pleased that most of the programmes examined today are in line with the requirements of the revised Stability and Growth Pact. Some countries are now defining more ambitious medium-term objectives for their public finances than is required and this is welcome," said Economic and Monetary Affairs Commissioner Joaquín Almunia. "As to Hungary, a revised programme would offer a new chance to clarify the strategy that will make its fiscal consolidation credible and sustainable".
Finland
Finland submitted a new update of its stability programme on 24 November 2005, covering the period 2005-2009. Based on a prudent macroeconomic scenario, the programme foresees the general government balance to remain in comfortable surplus, albeit slightly declining to 1½% of GDP by 2009 (the end of the programme period). Compared with the previous update, the projected annual surpluses have been revised down by ½ % of GDP, reflecting the phased introduction of tax cuts.
The programme does not explicitly present its medium-term objective (MTO) for the budgetary position. However, it projects a structural surplus of around 1½% of GDP by the end of the programme period, which can be regarded as its MTO.
The risks attached to the budgetary targets in the update appear to be broadly balanced. The multi-annual spending ceilings for central government have worked well so far to contain spending, while tax projections seem to be based on a cautious assessment. As regards economic growth during the period, the programme shows that the Finish authorities are aware that an ageing population and a dwindling labour supply may weigh more strongly on the projections. Taking into account this risk assessment, the budgetary stance in the programme seems sufficient to maintain the programme's MTO throughout the programme period. In addition, it provides a sufficient safety margin against breaching the 3% of GDP deficit ceiling with normal macroeconomic fluctuations for the entire period.
The debt ratio is estimated to decline by 2½ percentage points to reach 40% of GDP by 2009. With regard to the sustainability of public finances, Finland appears to be at low risk, given the significant assets in public pension schemes and the currently favourable budgetary position. However, sustainability may come under strain in the long term from rising old-age-related expenditure.
Czech Republic
The Czech Republic submitted a new update of its convergence programme on 24 November 2005, covering the period 2005-2008. Based on a plausible macroeconomic scenario that becomes somewhat favourable in the final year of the programme period, the programme aims to correct the excessive deficit by 2008 relying mainly on expenditure restraint. The budgetary targets are unchanged compared to the 2004 update although the underlying macroeconomic scenario is considerably stronger.
The medium-term objective (MTO) for the budgetary position set in the programme is a deficit of "around 1%" of GDP in cyclically-adjusted terms and net of one-off and temporary measures, which is in line with the Stability and Growth Pact but which is targeted to be reached only beyond the programme horizon, namely by 2012.
Given that the risks attached to the budgetary targets are broadly balanced, the fiscal stance in the programme seems consistent with a correction of the deficit to below 3% by 2008 (2.7%).
While the debt ratio is targeted to remain broadly constant at a relatively low level of 37-38% of GDP, the budgetary costs of an ageing population are projected to be very significant so that the Czech Republic is at high risk as regards the long-term sustainability of its public finances.
In the light of the Commission's evaluation, it would be appropriate for the Czech Republic to strengthen the fiscal adjustment effort; enhance the quality of budgetary planning by analysing causes of significant expenditure carryovers and reinforcing the expenditure ceilings; and improve the long-term sustainability of public finances through pension and healthcare reforms.
Denmark
Denmark submitted a new update of its convergence programme on 30 November 2005, covering the period 2005-2010. Based on a cautious macroeconomic scenario, with technically-assumed low GDP growth rates in 2007 and 2008, the update foresees a general government surplus of 3.6% in 2005, 3.1% in 2006, 3.2% in 2007, 2.7% in 2008 and 2.9% in the final year. Both expenditure and revenue ratios are on a gradually declining trend over the programme period.
The programme's medium-term objective (MTO) is a surplus, in cyclically-adjusted terms and net of one-off and other temporary measures, of 1½-2½% of GDP on average over the programme period. The programme explains that the MTO is set at a more demanding level than required by the Pact to set a sound basis for long-term fiscal sustainability through a rapid debt reduction.
The risks to the programme's budgetary targets are broadly balanced. On the one hand, given the cautious growth assumptions, the risks to the budgetary projections in the programme are on the positive side. On the other hand, a negative risk may be compliance with the strict target of limiting the growth of real public consumption, where the track record is mixed. Taking into account this risk assessment, the budgetary strategy laid out in the programme seems appropriate under the Pact. It seems sufficient to ensure that the MTO identified in the programme is maintained (by a large margin) throughout the programme period and to provide a safety margin against breaching the 3% of GDP deficit reference value with normal macroeconomic fluctuations in each year. Despite the reduction in the general government surplus in cyclically-adjusted terms and net of one-off and other temporary measures in 2006, Denmark's fiscal policy appears to remain prudent given the exceptional revenues recorded in 2005, the budget package for 2006 and the uncertainties attached to the calculation of the output gaps.
The gross debt ratio is projected to continue to decline markedly and reach 21½% of GDP in 2010. With regard to the sustainability of public finances, Denmark appears to be at low risk in terms of the projected budgetary costs of ageing populations. The consolidation in line with the MTO throughout the programme period will improve sustainability.
