# Official Journal C 70/2007

| | ISSN 1725-2423 |
| --- | --- |
| Official Journal
  of the European Union | C 70 |
| | |
| English edition | Information and Notices | Volume 5027 March 2007 |

ISSN 1725-2423

Official Journal

of the European Union

C 70

English edition

Information and Notices

Volume 5027 March 2007

---

| Notice No | Contents | page |
| --- | --- | --- |
| | I   Resolutions, recommendations, guidelines and opinions |
| | OPINIONS |
| | Council |
| 2007/C 070/01 | Council opinion of 27 February 2007 on the updated stability programme of Ireland, 2006-2009 | 1 |
| 2007/C 070/02 | Council opinion of 27 February 2007 on the updated stability programme of Germany, 2006-2010 | 5 |
| 2007/C 070/03 | Council opinion of 27 February 2007 on the updated stability programme of Greece, 2006-2009 | 9 |
| 2007/C 070/04 | Council opinion of 27 February 2007 on the updated stability programme of France, 2006-2010 | 13 |
| 2007/C 070/05 | Council opinion of 27 February 2007 on the updated stability programme of Italy, 2006-2011 | 17 |
| 2007/C 070/06 | Council opinion of 27 February 2007 on the updated stability programme of the Netherlands, 2006-2009 | 21 |
| 2007/C 070/07 | Council opinion of 27 February 2007 on the updated stability programme of Luxembourg, 2006-2009 | 24 |

Notice No

Contents

page

I   Resolutions, recommendations, guidelines and opinions

OPINIONS

Council

2007/C 070/01

Council opinion of 27 February 2007 on the updated stability programme of Ireland, 2006-2009

1

2007/C 070/02

Council opinion of 27 February 2007 on the updated stability programme of Germany, 2006-2010

5

2007/C 070/03

Council opinion of 27 February 2007 on the updated stability programme of Greece, 2006-2009

9

2007/C 070/04

Council opinion of 27 February 2007 on the updated stability programme of France, 2006-2010

13

2007/C 070/05

Council opinion of 27 February 2007 on the updated stability programme of Italy, 2006-2011

17

2007/C 070/06

Council opinion of 27 February 2007 on the updated stability programme of the Netherlands, 2006-2009

21

2007/C 070/07

Council opinion of 27 February 2007 on the updated stability programme of Luxembourg, 2006-2009

24

| | II   Information |
| --- | --- |
| | INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES |
| | Commission |
| 2007/C 070/08 | Authorisation for State aid pursuant to Articles 87 and 88 of the EC Treaty — Cases where the Commission raises no objections | 27 |

II   Information

INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

2007/C 070/08

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

27

| | IV   Notices |
| --- | --- |
| | NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES |
| | Commission |
| 2007/C 070/09 | Euro exchange rates | 35 |
| | NOTICES FROM MEMBER STATES |
| 2007/C 070/10 | Slovak national procedure for the allocation of limited air traffic rights | 36 |

IV   Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

2007/C 070/09

Euro exchange rates

35

NOTICES FROM MEMBER STATES

2007/C 070/10

Slovak national procedure for the allocation of limited air traffic rights

36

| | V   Announcements |
| --- | --- |
| | ADMINISTRATIVE PROCEDURES |
| | Commission |
| 2007/C 070/11 | Call for proposals — EACEA/03/07 — Youth in the world: cooperation with countries other than the neighbouring countries of the European Union — Youth in action programme | 40 |
| 2007/C 070/12 | Call for proposals — EACEA/02/07 — Call for proposals for projects promoting innovation and quality in the youth sector youth in action Programme | 42 |

V   Announcements

ADMINISTRATIVE PROCEDURES

Commission

2007/C 070/11

Call for proposals — EACEA/03/07 — Youth in the world: cooperation with countries other than the neighbouring countries of the European Union — Youth in action programme

40

2007/C 070/12

Call for proposals — EACEA/02/07 — Call for proposals for projects promoting innovation and quality in the youth sector youth in action Programme

42

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

EN

---

I Resolutions, recommendations, guidelines and opinions

OPINIONS

Council

| 27.3.2007 | EN | Official Journal of the European Union | C 70/1 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/1

---

COUNCIL OPINION

of 27 February 2007

on the updated stability programme of Ireland, 2006-2009

(2007/C 70/01)

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 27 February 2007 the Council examined the updated stability programme of Ireland, which covers the period 2006 to 2009. |
| --- | --- |

(1)

On 27 February 2007 the Council examined the updated stability programme of Ireland, which covers the period 2006 to 2009.

| (2) | The macroeconomic scenario underlying the programme envisages that real GDP growth will edge lower from 5,4 % in 2006 to an average of a little above 4

  % over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions, though a sharp downturn in high levels of residential construction and property prices are important risks. The programme's projections for inflation appear realistic. |
| --- | --- |

(2)

Formula

| (3) | For 2006 the general government balance is estimated in the programme as a surplus of 2,3 % of GDP, against a budgeted deficit of 0,6 % of GDP in the previous update; more recent cash data for central government points towards an even stronger surplus, of around 2

  % of GDP. The stronger than expected result compared with a year earlier is entirely attributable to the revenue side, reflecting in particular the continuing buoyancy of the property market boosting housing-related taxes, and to a more limited extent higher output growth having a similar effect on mainstream taxes. The estimated outturn for nominal expenditure is close to budget. |
| --- | --- |

(3)

Formula

| (4) | Ireland's medium-term budgetary strategy is based on maintaining budgetary sustainability, anchored in respect of the Stability and Growth Pact. Surpluses are projected to be maintained throughout the programme period, moderating from an estimated headline surplus of 2,3 % of GDP in 2006 to 1,2 % in 2007 and progressively declining to 0,6 % in 2009; the primary surplus declines similarly from an estimated 3,3 % of GDP in 2006 to 1,6 % of GDP in 2009. The halving of the budgeted headline surplus in 2007 is due to a higher planned expenditure ratio, the increase representing mainly higher social transfers; in 2008 and 2009 both revenue and expenditure ratios are projected to decline, but expenditure only slightly. Compared with the projections in the previous update (to 2008), the strong increase in the estimated 2006 balance, achieved through higher than expected revenues, is carried forward in terms of the revenue and headline and primary surplus ratios in the following two years, at a declining rate, with virtually no change in the profile of the projected expenditure ratio. |
| --- | --- |

(4)

Ireland's medium-term budgetary strategy is based on maintaining budgetary sustainability, anchored in respect of the Stability and Growth Pact. Surpluses are projected to be maintained throughout the programme period, moderating from an estimated headline surplus of 2,3 % of GDP in 2006 to 1,2 % in 2007 and progressively declining to 0,6 % in 2009; the primary surplus declines similarly from an estimated 3,3 % of GDP in 2006 to 1,6 % of GDP in 2009. The halving of the budgeted headline surplus in 2007 is due to a higher planned expenditure ratio, the increase representing mainly higher social transfers; in 2008 and 2009 both revenue and expenditure ratios are projected to decline, but expenditure only slightly. Compared with the projections in the previous update (to 2008), the strong increase in the estimated 2006 balance, achieved through higher than expected revenues, is carried forward in terms of the revenue and headline and primary surplus ratios in the following two years, at a declining rate, with virtually no change in the profile of the projected expenditure ratio.

| (5) | The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is planned to decline from a surplus of just under 3 % of GDP in 2006 to just over 1

  % in 2009. As in the previous update of the stability programme, the medium-term objective (MTO) for the budgetary position presented in the programme is a balanced position in structural terms, which the programme plans to maintain by a large margin throughout the programme period. As the MTO is itself more demanding than the minimum benchmark (estimated at a deficit of around 1

  % of GDP), achieving the programme's structural balance should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO lies within the range indicated for euro-area and ERM II Member States in the Stability and Growth Pact and the code of conduct and is more demanding than implied by the debt ratio and average potential output growth in the long term. |
| --- | --- |

(5)

Formula

Formula

| (6) | The risks to the budgetary projections in the programme appear broadly balanced. On the one hand, the macroeconomic situation, after a probably stronger than assumed starting position, could evolve less favourably than projected, and, associated with this, specific revenue sources, particularly those most closely linked to the housing market, could also be significantly weaker. On the other hand, other revenues taken together appear to have been projected cautiously, and in recent years expenditures have been contained within or close to planned levels. |
| --- | --- |

(6)

The risks to the budgetary projections in the programme appear broadly balanced. On the one hand, the macroeconomic situation, after a probably stronger than assumed starting position, could evolve less favourably than projected, and, associated with this, specific revenue sources, particularly those most closely linked to the housing market, could also be significantly weaker. On the other hand, other revenues taken together appear to have been projected cautiously, and in recent years expenditures have been contained within or close to planned levels.

| (7) | In view of this risk assessment, the budgetary stance in the programme seems sufficient to maintain the MTO throughout the programme period, as envisaged in the programme. In addition, it provides a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations throughout the same period. For 2008 and 2009 the fiscal policy stance is in line with the Stability and Growth Pact. In 2007, however, the structural balance declines strongly, carrying the risk that the fiscal policy stance implied by the programme may be pro-cyclical in this year should the economy turn out to be experiencing good times, a situation to be avoided under the Stability and Growth Pact. |
| --- | --- |

(7)

In view of this risk assessment, the budgetary stance in the programme seems sufficient to maintain the MTO throughout the programme period, as envisaged in the programme. In addition, it provides a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations throughout the same period. For 2008 and 2009 the fiscal policy stance is in line with the Stability and Growth Pact. In 2007, however, the structural balance declines strongly, carrying the risk that the fiscal policy stance implied by the programme may be pro-cyclical in this year should the economy turn out to be experiencing good times, a situation to be avoided under the Stability and Growth Pact.

| (8) | Government gross debt is estimated to have declined to around 25 % of GDP in 2006, well below the 60 % of GDP Treaty reference value. The programme projects the debt ratio to decline by a further three percentage points over the programme period. |
| --- | --- |

(8)

Government gross debt is estimated to have declined to around 25 % of GDP in 2006, well below the 60 % of GDP Treaty reference value. The programme projects the debt ratio to decline by a further three percentage points over the programme period.

| (9) | The long-term budgetary impact of ageing in Ireland is well above the EU average, mainly as a result of a relatively younger population and consequently a higher increase in pension expenditure as a share of GDP over the coming decades, influenced in part by the maturing of the pension system. The initial budgetary position, improved compared with 2005, contributes significantly to easing the projected long-term budgetary impact of ageing populations, but is not sufficient to fully cover the substantial increase in expenditure due to the ageing of the population. Maintaining high primary surpluses over the medium term and implementing measures aimed at curbing the significant increase in age-related expenditures would, as recognised in the programme, contribute to reducing risks to the sustainability of public finances. Overall, Ireland appears to be at medium risk with regard to the sustainability of public finances. |
| --- | --- |

(9)

The long-term budgetary impact of ageing in Ireland is well above the EU average, mainly as a result of a relatively younger population and consequently a higher increase in pension expenditure as a share of GDP over the coming decades, influenced in part by the maturing of the pension system. The initial budgetary position, improved compared with 2005, contributes significantly to easing the projected long-term budgetary impact of ageing populations, but is not sufficient to fully cover the substantial increase in expenditure due to the ageing of the population. Maintaining high primary surpluses over the medium term and implementing measures aimed at curbing the significant increase in age-related expenditures would, as recognised in the programme, contribute to reducing risks to the sustainability of public finances. Overall, Ireland appears to be at medium risk with regard to the sustainability of public finances.

| (10) | The stability programme does not contain a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections do not explicitly take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme nevertheless seem consistent with those foreseen in the national reform programme. In particular, both programmes envisage ongoing implementation of ambitious plans to upgrade infrastructure, notably in the context of the National Development Plan published in January 2007, while the stability programme complements the actions envisaged in the national reform programme with detailed description of measures to improve the institutional features of the public finances, notably measures to increase the efficiency of tax collection and achieve greater value for money in expenditure management. |
| --- | --- |

(10)

The stability programme does not contain a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections do not explicitly take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme nevertheless seem consistent with those foreseen in the national reform programme. In particular, both programmes envisage ongoing implementation of ambitious plans to upgrade infrastructure, notably in the context of the National Development Plan published in January 2007, while the stability programme complements the actions envisaged in the national reform programme with detailed description of measures to improve the institutional features of the public finances, notably measures to increase the efficiency of tax collection and achieve greater value for money in expenditure management.

| (11) | The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. |
| --- | --- |

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

| (12) | As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most optional data (2). |
| --- | --- |

(12)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most optional data (2).

