# Official Journal C 66/2009

| | ISSN 1725-2423 |
| --- | --- |
| Official Journal
  of the European Union | C 66 |
| | |
| English edition | Information and Notices | Volume 5220 March 2009 |

ISSN 1725-2423

Official Journal

of the European Union

C 66

English edition

Information and Notices

Volume 5220 March 2009

---

| Notice No | Contents | page |
| --- | --- | --- |
| | I   Resolutions, recommendations and opinions |
| | OPINIONS |
| | Council |
| 2009/C 066/01 | Council opinion of 10 March 2009 on the updated stability programme of Germany, 2008-2012 | 1 |
| 2009/C 066/02 | Council opinion of 10 March 2009 on the updated convergence programme of Hungary, 2008-2011 | 6 |
| 2009/C 066/03 | Council opinion of 10 March 2009 on the updated stability programme of Malta, 2008-2011 | 12 |
| 2009/C 066/04 | Council opinion of 10 March 2009 on the updated convergence programme of Poland, 2008-2011 | 17 |

Notice No

Contents

page

I   Resolutions, recommendations and opinions

OPINIONS

Council

2009/C 066/01

Council opinion of 10 March 2009 on the updated stability programme of Germany, 2008-2012

1

2009/C 066/02

Council opinion of 10 March 2009 on the updated convergence programme of Hungary, 2008-2011

6

2009/C 066/03

Council opinion of 10 March 2009 on the updated stability programme of Malta, 2008-2011

12

2009/C 066/04

Council opinion of 10 March 2009 on the updated convergence programme of Poland, 2008-2011

17

| | II   Information |
| --- | --- |
| | INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES |
| | Commission |
| 2009/C 066/05 | Authorisation for State aid pursuant to Articles 87 and 88 of the EC Treaty — Cases where the Commission raises no objections (
  1
  ) | 22 |
| 2009/C 066/06 | Non-opposition to a notified concentration (Case COMP/M.5408 — Fortress/Unicredit/Torre) (
  1
  ) | 23 |
| 2009/C 066/07 | Non-opposition to a notified concentration (Case COMP/M.5451 — CNP Assurances/CNP Unicredit Life) (
  1
  ) | 23 |
| 2009/C 066/08 | Non-opposition to a notified concentration (Case COMP/M.5253 — Sanofi-Aventis/Zentiva) (
  1
  ) | 24 |

II   Information

INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

2009/C 066/05

Authorisation for State aid pursuant to Articles 87 and 88 of the EC Treaty — Cases where the Commission raises no objections (
  1
  )

1

22

2009/C 066/06

Non-opposition to a notified concentration (Case COMP/M.5408 — Fortress/Unicredit/Torre) (
  1
  )

1

23

2009/C 066/07

Non-opposition to a notified concentration (Case COMP/M.5451 — CNP Assurances/CNP Unicredit Life) (
  1
  )

1

23

2009/C 066/08

Non-opposition to a notified concentration (Case COMP/M.5253 — Sanofi-Aventis/Zentiva) (
  1
  )

1

24

| | IV   Notices |
| --- | --- |
| | NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES |
| | Commission |
| 2009/C 066/09 | Euro exchange rates | 25 |
| | NOTICES FROM MEMBER STATES |
| 2009/C 066/10 | Information communicated by Member States regarding State aid granted under Commission Regulation (EC) No 1857/2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001 | 26 |
| 2009/C 066/11 | Information communicated by Member States regarding State aid granted under Commission Regulation (EC) No 1857/2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001 | 30 |

IV   Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

2009/C 066/09

Euro exchange rates

25

NOTICES FROM MEMBER STATES

2009/C 066/10

Information communicated by Member States regarding State aid granted under Commission Regulation (EC) No 1857/2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001

26

2009/C 066/11

Information communicated by Member States regarding State aid granted under Commission Regulation (EC) No 1857/2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001

30

| | V   Announcements |
| --- | --- |
| | PROCEDURES RELATING TO THE IMPLEMENTATION OF THE COMPETITION POLICY |
| | Commission |
| 2009/C 066/12 | Communication from the French Government concerning Directive 94/22/EC of the European Parliament and of the Council on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons (Notice regarding an application for a concession to prospect for oil and gas, designated the Nesles concession)
   (
  1
  ) | 33 |

V   Announcements

PROCEDURES RELATING TO THE IMPLEMENTATION OF THE COMPETITION POLICY

Commission

2009/C 066/12

Communication from the French Government concerning Directive 94/22/EC of the European Parliament and of the Council on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons (Notice regarding an application for a concession to prospect for oil and gas, designated the Nesles concession)
   (
  1
  )

(Notice regarding an application for a concession to prospect for oil and gas, designated the Nesles concession)

1

33

| | |
| --- | --- |
| | (1)   Text with EEA relevance |

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(1)   Text with EEA relevance

1

| EN | |
| --- | --- |

EN

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I Resolutions, recommendations and opinions

OPINIONS

Council

| 20.3.2009 | EN | Official Journal of the European Union | C 66/1 |
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20.3.2009

EN

Official Journal of the European Union

C 66/1

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COUNCIL OPINION

of 10 March 2009

on the updated stability programme of Germany, 2008-2012

(2009/C 66/01)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

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(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

| (1) | On 10 March 2009, the Council examined the updated stability programme of Germany, which covers the period 2008 to 2012. |
| --- | --- |

(1)

On 10 March 2009, the Council examined the updated stability programme of Germany, which covers the period 2008 to 2012.

| (2) | As a heavily export-oriented economy strongly specialised in investment goods, Germany is severely hit by the global recession. Real GDP growth decelerated sharply in 2008 on the back of lower export growth. A number of financial institutions, including the Landesbanken, had to bear substantial losses from the financial crisis. The direct impact of the financial crisis on the economy was, however, limited by overall sound corporate balance sheets, strong price competitiveness and the fact that Germany is not experiencing a correction in the housing market. Restoring confidence in the financial sector, ensuring access to corporate financing, facilitating adjustments in the labour market to deal with rising unemployment and strengthening domestic demand are key near-term challenges. Benefiting from successful fiscal consolidation the general government budget was close to balance in 2007 and 2008. Against this background, Germany adopted two fiscal stimulus packages in autumn 2008 and January 2009 which aim at bolstering private consumption, boosting private and public investment, ensuring access to finance, avoiding lay-offs, improving access to training, and which include measures that support the motor car industry. Revenue shortfalls and higher expenditure implied by these measures as well as by automatic stabilisers will lead to a deficit in public finances. Moreover, contingent liabilities in the context of large-scale bank rescue operations pose additional risks to the budget. An effective budgetary framework will help to support fiscal consolidation once the crisis abates. |
| --- | --- |

(2)

As a heavily export-oriented economy strongly specialised in investment goods, Germany is severely hit by the global recession. Real GDP growth decelerated sharply in 2008 on the back of lower export growth. A number of financial institutions, including the Landesbanken, had to bear substantial losses from the financial crisis. The direct impact of the financial crisis on the economy was, however, limited by overall sound corporate balance sheets, strong price competitiveness and the fact that Germany is not experiencing a correction in the housing market. Restoring confidence in the financial sector, ensuring access to corporate financing, facilitating adjustments in the labour market to deal with rising unemployment and strengthening domestic demand are key near-term challenges. Benefiting from successful fiscal consolidation the general government budget was close to balance in 2007 and 2008. Against this background, Germany adopted two fiscal stimulus packages in autumn 2008 and January 2009 which aim at bolstering private consumption, boosting private and public investment, ensuring access to finance, avoiding lay-offs, improving access to training, and which include measures that support the motor car industry. Revenue shortfalls and higher expenditure implied by these measures as well as by automatic stabilisers will lead to a deficit in public finances. Moreover, contingent liabilities in the context of large-scale bank rescue operations pose additional risks to the budget. An effective budgetary framework will help to support fiscal consolidation once the crisis abates.

| (3) | The macro-economic scenario underlying the January addendum envisages that real GDP growth will fall from 1,25 % in 2008 to – 2,25 % in 2009 before recovering to 1,25 % from 2010 onward. Assessed against currently available information (2), this scenario appears to be based on plausible growth assumptions until 2009 and somewhat favourable assumptions from 2010. In particular the expected recovery of private consumption in 2010 may prove more subdued, should the economic crisis lead to a sharper decrease in employment. The macro-economic projections take into account the stimulus measures adopted, but do not quantify their expected economic impact. The programme's projections for inflation appear realistic. |
| --- | --- |

(3)

The macro-economic scenario underlying the January addendum envisages that real GDP growth will fall from 1,25 % in 2008 to – 2,25 % in 2009 before recovering to 1,25 % from 2010 onward. Assessed against currently available information (2), this scenario appears to be based on plausible growth assumptions until 2009 and somewhat favourable assumptions from 2010. In particular the expected recovery of private consumption in 2010 may prove more subdued, should the economic crisis lead to a sharper decrease in employment. The macro-economic projections take into account the stimulus measures adopted, but do not quantify their expected economic impact. The programme's projections for inflation appear realistic.

| (4) | For 2008, the general government deficit is estimated at 0,1 % of GDP in the Commission services' January 2009 interim forecast, against a target of 0,5 % of GDP set in the December 2007 update of the programme. This better-than-expected outturn was owed to substantial revenue windfalls which occurred despite the corporate tax reform and a cut in social contribution rates. Higher direct tax revenues reflect stronger wage and employment growth and related fiscal drag effects. Part of the additional revenue was used to finance the reduction in social contribution rates and extra spending. Expenditure was 0,25 % of GDP higher than planned mainly due to one-off measures in connection with the bank rescue operations and higher outlays for retirement benefits as a result of ad hoc changes in the pension adjustment formula. |
| --- | --- |

(4)

For 2008, the general government deficit is estimated at 0,1 % of GDP in the Commission services' January 2009 interim forecast, against a target of 0,5 % of GDP set in the December 2007 update of the programme. This better-than-expected outturn was owed to substantial revenue windfalls which occurred despite the corporate tax reform and a cut in social contribution rates. Higher direct tax revenues reflect stronger wage and employment growth and related fiscal drag effects. Part of the additional revenue was used to finance the reduction in social contribution rates and extra spending. Expenditure was 0,25 % of GDP higher than planned mainly due to one-off measures in connection with the bank rescue operations and higher outlays for retirement benefits as a result of ad hoc changes in the pension adjustment formula.

| (5) | The target for the general government balance in 2009 is a deficit of 3 % of GDP. This is in line with the Commission services interim forecast. The widening of the deficit reflects tax revenue losses and higher expenditure due to automatic stabilisers (around 1,5 % of GDP) and stimulus measures taken in response to the crisis (around 1,5 % of GDP). The expenditure-to-GDP ratio is expected to increase by 2,5 percentage points, while the revenue-to-GDP ratio is projected to fall by 0,5 percentage point. The structural deficit (as recalculated by the Commission's services on the basis of the information provided in the programme) is estimated to widen by around 1,5 percentage points. |
| --- | --- |

(5)

The target for the general government balance in 2009 is a deficit of 3 % of GDP. This is in line with the Commission services interim forecast. The widening of the deficit reflects tax revenue losses and higher expenditure due to automatic stabilisers (around 1,5 % of GDP) and stimulus measures taken in response to the crisis (around 1,5 % of GDP). The expenditure-to-GDP ratio is expected to increase by 2,5 percentage points, while the revenue-to-GDP ratio is projected to fall by 0,5 percentage point. The structural deficit (as recalculated by the Commission's services on the basis of the information provided in the programme) is estimated to widen by around 1,5 percentage points.

| (6) | The medium-term budgetary objective (MTO) is to maintain a general government budget close to balance in structural terms (cyclically-adjusted net of one-off and other temporary measures). According to the programme, this implies a structural deficit of 0-0,5 % of GDP. The MTO is not expected to be reached within the programme period. However, budgetary consolidation is resumed after the deficit has peaked at 4 % of GDP, above the Treaty reference value, in 2010, to 3 % of GDP in 2011 and 2,5 % in 2012. The projections in the January addendum are based on a no-policy-change scenario and imply a mainly expenditure-based consolidation after 2010. The revenue-to-GDP ratio is expected to fall by 1,5 percentage points over 2008-2010 to 42,5 %, remain at that level in 2011 and to rebound in 2012 by 0,5 percentage point. The expenditure-to-GDP ratio will increase by 2,5 percentage points between 2008 and 2010, and is to fall thereafter by 1 percentage point.
  The revenue and expenditure developments in 2010 are mainly driven by the fiscal stimulus measures in response to the crisis. Measures underpinning the consolidation process after 2010 are not specified. Expiry of certain stimulus measures and the debt repayment fund could support the consolidation efforts. Rising deficits, lower nominal GDP growth and the stock-flow adjustments in 2008 reflecting primarily bank rescue operations contribute to an increase in the debt-to-GDP ratio by 7 percentage points over the programme period up to 72,5 % of GDP. |
| --- | --- |

(6)

The medium-term budgetary objective (MTO) is to maintain a general government budget close to balance in structural terms (cyclically-adjusted net of one-off and other temporary measures). According to the programme, this implies a structural deficit of 0-0,5 % of GDP. The MTO is not expected to be reached within the programme period. However, budgetary consolidation is resumed after the deficit has peaked at 4 % of GDP, above the Treaty reference value, in 2010, to 3 % of GDP in 2011 and 2,5 % in 2012. The projections in the January addendum are based on a no-policy-change scenario and imply a mainly expenditure-based consolidation after 2010. The revenue-to-GDP ratio is expected to fall by 1,5 percentage points over 2008-2010 to 42,5 %, remain at that level in 2011 and to rebound in 2012 by 0,5 percentage point. The expenditure-to-GDP ratio will increase by 2,5 percentage points between 2008 and 2010, and is to fall thereafter by 1 percentage point.

The revenue and expenditure developments in 2010 are mainly driven by the fiscal stimulus measures in response to the crisis. Measures underpinning the consolidation process after 2010 are not specified. Expiry of certain stimulus measures and the debt repayment fund could support the consolidation efforts. Rising deficits, lower nominal GDP growth and the stock-flow adjustments in 2008 reflecting primarily bank rescue operations contribute to an increase in the debt-to-GDP ratio by 7 percentage points over the programme period up to 72,5 % of GDP.

| (7) | The budgetary outcomes are subject to downside risks, in particular from 2010 onwards. First, the underlying macro-economic assumptions are subject to uncertainty as to the duration, extent and impact of the financial crisis. They appear to be somewhat favourable especially for 2010 and thereafter, when a swift recovery is projected to bring real GDP growth back to potential. Second, a risk to the projection is the potential lack of sufficient commitment at all levels of government to exert expenditure discipline. Third, considerable risks stem from lack of information on the measures envisaged to support the planned consolidation after 2010, notably given the permanent nature of a large part of the fiscal stimulus measures. In view of the negative risks to the deficit targets, the evolution of the debt ratio may also prove less benign than envisaged. Additional risks to the government accounts relate to direct implications of the financial crisis, in particular to possible further capital injections and potential bank takeovers (with an impact on the debt, though some effect on the deficit cannot be excluded) or bank guarantees (only to affect the deficit and the debt if and when called). |
| --- | --- |

(7)

The budgetary outcomes are subject to downside risks, in particular from 2010 onwards. First, the underlying macro-economic assumptions are subject to uncertainty as to the duration, extent and impact of the financial crisis. They appear to be somewhat favourable especially for 2010 and thereafter, when a swift recovery is projected to bring real GDP growth back to potential. Second, a risk to the projection is the potential lack of sufficient commitment at all levels of government to exert expenditure discipline. Third, considerable risks stem from lack of information on the measures envisaged to support the planned consolidation after 2010, notably given the permanent nature of a large part of the fiscal stimulus measures. In view of the negative risks to the deficit targets, the evolution of the debt ratio may also prove less benign than envisaged. Additional risks to the government accounts relate to direct implications of the financial crisis, in particular to possible further capital injections and potential bank takeovers (with an impact on the debt, though some effect on the deficit cannot be excluded) or bank guarantees (only to affect the deficit and the debt if and when called).

| (8) | The long-term budgetary impact of ageing is close to the EU average, with pension expenditure showing a somewhat more limited increase than in many other countries, as a result of the pension reforms already enacted. While the budgetary position in 2008 as estimated in the addendum would have contributed to partly offsetting the long-term budgetary impact of population ageing, the contrary would result if the budgetary projections materialise. Moreover, the current ratio of gross debt to GDP is above the Treaty reference value. Achieving high primary surpluses over the medium term would contribute to reducing the medium risks to the sustainability of public finances. The above-mentioned risks from financial sector stabilisation schemes (e.g. recapitalisation, guarantees) put in place by Germany could have a potential negative impact on the long-term sustainability of public finances, primarily via their impact on government debt, although some of the cost of the government support could be recouped in the future. |
| --- | --- |

(8)

The long-term budgetary impact of ageing is close to the EU average, with pension expenditure showing a somewhat more limited increase than in many other countries, as a result of the pension reforms already enacted. While the budgetary position in 2008 as estimated in the addendum would have contributed to partly offsetting the long-term budgetary impact of population ageing, the contrary would result if the budgetary projections materialise. Moreover, the current ratio of gross debt to GDP is above the Treaty reference value. Achieving high primary surpluses over the medium term would contribute to reducing the medium risks to the sustainability of public finances. The above-mentioned risks from financial sector stabilisation schemes (e.g. recapitalisation, guarantees) put in place by Germany could have a potential negative impact on the long-term sustainability of public finances, primarily via their impact on government debt, although some of the cost of the government support could be recouped in the future.

| (9) | Despite the overall sound quality of public finances and fiscal rules, there is still room for improvements of Germany's institutional budgetary framework. The Council welcomes the progress towards establishing a new budgetary rule providing for a limit of 0,35 % of GDP for the federal structural deficit in normal times and structurally balanced Länder budgets. The rule is to be anchored in the German Constitution still during the current legislation period and become operational by 2011 with transition periods for the federal government until 2015 and for the Länder until 2019. Furthermore, the government plans an overhaul of the federal budgeting and accounting system with a stronger focus on a performance-based assessment of revenues and expenditures. |
| --- | --- |

(9)

Despite the overall sound quality of public finances and fiscal rules, there is still room for improvements of Germany's institutional budgetary framework. The Council welcomes the progress towards establishing a new budgetary rule providing for a limit of 0,35 % of GDP for the federal structural deficit in normal times and structurally balanced Länder budgets. The rule is to be anchored in the German Constitution still during the current legislation period and become operational by 2011 with transition periods for the federal government until 2015 and for the Länder until 2019. Furthermore, the government plans an overhaul of the federal budgeting and accounting system with a stronger focus on a performance-based assessment of revenues and expenditures.

| (10) | With a view to stabilising the financial sector, the German authorities established a Financial Market Stabilisation Fund operational until end-2009 to provide capital (EUR 80 billion, around 3 % of GDP) and credit guarantees (EUR 400 billion, around 16 % of GDP). Already in 2007 and 2008 the German government at the federal and regional level was involved in large-scale bank rescue operations, providing capital and guarantees. Moreover, in 2008 the German government offered an unlimited guarantee for all private bank deposits. Further initiatives to alleviate bank balance sheets from troubled assets are under discussion. Resulting contingent liabilities from these rescue measures pose additional risks to the budget. |
| --- | --- |

(10)

With a view to stabilising the financial sector, the German authorities established a Financial Market Stabilisation Fund operational until end-2009 to provide capital (EUR 80 billion, around 3 % of GDP) and credit guarantees (EUR 400 billion, around 16 % of GDP). Already in 2007 and 2008 the German government at the federal and regional level was involved in large-scale bank rescue operations, providing capital and guarantees. Moreover, in 2008 the German government offered an unlimited guarantee for all private bank deposits. Further initiatives to alleviate bank balance sheets from troubled assets are under discussion. Resulting contingent liabilities from these rescue measures pose additional risks to the budget.

