# EUR-Lex - 52013DC0355 - EN

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# 52013DC0355

**Recommendation for a COUNCIL RECOMMENDATION on Germany’s 2013 national reform programme and delivering a Council opinion on Germany’s stability programme for 2012-2017 /* COM/2013/0355 final */**

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Recommendation for a

COUNCIL RECOMMENDATION

on Germany’s 2013 national reform
programme
and delivering a Council opinion on Germany’s stability programme for 2012-2017

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[1], and in particular Article 5(2)
thereof,

Having regard to the recommendation of the
European Commission[2],

Having regard to the resolutions of the
European Parliament[3],

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 Commission’s proposal to launch a new strategy
for growth and jobs, 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.

(2)       On 13 July 2010, on the
basis of the Commission's proposals, 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 Member States[4],
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 29 June 2012, the Heads
of State or Government decided on a Compact for Growth and Jobs, providing a
coherent framework for action at national, EU and euro area levels using all
possible levers, instruments and policies. They decided on action to be taken
at the level of the Member States, in particular expressing full commitment to
achieving the objectives of the Europe 2020 Strategy and to implementing the
country-specific recommendations.

(4)       On 6 July 2012, the
Council adopted a recommendation on Germany’s national reform programme for
2012 and delivered its opinion on Germany’s updated stability programme for 2011-2016.

(5)       On 28 November 2012, the
Commission adopted the Annual Growth Survey[5],
marking the start of the 2013 European Semester of economic policy
coordination. Also on 28 November 2012, the Commission, on the basis of
Regulation (EU) No 1176/2011, adopted the second Alert Mechanism Report[6], in which it did not identify Germany as one of the Member States for which an in-depth review would be carried out.

(6)       On 14 March 2013, 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.

(7)       On 17 April 2013, Germany
submitted its 2013 stability programme covering the period 2012-2017 and, on 12
April 2013, its 2013 national reform programme. In order to take account of
their interlinkages, the two programmes have been assessed at the same time.

(8)       Based on the assessment of
the 2013 stability programme pursuant to Council Regulation (EC) No 1466/97,
the Council is of the opinion that public finances in Germany have been overall sound and the medium-term budgetary objective (MTO) has been
achieved. The macroeconomic scenario underpinning the budgetary projections in
the programme is plausible. The stability programme's macroeconomic projections
are broadly in line with the Commission's 2013 spring forecast as regards the
pace and pattern of economic growth in 2013 and 2014 as well as with the
Commission's estimate of Germany's medium-term potential growth rate. The
objective of the budgetary strategy outlined in the programme is to ensure
continued achievement of the medium-term budgetary objective (MTO). The
programme confirms the previous MTO of -0.5 % of GDP. The MTO is in line with
the requirements of the Stability and Growth Pact. Germany achieved a structural
budgetary surplus and hence the MTO in 2012. According to the stability
programme, the (recalculated)[7]
structural balance will remain positive in 2013 and 2014, which is broadly in
line with the Commission’s forecast, and hence created space for automatic
stabilisers to play freely. Germany also complied with the expenditure
benchmark in 2012. According to the information provided in the stability
programme, the growth rate of government expenditure, net of discretionary
revenue measures, would exceed the expenditure benchmark in 2013, while
respecting it in 2014. The programme plans gross debt to fall to 801⁄2 % of GDP
in 2013 and to remain on a downward path thereafter. Following the correction of
the excessive deficit in 2011, Germany is in a transition period regarding
compliance with the debt criterion and made sufficient progress towards
compliance with the debt criterion in 2012. If the programme is implemented as
planned, it is also making sufficient progress towards compliance with the debt
criterion in 2013 and the debt benchmark will be met at the end of the
transition period in 2014. Overall, the deficit and debt targets appear
realistic.

(9)       Germany has made only
limited efforts to improve the efficiency of public spending on healthcare and
long-term care. Past reform efforts in the health sector as well as this year's
reform of long-term care appear insufficient to contain expected future cost
increases. Germany appears on track with respect to the national target on
education and research expenditure but should envisage even more ambitious
follow-up targets with a view to catching up with the most innovative
economies.

(10)     Germany is not sufficiently
tapping growth-friendly revenue sources. The application of the reduced VAT
rate (of currently 7 %) to what is now quite a wide range of goods and
services could be narrowed and VAT administration reviewed in an effort to
increase efficiency, improve tax collection and fight fraud. Revenues from
recurrent property taxes are particularly low in Germany (0.5 % of GDP in
2011 vs 1.3 % in the EU-27), which may leave room for increasing revenues
from the municipal real estate tax (Grundsteuer), in particular by reassessing
the tax base.

(12)     There has been some
progress in the implementation of the constitutional balanced-budget rule
("debt brake") since last year’s recommendation, However, specific
implementing rules appear still to be required in most Länder so as to
ensure the effective application of the debt brake in the annual budgetary
procedure.

(13)     The financial sector has
undergone significant adjustment and the regulatory and supervisory framework
has been strengthened. Commission state aid decisions have continued to drive the
restructuring of Landesbanken. However, there still appear to be
governance obstacles to market-driven consolidation in the banking sector,
which affect the overall efficiency of the financial sector.