The Council considers that the medium-term budgetary position is sound and, the budgetary strategy provides a good example of fiscal policies conducted in compliance with the Stability and Growth Pact. Nonetheless, it would be prudent to maintain room for manoeuvre against any reversal of the current growth pattern which has been led by strong housing sector developments.

In view of the above assessment, in particular the projected increase in age-related expenditure, the Council invites Ireland to continue to implement measures to improve the long-term sustainability of its public finances and to avoid pro-cyclical policies in the years ahead.

Comparison of key macroeconomic and budgetary projections

| | 2005 | 2006 | 2007 | 2008 | 2009 |
| --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Dec 2006 | 5,5 | 5,4 | 5,3 | 4,6 | 4,1 |
| COM Nov 2006 | 5,5 | 5,3 | 5,3 | 4,3 | n.a. |
| SP Dec 2005 | 4,6 | 4,8 | 5,0 | 4,8 | n.a. |
| HICP inflation
  (%) | SP Dec 2006 | 2,2 | 2,7 | 2,6 | 2,0 | 1,7 |
| COM Nov 2006 | 2,2 | 2,9 | 2,7 | 2,2 | n.a. |
| SP Dec 2005 | 2,2 | 2,0 | 2,0 | 1,8 | n.a. |
| Output gap
  (% of potential GDP) | SP Dec 2006 (3) | – 0,4 | – 1,2 | – 1,6 | – 2,2 | – 2,5 |
| COM Nov 2006 (7) | – 0,5 | – 1,4 | – 1,9 | – 2,7 | n.a. |
| SP Dec 2005 (3) | – 1,3 | – 1,9 | – 2,2 | – 2,1 | n.a. |
| General government balance
  (% of GDP) | SP Dec 2006 | 1,1 | 2,3 | 1,2 | 0,9 | 0,6 |
| COM Nov 2006 | 1,1 | 1,2 | 0,9 | 0,4 | n.a. |
| SP Dec 2005 | 0,3 | – 0,6 | – 0,8 | – 0,8 | n.a. |
| Primary balance
  (% of GDP) | SP Dec 2006 | 2,1 | 3,3 | 2,3 | 1,8 | 1,6 |
| COM Nov 2006 | 2,1 | 2,2 | 1,9 | 1,4 | n.a. |
| SP Dec 2005 | 1,5 | 0,6 | 0,4 | 0,5 | n.a. |
| Cyclically-adjusted balance
  (% of GDP) | SP Dec 2006 (3) | 1,3 | 2,8 | 1,8 | 1,8 | 1,6 |
| COM Nov 2006 | 1,3 | 1,7 | 1,6 | 1,5 | n.a. |
| SP Dec 2005 (3) | 0,8 | 0,2 | 0,1 | 0,1 | n.a. |
| Structural balance (4)

  (% of GDP) | SP Dec 2006 (5) | 1,6 | 2,7 | 1,8 | 1,8 | 1,6 |
| COM Nov 2006 (6) | 1,6 | 1,7 | 1,6 | 1,5 | n.a. |
| SP Dec 2005 | 0,8 | 0,2 | 0,1 | 0,1 | n.a. |
| Government gross debt
  (% of GDP) | SP Dec 2006 | 27,4 | 25,1 | 23,0 | 22,4 | 21,9 |
| COM Nov 2006 | 27,4 | 25,8 | 24,4 | 23,6 | n.a. |
| SP Dec 2005 | 28,0 | 28,0 | 28,2 | 28,3 | n.a. |
| Source:

  Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations |

2005

2006

2007

2008

2009

Real GDP

(% change)

SP Dec 2006

5,5

5,4

5,3

4,6

4,1

COM Nov 2006

5,5

5,3

5,3

4,3

n.a.

SP Dec 2005

4,6

4,8

5,0

4,8

n.a.

HICP inflation

(%)

SP Dec 2006

2,2

2,7

2,6

2,0

1,7

COM Nov 2006

2,2

2,9

2,7

2,2

n.a.

SP Dec 2005

2,2

2,0

2,0

1,8

n.a.

Output gap

(% of potential GDP)

SP Dec 2006 (3)

– 0,4

– 1,2

– 1,6

– 2,2

– 2,5

COM Nov 2006 (7)

– 0,5

– 1,4

– 1,9

– 2,7

n.a.

SP Dec 2005 (3)

– 1,3

– 1,9

– 2,2

– 2,1

n.a.

General government balance

(% of GDP)

SP Dec 2006

1,1

2,3

1,2

0,9

0,6

COM Nov 2006

1,1

1,2

0,9

0,4

n.a.

SP Dec 2005

0,3

– 0,6

– 0,8

– 0,8

n.a.

Primary balance

(% of GDP)

SP Dec 2006

2,1

3,3

2,3

1,8

1,6

COM Nov 2006

2,1

2,2

1,9

1,4

n.a.

SP Dec 2005

1,5

0,6

0,4

0,5

n.a.

Cyclically-adjusted balance

(% of GDP)

SP Dec 2006 (3)

1,3

2,8

1,8

1,8

1,6

COM Nov 2006

1,3

1,7

1,6

1,5

n.a.

SP Dec 2005 (3)

0,8

0,2

0,1

0,1

n.a.

Structural balance (4)

(% of GDP)

SP Dec 2006 (5)

1,6

2,7

1,8

1,8

1,6

COM Nov 2006 (6)

1,6

1,7

1,6

1,5

n.a.

SP Dec 2005

0,8

0,2

0,1

0,1

n.a.

Government gross debt

(% of GDP)

SP Dec 2006

27,4

25,1

23,0

22,4

21,9

COM Nov 2006

27,4

25,8

24,4

23,6

n.a.

SP Dec 2005

28,0

28,0

28,2

28,3

n.a.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

(1)  OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:

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

(2)  In particular, data are not provided for deflators for private consumption, public consumption and investment, net lending/borrowing of the private sector, government expenditure by function and decomposition of the general government debt stock-flow adjustment.

(3)  Commission services calculations on the basis of the information in the programme.

(4)  Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures.

(5)  One-off and other temporary measures of - 0,3 % of GDP in 2005 (assumed: cf note 4) and 0,1 % of GDP in 2006 (indicated in the programme); no information is given in the programme for 2007-09.

(6)  One-off and other temporary measures taken from the Commission services' autumn 2006 forecast (- 0,3 % of GDP in 2005, i.e. surplus-reducing).

(7)  Based on estimated potential growth of 6,1 %, 6,3 %, 5,8 % and 5,2 % respectively in the period 2005-2008.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

| 27.3.2007 | EN | Official Journal of the European Union | C 70/5 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/5

---

COUNCIL OPINION

of 27 February 2007

on the updated stability programme of Germany, 2006-2010

(2007/C 70/02)

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 5(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

| (1) | On 27 February 2007 the Council examined the updated stability programme of Germany, which covers the period 2006 to 2010. |
| --- | --- |

(1)

On 27 February 2007 the Council examined the updated stability programme of Germany, which covers the period 2006 to 2010.

| (2) | The macroeconomic scenario underlying the programme envisages that real GDP growth will temporarily slow down from 2,3 % in 2006 to 1,4 % in 2007, after which it is projected at 1

  % on average over the rest of the programme period. Assessed against currently available information (the latest official estimate of GDP growth in 2006 is a figure of 2,7 %), this scenario appears to be based on plausible assumptions until 2008 and mildly favourable ones thereafter, compared with Commission projections for potential growth. The programme's projections for inflation appear to be on the high side. |
| --- | --- |

(2)

Formula

| (3) | For 2006, the programme cites a general government deficit of 2,1 % of GDP (revised down to 1,9 % by latest government announcement), against a target of 3,3 % of GDP set in the previous update of the stability programme. The government received unexpectedly high revenues from taxes, which, in line with the Stability and Growth Pact, were not spent in 2006. The tax burden (i.e. revenues from taxes and social contributions) is now forecast to increase to around 40 % of GDP in 2006, which is about 1 % of GDP higher than projected in the previous update. General government expenditure has been kept under control in 2006. The somewhat tighter budgetary execution derives from lower monetary transfers, stemming mainly from the unexpected relief that the improving labour market has provided to the Federal Employment Agency. In addition, interest expenditure and subsidies have been lower than expected. |
| --- | --- |

(3)

For 2006, the programme cites a general government deficit of 2,1 % of GDP (revised down to 1,9 % by latest government announcement), against a target of 3,3 % of GDP set in the previous update of the stability programme. The government received unexpectedly high revenues from taxes, which, in line with the Stability and Growth Pact, were not spent in 2006. The tax burden (i.e. revenues from taxes and social contributions) is now forecast to increase to around 40 % of GDP in 2006, which is about 1 % of GDP higher than projected in the previous update. General government expenditure has been kept under control in 2006. The somewhat tighter budgetary execution derives from lower monetary transfers, stemming mainly from the unexpected relief that the improving labour market has provided to the Federal Employment Agency. In addition, interest expenditure and subsidies have been lower than expected.

| (4) | The main goal of the medium-term budgetary strategy is to ensure the long-term sustainability of public finances. To achieve this, the programme proposes to continue budgetary consolidation, while improving the conditions for growth and employment. After the envisaged correction of the excessive deficit in 2006, the deficit ratio is projected to decline by

  percentage point per year (except in 2008) to reach

   % of GDP in 2010. The improvement in the primary balance follows the same pattern, with the surplus reaching 2 % of GDP by 2010. While the budget contains corrective measures on the revenue side, notably the increase in the central VAT rate from 16 % to 19 %, both revenue and expenditure ratios are set to follow a downward trend in a year-to-year comparison. Indeed, the expenditure ratio would fall by 2

  percentage points to 43 % of GDP by 2010, which is planned to be achieved mostly through restraint in social spending. Over the same period, the revenue-to-GDP ratio is projected to decrease by 1

  percentage points to 42 % of GDP by 2010; an increase in the tax share (e.g. increase in the central VAT rate in 2007) is broadly offset by a decrease in the share of social contributions (due to the cut in the unemployment insurance rate in 2007 and the downward trend of the contributions share), while non-tax revenues decline. Compared with the previous update, the budgetary targets are higher in each year although no adjustment is planned in 2008. |
| --- | --- |