| (11) | In line with the EERP agreed in December by the European Council, Germany decided on a sizeable fiscal stimulus for 2009 and 2010 (around 3,5 % of GDP over two years) which is deemed to be an adequate response to the economic downturn. The measures focus on income support, private and public investment, avoiding lay-offs and improving training, support to credit-constrained companies and the automotive industry. They are broadly in line with the EERP, coming targeted and timely, even though the stimulus is somewhat back-loaded. However, while some of the measures are of temporary nature, a substantial part of them will be permanent. Thus, the full reversibility of the measures adopted in response to the crisis is not ensured. However, the envisaged debt repayment schedule and the new budgetary rule will aid the necessary fiscal consolidation process once the crisis recedes. The recovery will be supported by structural measures such as innovation support for the private sector, improved employment services and better broadband access within the framework of the planned Broadband Strategy. These measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs. Moreover, temporary changes in the public procurement procedures aim at accelerating infrastructure investment. |
| --- | --- |

(11)

In line with the EERP agreed in December by the European Council, Germany decided on a sizeable fiscal stimulus for 2009 and 2010 (around 3,5 % of GDP over two years) which is deemed to be an adequate response to the economic downturn. The measures focus on income support, private and public investment, avoiding lay-offs and improving training, support to credit-constrained companies and the automotive industry. They are broadly in line with the EERP, coming targeted and timely, even though the stimulus is somewhat back-loaded. However, while some of the measures are of temporary nature, a substantial part of them will be permanent. Thus, the full reversibility of the measures adopted in response to the crisis is not ensured. However, the envisaged debt repayment schedule and the new budgetary rule will aid the necessary fiscal consolidation process once the crisis recedes. The recovery will be supported by structural measures such as innovation support for the private sector, improved employment services and better broadband access within the framework of the planned Broadband Strategy. These measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs. Moreover, temporary changes in the public procurement procedures aim at accelerating infrastructure investment.

| (12) | In response to the economic downturn, the overall fiscal stance in 2009 and 2010 is expansionary. In the latter year, the deficit is expected to exceed the reference value. For 2011, the programme targets a substantial structural improvement (by 1 percentage point) and a further, albeit smaller step for 2012. While the pace of deficit reduction is broadly in line with the Stability and Growth Pact, a sufficient safety margin against breaching the 3 % of GDP deficit limit would not be reached within the programme period and the outlined consolidation path is subject to considerable risks. Finally, the debt ratio is increasing over the programme period, reflecting the expansionary stance in 2009 and 2010 and financial transactions related to the bank rescue operations undertaken. |
| --- | --- |

(12)

In response to the economic downturn, the overall fiscal stance in 2009 and 2010 is expansionary. In the latter year, the deficit is expected to exceed the reference value. For 2011, the programme targets a substantial structural improvement (by 1 percentage point) and a further, albeit smaller step for 2012. While the pace of deficit reduction is broadly in line with the Stability and Growth Pact, a sufficient safety margin against breaching the 3 % of GDP deficit limit would not be reached within the programme period and the outlined consolidation path is subject to considerable risks. Finally, the debt ratio is increasing over the programme period, reflecting the expansionary stance in 2009 and 2010 and financial transactions related to the bank rescue operations undertaken.

| (13) | As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has some gaps in the required and optional data (3). |
| --- | --- |

(13)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has some gaps in the required and optional data (3).

The overall conclusion is that benefiting from earlier consolidation and the achievement of a close-to-balance position in 2008, Germany was able to introduce a sizeable fiscal stimulus. This is welcome as it is commensurate with the scale of the economic downturn. Given the sharp deterioration in the global economic environment and distress in the financial sector, the budgetary strategy is subject to downside risks. Full reversibility of the short-term measures adopted in response to the crisis is however currently not ensured. Hence, the implementation of an enhanced medium-term budgetary framework as currently envisaged and the strong commitment at all levels of government to adhere to it will be crucial to return to fiscal consolidation once the crisis has abated. Given increasing public debt, ad hoc changes to the pension adjustment formula and uncertainty as to the impact of the health-care reform, preserving the achievements made to improve long-term sustainability is critical.

In view of the above assessment, Germany is invited to:

| (i) | implement the 2009 and 2010 fiscal policy as planned including stimulus measures in line with the EERP and within the framework of the SGP, reverse the fiscal stimulus in order to support significant budgetary consolidation towards the MTO, starting in 2011 at the latest; |
| --- | --- |

(i)

implement the 2009 and 2010 fiscal policy as planned including stimulus measures in line with the EERP and within the framework of the SGP, reverse the fiscal stimulus in order to support significant budgetary consolidation towards the MTO, starting in 2011 at the latest;

| (ii) | to this end strengthen the institutional fiscal framework by implementing the new budgetary rule as currently envisaged in order to underpin the necessary consolidation course after 2010; |
| --- | --- |

(ii)

to this end strengthen the institutional fiscal framework by implementing the new budgetary rule as currently envisaged in order to underpin the necessary consolidation course after 2010;

| (iii) | give renewed attention to measures strengthening the long-term sustainability of public finances and ensure that the deviation from the pension adjustment formula in 2008 is reversed as envisaged. |
| --- | --- |

(iii)

give renewed attention to measures strengthening the long-term sustainability of public finances and ensure that the deviation from the pension adjustment formula in 2008 is reversed as envisaged.

Comparison of key macro-economic and budgetary projections

| | | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Dec 2008 | 2,5 | 1,3 | – 2,25 | 1,25 | 1,25 | 1,25 |
| COM Jan 2009 | 2,5 | 1,3 | – 2,3 | 0,7 | n.a. | n.a. |
| SP Nov 2007 | 2,4 | 2,0 | 1,5 | 1,5 | 1,5 | n.a. |
| HICP inflation
  (%) | SP Dec 2008 | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
| COM Jan 2009 | 2,3 | 2,8 | 0,8 | 1,4 | n.a. | n.a. |
| SP Nov 2007 | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
| Output gap (4)

  (% of potential GDP) | SP Dec 2008 | 2,0 | 2,2 | – 0,9 | – 0,7 | – 0,7 | – 1,0 |
| COM Jan 2009 (5) | 2,2 | 2,3 | – 1,0 | – 1,2 | n.a. | n.a. |
| SP Nov 2007 | 0,7 | 1,1 | 0,8 | 0,5 | – 0,1 | n.a. |
| Net lending/borrowing vis-à-vis the rest of the world
  (% of GDP) | SP Dec 2008 | 7,6 | 7,1 | 7,0 | 7 | 7 | 7 |
| COM Jan 2009 | 7,6 | 7,1 | 5,2 | 5,4 | n.a. | n.a. |
| SP Nov 2007 | 6,1 | 6,1 | 6,3 | 6,3 | 6,3 | n.a. |
| General government revenue
  (% of GDP) | SP Dec 2008 | 44,0 | 44 | 43,5 | 42,5 | 42,5 | 43 |
| COM Jan 2009 | 43,9 | 43,7 | 43,5 | 42,3 | n.a. | n.a. |
| SP Nov 2007 | 44 | 43 | 43 | 42,5 | 42 | n.a. |
| General government expenditure
  (% of GDP) | SP Dec 2008 | 44,2 | 44 | 46,5 | 46,5 | 45,5 | 45,5 |
| COM Jan 2009 | 44,1 | 43,8 | 46,4 | 46,4 | n.a. | n.a. |
| SP Nov 2007 | 44 | 43,5 | 43 | 42 | 41,5 | n.a. |
| General government balance
  (% of GDP) | SP Dec 2008 | – 0,2 | – 0 | – 3 | – 4 | – 3 | – 2,5 |
| COM Jan 2009 | – 0,2 | – 0,1 | – 2,9 | – 4,2 | n.a. | n.a. |
| SP Nov 2007 | 0 | – 0,5 | 0 | 0,5 | 0,5 | n.a. |
| Primary balance
  (% of GDP) | SP Dec 2008 | 2,6 | 2,5 | 0 | – 1 | 0 | ,5 |
| COM Jan 2009 | 2,6 | 2,6 | – 0,1 | – 1,3 | n.a. | n.a. |
| SP Nov 2007 | 3 | 2,5 | 2,5 | 3 | 3,5 | n.a. |
| Cyclically-adjusted balance (4)

  (% of GDP) | SP Dec 2008 | – 1,2 | – 1,2 | – 2,4 | – 3,5 | – 2,4 | – 2,1 |
| COM Jan 2009 | – 1,3 | – 1,3 | – 2,4 | – 3,6 | n.a. | n.a. |
| SP Nov 2007 | – 0,3 | – 0,8 | – 0,4 | 0,0 | 0,7 | n.a. |
| Structural balance (6)

  (% of GDP) | SP Dec 2008 | – 0,9 | – 0.8 | – 2,5 | – 3,4 | – 2,4 | – 2,1 |
| COM Jan 2009 | – 1,0 | – 0,9 | – 2,4 | – 3,4 | n.a. | n.a. |
| SP Nov 2007 | – 0,3 | – 0,7 | – 0,3 | 0 | 0,7 | n.a. |
| Government gross debt
  (% of GDP) | SP Dec 2008 | 65,1 | 65,5 | 68,5 | 70,5 | 71,5 | 72,5 |
| COM Jan 2009 | 65,1 | 65,6 | 69,6 | 72,3 | n.a. | n.a. |
| SP Nov 2007 | 65 | 63 | – 61,5 | – 59,5 | – 57,5 | n.a. |
| Stability programme (SP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations. |

2007

2008

2009

2010

2011

2012

Real GDP

(% change)

SP Dec 2008

2,5

1,3

– 2,25

1,25

1,25

1,25

COM Jan 2009

2,5

1,3

– 2,3

0,7

n.a.

n.a.

SP Nov 2007

2,4

2,0

1,5

1,5

1,5

n.a.

HICP inflation

(%)

SP Dec 2008

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

COM Jan 2009

2,3

2,8

0,8

1,4

n.a.

n.a.

SP Nov 2007

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Output gap (4)

(% of potential GDP)

SP Dec 2008

2,0

2,2

– 0,9

– 0,7

– 0,7

– 1,0

COM Jan 2009 (5)

2,2

2,3

– 1,0

– 1,2

n.a.

n.a.

SP Nov 2007

0,7

1,1

0,8

0,5

– 0,1

n.a.

Net lending/borrowing vis-à-vis the rest of the world

(% of GDP)

SP Dec 2008

7,6

7,1

7,0

7

7

7

COM Jan 2009

7,6

7,1

5,2

5,4

n.a.

n.a.

SP Nov 2007

6,1

6,1

6,3

6,3

6,3

n.a.

General government revenue

(% of GDP)

SP Dec 2008

44,0

44

43,5

42,5

42,5

43

COM Jan 2009

43,9

43,7

43,5

42,3

n.a.

n.a.

SP Nov 2007

44

43

43

42,5

42

n.a.

General government expenditure

(% of GDP)

SP Dec 2008

44,2

44

46,5

46,5

45,5

45,5

COM Jan 2009

44,1

43,8

46,4

46,4

n.a.

n.a.

SP Nov 2007

44

43,5

43

42

41,5

n.a.

General government balance

(% of GDP)

SP Dec 2008

– 0,2

– 0

– 3

– 4

– 3

– 2,5

COM Jan 2009

– 0,2

– 0,1

– 2,9

– 4,2

n.a.

n.a.

SP Nov 2007

0

– 0,5

0

0,5

0,5

n.a.

Primary balance

(% of GDP)

SP Dec 2008

2,6

2,5

0

– 1

0

,5

COM Jan 2009

2,6

2,6

– 0,1

– 1,3

n.a.

n.a.

SP Nov 2007

3

2,5

2,5

3

3,5

n.a.

Cyclically-adjusted balance (4)

(% of GDP)

SP Dec 2008

– 1,2

– 1,2

– 2,4

– 3,5

– 2,4

– 2,1

COM Jan 2009

– 1,3

– 1,3

– 2,4

– 3,6

n.a.

n.a.

SP Nov 2007

– 0,3

– 0,8

– 0,4

0,0

0,7

n.a.

Structural balance (6)

(% of GDP)

SP Dec 2008

– 0,9

– 0.8

– 2,5

– 3,4

– 2,4

– 2,1

COM Jan 2009

– 1,0

– 0,9

– 2,4

– 3,4

n.a.

n.a.

SP Nov 2007

– 0,3

– 0,7

– 0,3

0

0,7

n.a.

Government gross debt

(% of GDP)

SP Dec 2008

65,1

65,5

68,5

70,5

71,5

72,5

COM Jan 2009

65,1

65,6

69,6

72,3

n.a.

n.a.

SP Nov 2007

65

63

– 61,5

– 59,5

– 57,5

n.a.

Stability programme (SP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations.

---

(1)  OJ L 209, 2.8.1997, p. 1. The documents referred to in this text can be found at the following website:

http://ec.europa.eu/economy_finance/about/activities/sgp/main_en.htm

(2)  The assessment notably takes into account the Commission services' January 2009 forecast, but also other information that has become available since then.

(3)  In particular, data on HICP inflation, the breakdown of tax revenue and of government expenditure into intermediate consumption, social transfers in kind and compensation of employees are not provided in the programme and not all basic assumptions underlying the macro-economic scenario are spelled out.

(4)  Output gaps and cyclically-adjusted balances from the programmes as recalculated by Commission services on the basis of the information in the programmes.

(5)  Based on estimated potential growth of 1,1 %, 1,2 %, 0,9 % and 1,0 % respectively in the period 2007-2010.

(6)  Cyclically-adjusted balance excluding one-off and other temporary measures. One-off and other temporary measures are 0,3 % of GDP in 2007 and 0,5 % of GDP in 2008 all deficit-increasing according to the most recent programme and 0,3 % of GDP in 2007, 0,3 % of GDP in 2008 and 0,1 % of GDP in 2010 all deficit-increasing in the Commission services' January interim forecast.

Source:

Stability programme (SP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations.

---

| 20.3.2009 | EN | Official Journal of the European Union | C 66/6 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/6

---

COUNCIL OPINION

of 10 March 2009

on the updated convergence programme of Hungary, 2008-2011

(2009/C 66/02)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

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 9(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

| (1) | On 10 March 2009, the Council examined the updated convergence programme of Hungary, which covers the period 2008 to 2011. |
| --- | --- |

(1)

On 10 March 2009, the Council examined the updated convergence programme of Hungary, which covers the period 2008 to 2011.

| (2) | After a moderate pickup in the first half of 2008, GDP declined slightly in the third quarter and more strongly in the fourth quarter. Despite the improvement in Hungary's twin deficits in recent years, the country has remained vulnerable due to high levels of government and external debt. Consequently, the financial crisis hit Hungary particularly hard and led to a sharp exchange rate depreciation and dysfunction in many segments of the financial markets. Therefore, restoring investor confidence and improving the functioning of financial markets are the most imminent challenges for economic policy. To this end, the central bank introduced new instruments and a new economic programme was adopted containing further fiscal adjustments, tighter deficit targets as well as a bank rescue package and enhanced financial sector regulation. In support of these steps, Hungary has been granted a large (EUR 20 billion) international financial assistance (2), subject to progress in fiscal consolidation, fiscal governance reform, financial sector regulation and supervision and structural reforms (3), from the EU, the IMF and the World Bank. The economic programme associated with the loan is incorporated in both the 2009 budget and the convergence programme update. The National Bank of Hungary tightened monetary policy via a hike in the base rate in October 2008 from 8,50 % to 11,50 % before lowering rates in the last two months of 2008 (in three steps to 10 % in December 2008). The Hungarian forint depreciated by 2,6 % in nominal effective terms during 2008. |
| --- | --- |

(2)

After a moderate pickup in the first half of 2008, GDP declined slightly in the third quarter and more strongly in the fourth quarter. Despite the improvement in Hungary's twin deficits in recent years, the country has remained vulnerable due to high levels of government and external debt. Consequently, the financial crisis hit Hungary particularly hard and led to a sharp exchange rate depreciation and dysfunction in many segments of the financial markets. Therefore, restoring investor confidence and improving the functioning of financial markets are the most imminent challenges for economic policy. To this end, the central bank introduced new instruments and a new economic programme was adopted containing further fiscal adjustments, tighter deficit targets as well as a bank rescue package and enhanced financial sector regulation. In support of these steps, Hungary has been granted a large (EUR 20 billion) international financial assistance (2), subject to progress in fiscal consolidation, fiscal governance reform, financial sector regulation and supervision and structural reforms (3), from the EU, the IMF and the World Bank. The economic programme associated with the loan is incorporated in both the 2009 budget and the convergence programme update. The National Bank of Hungary tightened monetary policy via a hike in the base rate in October 2008 from 8,50 % to 11,50 % before lowering rates in the last two months of 2008 (in three steps to 10 % in December 2008). The Hungarian forint depreciated by 2,6 % in nominal effective terms during 2008.

| (3) | The programme contains two different scenarios for the macro-economic and budgetary projections: a ‘baseline’ scenario and an ‘alternative’ scenario. The ‘baseline’ scenario is considered the reference scenario for assessing the budgetary projections because only this scenario contains detailed calculations concerning the breakdown of the budgetary and macro-economic aggregates. It envisages that after subdued growth of around 1 % in the previous two years real GDP growth will drop by 0,9 % in 2009 before accelerating again to 1,6 % and 2,5 % in 2010 and 2011, respectively. Assessed against currently available information (4), the baseline scenario appears to be based on markedly favourable growth assumptions over the entire programme horizon, partly because the worsening of the growth prospects in trading partner countries is likely to be more pronounced than assumed by the programme scenario. Assuming a worse external trade performance and a somewhat larger decline in investment, the Commission services' January 2009 interim forecast projected GDP to drop by 1,6 % in 2009 and then to accelerate to 1 % in 2010. However, in view of recent information including the sharp fall in industrial production in December and the strong deceleration in credits to corporations and households in late 2008, the outcome is likely to be much worse (around – 3,25 % in 2009). The programme's inflation projection of 4,5 % for 2009 also appears to be on the high side. Moreover, the strong export performance and the related improvement in the net financing capacity of the private sector over the programme horizon seem somewhat favourable. |
| --- | --- |

(3)

The programme contains two different scenarios for the macro-economic and budgetary projections: a ‘baseline’ scenario and an ‘alternative’ scenario. The ‘baseline’ scenario is considered the reference scenario for assessing the budgetary projections because only this scenario contains detailed calculations concerning the breakdown of the budgetary and macro-economic aggregates. It envisages that after subdued growth of around 1 % in the previous two years real GDP growth will drop by 0,9 % in 2009 before accelerating again to 1,6 % and 2,5 % in 2010 and 2011, respectively. Assessed against currently available information (4), the baseline scenario appears to be based on markedly favourable growth assumptions over the entire programme horizon, partly because the worsening of the growth prospects in trading partner countries is likely to be more pronounced than assumed by the programme scenario. Assuming a worse external trade performance and a somewhat larger decline in investment, the Commission services' January 2009 interim forecast projected GDP to drop by 1,6 % in 2009 and then to accelerate to 1 % in 2010. However, in view of recent information including the sharp fall in industrial production in December and the strong deceleration in credits to corporations and households in late 2008, the outcome is likely to be much worse (around – 3,25 % in 2009). The programme's inflation projection of 4,5 % for 2009 also appears to be on the high side. Moreover, the strong export performance and the related improvement in the net financing capacity of the private sector over the programme horizon seem somewhat favourable.

| (4) | For 2008, the general government deficit is estimated at 3,3 % of GDP in the Commission services' January 2009 interim forecast, against a target of 4 % of GDP set in the previous update of the convergence programme. The overachievement of this target against the background of weak growth is chiefly due to a favourable base effect on both the revenue and expenditure side from 2007 (when the deficit reached 5 % of GDP). |
| --- | --- |

(4)