(14)     Germany has not taken
action to remove significant disincentives faced by second earners and progress
in increasing the availability of full-time childcare facilities and all-day
schools remains limited. Germany has made some progress in raising the
educational achievement of disadvantaged people, but all Länder should
continue ambitious efforts to create a school system that provides equal
opportunities for all. Policy action to reduce the high tax wedge for low-wage
earners and improve the integration of the long-term unemployed into the labour
market has been limited so far. Germany should do more to reduce the high taxes
and social security contributions that they levy on low wages. Further efforts
are needed to improve transition from certain types of contracts, like
mini-jobs, into more sustainable forms of contracts, thus avoiding labour
market segmentation. While real wages are
still below their level in the year 2000, which contributed
to the structural reduction in the unemployment rate from 8% to 5.5%, they
have started to grow dynamically since then without adversely affecting
competitiveness. At the same time wage disparities have increased.

(15)     Germany is aiming to
minimise the overall economic costs of transforming the energy system. This has
not yet led to tangible results and major risks and potential inefficiencies
remain. Germany is making significant efforts to accelerate the expansion of energy
networks. Coordination of its national energy policy with the policies of neighbouring
countries is insufficient.

(16)     The situation in the
services sectors has not changed significantly since last year and there are
still restrictions on entering and exercising certain professions. Germany should do more to open up their services sector by removing unjustified
restrictions and barriers to entry, thereby leading to lower price levels,
making services more affordable for lower income groups. In many craft sectors,
including in the construction sector, there is still a requirement to hold a
master craftsman’s certificate (Meisterbrief) or an equivalent
qualification in order to run a business. The construction sector also faces
restrictions as regards commercial communication and authorisation procedures. Many
professional services are also subject to legal form and shareholding
requirements. Germany could assess whether the same public interest objectives
could not be reached with lighter regulation. The diversity of regulatory
regimes across Länder also suggests there is scope for further efforts
to identify the least burdensome regulatory approaches and extend them
throughout the country, thus cutting red tape for businesses. The level of
effective competition in the railway sector remains unchanged. Regarding public
procurement, the value of the contracts published by German authorities under
EU procurement legislation is significantly low. The legislative process
involving the revision of the Act against competition restrictions has not yet
been concluded. In the retail sector, planning regulations significantly
restrict new entries in the market.

(17)     In the context of the
European Semester, the Commission has carried out a comprehensive analysis of Germany’s economic policy. It has assessed the stability programme and national reform
programme. It has taken into account not only their relevance for sustainable
fiscal and socio-economic policy in Germany 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 (4) below.

(18)     In the light of this
assessment, the Council has examined Germany’s stability programme, and its
opinion[8]
is reflected in particular in recommendation (1) below,

(19)     In the context of the
European Semester the Commission has also carried out an analysis of the
economic policy of the euro area as a whole. On this basis the Council has
issued specific recommendations addressed to the countries that are part of the
euro area Member States whose currency is the euro. As a country that has
adopted the euro as its currency Germany should also ensure the full and timely
implementation of these recommendations.

HEREBY RECOMMENDS that Germany should take action within the period 2013-2014 to:

1.           Preserve a sound fiscal position
as envisaged which ensures compliance with the medium-term objective over the
programme horizon. Pursue a growth-friendly fiscal policy through additional
efforts to enhance the cost-effectiveness of public spending on healthcare and
long-term through better integration of care delivery and a stronger focus on
prevention and rehabilitation and independent living. Improve the efficiency of
the tax system, in particular by broadening the VAT base and by reassessing the
municipal real estate tax base; use the available scope for increased and more
efficient growth-enhancing spending on education and research at all levels of
government. Complete the implementation of the debt brake in a consistent
manner across all Länder, ensuring that monitoring procedures and
correction mechanisms are timely and relevant.

2.           Sustain conditions that
enable wage growth to support domestic demand. To this purpose, reduce high
taxes and social security contributions, especially for low-wage earners and
raise the educational achievement of disadvantaged people. Maintain appropriate
activation and integration measures, especially for the long-term unemployed. Facilitate
the transition from non-standard employment such as mini-jobs into more
sustainable forms of employment. Take measures to improve incentives to work
and the employability of workers, in particular for second earners and
low-skilled, also with a view to improving their income. To this end, remove
disincentives for second earners and increase the availability of fulltime
childcare facilities and all-day schools

3.           Improve the coordination
of the energy policy with neighbouring countries and keep the overall costs of
transforming the energy system to a minimum, in particular by reviewing the
cost-effectiveness of energy policy instruments designed to achieve the
renewable energy targets and by continuing efforts to accelerate the expansion
of the national and cross-border electricity and gas networks.

4.           Take measures to further
stimulate competition in the services sectors, including certain crafts — in
the construction sector in particular — and professional services to boost
domestic sources of growth. Take urgent action to significantly increase the value
of public contracts open to procurement. Adopt and implement the announced
legislative reform to improve the enforcement of competition law regarding
competition restrictions. Remove planning restrictions which unduly restrict
new entries in the retail sector. Take further measures to eliminate the remaining
barriers to competition in the railway markets. Pursue efforts for
consolidation in the banking sector, including by improving the governance framework.

Done at Brussels,

For
the Council

The
President

[1]               OJ L 209, 2.8.1997, p. 1.

[2]               COM(2013)355 final.

[3]               P7_TA(2013)0052 and P7_TA(2013)0053.

[4]               Council Decision2013/208/EU of 22 April 2013.

[5]               COM(2012) 750 final.

[6]               COM(2012) 751 final.

[7]               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

[8]               Under Article 5(2) of Council Regulation (EC) No
1466/97.