(4)

Formula

Formula

Formula

Formula

| (5) | The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures), calculated according to the commonly agreed methodology, is planned to improve from a deficit of around 2 % of GDP in 2006 to

  % at the end of the programme period, on average by almost

  % of GDP per year. As in the previous update of the stability programme, the medium-term objective (MTO) for the budgetary position presented in the programme is a balanced position in structural terms, which the programme does not aim to achieve within the programme period. As the MTO is more demanding than the minimum benchmark (estimated at a deficit of around 1

  % of GDP), achieving it should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO lies within the range indicated for euro-area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term. |
| --- | --- |

(5)

Formula

Formula

Formula

| (6) | The risks to the budgetary projections in the programme appear broadly balanced for 2007, but budgetary outcomes thereafter could be worse than projected. In particular, the risk remains that the envisaged decline in the social expenditure ratio would not be achieved without additional measures that are not specified in the programme. Indeed, the update itself states that further reforms are needed on the labour market and in the social security systems. In addition, a certain risk stems from the planned company tax reform in 2008. Thus, it might prove necessary to compensate possible shortfalls in company tax revenues through additional expenditure restraint. Abstracting from that reform, the revenue projections seem prudent. Nevertheless, overall, negative risks to the budgetary adjustment remain, in particular from the implementation of the adjustment path in the outer years. |
| --- | --- |

(6)

The risks to the budgetary projections in the programme appear broadly balanced for 2007, but budgetary outcomes thereafter could be worse than projected. In particular, the risk remains that the envisaged decline in the social expenditure ratio would not be achieved without additional measures that are not specified in the programme. Indeed, the update itself states that further reforms are needed on the labour market and in the social security systems. In addition, a certain risk stems from the planned company tax reform in 2008. Thus, it might prove necessary to compensate possible shortfalls in company tax revenues through additional expenditure restraint. Abstracting from that reform, the revenue projections seem prudent. Nevertheless, overall, negative risks to the budgetary adjustment remain, in particular from the implementation of the adjustment path in the outer years.

| (7) | In view of this risk assessment, the budgetary stance in the programme is consistent with a correction of the excessive deficit by 2006, one year ahead of the deadline set by the Council. In addition, it seems to provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations as from 2007, although subject to some risks for 2008. In the years following the correction of the excessive deficit, the pace of the adjustment towards the MTO implied by the programme should be strengthened, especially in 2008, to be in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in ‘good ’economic times and could be lower in ‘bad ’economic times. In particular, no improvement in the structural balance is planned for 2008, at a time when economic ‘good times ’are expected to prevail. Meeting the required structural adjustment path would actually allow the MTO to be reached by the programme horizon. |
| --- | --- |

(7)

In view of this risk assessment, the budgetary stance in the programme is consistent with a correction of the excessive deficit by 2006, one year ahead of the deadline set by the Council. In addition, it seems to provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations as from 2007, although subject to some risks for 2008. In the years following the correction of the excessive deficit, the pace of the adjustment towards the MTO implied by the programme should be strengthened, especially in 2008, to be in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in ‘good ’economic times and could be lower in ‘bad ’economic times. In particular, no improvement in the structural balance is planned for 2008, at a time when economic ‘good times ’are expected to prevail. Meeting the required structural adjustment path would actually allow the MTO to be reached by the programme horizon.

| (8) | Government gross debt is estimated to have levelled off at 67,9 % of GDP in 2006, above the 60 % of GDP Treaty reference value. The programme projects the debt ratio to decline by 3

  percentage points over the programme period. The evolution of the debt ratio may turn out to be less favourable than projected in the programme given the risks to the deficit targets and uncertainty about the debt-reducing stock-flow adjustments assumed in the programme. In view of this risk assessment, the debt ratio may not be sufficiently diminishing towards the reference value over the programme period. |
| --- | --- |

(8)

Formula

| (9) | The long-term budgetary impact of ageing in Germany is close to the EU average, though with pension expenditure showing a somewhat smaller increase than in many other countries, as a result of the pension reforms already enacted. A draft law has been adopted to raise the statutory retirement age in steps to 67 years, from 2012 onwards. Although exemptions to the higher age limit are being granted, the move will enhance the long-term sustainability of public finances. In addition, developing further private pension arrangements would contribute positively to retirement incomes. The initial budgetary position constitutes a risk to sustainable public finances even before the long-term budgetary impact of ageing populations is considered. Moreover, the current level of gross debt is above the Treaty reference value. Overall, Germany appears to be at medium risk with regard to the sustainability of public finances. |
| --- | --- |

(9)

The long-term budgetary impact of ageing in Germany is close to the EU average, though with pension expenditure showing a somewhat smaller increase than in many other countries, as a result of the pension reforms already enacted. A draft law has been adopted to raise the statutory retirement age in steps to 67 years, from 2012 onwards. Although exemptions to the higher age limit are being granted, the move will enhance the long-term sustainability of public finances. In addition, developing further private pension arrangements would contribute positively to retirement incomes. The initial budgetary position constitutes a risk to sustainable public finances even before the long-term budgetary impact of ageing populations is considered. Moreover, the current level of gross debt is above the Treaty reference value. Overall, Germany appears to be at medium risk with regard to the sustainability of public finances.

| (10) | The stability programme does not contain a qualitative assessment of the overall impact of the October 2006 implementation report of the National Reform Programme within the medium-term fiscal strategy. In addition, it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the National Reform Programme and its budgetary projections do not explicitly take into account the public finance implications of the actions outlined in the National Reform Programme. The measures in the area of public finances that are mentioned in the stability programme seem consistent with those foreseen in the national reform programme. In particular, the company tax reform 2008 and the health care reform are put forward in both programmes. Moreover, both programmes envisage, as the second stage of the reform of the federal system, a review of the fiscal relations between levels of government in order to strengthen the accountability of each level. In addition, the stability programme recognises in this context the necessity to develop an institutional framework that would ensure budgetary discipline at all levels of government and foresee measures to pre-empt emerging budgetary crises. |
| --- | --- |

(10)

The stability programme does not contain a qualitative assessment of the overall impact of the October 2006 implementation report of the National Reform Programme within the medium-term fiscal strategy. In addition, it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the National Reform Programme and its budgetary projections do not explicitly take into account the public finance implications of the actions outlined in the National Reform Programme. The measures in the area of public finances that are mentioned in the stability programme seem consistent with those foreseen in the national reform programme. In particular, the company tax reform 2008 and the health care reform are put forward in both programmes. Moreover, both programmes envisage, as the second stage of the reform of the federal system, a review of the fiscal relations between levels of government in order to strengthen the accountability of each level. In addition, the stability programme recognises in this context the necessity to develop an institutional framework that would ensure budgetary discipline at all levels of government and foresee measures to pre-empt emerging budgetary crises.

| (11) | The envisaged measures in the area of public finances are broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. |
| --- | --- |

(11)

The envisaged measures in the area of public finances are broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

| (12) | 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. (2) |
| --- | --- |

(12)

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. (2)

Overall, the Council deems the updated programme consistent with a correction of the excessive deficit as of 2006, one year before the deadline set by the Council, and some progress towards the medium term objective will be made in the subsequent years. However, there are risks linked to the achievement of the budgetary targets.

In view of the above assessment, the Council invites Germany to:

| (i) | Benefiting from economic ‘good times’, strengthen the structural adjustment in 2008 including by using any extra revenues for deficit reduction, continue the fiscal consolidation towards the medium-term objective thereafter, by maintaining tight control over expenditures, while ensuring that the announced reform of the corporate tax system does not jeopardise the fiscal consolidation; |
| --- | --- |

(i)

Benefiting from economic ‘good times’, strengthen the structural adjustment in 2008 including by using any extra revenues for deficit reduction, continue the fiscal consolidation towards the medium-term objective thereafter, by maintaining tight control over expenditures, while ensuring that the announced reform of the corporate tax system does not jeopardise the fiscal consolidation;

| (ii) | In view of the level of debt and the projected increase in age-related spending, improve long-term sustainability of public finances by achieving the MTO and by implementing reforms, particularly in the health care system; |
| --- | --- |

(ii)

In view of the level of debt and the projected increase in age-related spending, improve long-term sustainability of public finances by achieving the MTO and by implementing reforms, particularly in the health care system;

| (iii) | Improve the budgetary framework so as to strengthen fiscal discipline at all levels of government, notably by implementing the plans for the second stage of the reform of the federal system. |
| --- | --- |

(iii)

Improve the budgetary framework so as to strengthen fiscal discipline at all levels of government, notably by implementing the plans for the second stage of the reform of the federal system.

Comparison of key macroeconomic and budgetary projections

| | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| --- | --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Nov 2006 | 0,9 | 2,3 | 1,4 | 1 | 1 | 1 |
| COM Nov 2006 | 0,9 | 2,4 | 1,4 | 2,0 | — | — |
| SP Feb 2006 | 0,9 | 1 | 1 | 1 | 1 | — |
| HICP inflation
  (%) | SP Nov 2006 | — | — | — | — | — | — |
| COM Nov 2006 | 1,9 | 1,8 | 2,2 | 1,2 | — | — |
| SP Feb 2006 | — | — | — | — | — | — |
| Output gap
  (% of potential GDP) | SP Nov 2006 (3) | – 1,2 | – 0,3 | – 0,3 | – 0,2 | 0,0 | 0,0 |
| COM Nov 2006 (7) | – 1,3 | – 0,2 | – 0,4 | 0,1 | — | — |
| SP Feb 2006 (3) | – 0,9 | – 0,7 | – 1,1 | – 0,7 | – 0,4 | — |
| General government balance
  (% of GDP) | SP Nov 2006 | – 3,2 | – 2,1 | – 1 | – 1 | – 1 | – |
| COM Nov 2006 | – 3,2 | – 2,3 | – 1,6 | – 1,2 | — | — |
| SP Feb 2006 | – 3,3 | – 3,3 | – 2 | – 2 | – 1 | — |
| Primary balance
  (% of GDP) | SP Nov 2006 | – 0,5 | | 1 | 1 | 1 | 2 |
| COM Nov 2006 | – 0,5 | 0,4 | 1,1 | 1,5 | — | — |
| SP Feb 2006 | – 0,5 | – | | 1 | 1 | — |
| Cyclically-adjusted balance
  (% of GDP) | SP Nov 2006 (3) | – 2,6 | – 2,0 | – 1,5 | – 1,5 | – 1,0 | – 0,6 |
| COM Nov 2006 | – 2,6 | – 2,2 | – 1,4 | – 1,2 | — | — |
| SP Feb 2006 (3) | – 2,9 | – 2,9 | – 1,8 | – 1,5 | – 1,1 | — |
| Structural balance (4)