For 2008, the general government deficit is estimated at 3,3 % of GDP in the Commission services' January 2009 interim forecast, against a target of 4 % of GDP set in the previous update of the convergence programme. The overachievement of this target against the background of weak growth is chiefly due to a favourable base effect on both the revenue and expenditure side from 2007 (when the deficit reached 5 % of GDP).

| (5) | The update sets the 2009 budget deficit target at 2,6 % of GDP which compares with 3,2 % of GDP contained in the previous update and a projection of 2,8 % of GDP in the Commission services' interim forecast. The target was tightened as part of the government response to the financial crisis and against the background of a significantly deteriorated macro-economic scenario. Given the context of the financial crisis and the high deficit and public debt, the government did not adopt any fiscal stimulus measures. More recently however, in view of the sharper-than-expected economic downturn that is estimated to result in a revenue shortfall of around 1 % of GDP, the Government adopted on 15 February an additional corrective package of 0,7 % of GDP and revised its 2009 deficit target to 2,7-2,9 % of GDP in the context of the first review of its new economic programme. The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures), according to the information provided in the update and as recalculated by Commission services, is planned to improve by around 1,75 percentage points of GDP, pointing to a strongly restrictive fiscal policy stance. |
| --- | --- |

(5)

The update sets the 2009 budget deficit target at 2,6 % of GDP which compares with 3,2 % of GDP contained in the previous update and a projection of 2,8 % of GDP in the Commission services' interim forecast. The target was tightened as part of the government response to the financial crisis and against the background of a significantly deteriorated macro-economic scenario. Given the context of the financial crisis and the high deficit and public debt, the government did not adopt any fiscal stimulus measures. More recently however, in view of the sharper-than-expected economic downturn that is estimated to result in a revenue shortfall of around 1 % of GDP, the Government adopted on 15 February an additional corrective package of 0,7 % of GDP and revised its 2009 deficit target to 2,7-2,9 % of GDP in the context of the first review of its new economic programme. The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures), according to the information provided in the update and as recalculated by Commission services, is planned to improve by around 1,75 percentage points of GDP, pointing to a strongly restrictive fiscal policy stance.

| (6) | The main objective of the medium-term budgetary strategy in the update is to reduce the nominal deficit from 3,4 % of GDP in 2008 to 2,6 % of GDP in 2009, which is expected to be followed by a slight decline to 2,5 % in 2010 and further to 2,2 % of GDP in 2011. Since interest expenditure is anticipated to rise by half a percentage point of GDP in 2009, the primary balance shows a larger improvement in that year (exceeding 1 percentage point), followed by a 0,3 % of GDP improvement until 2011 to reach a surplus of 2,2 % of GDP. The country's medium-term objective (MTO) for the budgetary position (a deficit of 0,5 % of GDP in structural terms, i.e. cyclically-adjusted balance net of one-off and other temporary measures) is not expected to be achieved within the programme period. The overall budgetary consolidation of 1,2 percentage point of GDP is planned to be evenly distributed between the revenue and expenditure side. After 2009, the programme does not spell out the detailed measures underlying the planned deficit reduction. The update estimates that the debt-to-GDP ratio has increased steeply in 2008 to slightly over 71 %, chiefly linked to the utilisation of the first instalment of the financial assistance from the EU and the IMF mostly for reserve build-up. In 2009, the debt ratio is projected to increase further to 72,5 %, but in the outer years it is foreseen to start declining at an increasing pace (to 69 %), supported also by the gradual pick-up in growth. |
| --- | --- |

(6)

The main objective of the medium-term budgetary strategy in the update is to reduce the nominal deficit from 3,4 % of GDP in 2008 to 2,6 % of GDP in 2009, which is expected to be followed by a slight decline to 2,5 % in 2010 and further to 2,2 % of GDP in 2011. Since interest expenditure is anticipated to rise by half a percentage point of GDP in 2009, the primary balance shows a larger improvement in that year (exceeding 1 percentage point), followed by a 0,3 % of GDP improvement until 2011 to reach a surplus of 2,2 % of GDP. The country's medium-term objective (MTO) for the budgetary position (a deficit of 0,5 % of GDP in structural terms, i.e. cyclically-adjusted balance net of one-off and other temporary measures) is not expected to be achieved within the programme period. The overall budgetary consolidation of 1,2 percentage point of GDP is planned to be evenly distributed between the revenue and expenditure side. After 2009, the programme does not spell out the detailed measures underlying the planned deficit reduction. The update estimates that the debt-to-GDP ratio has increased steeply in 2008 to slightly over 71 %, chiefly linked to the utilisation of the first instalment of the financial assistance from the EU and the IMF mostly for reserve build-up. In 2009, the debt ratio is projected to increase further to 72,5 %, but in the outer years it is foreseen to start declining at an increasing pace (to 69 %), supported also by the gradual pick-up in growth.

| (7) | The budgetary outcomes are subject to downside risks, especially in the outer years of the programme. The risks to the deficit path stemming from the macro-economic outlook are considerable throughout the entire programme period. A deeper and more protracted recession will imply significant across-the-board revenue shortfalls and moderate increases in expenditures. However, on the expenditure side, there have recently been a number of positive elements. Budgetary control has considerably improved since 2006 and the enacted reform steps appear to have structurally restrained the past pattern of budgetary slippages in some important areas (e.g. price subsidies).
  In addition, the government adopted further expenditure cuts of 0,7 % of GDP for 2009 in response to the recent sharp deterioration of the economic outlook. Nevertheless, the risk of expenditure overruns cannot be ruled out, especially after 2009. In particular, the planned expenditure moderation might not be backed by follow-up steps in the reforms of the public administration, health and education systems and the further necessary budgetary measures do not seem to be fully specified and implemented. On the other hand, the implementation of the planned reform steps in the pension, social benefit and household subsidy systems should contribute to expenditure moderation in the medium term. Even though the fiscal governance framework was considerably strengthened, the risk of a budgetary loosening compared to plans as evidenced by past experience cannot be fully discarded, also in view of the fact that the new budgetary framework is still untested. Risks to the budgetary targets equally apply to the debt ratio; therefore its evolution envisaged from 2009 might also be less favourable than projected in the programme. |
| --- | --- |

(7)

The budgetary outcomes are subject to downside risks, especially in the outer years of the programme. The risks to the deficit path stemming from the macro-economic outlook are considerable throughout the entire programme period. A deeper and more protracted recession will imply significant across-the-board revenue shortfalls and moderate increases in expenditures. However, on the expenditure side, there have recently been a number of positive elements. Budgetary control has considerably improved since 2006 and the enacted reform steps appear to have structurally restrained the past pattern of budgetary slippages in some important areas (e.g. price subsidies).

In addition, the government adopted further expenditure cuts of 0,7 % of GDP for 2009 in response to the recent sharp deterioration of the economic outlook. Nevertheless, the risk of expenditure overruns cannot be ruled out, especially after 2009. In particular, the planned expenditure moderation might not be backed by follow-up steps in the reforms of the public administration, health and education systems and the further necessary budgetary measures do not seem to be fully specified and implemented. On the other hand, the implementation of the planned reform steps in the pension, social benefit and household subsidy systems should contribute to expenditure moderation in the medium term. Even though the fiscal governance framework was considerably strengthened, the risk of a budgetary loosening compared to plans as evidenced by past experience cannot be fully discarded, also in view of the fact that the new budgetary framework is still untested. Risks to the budgetary targets equally apply to the debt ratio; therefore its evolution envisaged from 2009 might also be less favourable than projected in the programme.

| (8) | A number of pension reform steps have recently been implemented, which are expected to moderate somewhat the increase in future pension expenditure, but more needs to be done to this end. The budgetary position in 2008 as estimated in the programme improved from the estimated starting position of the previous programme, however, the budgetary impact of population ageing remains high. The current level of gross debt is still above the Treaty reference value. Ensuring higher primary surpluses over the medium term, as already foreseen in the programme, as well as further pension reform steps as recently announced by the Government would contribute to reducing the medium risks to the sustainability of public finances. |
| --- | --- |

(8)

A number of pension reform steps have recently been implemented, which are expected to moderate somewhat the increase in future pension expenditure, but more needs to be done to this end. The budgetary position in 2008 as estimated in the programme improved from the estimated starting position of the previous programme, however, the budgetary impact of population ageing remains high. The current level of gross debt is still above the Treaty reference value. Ensuring higher primary surpluses over the medium term, as already foreseen in the programme, as well as further pension reform steps as recently announced by the Government would contribute to reducing the medium risks to the sustainability of public finances.

| (9) | Until 2006 when the deficit peaked at 9,3 % of GDP, the Hungarian budgetary framework was very vulnerable to fiscal slippages and was exposed recurrently to the electoral cycle. Following some gradual improvement in transparency and budgetary planning starting from 2006, a reform law of fiscal governance was adopted in November 2008 containing multi-annual numerical rules and the establishment of a Fiscal Council. The new body will carry out independent macro-economic and budgetary forecasts as well as fiscal impact assessments, and assess the budgetary situation and budget proposals. If implemented with determination, the new set-up should be conducive to improving the transparency and sustainability of public finances. However, some important issues remain unresolved, such as the specification of effective enforcement mechanisms and the coverage of the subnational sector. |
| --- | --- |

(9)

Until 2006 when the deficit peaked at 9,3 % of GDP, the Hungarian budgetary framework was very vulnerable to fiscal slippages and was exposed recurrently to the electoral cycle. Following some gradual improvement in transparency and budgetary planning starting from 2006, a reform law of fiscal governance was adopted in November 2008 containing multi-annual numerical rules and the establishment of a Fiscal Council. The new body will carry out independent macro-economic and budgetary forecasts as well as fiscal impact assessments, and assess the budgetary situation and budget proposals. If implemented with determination, the new set-up should be conducive to improving the transparency and sustainability of public finances. However, some important issues remain unresolved, such as the specification of effective enforcement mechanisms and the coverage of the subnational sector.

| (10) | In response to the financial crisis, the Hungarian authorities did not only tighten in October 2008 budgetary targets to reduce external financing needs of the economy as part of the new economic programme but also adopted a number of measures to ensure the stability of the financial sector. The coverage of the deposit guarantee scheme has been increased from HUF 6 million to HUF 13 million. The authorities also adopted a banking sector support scheme, which foresees the provision of interbank guarantees as well as a recapitalisation fund. Additionally, the central bank has taken a number of measures aimed at enhancing market liquidity, also supported by the repo agreement concluded with the European Central Bank. Further measures to strengthen financial market regulation and supervision are expected in line with the economic programme linked to the international financial assistance. |
| --- | --- |

(10)

In response to the financial crisis, the Hungarian authorities did not only tighten in October 2008 budgetary targets to reduce external financing needs of the economy as part of the new economic programme but also adopted a number of measures to ensure the stability of the financial sector. The coverage of the deposit guarantee scheme has been increased from HUF 6 million to HUF 13 million. The authorities also adopted a banking sector support scheme, which foresees the provision of interbank guarantees as well as a recapitalisation fund. Additionally, the central bank has taken a number of measures aimed at enhancing market liquidity, also supported by the repo agreement concluded with the European Central Bank. Further measures to strengthen financial market regulation and supervision are expected in line with the economic programme linked to the international financial assistance.

| (11) | In response to the economic crisis, the Hungarian authorities endorsed a budget-neutral package of measures to stimulate the economy, including structural reform steps. In the light of the need for correcting its significant external and internal imbalances, and in line with the EERP agreed in December by the European Council, the Hungarian authorities did not implement any fiscal stimulus measures. With a view to sustaining aggregate demand and employment over 2009 and 2010, the adopted measures include, notably, the acceleration of the absorption of EU structural funds and their reshuffling, as well as improving the access of small and medium-sized enterprises to financing. Structural reforms are an important element of the EERP, and are especially a relevant avenue for policy action in Hungary in light of the limited scope for fiscal stimulus and the need to improve external competitiveness. Less emphasis has been put on strengthening competitiveness. Moreover, Parliament adopted in December the ‘Pathway to work’ programme, which aims at creating incentives and improving employability of the low-skilled and long-term unemployed also through a partial reorientation of passive means in the Labour Market Fund towards active labour market policies. The programme includes a sharp increase in public works schemes, as well as training programmes, and adds incentives for better cooperation between the targeted population and the Public Employment Service. In addition, the Government continued to reform in gradual steps the health-care and education systems and the public administration. These measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs. On 16 February, the Government announced further structural reforms in the area of pension, social benefits, and local governments. |
| --- | --- |

(11)

In response to the economic crisis, the Hungarian authorities endorsed a budget-neutral package of measures to stimulate the economy, including structural reform steps. In the light of the need for correcting its significant external and internal imbalances, and in line with the EERP agreed in December by the European Council, the Hungarian authorities did not implement any fiscal stimulus measures. With a view to sustaining aggregate demand and employment over 2009 and 2010, the adopted measures include, notably, the acceleration of the absorption of EU structural funds and their reshuffling, as well as improving the access of small and medium-sized enterprises to financing. Structural reforms are an important element of the EERP, and are especially a relevant avenue for policy action in Hungary in light of the limited scope for fiscal stimulus and the need to improve external competitiveness. Less emphasis has been put on strengthening competitiveness. Moreover, Parliament adopted in December the ‘Pathway to work’ programme, which aims at creating incentives and improving employability of the low-skilled and long-term unemployed also through a partial reorientation of passive means in the Labour Market Fund towards active labour market policies. The programme includes a sharp increase in public works schemes, as well as training programmes, and adds incentives for better cooperation between the targeted population and the Public Employment Service. In addition, the Government continued to reform in gradual steps the health-care and education systems and the public administration. These measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs. On 16 February, the Government announced further structural reforms in the area of pension, social benefits, and local governments.

| (12) | Given the macro-financial risk, fiscal policy has to be restrictive. Following two years of restrictive policy, the stance of fiscal policy would be once again restrictive in 2009 against the background of a deep recession; in the outer years of the programme it would turn to broadly neutral. The update confirms the medium-term adjustment path laid down in the new economic policy programme of the authorities; thereby it is consistent with the commitments made in the context of EU medium-term financial assistance.
  However, the Commission services' interim forecast projecting a larger 2009 deficit at 2,8 % of GDP together with the risks to the macro-economic projections indicates that further consolidation measures might be necessary. Indeed, the government adopted a new corrective package of 0,7 % of GDP, while revising its 2009 deficit target slightly upwards. The newly adopted fiscal governance reform should contribute to improving the long-term sustainability of public finances through the programmed reduction in the debt ratio. In view of the risk assessment, the budgetary stance in the programme seems broadly consistent with the adjustment path for the correction of the excessive deficit recommended by the Council, provided that all budgetary measures announced in the programme and more recently are fully implemented as well as possible within-the-year deviations are effectively corrected. In the years following the correction of the excessive deficit, the deficit reduction envisaged in the programme is limited and not backed up sufficiently with measures. Finally, taking into account the risks to the debt projections mentioned above, the debt ratio is not sufficiently diminishing towards the reference value over the programme period. |
| --- | --- |

(12)

Given the macro-financial risk, fiscal policy has to be restrictive. Following two years of restrictive policy, the stance of fiscal policy would be once again restrictive in 2009 against the background of a deep recession; in the outer years of the programme it would turn to broadly neutral. The update confirms the medium-term adjustment path laid down in the new economic policy programme of the authorities; thereby it is consistent with the commitments made in the context of EU medium-term financial assistance.

However, the Commission services' interim forecast projecting a larger 2009 deficit at 2,8 % of GDP together with the risks to the macro-economic projections indicates that further consolidation measures might be necessary. Indeed, the government adopted a new corrective package of 0,7 % of GDP, while revising its 2009 deficit target slightly upwards. The newly adopted fiscal governance reform should contribute to improving the long-term sustainability of public finances through the programmed reduction in the debt ratio. In view of the risk assessment, the budgetary stance in the programme seems broadly consistent with the adjustment path for the correction of the excessive deficit recommended by the Council, provided that all budgetary measures announced in the programme and more recently are fully implemented as well as possible within-the-year deviations are effectively corrected. In the years following the correction of the excessive deficit, the deficit reduction envisaged in the programme is limited and not backed up sufficiently with measures. Finally, taking into account the risks to the debt projections mentioned above, the debt ratio is not sufficiently diminishing towards the reference value over the programme period.

| (13) | As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has some gaps in the required and optional data (5). |
| --- | --- |

(13)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has some gaps in the required and optional data (5).

The overall conclusion is that, in spite of distinct improvements in its high imbalances, including the reduction in the budget deficit from 9,3 % of GDP in 2006 to below 3,5 of GDP in 2008, Hungary has been particularly exposed to the financial crisis and thus had to limit the financing need of the government rather than stimulate the economy during the economic downturn. In this context, it adopted a policy of further fiscal adjustments and tighter deficit targets to restore investor confidence. This strategy has been backed by international financial assistance from the EU, the IMF and the World Bank. The programme foresees a continuation of the front-loaded consolidation strategy, with another important adjustment in 2009 to 2,6 % of GDP, and followed by a more moderate adjustment path towards a budget deficit of 2,2 % of GDP by 2011. However, this deficit reduction path is subject to risks, especially since the macro-economic assumptions underlying the programme have in the meantime become markedly favourable. This risk would be substantially reduced by the corrective measures adopted and structural steps recently announced by the Government together with the revision of the 2009 deficit target slightly upwards to 2,7-2,9 % of GDP. Moreover, the adoption of the law on fiscal responsibility is an important step towards establishing prudent fiscal policy and, if implemented with determination, should contribute to the durability of the fiscal consolidation. Nevertheless, the sustainability of public finances also hinges on the continuation of structural reforms, to the extent that they increase long-term growth, help meet budgetary targets, and reduce the country's vulnerabilities.

In view of the above assessment, the commitments made in the framework of international financial assistance, and also in the light of the recommendation under Article 104(7) of 10 October 2006 and also given the need to ensure sustainable convergence, Hungary is invited to:

| (i) | in view of the risks, maintain adequate buffers, take the necessary measures to bring the budget deficit below the 3 % of GDP threshold in 2009, and ensure that adequate progress in budgetary consolidation towards the MTO is made thereafter, thereby setting the debt-to-GDP ratio on a declining path towards the 60 % of GDP threshold; |
| --- | --- |

(i)

in view of the risks, maintain adequate buffers, take the necessary measures to bring the budget deficit below the 3 % of GDP threshold in 2009, and ensure that adequate progress in budgetary consolidation towards the MTO is made thereafter, thereby setting the debt-to-GDP ratio on a declining path towards the 60 % of GDP threshold;

| (ii) | ensure full implementation of the fiscal responsibility law, continue expenditure moderation through further reforming of public administration, healthcare, and education systems, as announced, and strengthen financial market regulation and supervision; |
| --- | --- |

(ii)

ensure full implementation of the fiscal responsibility law, continue expenditure moderation through further reforming of public administration, healthcare, and education systems, as announced, and strengthen financial market regulation and supervision;

| (iii) | in view of the level of debt and the increase in age-related expenditure, further improve the long-term sustainability of public finances; continue to reform the pension system after the steps already taken in 2006-2008. |
| --- | --- |

(iii)

in view of the level of debt and the increase in age-related expenditure, further improve the long-term sustainability of public finances; continue to reform the pension system after the steps already taken in 2006-2008.