Slovakia
Slovakia submitted a new update of its convergence programme on 1 December 2005, covering the period 2005-2008. Based on a plausible macroeconomic scenario, the programme aims to correct the excessive deficit by 2007, mainly by expenditure restraint. The new update broadly confirms the planned adjustment in the previous programme against a more favourable macroeconomic scenario.
The medium-term objective (MTO) for the budgetary position set in the programme is a deficit of -0.9% of GDP in cyclically-adjusted terms and net of one-off and temporary measures, which is in line with the Stability and Growth Pact but is targeted to be reached only beyond the programme horizon, namely by 2010.
Given that the risks attached to the budgetary targets are broadly balanced, the fiscal stance in the programme seems consistent with a correction of the excessive deficit by 2007. In the remaining year of the programme period (2008), when cyclical conditions may qualify as economic "good times", the planned improvement in the budgetary position (in cyclically-adjusted terms and net of one-off and temporary measures) by around ¼% of GDP is below the 0.5% of GDP benchmark set in the Stability and Growth Pact.
With regard to the sustainability of public finances, Slovakia appears to be at medium risk in terms of the projected budgetary costs of ageing populations. The level of debt is significantly under the 60% reference value and should remain so under the assumption of unchanged policies for the coming two decades. Implementing rigorously the planned consolidation of public finances over the medium term is necessary in order to reduce risks to long-term sustainability.
In the light of the Commission's evaluation, it would be appropriate for Slovakia to strengthen the fiscal adjustment effort and reinforce the expenditure ceiling framework.
Sweden
Sweden submitted a new update of its convergence programme on 24 November 2005, covering the period 2005-2008. Based on a plausible macroeconomic scenario, the update foresees a general government surplus of 1.6% of GDP in 2005, 0.9% in 2006, 1.2% in 2007 and 1.7% in the final year, 2008. Both expenditure and revenue to GDP ratios are on a gradually declining trend over the projection period. While the reduction in the revenue ratio is front-loaded and based on policy decisions, the reduction in the expenditure ratio is back-loaded and mainly based on improving cyclical conditions.
Sweden has set itself an objective of a surplus of 2% of GDP on average over the cycle which can be considered as an ambitious medium-term objective (MTO) and is significantly more demanding than required by the Stability and Growth Pact.
In view of the Commission's assessment, the budgetary strategy seems appropriate under the Pact. It provides a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal cyclical fluctuations throughout the period and seems broadly sufficient to ensure that the MTO will be reached by the end of the period. While the general government surplus decreases in cyclically-adjusted terms and net of one-off and other temporary measures in 2006, causing a deviation from the MTO of roughly 1% of GDP in 2006 and 2007, it should be noted that Sweden's MTO is significantly more demanding than required by the Pact.
The gross debt ratio is projected to continue to decline and reach 46% of GDP in 2008. With regard to the sustainability of public finances, Sweden appears to be at low risk in terms of the projected budgetary costs of ageing populations. The planned consolidation towards the 2% MTO at the end of the programme period will improve sustainability.
Hungary
The 2005 update of the Hungarian convergence programme, which covers the period 2005-2008, was submitted on 1 December. Based on a plausible macroeconomic scenario that becomes rather favourable towards the end of the programme period, the update confirms 2008 as the target date for correcting the excessive deficit from an estimated 6.1% of GDP in 2005 to 1.9% in 2008. But structural measures lack the necessary quantifications to judge their short- and medium-term budgetary effects. Based on past track record the budgetary outcomes could be different than projected in the programme. The budgetary strategy in the programme therefore needs to be substantiated to ensure its consistency with the correction of the excessive deficit by 2008.
The programme does not provide a medium-term objective (MTO) for the budgetary position. Nor can the MTO be inferred from the programme's budgetary projections.
At 58½% of GDP in 2006, the debt ratio is close to the reference value. But the sustainability of the Hungarian public finances appears to be at high risk given the projected budgetary costs of ageing populations. A large consolidation of public finances over the medium term and a strengthening of the budgetary position thereafter are necessary to reduce risks to public finance sustainability.
In November 2005, the Council concluded that the action planned by the Hungarian government was not sufficient to reach the deficit targets for 2005 and 2006. The Commission invites the Council to ask Hungary to present, by 1 September, a revised update of its convergence programme, which should identify concrete and structural measures that are fully consistent with Hungary's medium-term deficit reduction path. In the meantime, Hungary should pursue its efforts to achieve its budgetary objectives for 2006 and beyond.
The country-specific Commission assessments and an overview of the key figures from each programme are available at:
http://europa.eu.int/comm/economy_finance/about/activities/sgp/year/year20052006_en.htm
[1] According to Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (as amended by Regulation No 1055/2005), Member States that have adopted the single currency need to submit annual updates of their stability programmes and Member States that have not adopted the single currency need to submit annual updates of their convergence programmes.