  (% of GDP) | SP Nov 2006 (5) | – 2,7 | – 2,0 | – 1,5 | – 1,5 | – 1,0 | – 0,6 |
| COM Nov 2006 (6) | – 2,7 | – 2,2 | – 1,4 | – 1,2 | — | — |
| SP Feb 2006 | – 3,0 | – 2,9 | – 1,8 | – 1,5 | – 1,1 | — |
| Government gross debt
  (% of GDP) | SP Nov 2006 | 67,9 | 67,9 | 67 | 66 | 65 | 64 |
| COM Nov 2006 | 67,9 | 67,8 | 67,7 | 67,3 | — | — |
| SP Feb 2006 | 67 | 69 | 68 | 68 | 67 | — |
| Source:


  Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations |

2005

2006

2007

2008

2009

2010

Real GDP

(% change)

SP Nov 2006

0,9

2,3

1,4

1 Formula

1 Formula

1 Formula

COM Nov 2006

0,9

2,4

1,4

2,0

—

—

SP Feb 2006

0,9

1 Formula

1

1 Formula

1 Formula

—

HICP inflation

(%)

SP Nov 2006

—

—

—

—

—

—

COM Nov 2006

1,9

1,8

2,2

1,2

—

—

SP Feb 2006

—

—

—

—

—

—

Output gap

(% of potential GDP)

SP Nov 2006 (3)

– 1,2

– 0,3

– 0,3

– 0,2

0,0

0,0

COM Nov 2006 (7)

– 1,3

– 0,2

– 0,4

0,1

—

—

SP Feb 2006 (3)

– 0,9

– 0,7

– 1,1

– 0,7

– 0,4

—

General government balance

(% of GDP)

SP Nov 2006

– 3,2

– 2,1

– 1 Formula

– 1 Formula

– 1

– Formula

COM Nov 2006

– 3,2

– 2,3

– 1,6

– 1,2

—

—

SP Feb 2006

– 3,3

– 3,3

– 2 Formula

– 2

– 1 Formula

—

Primary balance

(% of GDP)

SP Nov 2006

– 0,5

Formula

1

1

1 Formula

2

COM Nov 2006

– 0,5

0,4

1,1

1,5

—

—

SP Feb 2006

– 0,5

– Formula

Formula

1 Formula

1 Formula

—

Cyclically-adjusted balance

(% of GDP)

SP Nov 2006 (3)

– 2,6

– 2,0

– 1,5

– 1,5

– 1,0

– 0,6

COM Nov 2006

– 2,6

– 2,2

– 1,4

– 1,2

—

—

SP Feb 2006 (3)

– 2,9

– 2,9

– 1,8

– 1,5

– 1,1

—

Structural balance (4)

(% of GDP)

SP Nov 2006 (5)

– 2,7

– 2,0

– 1,5

– 1,5

– 1,0

– 0,6

COM Nov 2006 (6)

– 2,7

– 2,2

– 1,4

– 1,2

—

—

SP Feb 2006

– 3,0

– 2,9

– 1,8

– 1,5

– 1,1

—

Government gross debt

(% of GDP)

SP Nov 2006

67,9

67,9

67

66 Formula

65 Formula

64 Formula

COM Nov 2006

67,9

67,8

67,7

67,3

—

—

SP Feb 2006

67 Formula

69

68 Formula

68

67

—

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

(1)  OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:

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

(2)  In particular, data on HICP inflation, total social transfers and the stock-flow adjustment are not provided in the programme, as well as compensation of employees and the break-down of tax revenues, which were provided separately to the Commission.

(3)  Commission services calculations on the basis of the information in the programme.

(4)  Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures.

(5)  One-off and other temporary measures taken from the programme (deficit-increasing 0.1% of GDP in 2005).

(6)  One-off and other temporary measures taken from the Commission services' autumn 2005 forecast (deficit-increasing 0.1% of GDP in 2005).

(7)  Based on estimated potential growth of 1.2%, 1.3%, 1.4% and 1.4% respectively in the period 2005-2008.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

| 27.3.2007 | EN | Official Journal of the European Union | C 70/9 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/9

---

COUNCIL OPINION

of 27 February 2007

on the updated stability programme of Greece, 2006-2009

(2007/C 70/03)

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 27 February 2007 the Council examined the updated stability programme of Greece, which covers the period 2006 to 2009 (2)
   (3). |
| --- | --- |

(1)

On 27 February 2007 the Council examined the updated stability programme of Greece, which covers the period 2006 to 2009 (2)
   (3).

| (2) | The macroeconomic scenario underlying the programme envisages that real GDP growth will be broadly stable at around 4 % per year. Assessed against currently available information, this scenario appears to be based on plausible growth assumption for 2006 and 2007 but on favourable ones thereafter when the projected evolution of growth appears to be on the high side. The programme's projections for inflation appear to be on the low side in the outer years of the programme period. |
| --- | --- |

(2)

The macroeconomic scenario underlying the programme envisages that real GDP growth will be broadly stable at around 4 % per year. Assessed against currently available information, this scenario appears to be based on plausible growth assumption for 2006 and 2007 but on favourable ones thereafter when the projected evolution of growth appears to be on the high side. The programme's projections for inflation appear to be on the low side in the outer years of the programme period.

| (3) | For 2006, the general government deficit is estimated at 2,6 % of GDP in the Commission services' autumn 2006 forecast and in the new update, fully in line with the target set in the previous update of the stability programme. Total expenditures achieved the target set in the 2006 budget. While the main categories of expenditure broadly achieved the targets, a reduction in social transfers other than in kind fully compensated a

  % of GDP overrun in public investment. Total revenues were marginally higher than expected. One-off measures were partly substituted by permanent measures implemented in the middle of the year, namely increases of the excise tax on fuel and cigarettes, and a tax increase on mobile connection bills. Revenues from these permanent measures compensated for the reduction in one-off revenues from 0,6 % of GDP set in the 2006 budget to 0,4 % of GDP. |
| --- | --- |

(3)

Formula

| (4) | The budgetary strategy in the programme aims at correcting the excessive deficit in 2006. Thereafter, the government deficit is planned to continue narrowing steadily over the programme period, to 1,2 % of GDP in 2009. The deficit reduction by 1

  percentage point of GDP between 2006 and 2009 is spread almost equally between revenue increase and expenditure reduction. On the revenue side, total revenue is expected to increase by

  p.p. of GDP, mainly driven by indirect taxes and social contributions. On the expenditure side, total expenditure is projected to fall by around

  p.p. of GDP over the same period, of which

  p.p., corresponds to lower interest payments. As a result, reductions in primary expenditure are projected to be limited to just

  p.p.. Social transfers are projected to increase by

  p.p., which would be more than compensated by reductions amounting

  p.p. in other expenditure categories, mainly collective consumption. The primary surplus would improve by around 1 percentage point over the programme period, to close to 3 % of GDP by 2009. Although, compared with the previous programme, the targets for 2006-2008 are broadly unchanged with the same macroeconomic scenario, the current adjustment in 2006 is more significant since the deficit outcome for 2005 (5,2 % of GDP) is higher than projected in the update of December 2005 (4,3 % of GDP). |
| --- | --- |

(4)

Formula

Formula

Formula

Formula

Formula

Formula

Formula

| (5) | The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is planned to improve from a deficit of around 3

  % of GDP in 2006 to 1

  % at the end of the programme period (2009). As in the previous update of the stability programme, the medium-term objective (MTO) for the budgetary position presented in the programme is balanced or in surplus in structural terms, which the programme does not aim to achieve within the programme period. As the MTO is more demanding than the minimum benchmark (estimated at a structural deficit of around 1

  % of GDP), achieving it should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO lies within the range indicated for euro-area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term. |
| --- | --- |

(5)

Formula

Formula

Formula

| (6) | The risks to the budgetary projections in the programme appear broadly balanced until 2007 but the budgetary outcomes could be worse than projected in the programme thereafter. In particular, for 2008 and 2009, the programme does not provide sufficient information on measures envisaged and is based on a favourable macroeconomic scenario. Based on past experience, and although no slippages have been recorded for the last two years, risks of expenditure overruns over the programme period can not be excluded, while revenue shortfalls may materialise if the announced measures to fight tax evasion would turn out ineffective. |
| --- | --- |

(6)

The risks to the budgetary projections in the programme appear broadly balanced until 2007 but the budgetary outcomes could be worse than projected in the programme thereafter. In particular, for 2008 and 2009, the programme does not provide sufficient information on measures envisaged and is based on a favourable macroeconomic scenario. Based on past experience, and although no slippages have been recorded for the last two years, risks of expenditure overruns over the programme period can not be excluded, while revenue shortfalls may materialise if the announced measures to fight tax evasion would turn out ineffective.

| (7) | In view of this risk assessment, the budgetary stance in the programme is consistent with a correction of the excessive deficit by 2006 as recommended by the Council. However, the budgetary stance does not seem to provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations within the programme's horizon. In the years following the correction of the excessive deficit, Greece is expected to continue to experience good times. In view of this assessment, the pace of the adjustment towards the MTO implied by the programme should be strengthened, especially after 2007, to be in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times. |
| --- | --- |

(7)

In view of this risk assessment, the budgetary stance in the programme is consistent with a correction of the excessive deficit by 2006 as recommended by the Council. However, the budgetary stance does not seem to provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations within the programme's horizon. In the years following the correction of the excessive deficit, Greece is expected to continue to experience good times. In view of this assessment, the pace of the adjustment towards the MTO implied by the programme should be strengthened, especially after 2007, to be in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times.

| (8) | Government gross debt is estimated to have reached 104 % of GDP in 2006, far above the 60 % of GDP Treaty reference value. The programme projects the debt ratio to gradually decline by almost 13 percentage points of GDP over the programme period, while stock-flow adjustments are diminishing rapidly starting from 2007. The evolution of the debt ratio after 2007 might be less favourable than projected in the programme given the favourable growth projections and the risks to the deficit targets mentioned above. Nevertheless, in view of this risk assessment, the debt ratio seems to be sufficiently diminishing towards the reference value over the programme period. |
| --- | --- |

(8)

Government gross debt is estimated to have reached 104 % of GDP in 2006, far above the 60 % of GDP Treaty reference value. The programme projects the debt ratio to gradually decline by almost 13 percentage points of GDP over the programme period, while stock-flow adjustments are diminishing rapidly starting from 2007. The evolution of the debt ratio after 2007 might be less favourable than projected in the programme given the favourable growth projections and the risks to the deficit targets mentioned above. Nevertheless, in view of this risk assessment, the debt ratio seems to be sufficiently diminishing towards the reference value over the programme period.

| (9) | The long-term budgetary impact of ageing in Greece is uncertain as long-term projections of pension expenditure are not available; however, it is very likely to be well above the EU average; according to the latest available information from the 2002 updated Greek stability programme, a significant increase in pension expenditure as a share of GDP is projected over the long term. The initial budgetary position, albeit improved compared with 2005, constitutes a significant risk to sustainable public finances even before considering the long-term budgetary impact of an ageing population. Moreover, the current level of gross debt is well above the Treaty reference value and reducing it requires achieving high primary surpluses for a long period of time. Consolidating the public finances as planned, together with urgent reform measures aimed at containing the likely significant increase in age-related expenditures, would contribute to reducing risks to the long-term sustainability of public finances. Overall, Greece appears to be at high risk with regard to the sustainability of public finances. The availability of long-term projections of pension expenditure would improve the assessment of long term budgetary sustainability. |
| --- | --- |