Comparison of key macro-economic and budgetary projections

| | | 2007 | 2008 | 2009 | 2010 | 2011 |
| --- | --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | CP Dec 2008 | 1,1 | 1,3 | – 0,9 | 1,6 | 2,5 |
| COM Jan 2009 | 1,1 | 0,9 | – 1,6 | 1,0 | n.a. |
| CP Nov 2007 | 1,7 | 2,8 | 4,0 | 4,1 | 4,2 |
| HICP inflation
  (%) | CP Dec 2008 | 7,9 | 6,2 | 4,5 | 3,2 | 3,0 |
| COM Jan 2009 | 7,9 | 6,1 | 2,8 | 2,2 | n.a. |
| CP Nov 2007 | 7,9 | 4,8 | 3,0 | 2,9 | 2,8 |
| Output gap (6)

  (% of potential GDP) | CP Dec 2008 | 1,9 | 1,1 | – 1,7 | – 1,9 | – 1,1 |
| COM Jan 2009 (7) | 2,7 | 2,3 | – 0,1 | 0,4 | n.a. |
| CP Nov 2007 | – 0,9 | – 1,8 | – 1,5 | – 0,9 | – 0,5 |
| Net lending/borrowing vis-à-vis the rest of the world
  (% of GDP) | CP Dec 2008 | – 5,3 | – 5,1 | – 3,7 | – 2,5 | – 1,6 |
| COM Jan 2009 | – 5,3 | – 6,0 | – 4,0 | – 3,5 | n.a. |
| CP Nov 2007 | – 4,1 | – 2,3 | – 1,7 | – 1,3 | – 0,8 |
| General government revenue
  (% of GDP) | CP Dec 2008 | 44,9 | 45,2 | 45,8 | 46,0 | 45,8 |
| COM Jan 2009 | 44,9 | 45,5 | 46,1 | 46,4 | n.a. |
| CP Nov 2007 | 44,1 | 44,2 | 43,3 | 42,4 | 42,0 |
| General government expenditure
  (% of GDP) | CP Dec 2008 | 49,8 | 48,6 | 48,4 | 48,5 | 48,0 |
| COM Jan 2009 | 49,8 | 48,8 | 48,9 | 49,5 | n.a. |
| CP Nov 2007 | 50,3 | 48,2 | 46,5 | 45,1 | 44,2 |
| General government balance
  (% of GDP) | CP Dec 2008 | – 5,0 | – 3,4 | – 2,6 | – 2,5 | – 2,2 |
| COM Jan 2009 | – 5,0 | – 3,3 | – 2,8 | – 3,0 | n.a. |
| CP Nov 2007 | – 6,2 | – 4,0 | – 3,2 | – 2,7 | – 2,2 |
| Primary balance
  (% of GDP) | CP Dec 2008 | – 0,9 | 0,6 | 1,9 | 2,0 | 2,2 |
| COM Jan 2009 | – 0,9 | 0,8 | 1,6 | 1,5 | n.a. |
| CP Nov 2007 | – 2,2 | 0,1 | 0,6 | 0,8 | 1,1 |
| Cyclically-adjusted balance (6)

  (% of GDP) | CP Dec 2008 | – 5,8 | – 3,9 | – 1,8 | – 1,6 | – 1,7 |
| COM Jan 2009 | – 6,2 | – 4,3 | – 2,8 | – 3,2 | n.a. |
| CP Nov 2007 | – 6,0 | – 3,5 | – 2,8 | – 2,5 | – 2,1 |
| Structural balance (8)

  (% of GDP) | CP Dec 2008 | – 4,9 | – 3,5 | – 1,8 | – 1,6 | – 1,7 |
| COM Jan 2009 | – 5,3 | – 4,0 | – 2,8 | – 3,2 | n.a. |
| CP Nov 2007 | – 4,9 | – 3,7 | – 2,9 | – 2,5 | – 2,1 |
| Government gross debt
  (% of GDP) | CP Dec 2008 | 65,8 | 71,1 | 72,5 | 72,2 | 69,0 |
| COM Jan 2009 | 65,8 | 71,9 | 73,8 | 74,0 | n.a. |
| CP Nov 2007 | 65,4 | 65,8 | 64,4 | 63,3 | 61,8 |
| Convergence programme (CP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations. |

2007

2008

2009

2010

2011

Real GDP

(% change)

CP Dec 2008

1,1

1,3

– 0,9

1,6

2,5

COM Jan 2009

1,1

0,9

– 1,6

1,0

n.a.

CP Nov 2007

1,7

2,8

4,0

4,1

4,2

HICP inflation

(%)

CP Dec 2008

7,9

6,2

4,5

3,2

3,0

COM Jan 2009

7,9

6,1

2,8

2,2

n.a.

CP Nov 2007

7,9

4,8

3,0

2,9

2,8

Output gap (6)

(% of potential GDP)

CP Dec 2008

1,9

1,1

– 1,7

– 1,9

– 1,1

COM Jan 2009 (7)

2,7

2,3

– 0,1

0,4

n.a.

CP Nov 2007

– 0,9

– 1,8

– 1,5

– 0,9

– 0,5

Net lending/borrowing vis-à-vis the rest of the world

(% of GDP)

CP Dec 2008

– 5,3

– 5,1

– 3,7

– 2,5

– 1,6

COM Jan 2009

– 5,3

– 6,0

– 4,0

– 3,5

n.a.

CP Nov 2007

– 4,1

– 2,3

– 1,7

– 1,3

– 0,8

General government revenue

(% of GDP)

CP Dec 2008

44,9

45,2

45,8

46,0

45,8

COM Jan 2009

44,9

45,5

46,1

46,4

n.a.

CP Nov 2007

44,1

44,2

43,3

42,4

42,0

General government expenditure

(% of GDP)

CP Dec 2008

49,8

48,6

48,4

48,5

48,0

COM Jan 2009

49,8

48,8

48,9

49,5

n.a.

CP Nov 2007

50,3

48,2

46,5

45,1

44,2

General government balance

(% of GDP)

CP Dec 2008

– 5,0

– 3,4

– 2,6

– 2,5

– 2,2

COM Jan 2009

– 5,0

– 3,3

– 2,8

– 3,0

n.a.

CP Nov 2007

– 6,2

– 4,0

– 3,2

– 2,7

– 2,2

Primary balance

(% of GDP)

CP Dec 2008

– 0,9

0,6

1,9

2,0

2,2

COM Jan 2009

– 0,9

0,8

1,6

1,5

n.a.

CP Nov 2007

– 2,2

0,1

0,6

0,8

1,1

Cyclically-adjusted balance (6)

(% of GDP)

CP Dec 2008

– 5,8

– 3,9

– 1,8

– 1,6

– 1,7

COM Jan 2009

– 6,2

– 4,3

– 2,8

– 3,2

n.a.

CP Nov 2007

– 6,0

– 3,5

– 2,8

– 2,5

– 2,1

Structural balance (8)

(% of GDP)

CP Dec 2008

– 4,9

– 3,5

– 1,8

– 1,6

– 1,7

COM Jan 2009

– 5,3

– 4,0

– 2,8

– 3,2

n.a.

CP Nov 2007

– 4,9

– 3,7

– 2,9

– 2,5

– 2,1

Government gross debt

(% of GDP)

CP Dec 2008

65,8

71,1

72,5

72,2

69,0

COM Jan 2009

65,8

71,9

73,8

74,0

n.a.

CP Nov 2007

65,4

65,8

64,4

63,3

61,8

Convergence programme (CP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations.

---

(1)  OJ L 209, 2.8.1997, p. 1. The documents referred to in this text can be found at the following website:

http://ec.europa.eu/economy_finance/about/activities/sgp/main_en.htm

(2)  See Council Decision 2009/102/EC providing Community medium-term financial assistance for Hungary (OJ L 37, 6.2.2009, p. 5).

(3)  For details on the EU medium-term financial assistance for Hungary, see the following thematic webpage:

http://ec.europa.eu/economy_finance/thematic_articles/article13488_en.htm

(4)  The assessment notably takes into account the Commission services' January 2009 forecast, but also other information that has become available since then.

(5)  In particular, the breakdown of stock-flow adjustment and some data on the long-term sustainability of public finances are not provided.

(6)  Output gaps and cyclically-adjusted balances according to the programmes as recalculated by Commission services on the basis of the information in the programmes.

(7)  Based on estimated potential growth of 1,7 %, 1,3 %, 0,9 % and 0,5 % respectively in the period 2007-2010.

(8)  Cyclically-adjusted balance excluding one-off and other temporary measures. Cyclically-adjusted balances according to the programmes as recalculated by the Commission services on the basis of the information in the programmes. One-off and other temporary measures are 0,9 % of GDP in 2007 and 0,4 % in 2008; all deficit-increasing, according to the most recent programme and 0,9 % of GDP in 2007 and 0,3 % of GDP in 2008; all deficit-increasing, according to the Commission services' January 2009 interim forecast.

Source:

Convergence programme (CP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations.

---

| 20.3.2009 | EN | Official Journal of the European Union | C 66/12 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/12

---

COUNCIL OPINION

of 10 March 2009

on the updated stability programme of Malta, 2008-2011

(2009/C 66/03)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

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(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

| (1) | On 10 March 2009, the Council examined the updated stability programme of Malta, which covers the period 2008 to 2011. |
| --- | --- |

(1)

On 10 March 2009, the Council examined the updated stability programme of Malta, which covers the period 2008 to 2011.

| (2) | While until now the financial crisis has had a modest effect on Malta, economic activity, especially the external sector, is expected to suffer from the ensuing global slowdown. The notable reduction in the general government deficit which took place over the period 2004-2007 was temporarily halted in 2008, when it is estimated to have increased to 3,5 % of GDP, linked to specific expenditure-increasing decisions. The budgetary strategy is to resume fiscal consolidation from 2009. Within the overall strategy, some measures have been taken to respond to the economic slowdown by increasing public investment (partly financed by EU funds), bolstering purchasing power and providing direct support targeted at manufacturing, tourism and SMEs. Resuming the path towards budgetary consolidation, while at the same time further diversifying the economic base and bolstering the export sector by strengthening competitiveness, are key challenges facing Malta. While Malta pursues a strategy of promoting non-price competitiveness by facilitating upwards shifts in value-added activity, cost competitiveness remains key to export-led growth. |
| --- | --- |

(2)

While until now the financial crisis has had a modest effect on Malta, economic activity, especially the external sector, is expected to suffer from the ensuing global slowdown. The notable reduction in the general government deficit which took place over the period 2004-2007 was temporarily halted in 2008, when it is estimated to have increased to 3,5 % of GDP, linked to specific expenditure-increasing decisions. The budgetary strategy is to resume fiscal consolidation from 2009. Within the overall strategy, some measures have been taken to respond to the economic slowdown by increasing public investment (partly financed by EU funds), bolstering purchasing power and providing direct support targeted at manufacturing, tourism and SMEs. Resuming the path towards budgetary consolidation, while at the same time further diversifying the economic base and bolstering the export sector by strengthening competitiveness, are key challenges facing Malta. While Malta pursues a strategy of promoting non-price competitiveness by facilitating upwards shifts in value-added activity, cost competitiveness remains key to export-led growth.

| (3) | The macro-economic scenario underlying the programme envisages real GDP growth to decelerate from 2,8 % in 2008 to 2,2 % in 2009 before recovering to an average rate of 2,7 % over the rest of the programme period. Assessed against currently available information (2), this scenario is based on markedly favourable growth assumptions because of relatively strong assumed recovery in exports. The programme's projections for inflation appear to be on the high side in 2009 but are plausible thereafter. The possibility that overall wages rise in excess of productivity gains may result in a less favourable development in Malta's competitiveness than implied by the updated stability programme. |
| --- | --- |

(3)

The macro-economic scenario underlying the programme envisages real GDP growth to decelerate from 2,8 % in 2008 to 2,2 % in 2009 before recovering to an average rate of 2,7 % over the rest of the programme period. Assessed against currently available information (2), this scenario is based on markedly favourable growth assumptions because of relatively strong assumed recovery in exports. The programme's projections for inflation appear to be on the high side in 2009 but are plausible thereafter. The possibility that overall wages rise in excess of productivity gains may result in a less favourable development in Malta's competitiveness than implied by the updated stability programme.

| (4) | For 2008, the general government deficit is estimated at 3,5 % of GDP in the Commission services' January 2009 interim forecast, against a target of 1,2 % of GDP set in the previous programme (3). The difference primarily reflects higher-than-planned expenditure growth, driven mainly by: (i) the unbudgeted one-off cost related to the granting of early retirement schemes to shipyard employees (1 % of GDP); (ii) additional expenditure in respect of energy subsidies (0,8 % of GDP); and (iii) a higher-than-planned increase in the wage bill on account of additional recruitment and higher wages in particular in the health sector (0,5 % of GDP). |
| --- | --- |

(4)

For 2008, the general government deficit is estimated at 3,5 % of GDP in the Commission services' January 2009 interim forecast, against a target of 1,2 % of GDP set in the previous programme (3). The difference primarily reflects higher-than-planned expenditure growth, driven mainly by: (i) the unbudgeted one-off cost related to the granting of early retirement schemes to shipyard employees (1 % of GDP); (ii) additional expenditure in respect of energy subsidies (0,8 % of GDP); and (iii) a higher-than-planned increase in the wage bill on account of additional recruitment and higher wages in particular in the health sector (0,5 % of GDP).

| (5) | According to the programme, the general government deficit is targeted to fall to 1,5 % of GDP in 2009 (one-off deficit-reducing transactions taking the form of sales of land are projected to amount to 0,3 % of GDP). The structural deficit in 2009 is diminishing. The budgetary impact of measures to support the economy (expected to amount to 1,5 % of GDP) is more than offset by the deficit-reducing impact of the reduction in energy and other subsidies, the vanishing of the one-off cost related to early retirement schemes to shipyard employees and an increase in excise duties together with higher tax buoyancy (from international companies), amounting to around 2,25 % of GDP. |
| --- | --- |

(5)

According to the programme, the general government deficit is targeted to fall to 1,5 % of GDP in 2009 (one-off deficit-reducing transactions taking the form of sales of land are projected to amount to 0,3 % of GDP). The structural deficit in 2009 is diminishing. The budgetary impact of measures to support the economy (expected to amount to 1,5 % of GDP) is more than offset by the deficit-reducing impact of the reduction in energy and other subsidies, the vanishing of the one-off cost related to early retirement schemes to shipyard employees and an increase in excise duties together with higher tax buoyancy (from international companies), amounting to around 2,25 % of GDP.

| (6) | The medium-term budgetary strategy outlined in the update aims at pursuing further fiscal consolidation over the programme period, with the overarching aim of achieving the medium-term objective (MTO) of a balanced budgetary position in structural terms (i.e. in cyclically-adjusted terms net of one-off and other temporary measures) by 2011, one year later than planned in the 2007 stability programme. The headline deficit is foreseen to decline further to 0,3 % of GDP in 2010, before turning into a surplus of 1,2 % of GDP in 2011, although the programme gives no indications about the measures underlying this path. The consolidation envisaged over the programme horizon will be primarily achieved through expenditure restraint, with a cut in the expenditure ratio by 3,2 percentage points of GDP, whilst revenue is expected to increase by 1,2 percentage points. Expenditure restraint is underpinned by lower subsidies and social payments (both front-loaded to 2009) and government consumption (back-loaded to 2010-2011). The bulk of the increase in revenue over the programme horizon is due to an assumed higher yield from direct taxes, which the programme attributes to a higher number of registered international operators in Malta. Government gross debt, estimated at 62,8 % of GDP in 2008, is projected to decline by 3 percentage points by 2010 and further by 3,5 percentage points in 2011, mainly driven by the growing primary surplus from 2009 onwards. |
| --- | --- |

(6)

The medium-term budgetary strategy outlined in the update aims at pursuing further fiscal consolidation over the programme period, with the overarching aim of achieving the medium-term objective (MTO) of a balanced budgetary position in structural terms (i.e. in cyclically-adjusted terms net of one-off and other temporary measures) by 2011, one year later than planned in the 2007 stability programme. The headline deficit is foreseen to decline further to 0,3 % of GDP in 2010, before turning into a surplus of 1,2 % of GDP in 2011, although the programme gives no indications about the measures underlying this path. The consolidation envisaged over the programme horizon will be primarily achieved through expenditure restraint, with a cut in the expenditure ratio by 3,2 percentage points of GDP, whilst revenue is expected to increase by 1,2 percentage points. Expenditure restraint is underpinned by lower subsidies and social payments (both front-loaded to 2009) and government consumption (back-loaded to 2010-2011). The bulk of the increase in revenue over the programme horizon is due to an assumed higher yield from direct taxes, which the programme attributes to a higher number of registered international operators in Malta. Government gross debt, estimated at 62,8 % of GDP in 2008, is projected to decline by 3 percentage points by 2010 and further by 3,5 percentage points in 2011, mainly driven by the growing primary surplus from 2009 onwards.

| (7) | The budgetary outcomes are subject to downside risks throughout the programme period. The risks mostly relate to the favourable macro-economic scenario, the reliance on volatile revenue items (an uncertain increase in direct taxes from international companies) and the possibility of expenditure slippages compared to the envisaged back-loaded decline in public consumption. For 2010 and 2011, an additional risk factor is the lack of information on measures underpinning the consolidation process, in particular as regards the envisaged continued restraint in the public wage bill. The risks to the deficit projections imply that the debt ratio could turn out higher than expected in the programme. In addition, based on currently available information, the liquidation of the Malta Shipyards during the course of 2009 could result in a higher debt level. |
| --- | --- |

(7)

The budgetary outcomes are subject to downside risks throughout the programme period. The risks mostly relate to the favourable macro-economic scenario, the reliance on volatile revenue items (an uncertain increase in direct taxes from international companies) and the possibility of expenditure slippages compared to the envisaged back-loaded decline in public consumption. For 2010 and 2011, an additional risk factor is the lack of information on measures underpinning the consolidation process, in particular as regards the envisaged continued restraint in the public wage bill. The risks to the deficit projections imply that the debt ratio could turn out higher than expected in the programme. In addition, based on currently available information, the liquidation of the Malta Shipyards during the course of 2009 could result in a higher debt level.

| (8) | The long-term budgetary impact of ageing in Malta is significantly lower than the EU average, with pension expenditure decreasing as a share of GDP over the long-term according to the projections made in 2005. Yet, the 2006 pension reform, which aims at improving the level of pension while also increasing the retirement age, is likely to imply higher spending over the long run. In addition, the current level of gross debt is above the Treaty reference value. The budgetary position in 2008 as estimated in the programme, which is worse than the starting position of the previous programme, compounds the budgetary impact of population ageing on the sustainability gap. Improving the budgetary position would contribute to reducing the medium risks to the sustainability of public finances. |
| --- | --- |

(8)

The long-term budgetary impact of ageing in Malta is significantly lower than the EU average, with pension expenditure decreasing as a share of GDP over the long-term according to the projections made in 2005. Yet, the 2006 pension reform, which aims at improving the level of pension while also increasing the retirement age, is likely to imply higher spending over the long run. In addition, the current level of gross debt is above the Treaty reference value. The budgetary position in 2008 as estimated in the programme, which is worse than the starting position of the previous programme, compounds the budgetary impact of population ageing on the sustainability gap. Improving the budgetary position would contribute to reducing the medium risks to the sustainability of public finances.

| (9) | While expenditure outturns over the period 2004-2007 were below budgeted amounts, experience in 2008 has shown that public expenditure is still subject to discretionary decisions in the budget implementation phase, whilst the budget lacks a clear medium-term focus. The programme does not envisage improvements in this area. In addition, the efficiency and effectiveness of expenditure in education and health seem to be weak. |
| --- | --- |

(9)

While expenditure outturns over the period 2004-2007 were below budgeted amounts, experience in 2008 has shown that public expenditure is still subject to discretionary decisions in the budget implementation phase, whilst the budget lacks a clear medium-term focus. The programme does not envisage improvements in this area. In addition, the efficiency and effectiveness of expenditure in education and health seem to be weak.

| (10) | In October 2008, the government announced an increase in the guarantee on deposits held with banks in Malta from EUR 20 000 to EUR 100 000. No other measures to help stabilise the financial system have proved necessary so far. |
| --- | --- |

(10)

In October 2008, the government announced an increase in the guarantee on deposits held with banks in Malta from EUR 20 000 to EUR 100 000. No other measures to help stabilise the financial system have proved necessary so far.