(9)

The long-term budgetary impact of ageing in Greece is uncertain as long-term projections of pension expenditure are not available; however, it is very likely to be well above the EU average; according to the latest available information from the 2002 updated Greek stability programme, a significant increase in pension expenditure as a share of GDP is projected over the long term. The initial budgetary position, albeit improved compared with 2005, constitutes a significant risk to sustainable public finances even before considering the long-term budgetary impact of an ageing population. Moreover, the current level of gross debt is well above the Treaty reference value and reducing it requires achieving high primary surpluses for a long period of time. Consolidating the public finances as planned, together with urgent reform measures aimed at containing the likely significant increase in age-related expenditures, would contribute to reducing risks to the long-term sustainability of public finances. Overall, Greece appears to be at high risk with regard to the sustainability of public finances. The availability of long-term projections of pension expenditure would improve the assessment of long term budgetary sustainability.

| (10) | The stability programme does not contain a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and, excluding 2007, its budgetary projections do not explicitly take into account the public finance implications of the actions outlined in the national reform programme. Nevertheless, the measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, the majority of the measures and actions planned for 2007 in the implementation report of the national reform programme seem to have been included in the 2007 Budget Law, even if the lack of detailed description of the measures and their implementation raises some doubts over the budgetary implications. |
| --- | --- |

(10)

The stability programme does not contain a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and, excluding 2007, its budgetary projections do not explicitly take into account the public finance implications of the actions outlined in the national reform programme. Nevertheless, the measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, the majority of the measures and actions planned for 2007 in the implementation report of the national reform programme seem to have been included in the 2007 Budget Law, even if the lack of detailed description of the measures and their implementation raises some doubts over the budgetary implications.

| (11) | The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. |
| --- | --- |

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

| (12) | 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). |
| --- | --- |

(12)

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 Council considers that, following a significant fiscal consolidation and in a context of strong growth prospects, the programme is consistent with the correction of the excessive deficit by 2006 and it envisages progress towards the MTO. However, the MTO would not be attained within the programme period. The consolidation, which also relies on a significant decline in the interest burden, is subject to some risks as specific measures are only partially spelled out after 2007.

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

| (i) | taking into account the good times, following the correction of the excessive deficit, strengthen the adjustment towards the MTO and ensure that the debt-to-GDP ratio is reduced accordingly; |
| --- | --- |

(i)

taking into account the good times, following the correction of the excessive deficit, strengthen the adjustment towards the MTO and ensure that the debt-to-GDP ratio is reduced accordingly;

| (ii) | continue improving the budgetary process by further increasing its transparency, spelling out the budgetary strategy within a longer time perspective and effectively implementing mechanisms to monitor and control primary expenditure; |
| --- | --- |

(ii)

continue improving the budgetary process by further increasing its transparency, spelling out the budgetary strategy within a longer time perspective and effectively implementing mechanisms to monitor and control primary expenditure;

| (iii) | in view of the very high level of debt and the projected increase in age-related expenditure, improve the long-term sustainability of public finances by achieving the MTO, controlling public pension and healthcare expenditures and resolutely implementing ambitious reforms; and produce as soon as possible long-term projections for age-related expenditure. |
| --- | --- |

(iii)

in view of the very high level of debt and the projected increase in age-related expenditure, improve the long-term sustainability of public finances by achieving the MTO, controlling public pension and healthcare expenditures and resolutely implementing ambitious reforms; and produce as soon as possible long-term projections for age-related expenditure.

Comparison of key macroeconomic and budgetary projections

| | 2005 | 2006 | 2007 | 2008 | 2009 |
| --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Dec 2006 | 3,7 | 4,0 | 3,9 | 4,0 | 4,1 |
| COM Nov 2006 | 3,7 | 3,8 | 3,7 | 3,7 | n.a. |
| SP Dec 2005 | 3,6 | 3,8 | 3,8 | 4,0 | n.a. |
| HICP inflation
  (%) | SP Dec 2006 | 3,5 | 3,3 | 3,0 | 2,8 | 2,6 |
| COM Nov 2006 | 3,5 | 3,3 | 3,3 | 3,3 | n.a. |
| SP Dec 2005 | 3,5 | 3,2 | 3,0 | 2,7 | n.a. |
| Output gap
  (% of potential GDP) | SP Dec 2006 (5) | 0,9 | 1,0 | 0,9 | 1,1 | 1,5 |
| COM Nov 2006 (9) | 1,5 | 1,5 | 1,5 | 1,8 | n.a. |
| SP Dec 2005 (5) | 1,1 | 1,1 | 1,1 | 1,5 | n.a. |
| General government balance
  (% of GDP) | SP Dec 2006 | – 5,2 | – 2,6 | – 2,4 | – 1,8 | – 1,2 |
| COM Nov 2006 | – 5,2 | – 2,6 | – 2,6 | – 2,4 | n.a. |
| SP Dec 2005 | – 4,3 | – 2,6 | – 2,3 | – 1,7 | n.a. |
| Primary balance
  (% of GDP) | SP Dec 2006 | – 0,4 | 2,0 | 2,0 | 2,4 | 2,9 |
| COM Nov 2006 | – 0,4 | 2,0 | 1,8 | 1,7 | n.a. |
| SP Dec 2005 | 0,9 | 2,3 | 2,4 | 2,8 | n.a. |
| Cyclically-adjusted balance
  (% of GDP) | SP Dec 2006 (5) | – 5,6 | – 3,0 | – 2,8 | – 2,3 | – 1,8 |
| COM Nov 2006 | – 5,9 | – 3,3 | – 3,3 | – 3,1 | n.a. |
| SP Dec 2005 (5) | – 4,8 | – 3,1 | – 2,8 | – 2,4 | n.a. |
| Structural balance (6)

  (% of GDP) | SP Dec 2006 (7) | – 5,6 | – 3,4 | – 2,8 | – 2,3 | – 1,8 |
| COM Nov 2006 (8) | – 5,9 | – 3,7 | – 3,3 | – 3,1 | n.a. |
| SP Dec 2005 | – 4,8 | – 3,7 | – 2,8 | – 2,4 | n.a. |
| Government gross debt
  (% of GDP) | SP Dec 2006 | 107,5 | 104,1 | 100,1 | 95,9 | 91,3 |
| COM Nov 2006 | 107,5 | 104,8 | 101,0 | 96,4 | n.a. |
| SP Dec 2005 | 107,9 | 104,8 | 101,1 | 96,8 | n.a. |
| Source:

  Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations |

2005

2006

2007

2008

2009

Real GDP

(% change)

SP Dec 2006

3,7

4,0

3,9

4,0

4,1

COM Nov 2006

3,7

3,8

3,7

3,7

n.a.

SP Dec 2005

3,6

3,8

3,8

4,0

n.a.

HICP inflation

(%)

SP Dec 2006

3,5

3,3

3,0

2,8

2,6

COM Nov 2006

3,5

3,3

3,3

3,3

n.a.

SP Dec 2005

3,5

3,2

3,0

2,7

n.a.

Output gap

(% of potential GDP)

SP Dec 2006 (5)

0,9

1,0

0,9

1,1

1,5

COM Nov 2006 (9)

1,5

1,5

1,5

1,8

n.a.

SP Dec 2005 (5)

1,1

1,1

1,1

1,5

n.a.

General government balance

(% of GDP)

SP Dec 2006

– 5,2

– 2,6

– 2,4

– 1,8

– 1,2

COM Nov 2006

– 5,2

– 2,6

– 2,6

– 2,4

n.a.

SP Dec 2005

– 4,3

– 2,6

– 2,3

– 1,7

n.a.

Primary balance

(% of GDP)

SP Dec 2006

– 0,4

2,0

2,0

2,4

2,9

COM Nov 2006

– 0,4

2,0

1,8

1,7

n.a.

SP Dec 2005

0,9

2,3

2,4

2,8

n.a.

Cyclically-adjusted balance

(% of GDP)

SP Dec 2006 (5)

– 5,6

– 3,0

– 2,8

– 2,3

– 1,8

COM Nov 2006

– 5,9

– 3,3

– 3,3

– 3,1

n.a.

SP Dec 2005 (5)

– 4,8

– 3,1

– 2,8

– 2,4

n.a.

Structural balance (6)

(% of GDP)

SP Dec 2006 (7)

– 5,6

– 3,4

– 2,8

– 2,3

– 1,8

COM Nov 2006 (8)

– 5,9

– 3,7

– 3,3

– 3,1

n.a.

SP Dec 2005

– 4,8

– 3,7

– 2,8

– 2,4

n.a.

Government gross debt

(% of GDP)

SP Dec 2006

107,5

104,1

100,1

95,9

91,3

COM Nov 2006

107,5

104,8

101,0

96,4

n.a.

SP Dec 2005

107,9

104,8

101,1

96,8

n.a.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

(1)  OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:

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

(2)  The update was submitted 2 weeks beyond the 1 December deadline set in the code of conduct.

(3)  The Greek authorities have transmitted to Eurostat new GDP data for the period 1995-2005, showing a sharp upward revision of GDP levels. This revision was carried out within the regular assessment of compliance with Eurostat's statistical practices. Eurostat is currently reviewing these data. The updated Greek stability programme and its assessment are based on unrevised GDP data. Eurostat has lifted its reservations on historical Greek budgetary data.

(4)  In particular, data on general government expenditure by function, long-term sustainability and contributions to potential GDP growth are missing.

(5)  Commission services calculations on the basis of the information in the programme.

(6)  Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures.

(7)  One-off and other temporary measures taken from the programme (0,4 % of GDP in 2006).

(8)  One-off and other temporary measures taken from the Commission services' autumn 2006 forecast (0,4 % of GDP in 2006).