| (11) | Fiscal policy in 2009 is overall consolidating the budget which is adequate and in line with the European Economic Recovery Plan agreed in December 2008 by the European Council (EERP) in the light of the high deficit and debt ratios and the competitiveness challenge. However, in line with the EERP, Malta adopted several measures to support the economy in 2009. Most of these measures are timely and targeted and are addressed to sectors which are expected to be hit hardest by the economic slowdown, e.g. tourism and manufacturing. With the exception of public investment, which will moderate as a share of GDP in 2011, the measures seem to be of a permanent nature. A number of structural measures, which are part of the longer-term policy reform agenda, should provide support in view of the challenges posed by the downturn by enhancing growth potential. Specifically, the planned liberalisation of public transport will render the sector more efficient and competitive, while the implementation of a flexicurity roadmap will help ensure an adequate supply of skills in emerging high-skill sectors. Furthermore, the programme envisages higher outlays on infrastructure and environmental projects. The measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs. |
| --- | --- |

(11)

Fiscal policy in 2009 is overall consolidating the budget which is adequate and in line with the European Economic Recovery Plan agreed in December 2008 by the European Council (EERP) in the light of the high deficit and debt ratios and the competitiveness challenge. However, in line with the EERP, Malta adopted several measures to support the economy in 2009. Most of these measures are timely and targeted and are addressed to sectors which are expected to be hit hardest by the economic slowdown, e.g. tourism and manufacturing. With the exception of public investment, which will moderate as a share of GDP in 2011, the measures seem to be of a permanent nature. A number of structural measures, which are part of the longer-term policy reform agenda, should provide support in view of the challenges posed by the downturn by enhancing growth potential. Specifically, the planned liberalisation of public transport will render the sector more efficient and competitive, while the implementation of a flexicurity roadmap will help ensure an adequate supply of skills in emerging high-skill sectors. Furthermore, the programme envisages higher outlays on infrastructure and environmental projects. The measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs.

| (12) | According to the programme, the structural balance as recalculated by the Commission services on the basis of the information in the programme is expected to improve further by a yearly average of 1,25 percentage points of GDP in 2010-2011. Taking into account the important risks to the budgetary targets, the stance in the programme would not provide a sufficient safety margin against breaching the 3 % of GDP deficit limit by the end of the programme period. The planned consolidation in the outer years should be backed up by measures. Taking into account the risks to the debt projections, the debt ratio seems to be sufficiently diminishing towards the reference value in a medium-term perspective, although increasing slightly in the short term according to the Commission forecast, bearing in mind the significant decline in the ratio during the period 2004-2007. |
| --- | --- |

(12)

According to the programme, the structural balance as recalculated by the Commission services on the basis of the information in the programme is expected to improve further by a yearly average of 1,25 percentage points of GDP in 2010-2011. Taking into account the important risks to the budgetary targets, the stance in the programme would not provide a sufficient safety margin against breaching the 3 % of GDP deficit limit by the end of the programme period. The planned consolidation in the outer years should be backed up by measures. Taking into account the risks to the debt projections, the debt ratio seems to be sufficiently diminishing towards the reference value in a medium-term perspective, although increasing slightly in the short term according to the Commission forecast, bearing in mind the significant decline in the ratio during the period 2004-2007.

| (13) | As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data (4). |
| --- | --- |

(13)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data (4).

The overall conclusion is that, against a backdrop of weakening economic growth and a breach of the 3 % of GDP deficit reference value in 2008, the programme envisages a return to budgetary consolidation from 2009 onwards, brought about by expenditure restraint and, to a lesser extent, higher revenue. This is in line with the European Economic Recovery Plan and can be regarded as adequate given the high deficit and debt ratios and the competitiveness challenge. However, there are risks to the achievement of the deficit and debt targets over the programme period stemming from the favourable macro-economic scenario, the reliance on volatile revenue, the possibility of expenditure slippages and the lack of information on the consolidation measures in the outer years. The debt ratio, which is targeted to fall gradually over the programme period to below the 60 % of GDP reference value but is subject to the risks mentioned above, seems to be sufficiently diminishing towards the reference value in a medium-term perspective, although increasing slightly in the short term according to the Commission forecast, bearing in mind the significant decline in the ratio during the period 2004-2007. Although improving in recent years, the lack of diversification in the economic base increases Malta's exposure to external shocks, especially in the face of the current economic downturn. Moreover, competitiveness remains vulnerable, especially if overall wages move out of line with productivity.

In view of the above assessment, Malta is invited to:

| (i) | resume fiscal consolidation as envisaged in the programme so as to return to a deficit-to-GDP ratio below 3 % in 2009 as planned and ensure that the general government debt ratio is reduced accordingly, by spelling out the measures underlying the planned consolidation in the outer years towards the MTO; |
| --- | --- |

(i)

resume fiscal consolidation as envisaged in the programme so as to return to a deficit-to-GDP ratio below 3 % in 2009 as planned and ensure that the general government debt ratio is reduced accordingly, by spelling out the measures underlying the planned consolidation in the outer years towards the MTO;

| (ii) | strengthen the medium-term budgetary framework and enhance the efficiency and effectiveness of public spending, including by accelerating the design and implementation of a comprehensive healthcare reform. |
| --- | --- |

(ii)

strengthen the medium-term budgetary framework and enhance the efficiency and effectiveness of public spending, including by accelerating the design and implementation of a comprehensive healthcare reform.

Comparison of key macro-economic and budgetary projections

| | | 2007 | 2008 | 2009 | 2010 | 2011 |
| --- | --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Dec 2008 | 3,7 | 2,8 | 2,2 | 2,5 | 2,8 |
| COM Jan 2009 | 3,9 | 2,1 | 0,7 | 1,3 | n.a. |
| CP Nov 2007 | 3,5 | 3,1 | 3,2 | 3,4 | n.a. |
| HICP inflation
  (%) | SP Dec 2008 | 0,7 | 4,5 | 2,7 | 2,3 | 2,0 |
| COM Jan 2009 | 0,7 | 4,6 | 1,9 | 2,2 | n.a. |
| CP Nov 2007 | 0,9 | 2,5 | 2,3 | 2,1 | n.a. |
| Output gap (5)

  (% of potential GDP) | SP Dec 2008 | 0,0 | 0,1 | – 0,3 | – 0,5 | 0,5 |
| COM Jan 2009 (6) | 1,1 | 1,2 | 0,0 | – 0,6 | n.a. |
| CP Nov 2007 | – 0,8 | – 0,1 | 0,5 | 1,9 | n.a. |
| Net lending/borrowing vis-à-vis the rest of the world
  (% of GDP) | SP Dec 2008 | – 5,5 | – 5,1 | – 3,1 | – 2,7 | 0,7 |
| COM Jan 2009 | – 4,6 | – 5,5 | – 5,5 | – 5,3 | n.a. |
| CP Nov 2007 | – 0,5 | 0,2 | 3,2 | 5,5 | n.a. |
| General government revenue
  (% of GDP) | SP Dec 2008 | 40,6 | 40,6 | 41,7 | 41,8 | 41,9 |
| COM Jan 2009 | 40,4 | 40,7 | 41,1 | 41,2 | n.a. |
| CP Nov 2007 | 41,0 | 40,9 | 39,9 | 39,5 | n.a. |
| General government expenditure
  (% of GDP) | SP Dec 2008 | 42,4 | 43,9 | 43,2 | 42,1 | 40,7 |
| COM Jan 2009 | 42,2 | 44,2 | 43,7 | 43,8 | n.a. |
| CP Nov 2007 | 42,7 | 42,2 | 40,0 | 38,5 | n.a. |
| General government balance
  (% of GDP) | SP Dec 2008 | – 1,8 | – 3,3 | – 1,5 | – 0,3 | 1,2 |
| COM Jan 2009 | – 1,8 | – 3,5 | – 2,6 | – 2,5 | n.a. |
| CP Nov 2007 | – 1,6 | – 1,2 | – 0,1 | 0,9 | n.a. |
| Primary balance
  (% of GDP) | SP Dec 2008 | 1,6 | 0,0 | 1,9 | 3,0 | 4,3 |
| COM Jan 2009 | 1,6 | – 0,2 | 0,8 | 0,8 | n.a. |
| CP Nov 2007 | 1,7 | 2,0 | 2,9 | 3,8 | n.a. |
| Cyclically-adjusted balance (5)

  (% of GDP) | SP Dec 2008 | – 1,8 | – 3,4 | – 1,4 | – 0,1 | 1,0 |
| COM Jan 2009 | – 2,2 | – 4,0 | – 2,6 | – 2,3 | n.a. |
| CP Nov 2007 | – 1,3 | – 1,2 | – 0,3 | 0,3 | n.a. |
| Structural balance (7)

  (% of GDP) | SP Dec 2008 | – 2,4 | – 3,7 | – 1,7 | – 0,2 | 0,9 |
| COM Jan 2009 | – 2,8 | – 3,3 | – 2,9 | – 2,3 | n.a. |
| CP Nov 2007 | – 2,1 | – 1,4 | – 0,5 | 0,1 | n.a. |
| Government gross debt
  (% of GDP) | SP Dec 2008 | 62,2 | 62,8 | 61,9 | 59,8 | 56,3 |
| COM Jan 2009 | 61,9 | 63,3 | 64,0 | 64,2 | n.a. |
| CP Nov 2007 | 62,9 | 60,0 | 57,2 | 53,3 | n.a. |
| Stability programme (SP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations. |

2007

2008

2009

2010

2011

Real GDP

(% change)

SP Dec 2008

3,7

2,8

2,2

2,5

2,8

COM Jan 2009

3,9

2,1

0,7

1,3

n.a.

CP Nov 2007

3,5

3,1

3,2

3,4

n.a.

HICP inflation

(%)

SP Dec 2008

0,7

4,5

2,7

2,3

2,0

COM Jan 2009

0,7

4,6

1,9

2,2

n.a.

CP Nov 2007

0,9

2,5

2,3

2,1

n.a.

Output gap (5)

(% of potential GDP)

SP Dec 2008

0,0

0,1

– 0,3

– 0,5

0,5

COM Jan 2009 (6)

1,1

1,2

0,0

– 0,6

n.a.

CP Nov 2007

– 0,8

– 0,1

0,5

1,9

n.a.

Net lending/borrowing vis-à-vis the rest of the world

(% of GDP)

SP Dec 2008

– 5,5

– 5,1

– 3,1

– 2,7

0,7

COM Jan 2009

– 4,6

– 5,5

– 5,5

– 5,3

n.a.

CP Nov 2007

– 0,5

0,2

3,2

5,5

n.a.

General government revenue

(% of GDP)

SP Dec 2008

40,6

40,6

41,7

41,8

41,9

COM Jan 2009

40,4

40,7

41,1

41,2

n.a.

CP Nov 2007

41,0

40,9

39,9

39,5

n.a.

General government expenditure

(% of GDP)

SP Dec 2008

42,4

43,9

43,2

42,1

40,7

COM Jan 2009

42,2

44,2

43,7

43,8

n.a.

CP Nov 2007

42,7

42,2

40,0

38,5

n.a.

General government balance

(% of GDP)

SP Dec 2008

– 1,8

– 3,3

– 1,5

– 0,3

1,2

COM Jan 2009

– 1,8

– 3,5

– 2,6

– 2,5

n.a.

CP Nov 2007

– 1,6

– 1,2

– 0,1

0,9

n.a.

Primary balance

(% of GDP)

SP Dec 2008

1,6

0,0

1,9

3,0

4,3

COM Jan 2009

1,6

– 0,2

0,8

0,8

n.a.

CP Nov 2007

1,7

2,0

2,9

3,8

n.a.

Cyclically-adjusted balance (5)

(% of GDP)

SP Dec 2008

– 1,8

– 3,4

– 1,4

– 0,1

1,0

COM Jan 2009

– 2,2

– 4,0

– 2,6

– 2,3

n.a.

CP Nov 2007

– 1,3

– 1,2

– 0,3

0,3

n.a.

Structural balance (7)

(% of GDP)

SP Dec 2008

– 2,4

– 3,7

– 1,7

– 0,2

0,9

COM Jan 2009

– 2,8

– 3,3

– 2,9

– 2,3

n.a.

CP Nov 2007

– 2,1

– 1,4

– 0,5

0,1

n.a.

Government gross debt

(% of GDP)

SP Dec 2008

62,2

62,8

61,9

59,8

56,3

COM Jan 2009

61,9

63,3

64,0

64,2

n.a.

CP Nov 2007

62,9

60,0

57,2

53,3

n.a.

Stability programme (SP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations.

---

(1)  OJ L 209, 2.8.1997, p. 1. The documents referred to in this text can be found at the following website:

http://ec.europa.eu/economy_finance/about/activities/sgp/main_en.htm

(2)  The assessment notably takes into account the Commission services' January 2009 forecast, but also other information that has become available since then.

(3)  The programme estimates the 2008 deficit outcome at 3,3 % of GDP, confirming the value reported in the EDP notification of October 2008. In view of the reported breach of the Treaty reference value, the Commission prepared on 18 February 2009 a report under Article 104(3) of the Treaty.

(4)  In particular, the data on general government debt developments, in particular data on stock-flow adjustment in respect of differences between cash and accruals, net accumulation of financial assets, net accumulation of financial assets — privatisation proceeds, valuation effects and other, liquid financial assets, net financial debt, all for the period 2007-2011, are not provided.

(5)  Output gaps and cyclically-adjusted balances according to the programmes as recalculated by Commission services on the basis of the information in the programmes.

(6)  Based on estimated potential growth of 2,3 %, 2 %, 1,9 % and 1,9 % respectively in the period 2007-2010.

(7)  Cyclically-adjusted balance excluding one-off and other temporary measures. One-off and other temporary measures are 0,6 % of GDP in 2007, 0,3 % of GDP in 2008, 0,3 % of GDP in 2009 and 0,1 % of GDP in 2010; all deficit-reducing, according to the 2008 stability programme and 0,6 % of GDP in 2007, – 0,6 % of GDP in 2008 and 0,3 % of GDP in 2009 in the Commission services' January 2009 interim forecast.

Source:

Stability programme (SP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations.

---

| 20.3.2009 | EN | Official Journal of the European Union | C 66/17 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/17

---

COUNCIL OPINION

of 10 March 2009

on the updated convergence programme of Poland, 2008-2011

(2009/C 66/04)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

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 9(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

| (1) | On 10 March 2009, the Council examined the updated convergence programme of Poland, which covers the period 2008 to 2011. |
| --- | --- |

(1)

On 10 March 2009, the Council examined the updated convergence programme of Poland, which covers the period 2008 to 2011.

| (2) | The Commission services' January 2009 interim forecast projects GDP growth to decrease from 5 % in 2008 to around 2 % in 2009 mainly on account of the global financial crisis. The deterioration in global trade flows affects Polish export-oriented sectors, while the financial crisis hampers FDI activity and limits the availability of external financing to both the financial and non-financial sector. The relatively high share of foreign currency denominated mortgages brings an additional drag on private consumption in times of marked currency depreciation, while the Polish construction sector suffers from falling prices and demand in the housing market. After hiking interest rates in the first half of 2008 (from 5,25 % in January 2008 to 6 % in June 2008) the National Bank of Poland eased monetary policy by cutting interest rates to 5 % in the last two months of 2008. The nominal effective exchange rate of the Polish zloty depreciated by 11,2 % during 2008. In view of the economic slowdown the government has adopted a number of expansionary measures (chiefly tax reductions and a surge in public investment) both ahead of the crisis and after its effects became visible. The planned fiscal measures will stimulate both aggregate demand in the short term and strengthen the supply side of the Polish economy in a longer term. A deterioration of the general government deficit by about 1 percentage point to 3,5 % of GDP in 2009 is foreseen in the Commission services' January 2009 interim forecast. In the absence of corrective measures, the deficit will decline only marginally in 2010. |
| --- | --- |

(2)

The Commission services' January 2009 interim forecast projects GDP growth to decrease from 5 % in 2008 to around 2 % in 2009 mainly on account of the global financial crisis. The deterioration in global trade flows affects Polish export-oriented sectors, while the financial crisis hampers FDI activity and limits the availability of external financing to both the financial and non-financial sector. The relatively high share of foreign currency denominated mortgages brings an additional drag on private consumption in times of marked currency depreciation, while the Polish construction sector suffers from falling prices and demand in the housing market. After hiking interest rates in the first half of 2008 (from 5,25 % in January 2008 to 6 % in June 2008) the National Bank of Poland eased monetary policy by cutting interest rates to 5 % in the last two months of 2008. The nominal effective exchange rate of the Polish zloty depreciated by 11,2 % during 2008. In view of the economic slowdown the government has adopted a number of expansionary measures (chiefly tax reductions and a surge in public investment) both ahead of the crisis and after its effects became visible. The planned fiscal measures will stimulate both aggregate demand in the short term and strengthen the supply side of the Polish economy in a longer term. A deterioration of the general government deficit by about 1 percentage point to 3,5 % of GDP in 2009 is foreseen in the Commission services' January 2009 interim forecast. In the absence of corrective measures, the deficit will decline only marginally in 2010.

| (3) | The macro-economic scenario underlying the programme envisages that real GDP growth will slow down from 5,1 % in 2008 to 3,7 % in 2009 before recovering to an average rate of 4,2 % over the rest of the programme period. Assessed against currently available information (2), this scenario appears to be based on markedly favourable growth assumptions for 2009 and thereafter, as it is based on an optimistic assessment of export market growth and does not take fully into account more recent information pointing to a further deterioration in the economic situation. In particular, little attention is paid to the situation of foreign currency denominated loans and housing market developments, while the programme appears to downplay the effect of a decreasing credit growth on private investment. The programme's projections for inflation are realistic. |
| --- | --- |

(3)

The macro-economic scenario underlying the programme envisages that real GDP growth will slow down from 5,1 % in 2008 to 3,7 % in 2009 before recovering to an average rate of 4,2 % over the rest of the programme period. Assessed against currently available information (2), this scenario appears to be based on markedly favourable growth assumptions for 2009 and thereafter, as it is based on an optimistic assessment of export market growth and does not take fully into account more recent information pointing to a further deterioration in the economic situation. In particular, little attention is paid to the situation of foreign currency denominated loans and housing market developments, while the programme appears to downplay the effect of a decreasing credit growth on private investment. The programme's projections for inflation are realistic.

| (4) | For 2008, the general government deficit is estimated at 2,5 % of GDP in the Commission services' January 2009 interim forecast, as targeted in the previous update of the convergence programme. This is basically the result of lower revenue growth in 2008 (consistent with the lower estimated GDP growth), offset by less dynamic expenditure. |
| --- | --- |

(4)

For 2008, the general government deficit is estimated at 2,5 % of GDP in the Commission services' January 2009 interim forecast, as targeted in the previous update of the convergence programme. This is basically the result of lower revenue growth in 2008 (consistent with the lower estimated GDP growth), offset by less dynamic expenditure.

| (5) | The general government deficit is planned to improve to 2,5 % of GDP in 2009 according to the December 2008 convergence programme, compared to a deterioration to 3,5 % projected in the Commission services' interim forecast based on a less favourable macro-economic scenario. The estimated net expansionary effect on the budget from discretionary measures exceeds 1 percentage point. This includes the specific measures adopted in response to the economic downturn (‘Stability and Development Plan’ announced on 30 November 2008). Due to a changing composition of tax revenues in Poland, this does not feed into a corresponding deterioration of the structural balance, which is estimated at about 1/3 percentage point. |
| --- | --- |

(5)

The general government deficit is planned to improve to 2,5 % of GDP in 2009 according to the December 2008 convergence programme, compared to a deterioration to 3,5 % projected in the Commission services' interim forecast based on a less favourable macro-economic scenario. The estimated net expansionary effect on the budget from discretionary measures exceeds 1 percentage point. This includes the specific measures adopted in response to the economic downturn (‘Stability and Development Plan’ announced on 30 November 2008). Due to a changing composition of tax revenues in Poland, this does not feed into a corresponding deterioration of the structural balance, which is estimated at about 1/3 percentage point.