(9)  Based on estimated potential growth of 3,7 %, 3,8 %, 3,6 % and 3,5 % respectively in the period 2005-2008.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

| 27.3.2007 | EN | Official Journal of the European Union | C 70/13 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/13

---

COUNCIL OPINION

of 27 February 2007

on the updated stability programme of France, 2006-2010

(2007/C 70/04)

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 5(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

| (1) | On 27 February 2007 the Council examined the updated stability programme of France, which covers the period 2006 to 2010. |
| --- | --- |

(1)

On 27 February 2007 the Council examined the updated stability programme of France, which covers the period 2006 to 2010.

| (2) | The programme contains two different scenarios for the macroeconomic and budgetary projections: a ‘low ’scenario and a ‘high ’scenario. The ‘low ’scenario, which is in line with the Commission services' autumn 2006 forecast, is considered the reference scenario for assessing budgetary projections. Assessed against currently available information, it appears to be based on plausible assumptions, although somewhat on the high side concerning 2006. It envisages that real GDP will grow by 2

  % per year over the programme period. The programme's projections for inflation also appear realistic. |
| --- | --- |

(2)

Formula

| (3) | For 2006, the general government deficit is estimated at 2,7 % of GDP in the Commission services' autumn 2006 forecast, against a target of 2,9 % of GDP for 2006 set in the previous update of the stability programme (and a deficit outturn of 2,9 % of GDP in 2005). Although the GDP growth assumption is the same in the previous and current update, a range between 2 % and 2,5 %, the composition of growth is more tax rich in the current update as it is based on higher private consumption. The expected improvement in the deficit is supported by (a) an acceleration in GDP growth (from 1,2 % to about 2 %) which boosts revenues (about EUR 5bn, i.e. 0,3 percentage point of GDP), and (b) a slowdown in expenditure. |
| --- | --- |

(3)

For 2006, the general government deficit is estimated at 2,7 % of GDP in the Commission services' autumn 2006 forecast, against a target of 2,9 % of GDP for 2006 set in the previous update of the stability programme (and a deficit outturn of 2,9 % of GDP in 2005). Although the GDP growth assumption is the same in the previous and current update, a range between 2 % and 2,5 %, the composition of growth is more tax rich in the current update as it is based on higher private consumption. The expected improvement in the deficit is supported by (a) an acceleration in GDP growth (from 1,2 % to about 2 %) which boosts revenues (about EUR 5bn, i.e. 0,3 percentage point of GDP), and (b) a slowdown in expenditure.

| (4) | The programme is inscribed in the French authorities' overarching strategy of ‘national commitment to debt reduction ’and is presented as a multi-annual programme for debt reduction targeting a zero deficit and a debt level below 60 % of GDP by 2010. It foresees a continuous but back loaded decrease in the headline deficit from 2,7 % of GDP in 2006 (2,5 % in 2007) to 0 % of GDP in 2010, amounting to an overall reduction by 2,7 percentage points of GDP. The primary deficit, of 0,1 % of GDP in 2006, would turn into a surplus from 2007 onwards and reach 2,5 % of GDP in 2010. The planned fiscal consolidation is expenditure-driven: it is based on multi-annual targets for the increase in the general government expenditures that imply a reduction in the (primary) expenditure-to-GDP ratio by close to 3 percentage points of GDP over the period. Compared with the previous programme, the new update largely confirms the planned fiscal adjustment against a broadly unchanged macroeconomic scenario. |
| --- | --- |

(4)

The programme is inscribed in the French authorities' overarching strategy of ‘national commitment to debt reduction ’and is presented as a multi-annual programme for debt reduction targeting a zero deficit and a debt level below 60 % of GDP by 2010. It foresees a continuous but back loaded decrease in the headline deficit from 2,7 % of GDP in 2006 (2,5 % in 2007) to 0 % of GDP in 2010, amounting to an overall reduction by 2,7 percentage points of GDP. The primary deficit, of 0,1 % of GDP in 2006, would turn into a surplus from 2007 onwards and reach 2,5 % of GDP in 2010. The planned fiscal consolidation is expenditure-driven: it is based on multi-annual targets for the increase in the general government expenditures that imply a reduction in the (primary) expenditure-to-GDP ratio by close to 3 percentage points of GDP over the period. Compared with the previous programme, the new update largely confirms the planned fiscal adjustment against a broadly unchanged macroeconomic scenario.

| (5) | The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is planned to improve from a deficit of about 2

  % of GDP in 2006 to a surplus of about

  % at the end of the programme period (2010). As in the previous update of the stability programme, the medium-term objective (MTO) is a balanced position in structural terms, which the programme aims to achieve by 2010. As the MTO is more demanding than the minimum benchmark (estimated at a deficit of around 1

  % of GDP), achieving it should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO lies within the range indicated for euro-area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term. |
| --- | --- |

(5)

Formula

Formula

Formula

| (6) | The risks to the budgetary projections in the programme appear broadly balanced in the near term (until 2008) but budgetary outcomes could be worse than projected in the programme in the outer years. Concerning the near term, the adjustment mainly relies on stronger expenditure control at the State level, which is backed by the progressive implementation of the new Constitutional Bylaw on Budget Bills (2) and the results of the modernisation audits and is plausible although local authorities' expenditure trends are a risk factor. Regarding the outer years, there are risks to the full achievement of the strong adjustment targeted. Indeed, the strong restraint envisaged is likely to call for additional measures that are not spelled out in the programme, even if the track record of the compliance with its expenditure norm at the State level is good. More generally, the track record related to the achievement of the overall general government expenditure ceilings, at the heart of the French budgetary consolidation strategy, together with the lack of enforcement mechanisms notably for local authorities, tilt the risks to the negative side. Mechanisms have been created to develop the dialogue among public expenditure managers with a view to contributing to better control expenditure at all levels. |
| --- | --- |

(6)

The risks to the budgetary projections in the programme appear broadly balanced in the near term (until 2008) but budgetary outcomes could be worse than projected in the programme in the outer years. Concerning the near term, the adjustment mainly relies on stronger expenditure control at the State level, which is backed by the progressive implementation of the new Constitutional Bylaw on Budget Bills (2) and the results of the modernisation audits and is plausible although local authorities' expenditure trends are a risk factor. Regarding the outer years, there are risks to the full achievement of the strong adjustment targeted. Indeed, the strong restraint envisaged is likely to call for additional measures that are not spelled out in the programme, even if the track record of the compliance with its expenditure norm at the State level is good. More generally, the track record related to the achievement of the overall general government expenditure ceilings, at the heart of the French budgetary consolidation strategy, together with the lack of enforcement mechanisms notably for local authorities, tilt the risks to the negative side. Mechanisms have been created to develop the dialogue among public expenditure managers with a view to contributing to better control expenditure at all levels.

| (7) | In view of this risk assessment, the budgetary stance in the programme may not be sufficient to ensure that the MTO is achieved by 2010 as envisaged in the programme. However, it seems to provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations towards the end of the programme period, most probably from 2009. Except for 2007, the pace of the adjustment towards the MTO implied by the programme is broadly in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times. Although France has only just corrected its excessive deficit, the envisaged adjustment for 2007 would be limited to an estimated 0,3 percentage point of GDP, while the economic situation cannot be assessed as ‘bad times ’and tax elasticities even point to ‘good times’. |
| --- | --- |

(7)

In view of this risk assessment, the budgetary stance in the programme may not be sufficient to ensure that the MTO is achieved by 2010 as envisaged in the programme. However, it seems to provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations towards the end of the programme period, most probably from 2009. Except for 2007, the pace of the adjustment towards the MTO implied by the programme is broadly in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times. Although France has only just corrected its excessive deficit, the envisaged adjustment for 2007 would be limited to an estimated 0,3 percentage point of GDP, while the economic situation cannot be assessed as ‘bad times ’and tax elasticities even point to ‘good times’.

| (8) | Government gross debt is estimated to have reached 64,6 % of GDP in 2006, above the 60 % of GDP Treaty reference value. The programme projects the debt-to GDP ratio to decline by 6

  percentage points over the programme period. The evolution of the debt ratio might be less favourable than projected in the outer years of the programme given (1) the risks to the budgetary targets mentioned above, and (2) uncertainty about the materialization of non-strategic asset sales which tend to be larger than the historical average. In view of this risk assessment, the debt ratio seems to be sufficiently diminishing towards the reference value over the programme period. |
| --- | --- |

(8)

Formula

| (9) | The long-term budgetary impact of ageing in France is slightly lower than 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. The initial budgetary position, albeit improved compared with 2005, still constitutes a risk to sustainable public finances even before the long-term budgetary impact of an ageing population is considered. Moreover, the current level of gross debt is above the Treaty reference value. Further budgetary consolidation would contribute to reducing risks to the sustainability of public finances, which would also benefit from preserving and possibly enhancing the benefits of the pension reform. Overall, France appears to be at medium risk with regard to the sustainability of public finances. |
| --- | --- |

(9)

The long-term budgetary impact of ageing in France is slightly lower than 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. The initial budgetary position, albeit improved compared with 2005, still constitutes a risk to sustainable public finances even before the long-term budgetary impact of an ageing population is considered. Moreover, the current level of gross debt is above the Treaty reference value. Further budgetary consolidation would contribute to reducing risks to the sustainability of public finances, which would also benefit from preserving and possibly enhancing the benefits of the pension reform. Overall, France appears to be at medium risk with regard to the sustainability of public finances.

| (10) | The stability programme contains a qualitative assessment of the overall impact of France's October 2006 national reform programme within the medium-term fiscal strategy. However, although it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme, its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, the programme presents measures aiming at increasing potential growth, which concern the modernisation of the labour market but also some innovation in the area of industrial and research policies. |
| --- | --- |

(10)

The stability programme contains a qualitative assessment of the overall impact of France's October 2006 national reform programme within the medium-term fiscal strategy. However, although it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme, its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, the programme presents measures aiming at increasing potential growth, which concern the modernisation of the labour market but also some innovation in the area of industrial and research policies.

| (11) | The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. |
| --- | --- |

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

| (12) | 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). |
| --- | --- |

(12)

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 Council welcomes that, after the correction of the excessive deficit and in a context of strong revenue growth, the programme gives priority to debt reduction and envisages progress towards the MTO through an expenditure-based adjustment. But it notes that the adjustment is somewhat back-loaded and that there are risks to the achievement of the budgetary targets, especially in the outer years.

In view of the above assessment, the Council invites France to:

| (i) | exploit the robust growth prospects and the positive base effect from a stronger-than previously expected 2006 outturn to frontload the adjustment towards the MTO and pursue an ambitious structural adjustment in the coming years with a view to achieving the MTO by 2010 as planned, thereby reducing the level of the debt and improving the long-term sustainability of public finances. In particular, the 2007 budget should be fully and effectively implemented and any opportunity should be seized to step up the structural adjustment. |
| --- | --- |

(i)

exploit the robust growth prospects and the positive base effect from a stronger-than previously expected 2006 outturn to frontload the adjustment towards the MTO and pursue an ambitious structural adjustment in the coming years with a view to achieving the MTO by 2010 as planned, thereby reducing the level of the debt and improving the long-term sustainability of public finances. In particular, the 2007 budget should be fully and effectively implemented and any opportunity should be seized to step up the structural adjustment.

| (ii) | strengthen the monitoring and enforcement of expenditure rules for all sub-sectors of the general government so as to ensure the respect of the ambitious multi-annual expenditure ceilings. |
| --- | --- |

(ii)

strengthen the monitoring and enforcement of expenditure rules for all sub-sectors of the general government so as to ensure the respect of the ambitious multi-annual expenditure ceilings.