| (6) | The medium-term goal of the December 2008 convergence programme is to keep general government balances below 3 % of GDP in a sustainable way, reducing them gradually in the programme period, with a headline general government balance target of – 1,9 % in 2011. Due to the significant deterioration in the macro-economic scenario, the achievement of the medium-term budgetary objective consistent with the nominal deficit targets, which is a general government structural balance (cyclically-adjusted balance net of one-off and other temporary measures) of – 1 % of GDP, is postponed beyond 2011, the target year in the previous update. The adjustment path is based on sizeable expenditure reductions, by 1,5 percentage points of GDP, while the revenue ratio is decreasing by 1 percentage point. However, the expenditure-reducing measures are not specified in the programme. The programme projects a reduction of the debt ratio from almost 46 % of GDP in 2008 to less than 45 % in 2011 (with a 0,7 percentage point decrease in the last year of the programme). This contrasts with the Commission services' interim forecast which projects a steep increase of the gross debt ratio from 45,5 % in 2008 to slightly less than 50 % in 2010. The differences are mainly explained by different forecasts for the evolution of the primary deficit. |
| --- | --- |

(6)

The medium-term goal of the December 2008 convergence programme is to keep general government balances below 3 % of GDP in a sustainable way, reducing them gradually in the programme period, with a headline general government balance target of – 1,9 % in 2011. Due to the significant deterioration in the macro-economic scenario, the achievement of the medium-term budgetary objective consistent with the nominal deficit targets, which is a general government structural balance (cyclically-adjusted balance net of one-off and other temporary measures) of – 1 % of GDP, is postponed beyond 2011, the target year in the previous update. The adjustment path is based on sizeable expenditure reductions, by 1,5 percentage points of GDP, while the revenue ratio is decreasing by 1 percentage point. However, the expenditure-reducing measures are not specified in the programme. The programme projects a reduction of the debt ratio from almost 46 % of GDP in 2008 to less than 45 % in 2011 (with a 0,7 percentage point decrease in the last year of the programme). This contrasts with the Commission services' interim forecast which projects a steep increase of the gross debt ratio from 45,5 % in 2008 to slightly less than 50 % in 2010. The differences are mainly explained by different forecasts for the evolution of the primary deficit.

| (7) | The budgetary outcomes projected in the programme are subject to downside risks. The favourable assumptions regarding GDP growth lead to an optimistic estimate of revenue growth throughout the programme period. In particular, the expected revenues from direct taxes and revenues other than taxes, social contributions or property income in 2009 are on the high side. The macro-economic scenario of the programme appears to assume that the fiscal stimulus measures in 2009 (personal income tax reduction and a surge in public investment) are very effective in fuelling growth. This may not fully materialise because high-income households with a comparatively high propensity to save benefit most from the tax reform and there may be an underexecution of investment as in previous years. In addition, certain expenditure such as social transfers and subsidies may rise more than expected in 2009. For the outer years, the planned spending restraint is subject to risks in view of (i) the electoral cycle; and (ii) the lack of information on concrete reform measures. |
| --- | --- |

(7)

The budgetary outcomes projected in the programme are subject to downside risks. The favourable assumptions regarding GDP growth lead to an optimistic estimate of revenue growth throughout the programme period. In particular, the expected revenues from direct taxes and revenues other than taxes, social contributions or property income in 2009 are on the high side. The macro-economic scenario of the programme appears to assume that the fiscal stimulus measures in 2009 (personal income tax reduction and a surge in public investment) are very effective in fuelling growth. This may not fully materialise because high-income households with a comparatively high propensity to save benefit most from the tax reform and there may be an underexecution of investment as in previous years. In addition, certain expenditure such as social transfers and subsidies may rise more than expected in 2009. For the outer years, the planned spending restraint is subject to risks in view of (i) the electoral cycle; and (ii) the lack of information on concrete reform measures.

| (8) | Although, based on the convergence programme, the budgetary position in 2008 includes a small structural primary deficit, the long-term budgetary impact of ageing is among the lowest in the EU according to the projections made in 2005, which are based on the common methodology. Recent reforms, however, tend to raise expenditure in the long term. Maintaining high primary surpluses over the medium term would contribute to limiting the risks to the long-term sustainability of public finances, which are currently at a low level. |
| --- | --- |

(8)

Although, based on the convergence programme, the budgetary position in 2008 includes a small structural primary deficit, the long-term budgetary impact of ageing is among the lowest in the EU according to the projections made in 2005, which are based on the common methodology. Recent reforms, however, tend to raise expenditure in the long term. Maintaining high primary surpluses over the medium term would contribute to limiting the risks to the long-term sustainability of public finances, which are currently at a low level.

| (9) | The overall track record of the budgetary framework is good when it comes to respecting the budgetary targets. However, this is largely the result of strong growth and sizeable windfall revenues in recent years as well as an unintended underexecution of expenditure plans (mainly investment). The convergence programme refers to a planned amendment of the public finance law, which includes a reduction of the amount of autonomous public funds not directly controlled by central or local authorities, obligatory multiannual budgetary plans for the central State budget and local authorities as well as modified fiscal rules. In addition, the programme confirms the planned implementation of performance budgeting with a gradually increasing institutional coverage. These are steps in the right direction although the expected impact is limited. |
| --- | --- |

(9)

The overall track record of the budgetary framework is good when it comes to respecting the budgetary targets. However, this is largely the result of strong growth and sizeable windfall revenues in recent years as well as an unintended underexecution of expenditure plans (mainly investment). The convergence programme refers to a planned amendment of the public finance law, which includes a reduction of the amount of autonomous public funds not directly controlled by central or local authorities, obligatory multiannual budgetary plans for the central State budget and local authorities as well as modified fiscal rules. In addition, the programme confirms the planned implementation of performance budgeting with a gradually increasing institutional coverage. These are steps in the right direction although the expected impact is limited.

| (10) | In response to the financial crisis, the Polish government adopted a number of measures to ensure the stability of the financial sector. The guarantees for bank deposits have been significantly increased, with EUR 50 000 as a new threshold. The main measure, which is the increase in the ceiling for guarantees for inter-bank and corporate loans (by almost 2 % of GDP), is envisaged for 2009 only and therefore planned to be temporary. In addition, the government has planned a capital injection (about 0,15 % of GDP) to the State-owned BGK bank, intended for increasing loans to small and medium-sized enterprises. |
| --- | --- |

(10)

In response to the financial crisis, the Polish government adopted a number of measures to ensure the stability of the financial sector. The guarantees for bank deposits have been significantly increased, with EUR 50 000 as a new threshold. The main measure, which is the increase in the ceiling for guarantees for inter-bank and corporate loans (by almost 2 % of GDP), is envisaged for 2009 only and therefore planned to be temporary. In addition, the government has planned a capital injection (about 0,15 % of GDP) to the State-owned BGK bank, intended for increasing loans to small and medium-sized enterprises.

| (11) | In line with the EERP agreed in December by the European Council, the fiscal stimulus measures planned by the Polish government aiming at aggregate demand stimulation through increased public investment in infrastructure, should also be beneficial for long-term potential growth and thus public finances. The personal income tax cut reduces the tax wedge, though mainly for high-income tax-payers. These stimulus measures are not temporary. Given the risk of a high fiscal deficit, but still relatively resilient growth, as indicated by the Commission services' interim forecast, the fiscal stimulus for 2009 adopted by Poland is an adequate response to the economic downturn. However, all the planned measures need timely adoption by the government and parliament and implementation. As regards the structural measures, the sustainability of public finances will be improved by the replacement of early pensions with less costly ‘bridge pensions’. Poland has also taken measures to improve the quality of public finances (a new public finance law strengthening budgetary rules and the control over autonomous funds, and further implementation of performance budgeting). These measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs. |
| --- | --- |

(11)

In line with the EERP agreed in December by the European Council, the fiscal stimulus measures planned by the Polish government aiming at aggregate demand stimulation through increased public investment in infrastructure, should also be beneficial for long-term potential growth and thus public finances. The personal income tax cut reduces the tax wedge, though mainly for high-income tax-payers. These stimulus measures are not temporary. Given the risk of a high fiscal deficit, but still relatively resilient growth, as indicated by the Commission services' interim forecast, the fiscal stimulus for 2009 adopted by Poland is an adequate response to the economic downturn. However, all the planned measures need timely adoption by the government and parliament and implementation. As regards the structural measures, the sustainability of public finances will be improved by the replacement of early pensions with less costly ‘bridge pensions’. Poland has also taken measures to improve the quality of public finances (a new public finance law strengthening budgetary rules and the control over autonomous funds, and further implementation of performance budgeting). These measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs.

| (12) | The projected fiscal stance is expansionary for 2009 and restrictive for 2010. A higher deficit in 2009 could result in higher interest expenditure because of risk aversion towards emerging markets. The planned measures may be insufficient to ensure the accomplishment of the envisaged adjustment after 2009. Moreover, the budgetary strategy should be backed up with specific deficit-reducing measures in 2010 and 2011. |
| --- | --- |

(12)

The projected fiscal stance is expansionary for 2009 and restrictive for 2010. A higher deficit in 2009 could result in higher interest expenditure because of risk aversion towards emerging markets. The planned measures may be insufficient to ensure the accomplishment of the envisaged adjustment after 2009. Moreover, the budgetary strategy should be backed up with specific deficit-reducing measures in 2010 and 2011.

| (13) | As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data (3). |
| --- | --- |

(13)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data (3).

The overall conclusion is that Poland is planning an adequate fiscal stimulus, some measures of which are not temporary. The planned measures will stimulate both aggregate demand in the short term and strengthen the supply side of the Polish economy in a longer term. Given the optimistic GDP growth forecasts, the budgetary outcomes projected in the programme are subject to downside risks, according to the Commission forecasts, throughout the whole period covered by the current update. In addition, for the outer years, the planned spending restraint will have to be backed up with specified measures, as appropriate.

In view of the above assessment and also given the need to ensure sustainable convergence, Poland is invited to:

| (i) | implement the 2009 fiscal plans, including the stimulus measures in line with the EERP and the framework of the SGP, while avoiding to breach the reference value, as targeted by the Government; |
| --- | --- |

(i)

implement the 2009 fiscal plans, including the stimulus measures in line with the EERP and the framework of the SGP, while avoiding to breach the reference value, as targeted by the Government;

| (ii) | back up the consolidation strategy for 2010 and 2011 with specific deficit-reducing measures; |
| --- | --- |

(ii)

back up the consolidation strategy for 2010 and 2011 with specific deficit-reducing measures;

| (iii) | reinforce the budgetary framework through better control over expenditure, including the swift implementation of the amended public finance act and performance budgeting. |
| --- | --- |

(iii)

reinforce the budgetary framework through better control over expenditure, including the swift implementation of the amended public finance act and performance budgeting.

Comparison of key macro-economic and budgetary projections

| | | 2007 | 2008 | 2009 | 2010 | 2011 |
| --- | --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | CP Dec 2008 | 6,7 | 5,1 | 3,7 | 4,0 | 4,5 |
| COM Jan 2009 | 6,7 | 5,0 | 2,0 | 2,4 | n.a. |
| CP Mar 2008 | 6,5 | 5,3 | 5,0 | 5,0 | n.a. |
| HICP inflation
  (%) | CP Dec 2008 | 2,6 | 4,2 | 2,9 | 2,5 | 2,5 |
| COM Jan 2009 | 2,6 | 4,2 | 2,9 | 2,5 | n.a. |
| CP Mar 2008 | 2,6 | 3,5 | 2,9 | 2,5 | n.a. |
| Output gap (4)

  (% of potential GDP) | CP Dec 2008 | 1,3 | 1,0 | – 0,1 | – 0,6 | – 0,5 |
| COM Jan 2009 (5) | 2,2 | 2,2 | 0,1 | – 1,1 | n.a. |
| CP Mar 2008 | 1,1 | 0,7 | – 0,2 | – 0,9 | n.a. |
| Net lending/borrowing vis-à-vis the rest of the world
  (% of GDP) | CP Dec 2008 | – 3,6 | – 4,0 | – 1,8 | – 1,3 | 1,5 |
| COM Jan 2009 | – 3,6 | – 4,1 | – 3,5 | – 2,9 | n.a. |
| CP Mar 2008 | – 2,6 | – 3,5 | – 4,2 | – 4,6 | n.a. |
| General government revenue
  (% of GDP) | CP Dec 2008 | 40,0 | 39,8 | 40,7 | 40,0 | 39,7 |
| COM Jan 2009 | 40,0 | 39,6 | 40,2 | 40,3 | n.a. |
| CP Mar 2008 | 40,0 | 40,0 | 39,2 | 38,7 | n.a. |
| General government expenditure
  (% of GDP) | CP Dec 2008 | 42,0 | 42,6 | 43,2 | 42,4 | 41,7 |
| COM Jan 2009 | 42,0 | 42,1 | 43,8 | 43,7 | n.a. |
| CP Mar 2008 | 42,0 | 42,5 | 41,2 | 40,1 | n.a. |
| General government balance
  (% of GDP) | CP Dec 2008 | – 2,0 | – 2,7 | – 2,5 | – 2,3 | – 1,9 |
| COM Jan 2009 | – 2,0 | – 2,5 | – 3,6 | – 3,5 | n.a. |
| CP Mar 2008 | – 2,0 | – 2,5 | – 2,0 | – 1,5 | n.a. |
| Primary balance
  (% of GDP) | CP Dec 2008 | 0,5 | – 0,3 | 0,1 | 0,2 | 0,5 |
| COM Jan 2009 | 0,5 | – 0,2 | – 1,2 | – 1,3 | n.a. |
| CP Mar 2008 | 0,2 | – 0,2 | 0,3 | 0,8 | n.a. |
| Cyclically-adjusted balance (4)

  (% of GDP) | CP Dec 2008 | – 2,5 | – 3,1 | – 2,5 | – 2,1 | – 1,7 |
| COM Jan 2009 | – 2,8 | – 3,4 | – 3,7 | – 3,0 | n.a. |
| CP Mar 2008 | 0,6 | 0,5 | 0,1 | – 0,1 | n.a. |
| Structural balance (6)

  (% of GDP) | CP Dec 2008 | – 2,5 | – 3,1 | – 2,5 | – 1,9 | – 1,7 |
| COM Jan 2009 | – 2,8 | – 3,4 | – 3,7 | – 2,9 | n.a. |
| CP Mar 2008 | – 2,2 | – 2,7 | – 2,1 | – 1,4 | n.a. |
| Government gross debt
  (% of GDP) | CP Dec 2008 | 44,9 | 45,9 | 45,8 | 45,5 | 44,8 |
| COM Jan 2009 | 44,9 | 45,5 | 47,7 | 49,7 | n.a. |
| CP Mar 2008 | 44,9 | 44,2 | 43,3 | 42,3 | n.a. |
| Convergence programme (CP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations. |

2007

2008

2009

2010

2011

Real GDP

(% change)

CP Dec 2008

6,7

5,1

3,7

4,0

4,5

COM Jan 2009

6,7

5,0

2,0

2,4

n.a.

CP Mar 2008

6,5

5,3

5,0

5,0

n.a.

HICP inflation

(%)

CP Dec 2008

2,6

4,2

2,9

2,5

2,5

COM Jan 2009

2,6

4,2

2,9

2,5

n.a.

CP Mar 2008

2,6

3,5

2,9

2,5

n.a.

Output gap (4)

(% of potential GDP)

CP Dec 2008

1,3

1,0

– 0,1

– 0,6

– 0,5

COM Jan 2009 (5)

2,2

2,2

0,1

– 1,1

n.a.

CP Mar 2008

1,1

0,7

– 0,2

– 0,9

n.a.

Net lending/borrowing vis-à-vis the rest of the world

(% of GDP)

CP Dec 2008

– 3,6

– 4,0

– 1,8

– 1,3

1,5

COM Jan 2009

– 3,6

– 4,1

– 3,5

– 2,9

n.a.

CP Mar 2008

– 2,6

– 3,5

– 4,2

– 4,6

n.a.

General government revenue

(% of GDP)

CP Dec 2008

40,0

39,8

40,7

40,0

39,7

COM Jan 2009

40,0

39,6

40,2

40,3

n.a.

CP Mar 2008

40,0

40,0

39,2

38,7

n.a.

General government expenditure

(% of GDP)

CP Dec 2008

42,0

42,6

43,2

42,4

41,7

COM Jan 2009

42,0

42,1

43,8

43,7

n.a.

CP Mar 2008

42,0

42,5

41,2

40,1

n.a.

General government balance

(% of GDP)

CP Dec 2008

– 2,0

– 2,7

– 2,5

– 2,3

– 1,9

COM Jan 2009

– 2,0

– 2,5

– 3,6

– 3,5

n.a.

CP Mar 2008

– 2,0

– 2,5

– 2,0

– 1,5

n.a.

Primary balance

(% of GDP)

CP Dec 2008

0,5

– 0,3

0,1

0,2

0,5

COM Jan 2009

0,5

– 0,2

– 1,2

– 1,3

n.a.

CP Mar 2008

0,2

– 0,2

0,3

0,8

n.a.

Cyclically-adjusted balance (4)

(% of GDP)

CP Dec 2008

– 2,5

– 3,1

– 2,5

– 2,1

– 1,7

COM Jan 2009

– 2,8

– 3,4

– 3,7

– 3,0

n.a.

CP Mar 2008

0,6

0,5

0,1

– 0,1

n.a.

Structural balance (6)

(% of GDP)

CP Dec 2008

– 2,5

– 3,1

– 2,5

– 1,9

– 1,7

COM Jan 2009

– 2,8

– 3,4

– 3,7

– 2,9

n.a.

CP Mar 2008

– 2,2

– 2,7

– 2,1

– 1,4

n.a.

Government gross debt

(% of GDP)

CP Dec 2008

44,9

45,9

45,8

45,5

44,8

COM Jan 2009

44,9

45,5

47,7

49,7

n.a.

CP Mar 2008

44,9

44,2

43,3

42,3

n.a.

Convergence programme (CP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations.

---

(1)  OJ L 209, 2.8.1997, p. 1. The documents referred to in this text can be found at the following website:

http://ec.europa.eu/economy_finance/about/activities/sgp/main_en.htm

(2)  The assessment notably takes into account the Commission services' January 2009 forecast, but also other information that has become available since then.

(3)  The programme provides additional non-compulsory data which have to be checked for consistency.

(4)  Output gaps and cyclically-adjusted balances according to the programmes as recalculated by Commission services on the basis of the information in the programmes.

(5)  Based on estimated potential growth of 5,2 %, 4,9 %, 4,2 % and 3,7 % respectively in the period 2007-2010.

(6)  Cyclically-adjusted balance excluding one-off and other temporary measures. One-off and other temporary measures are 0,2 % in 2010, deficit-increasing, and zero for other years according to the most recent programme and the Commission services' January 2009 interim forecast.

Source:

Convergence programme (CP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations.