Comparison of budgetary developments and projections

| | | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Dec 2006 | 1,2 | 2,0-2,5 | 2,0-2,5 | 2 | 2 | 2 |
| COM Nov 2006 | 1,2 | 2,2 | 2,3 | 2,1 | n.a. | n.a. |
| SP Jan 2006 | 1,5-2,0 | 2,0-2,5 | 2 | 2 | 2 | n.a. |
| HICP inflation
  (%) | SP Dec 2006 | 1,9 | 2,0 | 1,9 | 1 | 1 | 1 |
| COM Nov 2006 | 1,9 | 2,0 | 1,8 | 1,9 | n.a. | n.a. |
| SP Jan 2006 | 1,9 | 1,8 | 1 | 1 | 1 | n.a. |
| Output gap
  (% of potential GDP) | SP Dec 2006 (4) | – 0,8 | – 0,6 | – 0,6 | – 0,5 | – 0,4 | – 0,3 |
| COM Nov 2006 (8) | – 0,8 | – 0,8 | – 0,7 | – 0,9 | n.a. | n.a. |
| SP Jan 2006 (4) | – 0,5 | – 0,4 | – 0,6 | – 0,8 | – 0,9 | n.a. |
| General government balance
  (% of GDP) | SP Dec 2006 | – 2,9 | – 2,7 | – 2,5 | – 1,8 | – 0,9 | 0,0 |
| COM Nov 2006 | – 2,9 | – 2,7 | – 2,6 | – 2,2 | n.a. | n.a. |
| SP Jan 2006 | – 3,0 | – 2,9 | – 2,6 | – 1,9 | – 1,0 | n.a. |
| Primary balance
  (% of GDP) | SP Dec 2006 | – 0,2 | – 0,1 | 0,1 | 0,7 | 1,7 | 2,5 |
| COM Nov 2006 | – 0,2 | – 0,1 | 0,0 | 0,4 | n.a. | n.a. |
| SP Jan 2006 | – 0,3 | – 0,3 | 0,0 | 0,6 | 1,6 | n.a. |
| Cyclically-adjusted balance
  (% of GDP) | SP Dec 2006 (4) | – 2,5 | – 2,4 | – 2,2 | – 1,6 | – 0,7 | 0,2 |
| COM Nov 2006 | – 2,5 | – 2,3 | – 2,3 | – 1,8 | n.a. | n.a. |
| SP Jan 2006 (4) | – 2,8 | – 2,7 | – 2,3 | – 1,5 | – 0,6 | n.a. |
| Structural balance (5)

  (% of GDP) | SP Dec 2006 (6) | – 3,0 | – 2,5 | – 2,2 | – 1,6 | – 0,7 | 0,2 |
| COM Nov 2006 (7) | – 3,1 | – 2,6 | – 2,3 | – 1,8 | n.a. | n.a. |
| SP Jan 2006 | – 3,3 | – 2,9 | – 2,3 | – 1,5 | – 0,6 | n.a. |
| Government gross debt
  (% of GDP) | SP Dec 2006 | 66,6 | 64,6 | 63,6 | 62,6 | 60,7 | 58,0 |
| COM Nov 2006 | 66,6 | 64,7 | 63,9 | 63,3 | n.a. | n.a. |
| SP Jan 2006 | 65,8 | 66,0 | 65,6 | 64,6 | 62,8 | n.a. |
| Source:

  Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations |

2005

2006

2007

2008

2009

2010

Real GDP

(% change)

SP Dec 2006

1,2

2,0-2,5

2,0-2,5

2 Formula

2 Formula

2 Formula

COM Nov 2006

1,2

2,2

2,3

2,1

n.a.

n.a.

SP Jan 2006

1,5-2,0

2,0-2,5

2 Formula

2 Formula

2 Formula

n.a.

HICP inflation

(%)

SP Dec 2006

1,9

2,0

1,9

1 Formula

1 Formula

1 Formula

COM Nov 2006

1,9

2,0

1,8

1,9

n.a.

n.a.

SP Jan 2006

1,9

1,8

1 Formula

1 Formula

1 Formula

n.a.

Output gap

(% of potential GDP)

SP Dec 2006 (4)

– 0,8

– 0,6

– 0,6

– 0,5

– 0,4

– 0,3

COM Nov 2006 (8)

– 0,8

– 0,8

– 0,7

– 0,9

n.a.

n.a.

SP Jan 2006 (4)

– 0,5

– 0,4

– 0,6

– 0,8

– 0,9

n.a.

General government balance

(% of GDP)

SP Dec 2006

– 2,9

– 2,7

– 2,5

– 1,8

– 0,9

0,0

COM Nov 2006

– 2,9

– 2,7

– 2,6

– 2,2

n.a.

n.a.

SP Jan 2006

– 3,0

– 2,9

– 2,6

– 1,9

– 1,0

n.a.

Primary balance

(% of GDP)

SP Dec 2006

– 0,2

– 0,1

0,1

0,7

1,7

2,5

COM Nov 2006

– 0,2

– 0,1

0,0

0,4

n.a.

n.a.

SP Jan 2006

– 0,3

– 0,3

0,0

0,6

1,6

n.a.

Cyclically-adjusted balance

(% of GDP)

SP Dec 2006 (4)

– 2,5

– 2,4

– 2,2

– 1,6

– 0,7

0,2

COM Nov 2006

– 2,5

– 2,3

– 2,3

– 1,8

n.a.

n.a.

SP Jan 2006 (4)

– 2,8

– 2,7

– 2,3

– 1,5

– 0,6

n.a.

Structural balance (5)

(% of GDP)

SP Dec 2006 (6)

– 3,0

– 2,5

– 2,2

– 1,6

– 0,7

0,2

COM Nov 2006 (7)

– 3,1

– 2,6

– 2,3

– 1,8

n.a.

n.a.

SP Jan 2006

– 3,3

– 2,9

– 2,3

– 1,5

– 0,6

n.a.

Government gross debt

(% of GDP)

SP Dec 2006

66,6

64,6

63,6

62,6

60,7

58,0

COM Nov 2006

66,6

64,7

63,9

63,3

n.a.

n.a.

SP Jan 2006

65,8

66,0

65,6

64,6

62,8

n.a.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

(1)  OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:

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

(2)  The new Constitutional Bylaw on Budget Bills (LOLF), which has been implemented for the first time in 2006, aims at more transparency and efficiency of public expenditure management.

(3)  In particular, the data on collective consumption and short and long-term interest rates (for the years 2008 to 2010) are not provided.

(4)  Commission services calculations on the basis of the information in the programme.

(5)  Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures.

(6)  One-off and other temporary measures taken from the programme (0,5 % of GDP in 2005 and 0,1 % in 2006; 0 % thereafter, all deficit-reducing).

(7)  One-off and other temporary measures taken from the Commission services' autumn 2006 forecast (0,6 % of GDP in 2005 and 0,2 % in 2006; 0 % thereafter, all deficit-reducing).

(8)  Based on estimated potential growth of 2,0 %, 2,2 %, 2,2 % and 2,3 % respectively in the period 2005-2008.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

| 27.3.2007 | EN | Official Journal of the European Union | C 70/17 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/17

---

COUNCIL OPINION

of 27 February 2007

on the updated stability programme of Italy, 2006-2011

(2007/C 70/05)

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 27 February 2007 the Council examined the updated stability programme of Italy, which covers the period 2006 to 2011. |
| --- | --- |

(1)

On 27 February 2007 the Council examined the updated stability programme of Italy, which covers the period 2006 to 2011.

| (2) | The macroeconomic scenario underlying the programme envisages that real GDP growth will initially decline from 1,6 % in 2006 to 1,3 % in 2007. Afterwards, economic growth will gradually pick up, to reach 1,7 % in 2011. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. The programme's projections for inflation appear to be on the low side in the outer years. |
| --- | --- |

(2)

The macroeconomic scenario underlying the programme envisages that real GDP growth will initially decline from 1,6 % in 2006 to 1,3 % in 2007. Afterwards, economic growth will gradually pick up, to reach 1,7 % in 2011. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. The programme's projections for inflation appear to be on the low side in the outer years.

| (3) | The 2006 stability programme update projects the 2006 deficit at 5,7 % of GDP (2). This contrasts with the 4,7 % of GDP in the Commission services' autumn 2006 forecast. The Commission scenario does not take account of the 0,9 % of GDP slippage due to the cancellation of railway company's debt related to the high speed project (Ferrovie dello Stato — RFI/TAV) (3), following a decision taken in the final phase of the budgetary process. In turn, the Commission services' autumn forecast for the general government deficit is higher than the 3,5 % of GDP set in the previous update of the stability programme. The 1,2 % of GDP difference is essentially explained by the different impact of one-offs (0,8 % of GDP) and the permanent negative impact of the European Court of Justice's ruling on VAT on company cars (around 0,4 % of GDP). |
| --- | --- |

(3)

The 2006 stability programme update projects the 2006 deficit at 5,7 % of GDP (2). This contrasts with the 4,7 % of GDP in the Commission services' autumn 2006 forecast. The Commission scenario does not take account of the 0,9 % of GDP slippage due to the cancellation of railway company's debt related to the high speed project (Ferrovie dello Stato — RFI/TAV) (3), following a decision taken in the final phase of the budgetary process. In turn, the Commission services' autumn forecast for the general government deficit is higher than the 3,5 % of GDP set in the previous update of the stability programme. The 1,2 % of GDP difference is essentially explained by the different impact of one-offs (0,8 % of GDP) and the permanent negative impact of the European Court of Justice's ruling on VAT on company cars (around 0,4 % of GDP).

| (4) | The budgetary strategy in the programme aims at correcting the excessive deficit in 2007 (the deficit is planned to decline to 2,8 % of GDP) largely with measures of a permanent nature. Thereafter, the government balance is planned to continue improving steadily over the programme period, to turn into a positive 0,1 % of GDP in 2011. The primary balance is planned to improve from -0,9 % of GDP in 2006 (2) to 5 % in 2011. Until 2007, the adjustment is essentially revenue-based. Beyond 2007, the information is limited to the size of the correction required to achieve the budgetary targets relative to trends. Compared with the previous programme, the targets from 2007 onwards are broadly unchanged against a less favourable macroeconomic scenario but, due to the much higher 2006 deficit starting point, the adjustment in 2007 is much higher. |
| --- | --- |

(4)

The budgetary strategy in the programme aims at correcting the excessive deficit in 2007 (the deficit is planned to decline to 2,8 % of GDP) largely with measures of a permanent nature. Thereafter, the government balance is planned to continue improving steadily over the programme period, to turn into a positive 0,1 % of GDP in 2011. The primary balance is planned to improve from -0,9 % of GDP in 2006 (2) to 5 % in 2011. Until 2007, the adjustment is essentially revenue-based. Beyond 2007, the information is limited to the size of the correction required to achieve the budgetary targets relative to trends. Compared with the previous programme, the targets from 2007 onwards are broadly unchanged against a less favourable macroeconomic scenario but, due to the much higher 2006 deficit starting point, the adjustment in 2007 is much higher.

| (5) | The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is planned to improve from a deficit of around 4 % of GDP in 2006 to a surplus of

  % at the end of the programme period (2011). As in the previous update of the stability programme, the medium-term objective (MTO) for the budgetary position presented in the programme is a balanced budget in structural terms, which the programme aims to achieve by the end of the programme period. The previous update of the programme did not plan to reach the MTO within the programme period (which stopped in 2009). As the MTO is more demanding than the minimum benchmark (estimated at a deficit of around 1

  % of GDP), achieving it should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO lies within the range indicated for euro-area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term. |
| --- | --- |

(5)

Formula

Formula

| (6) | The budgetary outcomes could be better than projected in the programme in 2006 and worse than projected in the programme after 2007. For 2007 the risks to the budgetary projections in the programme appear broadly balanced. On the positive side, in view of the developments of cash data, the 2006 deficit could turn out lower than the projected 5,7 % of GDP, implying a better-than-projected base effect for 2007. However, risks are attached to the effectiveness of some measures included in the 2007 budget. Risks to public finances in the medium term cannot be excluded, in particular stemming from the repeated overruns in health care expenditure. In addition, after 2007, no details are given on the adjustment strategy, increasing the risks attached to the planned fiscal consolidation. |
| --- | --- |