---

II Information

INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

| 20.3.2009 | EN | Official Journal of the European Union | C 66/22 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/22

---

Authorisation for State aid pursuant to Articles 87 and 88 of the EC Treaty

Cases where the Commission raises no objections

(Text with EEA relevance)

(2009/C 66/05)

| Date of adoption of the decision | 26.11.2008 |
| --- | --- |
| Reference number of the aid | N 293/08 |
| Member State | Hungary |
| Region | Közép-Dunántúl, Nyugat-Dunántúl, Dél-Dunántúl, Észak-Magyarország, Észak-Alföld, Dél-Alföld |
| Title (and/or name of the beneficiary) | Magyarország 6 konvergencia régiójában térségi központi szerepet ellátó nagyvárosok önkormányzatai, az 1997. évi CXL törvényben foglalt közművelődési, múzeumi, könyvtári intézmények, ezek tulajdonosai, fenntartói |
| Legal basis | 27/2007 (X.10) a Társadalmi Infrastruktúra Operatív Program előirányzatából nyújtott, az Európai Közösséget Létrehozó Szerződés 87. Cikk (1) bekezdés hatálya alá tartozó támogatások felhasználásáról szóló ÖTM rendelet |
| Type of measure | Aid scheme |
| Objective | Culture |
| Form of aid | Direct grant |
| Budget | Overall budget: HUF 35 863 million |
| Intensity | 100 % |
| Duration | 1.9.2008-31.12.2013 |
| Economic sectors | Recreational, cultural sporting activities |
| Name and address of the granting authority | Nemzeti Fejlesztési Ügynökség |
| Other information | — |

Date of adoption of the decision

26.11.2008

Reference number of the aid

N 293/08

Member State

Hungary

Region

Közép-Dunántúl, Nyugat-Dunántúl, Dél-Dunántúl, Észak-Magyarország, Észak-Alföld, Dél-Alföld

Title (and/or name of the beneficiary)

Magyarország 6 konvergencia régiójában térségi központi szerepet ellátó nagyvárosok önkormányzatai, az 1997. évi CXL törvényben foglalt közművelődési, múzeumi, könyvtári intézmények, ezek tulajdonosai, fenntartói

Legal basis

27/2007 (X.10) a Társadalmi Infrastruktúra Operatív Program előirányzatából nyújtott, az Európai Közösséget Létrehozó Szerződés 87. Cikk (1) bekezdés hatálya alá tartozó támogatások felhasználásáról szóló ÖTM rendelet

Type of measure

Aid scheme

Objective

Culture

Form of aid

Direct grant

Budget

Overall budget: HUF 35 863 million

Intensity

100 %

Duration

1.9.2008-31.12.2013

Economic sectors

Recreational, cultural sporting activities

Name and address of the granting authority

Nemzeti Fejlesztési Ügynökség

Other information

—

The authentic text(s) of the decision, from which all confidential information has been removed, can be found at:

http://ec.europa.eu/community_law/state_aids/

---

| 20.3.2009 | EN | Official Journal of the European Union | C 66/23 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/23

---

Non-opposition to a notified concentration

(Case COMP/M.5408 — Fortress/Unicredit/Torre)

(Text with EEA relevance)

(2009/C 66/06)

On 12 March 2009, the Commission decided not to oppose the above notified concentration and to declare it compatible with the common market. This decision is based on Article 6(1)(b) of Council Regulation (EC) No 139/2004. The full text of the decision is available only in English and will be made public after it is cleared of any business secrets it may contain. It will be available:

| — | from the Europa competition website (http://ec.europa.eu/comm/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes, |
| --- | --- |

—

from the Europa competition website (http://ec.europa.eu/comm/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes,

| — | in electronic form on the EUR-Lex website under document number 32009M5408. EUR-Lex is the on-line access to European law (http://eur-lex.europa.eu). |
| --- | --- |

—

in electronic form on the EUR-Lex website under document number 32009M5408. EUR-Lex is the on-line access to European law (http://eur-lex.europa.eu).

---

| 20.3.2009 | EN | Official Journal of the European Union | C 66/23 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/23

---

Non-opposition to a notified concentration

(Case COMP/M.5451 — CNP Assurances/CNP Unicredit Life)

(Text with EEA relevance)

(2009/C 66/07)

On 12 March 2009, the Commission decided not to oppose the above notified concentration and to declare it compatible with the common market. This decision is based on Article 6(1)(b) of Council Regulation (EC) No 139/2004. The full text of the decision is available only in English and will be made public after it is cleared of any business secrets it may contain. It will be available:

| — | from the Europa competition website (http://ec.europa.eu/comm/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes, |
| --- | --- |

—

from the Europa competition website (http://ec.europa.eu/comm/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes,

| — | in electronic form on the EUR-Lex website under document number 32009M5451. EUR-Lex is the on-line access to European law (http://eur-lex.europa.eu). |
| --- | --- |

—

in electronic form on the EUR-Lex website under document number 32009M5451. EUR-Lex is the on-line access to European law (http://eur-lex.europa.eu).

---

| 20.3.2009 | EN | Official Journal of the European Union | C 66/24 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/24

---

Non-opposition to a notified concentration

(Case COMP/M.5253 — Sanofi-Aventis/Zentiva)

(Text with EEA relevance)

(2009/C 66/08)

On 4 February 2009, the Commission decided not to oppose the above notified concentration and to declare it compatible with the common market. This decision is based on Article 6(1) in conjunction with Article 6(2) of Council Regulation (EC) No 139/2004. The full text of the decision is available only in English and will be made public after it is cleared of any business secrets it may contain. It will be available:

| — | from the Europa competition website (http://ec.europa.eu/comm/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes, |
| --- | --- |

—

from the Europa competition website (http://ec.europa.eu/comm/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes,

| — | in electronic form on the EUR-Lex website under document number 32009M5253. EUR-Lex is the on-line access to European law (http://eur-lex.europa.eu). |
| --- | --- |

—

in electronic form on the EUR-Lex website under document number 32009M5253. EUR-Lex is the on-line access to European law (http://eur-lex.europa.eu).

---

IV Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

| 20.3.2009 | EN | Official Journal of the European Union | C 66/25 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/25

---

Euro exchange rates (1)

19 March 2009

(2009/C 66/09)

1 euro=

| | Currency | Exchange rate |
| --- | --- | --- |
| USD | US dollar | 1,3671 |
| JPY | Japanese yen | 129,67 |
| DKK | Danish krone | 7,4514 |
| GBP | Pound sterling | 0,94050 |
| SEK | Swedish krona | 10,8663 |
| CHF | Swiss franc | 1,5385 |
| ISK | Iceland króna | |
| NOK | Norwegian krone | 8,6450 |
| BGN | Bulgarian lev | 1,9558 |
| CZK | Czech koruna | 26,779 |
| EEK | Estonian kroon | 15,6466 |
| HUF | Hungarian forint | 298,50 |
| LTL | Lithuanian litas | 3,4528 |
| LVL | Latvian lats | 0,7080 |
| PLN | Polish zloty | 4,5410 |
| RON | Romanian leu | 4,3003 |
| TRY | Turkish lira | 2,3047 |
| AUD | Australian dollar | 1,9771 |
| CAD | Canadian dollar | 1,6732 |
| HKD | Hong Kong dollar | 10,5972 |
| NZD | New Zealand dollar | 2,4601 |
| SGD | Singapore dollar | 2,0589 |
| KRW | South Korean won | 1 897,94 |
| ZAR | South African rand | 13,0797 |
| CNY | Chinese yuan renminbi | 9,3352 |
| HRK | Croatian kuna | 7,4555 |
| IDR | Indonesian rupiah | 16 357,35 |
| MYR | Malaysian ringgit | 4,9933 |
| PHP | Philippine peso | 65,830 |
| RUB | Russian rouble | 45,6515 |
| THB | Thai baht | 48,430 |
| BRL | Brazilian real | 3,0624 |
| MXN | Mexican peso | 18,8722 |
| INR | Indian rupee | 68,7790 |

Currency

Exchange rate

USD

US dollar

1,3671

JPY

Japanese yen

129,67

DKK

Danish krone

7,4514

GBP

Pound sterling

0,94050

SEK

Swedish krona

10,8663

CHF

Swiss franc

1,5385

ISK

Iceland króna

NOK

Norwegian krone

8,6450

BGN

Bulgarian lev

1,9558

CZK

Czech koruna

26,779

EEK

Estonian kroon

15,6466

HUF

Hungarian forint

298,50

LTL

Lithuanian litas

3,4528

LVL

Latvian lats

0,7080

PLN

Polish zloty

4,5410

RON

Romanian leu

4,3003

TRY

Turkish lira

2,3047

AUD

Australian dollar

1,9771

CAD

Canadian dollar

1,6732

HKD

Hong Kong dollar

10,5972

NZD

New Zealand dollar

2,4601

SGD

Singapore dollar

2,0589

KRW

South Korean won

1 897,94

ZAR

South African rand

13,0797

CNY

Chinese yuan renminbi

9,3352

HRK

Croatian kuna

7,4555

IDR

Indonesian rupiah

16 357,35

MYR

Malaysian ringgit

4,9933

PHP

Philippine peso

65,830

RUB

Russian rouble

45,6515

THB

Thai baht

48,430

BRL

Brazilian real

3,0624

MXN

Mexican peso

18,8722

INR

Indian rupee

68,7790

---

(1)

Source: reference exchange rate published by the ECB.

---

NOTICES FROM MEMBER STATES

| 20.3.2009 | EN | Official Journal of the European Union | C 66/26 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/26

---

Information communicated by Member States regarding State aid granted under Commission Regulation (EC) No 1857/2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001

(2009/C 66/10)

Aid No: XA 406/08

Member State: Austria

Region: Bundesland Wien

Title of aid scheme or name of company receiving an individual aid: Richtlinie für die Gewährung eines Zuschusses zu den Versicherungsprämien für versicherbare Risiken in der Landwirtschaft

Legal basis: Gesetz über die Förderung der Landwirtschaft in Wien (Wiener Landwirtschaftsgesetz), LGBl. für Wien Nr. 15/2000, in der geltenden Fassung

Annual expenditure planned under the scheme or overall amount of individual aid granted to the company: EUR 0,13 million

Maximum aid intensity: A grant of no more than 50 % of the premium costs will be made

Date of implementation: From 1 January 2009

Duration of scheme or individual aid award: 1 January 2009 to 31 December 2013

Objective of aid: There are some 700 agricultural holdings in the Province of Vienna, with horticulture and arable farming being among the main production sectors. The holdings are all SMEs. Apart from supplying the city with fresh, high-quality agricultural products these family businesses make a significant contribution to the appearance and maintenance of the farmed landscape of the Vienna region through cultivating and managing the agricultural land. The long-term security of these businesses is therefore an important goal of Vienna Province's policies.

An important tool in the economic viability of the businesses is the taking-out insurance policies against damage to agricultural production caused by adverse climatic events which can be likened to natural disasters. As climate fluctuations have become greater in recent years good risk management is becoming increasingly important for agricultural holdings.

According to Article 12 of Regulation (EC) No 1857/2006 aid to insure against risks in the form of subsidies for insurance premiums is compatible with the common market.

Since 2001 the Province of Vienna has been subsidising horticultural businesses to the tune of a maximum of 50 % of the cost of taking out insurance against storm damage to glasshouses.

This aid scheme approved by the Commission (State aid N 854/2000/Austria/Vienna) has very much proved its worth with the result that more than 90 % of the glasshouses in the Vienna region are now insured against storm damage. To guarantee the continuation of the scheme aid is to continue to be offered to the businesses under these new guidelines.

In view of the highly effective nature of the scheme and of the increased risk of adverse climatic events caused by climate change which may cause extensive damage to agricultural production, particularly in the arable sector, this aid scheme is to be extended to cover Viennese arable farms from 2009. A multi-risk insurance policy for arable land will enable farms to insure against not only storm and hail damage but also other adverse climatic events such as drought, flooding, spray drift, mud silting, storms, etc. To give Viennese arable farmers an incentive to take out such insurance they will be granted an annual subsidy of a maximum of 50 % of the cost of the premium. This scheme is intended to speed up the widest possible coverage of Viennese arable land against the above risks thus contributing to risk management and the financial stability of the agricultural holdings in the Province of Vienna

Sector(s) concerned: Agricultural production businesses (horticulture and arable farming) in Vienna

Name and address of the granting authority:

| Amt der Wiener Landesregierung |
| --- |
| Magistratsabteilung 58 |
| Volksgartenstraße 3 |
| 1082 Wien |
| ÖSTERREICH |

Amt der Wiener Landesregierung

Magistratsabteilung 58

Volksgartenstraße 3

1082 Wien

ÖSTERREICH

Website: http://www.wien.gv.at/umwelt/wasserrecht/foerderrichtlinie.html

Other information: Entry into force of these guidelines repeals the approved ‘Richtlinie für die Gewährung eines Zuschusses zu den Versicherungsprämien zum Schutz vor Sturmschäden an Gewächshäusern in der Landwirtschaft’ (State aid N 845/00/Austria/Vienna).

This scheme falls under to Article 12 of Regulation (EC) No 1857/2006 and meets its requirements in full. In particular, this scheme does not jeopardise the operation of the single market in insurance services. The granting authority guarantees that the aid is not limited to insurance provided by a single insurance company or group of companies, or subject to the condition that the insurance contract be taken out with a company established in Austria

Aid No: XA 409/08

Member State: France

Region: Champagne-Ardenne

Title of aid scheme: Aide à la reconstitution du cheptel ovin de la région Champagne-Ardenne à la suite de la crise de la fièvre catarrhale ovine (F.C.O.)

Legal basis:

| — | Article L 1511-2 du Code Général des Collectivités Territoriales. |
| --- | --- |

—

Article L 1511-2 du Code Général des Collectivités Territoriales.

| — | Article 10(2) of Regulation (EC) No 1857/2006. |
| --- | --- |

—

Article 10(2) of Regulation (EC) No 1857/2006.

| — | Règlement «Aide à la reconstitution des troupes ovines» adopté par la Commission permanente du Conseil Régional de Champagne-Ardenne du 7 juillet 2008 |
| --- | --- |

—

Règlement «Aide à la reconstitution des troupes ovines» adopté par la Commission permanente du Conseil Régional de Champagne-Ardenne du 7 juillet 2008

Annual expenditure planned under the scheme: EUR 800 000 for the programme, which will end in January 2010

Maximum aid intensity: The Region will provide aid of a maximum of 80 % of losses for which compensation has not been received (up to EUR 200 per ewe replaced, EUR 20 per sheep and EUR 320 per registered ram replaced).

The aid will be paid for up to the number of mortalities declared to the groupement de défense sanitaire (health protection group) between the date an outbreak of bluetongue is notified and the date aid is requested

Date of implementation: From the date of publication of the registration number of the request for exemption on the website of the Commission's Directorate-General for Agriculture and Rural Development

Duration of scheme: Until 31 January 2010

Objective of aid: The aid is to compensate farmers for financial losses suffered as a result of the death of livestock from bluetongue.

In the Champagne-Ardenne Region, an estimated total of 6 639 sheep on 237 holdings were declared as having died from bluetongue in applications to the authorities for compensation (including 1 660 adult animals). In addition, in 2008 farmers applied for 2 882 fewer ewe/goat premiums (EGP = the number of ewes that have lambed at least once or that are more than 12 months old declared to be present on sheep farms from 1 February to 10 May of the year in question) than in 2007. This crisis hit when the Region's sheep flock had been growing since 2003 (an additional 10 000 ewes over the past four years). The sector's regional dynamic is therefore facing a serious threat.

That is why the Champagne-Ardenne Region is to provide aid to sheep farmers affected by the bluetongue crisis and suffering serious financial and health problems since September 2006.

The regional aid is intended to provide support to professional sheep farms with a flock equivalent to 100 EGP minimum.

Beneficiaries of the regional aid must undertake to maintain their production level for five years. A check will be carried out on the annual declaration of the number of EGP

Sector(s) concerned: All farmers with a holding with 80 % of its utilised agricultural area in the Champagne-Ardenne Region, who practise farming as their main occupation and who are 60 years old or younger (or agricultural companies 50 % of whose shares are held by natural persons who are 60 years old or younger and members of AMEXA (the agricultural sickness insurance scheme) as main occupation farmers)

Name and address of the granting authority:

| Région Champagne-Ardenne |
| --- |
| Hôtel de Région |
| 5, rue de Jéricho |
| 51037 Chalons en Champagne cedex |
| FRANCE |

Région Champagne-Ardenne

Hôtel de Région

5, rue de Jéricho

51037 Chalons en Champagne cedex

FRANCE

Website: http://www.cr-champagne-ardenne.fr/?SID=731

http://www.cr-champagne-ardenne.fr/getFile.aspx?FILEID=2808

Aid No: XA 414/08

Member State: Federal Republic of Germany

Region: Land Baden-Württemberg

Title of aid scheme or name of company receiving an individual aid: Landwirtschaft — Wachstum

Legal basis: Rechtsgrundlage ist das Gesetz über die Landeskreditbank Baden-Württemberg — Förderbank vom 11.11.1998 (Gesetzblatt für Baden-Württemberg (GBl.) vom 18.11.1998, S. 581), zuletzt geändert durch Gesetz vom 11.12.2007 (GBl. vom 14.12.2007, S. 581) in Verbindung mit dem Programmmerkblatt Landwirtschaft — Wachstum

Annual expenditure planned under the scheme or overall amount of individual aid granted to the company: Soft loans will be granted with a planned aid value amounting to between EUR 500 000 and EUR 600 000. That amount will be made available by the Landwirtschaftliche Rentenbank. L-Bank will not be making a contribution of its own

Maximum aid intensity: Up to 20 % of the eligible costs. The maximum amount of aid granted to an individual enterprise must not exceed EUR 400 000 over any period of three fiscal years. Where there is cumulation with other public funding in respect of the same eligible costs, the thresholds laid down in Regulation (EC) No 1857/2006 will be complied with. Aid may be granted for the purchase of land, other than land for construction purposes, costing up to 10 % of the eligible expenses of the investment

Date of implementation: In accordance with the time limit laid down in Article 20(1) of Regulation (EC) No 1857/2006, but not before 2 January 2009

Duration of scheme or individual aid award: Until 30 June 2014

Objective of aid: To support SMEs active in the primary production of agricultural products, as listed in Annex I to the EC Treaty (with the exception of fisheries and aquaculture), by promoting investment in primary agricultural production (Article 4 of Regulation (EC) No 1857/2006). The eligible expenses cover (a) the construction, acquisition or improvement of immovable property; (b) the purchase or lease-purchase of machinery and equipment, including computer software, up to the market value of the asset; and (c) general costs linked to expenditure under points (a) and (b), such as architects, engineers and consultation fees, feasibility studies, etc. Under the scheme, aid will not be granted in contravention of any prohibitions or restrictions laid down in Council Regulations establishing common organisation of the markets, even where such prohibitions and restrictions refer only to Community support

Sector(s) concerned: Agriculture, viticulture, horticulture

Name and address of the granting authority:

| Landeskreditbank Baden-Württemberg — Förderbank |
| --- |
| Postfach 10 29 43 |
| 70025 Stuttgart |
| DEUTSCHLAND |

Landeskreditbank Baden-Württemberg — Förderbank

Postfach 10 29 43

70025 Stuttgart

DEUTSCHLAND

Website: www.l-bank.de/landwirtschaft-wachstum

Other information: —

Aid No: XA 417/08

Member State: Federal Republic of Germany

Region: Freistaat Bayern

Title of aid scheme or name of company receiving individual aid: Bezuschussung der aufgrund gesetzlicher Testpflicht durchgeführten BSE/TSE-Schnelltests bei Schlachtrindern über 30 Monaten entstandenen Kosten, durch Verrechnung der Finanzhilfe der Gemeinschaft für diese BSE-Pflichttests

Legal basis:

| — | Article 6(1) in conjunction with Chapter A II, point 2 of Annex III to Regulation (EC) No 999/2001 |
| --- | --- |

—

Article 6(1) in conjunction with Chapter A II, point 2 of Annex III to Regulation (EC) No 999/2001

| — | Gesetz zum Vollzug des Tierseuchenrechts und der Verordnung über die Benutzungsgebühren der Gesundheitsverwaltung |
| --- | --- |

—

Gesetz zum Vollzug des Tierseuchenrechts und der Verordnung über die Benutzungsgebühren der Gesundheitsverwaltung

Annual expenditure planned under the scheme or overall amount of individual aid granted to the company: Approx. EUR 2,3 million grant for rapid tests for BSE in slaughter bovine animals over 30 months; the level of grant depends on the Community support decided on each year and the number of tests required

Maximum aid intensity: Up to 100 %

Date of implementation: Annual implementation

Duration of scheme or individual aid award: Until 31 December 2013

Objective of aid: State grant to cover costs arising from the legal obligation to test for TSE or BSE.

Legal basis of State aid: Article 16(1) of Regulation (EC) No 1857/2006.

It is confirmed that aid pursuant to Article 16(3) of Regulation (EC) No 1857/2006 does not include any direct payments to producers

Economic sectors: Slaughterhouses and rendering plants in Bavaria and small and medium-sized agricultural holdings. The requirements of Article 16(2) of Regulation (EC) No 1857/2006 are met as regards slaughterhouses and rendering plants in Bavaria

Name and address of the granting authority:

| Bayerisches Staatsministerium für Umwelt und Gesundheit |
| --- |
| Rosenkavalierplatz 2 |
| Postfach 810140 |
| 81901 München |
| DEUTSCHLAND |

Bayerisches Staatsministerium für Umwelt und Gesundheit

Rosenkavalierplatz 2

Postfach 810140

81901 München

DEUTSCHLAND

Queries may be addressed to:

| Bayerisches Staatsministerium für |
| --- |
| Landwirtschaft und Forsten |
| Referat C/6 |
| Ludwigstr. 2 |
| 80539 München |
| DEUTSCHLAND |
| Tel. +49 892182-2222 |

Bayerisches Staatsministerium für

Landwirtschaft und Forsten

Referat C/6

Ludwigstr. 2

80539 München

DEUTSCHLAND

Tel. +49 892182-2222

Website: http://www.stmugv.bayern.de/tiergesundheit/krankheiten/bsediagnostik.htm

Other information: —

Aid No: XA 429/08

Member State: Ireland

Region: Member State

Title of aid scheme or name of company receiving an individual aid: Cattle Breeding Infrastructure Program

Legal basis: National Development Plan 2007-2013

Annual expenditure planned under the scheme or overall amount of individual aid granted to the company: Maximum of EUR 1,5 million annually

Maximum aid intensity: Up to 70 % of eligible costs

Date of implementation:

Duration of scheme or individual aid award: 1 January 2009-31 December 2013

Objective of aid: The Irish Cattle Breeding Federation (ICBF) will administer the Cattle Breeding Infrastructure Program. This program aims to encourage the uptake of modern scientific breeding values by beef and dairy farmers, thus contributing to their long-term viability. This program comprises a number of elements relating to testing, genetic evaluation and data collection and distribution of scientific information.

The genetic evaluation project includes researching, reviewing and developing enhancements to the beef and dairy genetic evaluation systems operating in Ireland, incorporating genomic data where appropriate, rollout of new beef evaluations, including advertising, publication of educational material, direct mail shots to farmers, and meetings with farmers and stakeholders in the industry with a view to improving farmer understanding of the new indices.

The Data Collection and Information Distribution element of this program aims to develop computer systems, provide training and to support the roll-out of beef and dairy indices.

This aid is provided in accordance with Article 15(2)(d), 15(2)(e) and 16(1)(b) of Regulation (EC) No 1857/06 — provision of technical support in the agricultural sector and support for the livestock sector

Sector(s) concerned: Bovines

Name and address of the granting authority:

| Department of Agriculture, Fisheries and Food |
| --- |
| Agriculture House |
| Kildare Street |
| Dublin 2 |
| IRELAND |

Department of Agriculture, Fisheries and Food

Agriculture House

Kildare Street

Dublin 2

IRELAND

Website: http://www.agriculture.gov.ie/schemes/NDP_State_Aid/CattleBreedingInfrastructure2009_13.doc

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| 20.3.2009 | EN | Official Journal of the European Union | C 66/30 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/30

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Information communicated by Member States regarding State aid granted under Commission Regulation (EC) No 1857/2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001

(2009/C 66/11)

Aid No: XA 425/08

Member State: Spain

Region: Comunitat Valenciana

Title of the aid scheme: Ayudas a los programas de mejora de calidad de la leche cruda de vaca, oveja y cabra

Legal basis: Orden de 23 de septiembre de 2008 de la Consellería de Agricultura, Pesca y Alimentación por la que se modifican determinados aspectos de la Orden de 28 de diciembre de 2005, por la que se aprueban las bases reguladoras para la financiación de programas de mejora de calidad de la leche cruda de vaca, oveja y cabra y de la Orden de 24 de mayo de 2006, por la que se establecen las bases reguladoras de ayudas al programa de genotipado, se convocan las ayudas para la mejora de la calidad de la leche, en la Comunidad Valenciana y se fijan los importes globales de la ayuda al programa de genotipado en la Comunidad Valenciana (DOCV no 5875 de 21.10.2008).

Orden de 28 de diciembre de 2005, de la CAPA, por la que se aprueban las bases reguladoras para la financiación de programas de mejora de calidad de la leche cruda de vaca, oveja y cabra (DOGV no 5175)

Annual budget: EUR 90 000

Maximum aid intensity: 50 % of expenditure

Date of application: As of the publication of the identification number of the request for exemption on the website of the European Commission's Directorate-General for Agriculture and Rural Development

Duration of the aid scheme: 2008-2013

Objective of aid: Technical support to the milk-producing sector by means of programmes to control and improve the quality of raw cow's, sheep's and goat's milk with a view to promoting milk quality on holdings by adjusting raw milk production, storage and transportation conditions in such a way as to ensure progress in all or some of the following:

The scheme complies with Article 15 of Regulation (EC) No 1857/2006

Sector(s) concerned: Owners of ruminant dairy farms of the Comunitat Valenciana

Name and address of the granting authority:

| Amadeo de Saboya, 2 |
| --- |
| 46010 Valencia |
| ESPAÑA |

Amadeo de Saboya, 2

46010 Valencia

ESPAÑA

Other information: —

Website: http://www.agricultura.gva.es/especiales/ayudas_agrarias/pdf/Ordenes%20modif%20leche%20genotipado_14agosto_2008.pdf

Aid No: XA 426/08

Member State: Spain

Region: Comunitat Valenciana

Title of aid scheme or name of company receiving individual aid: Ayudas para los consejos reguladores u órganos de gestión de las figuras de calidad de la Comunitat Valenciana y entidades asociativas gestoras de la autorización del uso de la marca ‘CV’

Legal basis: Orden de la Consellería de Agricultura, Pesca y Alimentación por la que se establecen las ayudas para los Consejos Reguladores u Órganos de Gestión de las figuras de calidad de la Comunitat Valenciana y entidades asociativas gestoras de la autorización del uso de la marca ‘CV’

Annual expenditure planned under the scheme: EUR 4 193 400

Maximum aid intensity:

I.   For activities developed by regulatory councils or management bodies:

| — | aid to encourage the production of quality agricultural products — up to 80 %, |
| --- | --- |

—

aid to encourage the production of quality agricultural products — up to 80 %,

| — | start-up aid for the constitution of associations and similar entities — up to 100 %. |
| --- | --- |

—

start-up aid for the constitution of associations and similar entities — up to 100 %.

Under no circumstances may aid granted to an individual regulatory council or management body concerned with geographic indications and denominations of origin or to the Organic Farming Committee exceed EUR 550 000 yearly.

II.   For activities developed by associations managing authorisations for the use of the ‘CV’ trademark:

| — | aid up to 70 %. |
| --- | --- |

—

aid up to 70 %.

Under no circumstances may aid granted to an individual association exceed EUR 50 000 yearly.

III.   For activities developed by regulatory council associations, federations or confederations thereof or inter-branch organisations related to quality marks:

| — | aid up to 50 %. |
| --- | --- |

—

aid up to 50 %.

Under no circumstances may aid granted to an invidual association exceed EUR 70 000 yearly

Date of implementation: As from the publication of the registration number of the request for exemption on the website of the European Commission's Directorate-General for Agriculture and Rural Development

Duration of scheme or individual aid award: From 2009 to 2013 inclusive

Objective of aid: The general objective is to establish bases for the development of activities in the 2009-2013 period related to for agri-food products carrying a Comunitat Valenciana quality mark.

This aid is related to the exemption provided for in Articles 9(3), 14(2) and 15(2) of Regulation (EC) No 1857/2006

Sector(s) concerned: Agri-food sector of the Comunitat Valenciana

Name and address of the granting authority:

| Consellería de Agricultura, Pesca y Alimentación |
| --- |
| C/ Amadeo de Saboya, 2 |
| 46010 Valencia |
| ESPAÑA |

Consellería de Agricultura, Pesca y Alimentación

C/ Amadeo de Saboya, 2

46010 Valencia

ESPAÑA

Website: http://www.agricultura.gva.es/especiales/ayudas_agrarias/pdf/AYUDAS%20A%20LOS%20CONSEJO%20REGULADORES,%20ASOCIACIONES%20GESTORAS%20MARCAS%20CV%20Y%20FEDERACIONES%20DE%20LA%20COMUNITAT%20VALENCIANA.pdf

Other information: —

La Directora General de Comercialización

Marta VALSANGIACOMO GIL

Aid No: XA 427/08

Member State: Spain

Region: Comunidad Valenciana

Title of the aid scheme: Ayudas al programa de genotipado

Legal basis: Orden de 23 de septiembre de 2008 de la Consellería de Agricultura, Pesca y Alimentación por la que se modifican determinados aspectos de la Orden de 28 de diciembre de 2005, por la que se aprueban las bases reguladoras para la financiación de programas de mejora de calidad de la leche cruda de vaca, oveja y cabra y de la Orden de 24 de mayo de 2006, por la que se establecen las bases reguladoras de ayudas al programa de genotipado, se convocan las ayudas para la mejora de la calidad de la leche, en la Comunidad Valenciana y se fijan los importes globales de la ayuda al programa de genotipado en la Comunidad Valenciana (DOCV no5 875 de 21.10.2008).

Orden de 24 de mayo de 2006, de la CAPA, por la que se establecen las bases reguladoras de ayudas al programa de genotipado.

Annual budget: EUR 21 000

Maximum aid intensity: 50 % of expenditure

Date of application: As of the publication of the identification number of the request for exemption on the website of the European Commission's Directorate-General for Agriculture and Rural Development

Duration of the aid scheme: 2008-2013

Objective of aid: Development of the national programme for genetic selection for scrapie resistance (goat and sheep TSE). This complies with Article 16 of Regulation (EC) No 1857/2006

Sector(s) concerned: Owners of goat and sheep farms in the region with purebred stock

Name and address of the granting authority:

| Consellería de Agricultura, Pesca y Alimentación |
| --- |
| Amadeo de Saboya, 2 |
| 46010 Valencia |
| ESPAÑA |

Consellería de Agricultura, Pesca y Alimentación

Amadeo de Saboya, 2

46010 Valencia

ESPAÑA

Website: http://www.agricultura.gva.es/especiales/ayudas_agrarias/pdf/Ordenes%20modif%20leche%20genotipado_14agosto_2008.pdf

Aid No: XA 428/08

Member State: Netherlands

Region: Provincie Limburg

Title of aid scheme or name of company receiving individual aid: Wijnen Paprika's BV (Advieskosten Geothermisch onderzoek fase 2)

Legal basis: Algemene Subsidieverordening 2004 Provincie Limburg en Subsidieverordening Inrichting Landelijk Gebied

Annual expenditure planned under the scheme or overall amount of individual aid granted to the company: EUR 31 000

Maximum aid intensity: 100 %

Date of implementation:

Duration of scheme or individual aid award: Until 1 March 2009

Objective of aid: The aid is being granted pursuant to Article 15 of Regulation (EC) No 1857/2006. The conditions stipulated in Article 15(2), (3) and (4) of Regulation (EC) No 1857/2006 will be complied with

Sector(s) concerned: Primary agriculture (peppers)

Name and address of the granting authority:

| Provincie Limburg |
| --- |
| Limburglaan 10 |
| 6229 GA Maastricht |
| NEDERLAND |

Provincie Limburg

Limburglaan 10

6229 GA Maastricht

NEDERLAND

Website: http://www.limburg.nl/nl/html/algemeen/beleid/Europa/KennisgevingenStaatssteun/KennisgevingenStaatssteun.asp#a1RSN3VF5X0O0EBAKCMO1

Other information: Wijnen Paprika's is in the process of expanding its area under greenhouses. The expansion is taking place in three phases. The greenhouses being completed in the first two phases will be heated by means of gas-based combined heat and power (CHP). The intention is to heat the third-phase greenhouses by means of geothermal energy. So that this can ultimately be achieved, a number of investigations need to be carried out.

The first phase concerns a study for a depth and temperature model of the soil. Based on that investigation, two potential reservoirs have been selected. The depth of both reservoirs guarantees that the formation water is hot enough to heat the greenhouses. However, it is not clear whether sufficient water can be drawn from the reservoirs. The volume of water present in the reservoirs therefore needs to be ascertained, along with the porosity and permeability of the rock. This concerns the second phase, to which the granting of aid relates. The aid amounts to EUR 31 000, this being the costs of the investigation.

The aid is being granted on the basis of Article 15 of Regulation (EC) No 1857/2006. There will be no direct payments to farmers; the aid is granted in the form of subsidised consultancy services. The aid is not for services which constitute a continuous or periodic activity and the costs do not relate to the enterprise's usual operating expenditure. The aid is being granted on the basis of the Subsidieverordening Inrichting Landelijk Gebied van de provincie Limburg and is generally available to all enterprises which fulfil the conditions stipulated therein

Aid No: XA 431/08

Member State: Federal Republic of Germany

Region: Thüringen (DEG0)

Title of aid scheme or name of company receiving individual aid: Satzung über Beihilfen der Thüringer Tierseuchenkasse (Beihilfesatzung)

Legal basis:

| — | § 7 Abs. 2 und § 20 Thüringer Ausführungsgesetz zum Tierseuchengesetz (Thüringer Tierseuchengesetz -ThürTierSG-) |
| --- | --- |

—

§ 7 Abs. 2 und § 20 Thüringer Ausführungsgesetz zum Tierseuchengesetz (Thüringer Tierseuchengesetz -ThürTierSG-)

| — | Satzung über Beihilfen der Thüringer Tierseuchenkasse (Beihilfesatzung) |
| --- | --- |

—

Satzung über Beihilfen der Thüringer Tierseuchenkasse (Beihilfesatzung)

Annual expenditure planned under the scheme or overall amount of individual aid granted to the company: Total aid of approximately EUR 2,47 million

Maximum aid intensity: Up to 100 %

Date of implementation: From the time of publication of the aid measure by the Commission

Duration of scheme or individual aid award: Up to 31 December 2013

Objective of aid:

| — | compensation for costs incurred by farmers for health checks, tests and other screening measures, for the purchase and use of vaccines and medicinal products in connection with the prevention and eradication of animal diseases within the meaning of Article 10(7) of Regulation (EC) No 1857/2006.






  — | Article 10(1) of Regulation (EC) No 1857/2006, |
| --- | --- | --- |

—

compensation for costs incurred by farmers for health checks, tests and other screening measures, for the purchase and use of vaccines and medicinal products in connection with the prevention and eradication of animal diseases within the meaning of Article 10(7) of Regulation (EC) No 1857/2006.

—

Article 10(1) of Regulation (EC) No 1857/2006,

| — | compensation for losses incurred by farmers due to animal diseases within the meaning of Article 10(7) of Regulation (EC) No 1857/2006.






  — | Article 10(1) of Regulation (EC) No 1857/2006. |
| --- | --- | --- |

—

compensation for losses incurred by farmers due to animal diseases within the meaning of Article 10(7) of Regulation (EC) No 1857/2006.

—

Article 10(1) of Regulation (EC) No 1857/2006.

Eligible costs: See Annex 1 to the Satzung über Beihilfen der Thüringer Tierseuchenkasse (Beihilfesatzung)

Sector(s) concerned: Cattle farming, pig farming, sheep farming, goat farming, horse rearing, beekeeping

Name and address of the granting authority:

| Thüringer Tierseuchenkasse |
| --- |
| Anstalt des öffentlichen Rechts |
| Victor Goerttler Straße 4 |
| 07745 Jena |
| DEUTSCHLAND |
| E-mail: direkt@thueringertierseuchenkasse.de |

Thüringer Tierseuchenkasse

Anstalt des öffentlichen Rechts

Victor Goerttler Straße 4

07745 Jena

DEUTSCHLAND

E-mail: direkt@thueringertierseuchenkasse.de

Website: Satzung über Beihilfen der Thüringer Tierseuchenkasse (Beihilfesatzung):

http://www.thueringertierseuchenkasse.de

Other information: —

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V Announcements

PROCEDURES RELATING TO THE IMPLEMENTATION OF THE COMPETITION POLICY

Commission

| 20.3.2009 | EN | Official Journal of the European Union | C 66/33 |
| --- | --- | --- | --- |

20.3.2009

EN

Official Journal of the European Union

C 66/33

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Communication from the French Government concerning Directive 94/22/EC of the European Parliament and of the Council on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons (1)

(Notice regarding an application for a concession to prospect for oil and gas, designated the ‘Nesles concession’)

(Text with EEA relevance)

(2009/C 66/12)

On 18 September 2008, Geopetrol SA, a company with registered offices at 9, rue Nicolas Copernic, BP 20, Le Blanc-Mesnil Cedex (France), applied for a ten-year licence, designated the ‘Nesles concession’, to prospect for oil and gas in an area of approximately 11,27 km2 in the department of Seine-et-Marne.

The perimeter of this licence is made up of the meridian and parallel arcs joining the vertices defined below by their geographical coordinates (NTF, Paris meridian):

| Vertex | Longitude
  (degrees east) | Latitude
  (degrees north) |
| --- | --- | --- |
| A | 0,70 | 54,15 |
| B | 0,72 | 54,15 |
| C | 0,72 | 54,09 |
| D | 0,69 | 54,09 |
| E | 0,69 | 54,14 |
| F | 0,70 | 54,14 |

Vertex

Longitude

(degrees east)

Latitude

(degrees north)

A

0,70

54,15

B

0,72

54,15

C

0,72

54,09

D

0,69

54,09

E

0,69

54,14

F

0,70

54,14

Submission of applications and criteria for awarding rights

The initial applicants and competing applicants must meet the requirements for obtaining the licence, specified in Articles 4 and 5 of Decree No 2006-648 of 2 June 2006 concerning mining rights and underground storage rights (Journal officiel de la République française of 3 June 2006).

Interested companies may, within ninety days of the publication of this notice, submit a competing application in accordance with the procedure summarised in the ‘Notice regarding the granting of mining rights for hydrocarbons in France’, published in the Official Journal of the European Communities
  C 374 of 30 December 1994, p. 11, and established by Decree No 2006-648 concerning mining rights and underground storage rights. Competing applications must be sent to the Minister responsible for mines at the address below.

The decisions on the initial application and the competing applications will be based on the criteria governing the award of mining rights, as set out in Article 6 of the abovementioned Decree, and will be taken by 23 September 2011 at the latest.

Conditions and requirements regarding performance of the activity and cessation thereof

Applicants are referred to Articles 79 and 79.1 of the Mining Code (code minier) and to Decree No 2006-649 of 2 June 2006 on mining and underground storage operations and the regulations governing mining and underground storage (décret relatif aux travaux miniers, aux travaux de stockage souterrain et à la police des mines et des stockages souterrains) (Journal officiel de la République française of 3 June 2006).

Further information can be obtained from the following address: Ministère de l'écologie, de l'énergie, du développement durable et de l'aménagement du territoire (Direction générale de l'énergie et climat, Direction de l'énergie, Sous-direction de la sécurité d'approvisionnement et des nouveaux produits energétiques, bureau exploration production des hydrocarbures), 41, boulevard Vincent Auriol, F-75703 Paris Cedex 13 (tel. (33) 153 94 14 81, fax (33) 153 94 14 40).

The abovementioned laws and regulations can be consulted at: http://www.legifrance.gouv.fr

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(1)  OJ L 164, 30.6.1994, p. 3.

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