(6)

The budgetary outcomes could be better than projected in the programme in 2006 and worse than projected in the programme after 2007. For 2007 the risks to the budgetary projections in the programme appear broadly balanced. On the positive side, in view of the developments of cash data, the 2006 deficit could turn out lower than the projected 5,7 % of GDP, implying a better-than-projected base effect for 2007. However, risks are attached to the effectiveness of some measures included in the 2007 budget. Risks to public finances in the medium term cannot be excluded, in particular stemming from the repeated overruns in health care expenditure. In addition, after 2007, no details are given on the adjustment strategy, increasing the risks attached to the planned fiscal consolidation.

| (7) | In view of this risk assessment, the budgetary stance in the programme seems broadly consistent with a correction of the excessive deficit by 2007 as recommended by the Council, provided the budget measures are fully and effectively implemented. Overall, there are negative risks to the 1

  % of GDP planned structural adjustment in 2007. However, available data pointing to a better-than-projected structural adjustment in 2006 (

  % of GDP) could imply a better carry-over into 2007. The budgetary stance may not provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations before 2010. Furthermore, it may not be sufficient to ensure that the MTO is achieved within the programme period, as envisaged in the programme. In the years following the correction of the excessive deficit, the pace of the adjustment towards the MTO implied by the programme is broadly in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times. |
| --- | --- |

(7)

Formula

Formula

| (8) | Government gross debt is officially estimated to have reached 107,6 % of GDP in 2006, far above the 60 % of GDP Treaty reference value. The programme projects the debt ratio to gradually decline to reach around 98 % of GDP in 2011. The evolution of the debt ratio is likely to be more favourable than projected in the programme in 2006 given cash data developments. The risks to the projected evolution of the debt appear to be broadly balanced in 2007. After 2007, the lack of details on the adjustment strategy increases the risks attached to the planned debt reduction. In view of this risk assessment, the debt ratio be may not be sufficiently diminishing towards the reference value over the programme period. |
| --- | --- |

(8)

Government gross debt is officially estimated to have reached 107,6 % of GDP in 2006, far above the 60 % of GDP Treaty reference value. The programme projects the debt ratio to gradually decline to reach around 98 % of GDP in 2011. The evolution of the debt ratio is likely to be more favourable than projected in the programme in 2006 given cash data developments. The risks to the projected evolution of the debt appear to be broadly balanced in 2007. After 2007, the lack of details on the adjustment strategy increases the risks attached to the planned debt reduction. In view of this risk assessment, the debt ratio be may not be sufficiently diminishing towards the reference value over the programme period.

| (9) | The long-term budgetary impact of ageing in Italy is lower than the EU average, with pension expenditure showing a more limited increase than on average in the EU, thanks to the pension reforms adopted, assuming they are fully implemented, notably including the planned periodical actuarial adjustment in line with life expectancy. Increasing the employment rate, notably of older workers, would improve workers' pensions in the future and contribute to the success of the pension reforms. The initial budgetary position, albeit slightly improved compared with 2005, constitutes a risk to sustainable public finances even before the long-term budgetary impact of an ageing population is considered. Moreover, the current level of gross debt is well above the Treaty reference value and reducing it will require high primary surpluses to be achieved and maintained over a long period. Overall, Italy appears to be at medium risk with regard to the sustainability of public finances. |
| --- | --- |

(9)

The long-term budgetary impact of ageing in Italy is lower than the EU average, with pension expenditure showing a more limited increase than on average in the EU, thanks to the pension reforms adopted, assuming they are fully implemented, notably including the planned periodical actuarial adjustment in line with life expectancy. Increasing the employment rate, notably of older workers, would improve workers' pensions in the future and contribute to the success of the pension reforms. The initial budgetary position, albeit slightly improved compared with 2005, constitutes a risk to sustainable public finances even before the long-term budgetary impact of an ageing population is considered. Moreover, the current level of gross debt is well above the Treaty reference value and reducing it will require high primary surpluses to be achieved and maintained over a long period. Overall, Italy appears to be at medium risk with regard to the sustainability of public finances.

| (10) | The stability programme contains a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. It provides some information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, both programmes address the issue of fiscal sustainability and envisage the implementation of a cut in the labour tax wedge over 2007-2008. |
| --- | --- |

(10)

The stability programme contains a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. It provides some information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, both programmes address the issue of fiscal sustainability and envisage the implementation of a cut in the labour tax wedge over 2007-2008.

| (11) | The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. |
| --- | --- |

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

| (12) | As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has gaps in the required and optional data (4) which need to be closed in the future programmes. |
| --- | --- |

(12)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has gaps in the required and optional data (4) which need to be closed in the future programmes.

The Council considers that the programme is consistent with a correction of the excessive deficit by 2007, subject to the full and effective implementation of the 2007 Budget. After 2007, the planned adjustment is in line with the requirements of the Stability and Growth Pact and would allow reaching the MTO by the end of the programme period. However, no details are given on the adjustment strategy, which itself represents a risk for the achievement of the budgetary targets after 2007 and hinders a proper assessment of the consolidation strategy.

In view of the above assessment and also in the light of the recommendation under Article 104(7) of 28 July 2005, the Council invites Italy to:

| (i) | achieve the planned fiscal consolidation in 2007 so as to correct the situation of excessive deficit in line with the Council recommendation under Article 104(7); |
| --- | --- |

(i)

achieve the planned fiscal consolidation in 2007 so as to correct the situation of excessive deficit in line with the Council recommendation under Article 104(7);

| (ii) | take advantage of better than expected budgetary developments for deficit reduction and ensure, after the excessive deficit has been corrected, adequate progress towards the MTO so as to achieve it by the end of the programme period at the latest and ensure that the debt-to-GDP ratio is reduced accordingly; |
| --- | --- |

(ii)

take advantage of better than expected budgetary developments for deficit reduction and ensure, after the excessive deficit has been corrected, adequate progress towards the MTO so as to achieve it by the end of the programme period at the latest and ensure that the debt-to-GDP ratio is reduced accordingly;

| (iii) | in view of the very high level of debt, fully implement the adopted pension reforms including the planned periodical actuarial adjustment in line with life expectancy so as to avoid significant increases in age-related spending; and |
| --- | --- |

(iii)

in view of the very high level of debt, fully implement the adopted pension reforms including the planned periodical actuarial adjustment in line with life expectancy so as to avoid significant increases in age-related spending; and

| (iv) | improve the budgetary process by increasing its transparency, specify in greater detail the budgetary measures with a longer time perspective and effectively implementing mechanisms to monitor and control expenditure, especially health care expenditure; |
| --- | --- |

(iv)

improve the budgetary process by increasing its transparency, specify in greater detail the budgetary measures with a longer time perspective and effectively implementing mechanisms to monitor and control expenditure, especially health care expenditure;

Comparison of key macroeconomic and budgetary projections

| | | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Dec 2006 | 0,0 | 1,6 | 1,3 | 1,5 | 1,6 | 1,7 | 1,7 |
| COM Nov 2006 | 0,0 | 1,7 | 1,4 | 1,4 | n.a. | n.a. | n.a. |
| SP Dec 2005 | 0,0 | 1,5 | 1,5 | 1,7 | 1,8 | n.a. | n.a. |
| HICP inflation
  (%) | SP Dec 2006 | 2,2 | 2,2 | 2,1 | 1,7 | 1,5 | 1,5 | 1,5 |
| COM Nov 2006 | 2,2 | 2,3 | 2,0 | 1,9 | n.a. | n.a. | n.a. |
| SP Dec 2005 | 2,3 | 2,3 | 2,2 | 2,0 | 2,0 | n.d. | n.d. |
| Output gap
  (% of potential GDP) | SP Dec 2006 (5) | – 1,3 | – 0,9 | – 0,9 | – 0,8 | – 0,7 | – 0,5 | – 0,5 |
| COM Nov 2006 (9) | – 1,4 | – 1,0 | – 1,0 | – 1,1 | n.a. | n.a. | n.a. |
| SP Dec 2005 (5) | – 1,5 | – 1,2 | – 1,0 | – 0,8 | – 0,6 | n.a. | n.a. |
| General government balance
  (% of GDP) | SP Dec 2006 (11) | – 4,1 | – 5,7 | – 2,8 | – 2,2 | – 1,5 | – 0,7 | 0,1 |
| COM Nov 2006 | – 4,1 | – 4,7 | – 2,9 | – 3,1 | n.a. | n.a. | n.a. |
| SP Dec 2005 | – 4,3 | – 3,5 | – 2,8 | – 2,1 | – 1,5 | n.a. | n.a. |
| Primary balance (10)

  (% of GDP) | SP Dec 2006 (11) | 0,7 | – 0,9 | 2,2 | 2,8 | 3,4 | 4,2 | 5,0 |
| COM Nov 2006 | 0,5 | – 0,1 | 1,8 | 1,7 | n.a. | n.a. | n.a. |
| SP Dec 2005 | 0,6 | 1,3 | 1,9 | 2,6 | 3,2 | n.a. | n.a. |
| Cyclically-adjusted balance
  (% of GDP) | SP Dec 2006 (5)
   (11) | – 3,5 | – 5,3 | – 2,3 | – 1,8 | – 1,2 | – 0,4 | 0,3 |
| COM Nov 2006 | – 3,4 | – 4,1 | – 2,4 | – 2,5 | n.a. | n.a. | n.a. |
| SP Dec 2005 (5) | – 3,5 | – 2,9 | – 2,3 | – 1,7 | – 1,2 | n.a. | n.a. |
| Structural balance (6)

  (% of GDP) | SP Dec 2006 (5)
   (7) | – 4,0 | – 3,9 | – 2,5 | – 1,9 | – 1,2 | – 0,4 | 0,3 |
| COM Nov 2006 (8) | – 3,9 | – 3,6 | – 2,5 | – 2,6 | n.a. | n.a. | n.a. |
| SP Dec 2005 (5) | – 4,1 | – 3,2 | – 2,3 | – 1,7 | – 1,2 | n.a. | n.a. |
| Government gross debt
  (% of GDP) | SP Dec 2006 | 106,6 | 107,6 | 106,9 | 105,4 | 103,5 | 100,7 | 97,8 |
| COM Nov 2006 | 106,6 | 107,2 | 105,9 | 105,7 | n.a. | n.a. | n.a. |
| SP Dec 2005 | 108,5 | 108,0 | 106,1 | 104,4 | 101,7 | n.a. | n.a. |
| Source:

  Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations |

2005

2006

2007

2008

2009

2010

2011

Real GDP

(% change)

SP Dec 2006

0,0

1,6

1,3

1,5

1,6

1,7

1,7

COM Nov 2006

0,0

1,7

1,4

1,4

n.a.

n.a.

n.a.

SP Dec 2005

0,0

1,5

1,5

1,7

1,8

n.a.

n.a.

HICP inflation

(%)

SP Dec 2006

2,2

2,2

2,1

1,7

1,5

1,5

1,5

COM Nov 2006

2,2

2,3

2,0

1,9

n.a.

n.a.

n.a.

SP Dec 2005

2,3

2,3

2,2

2,0

2,0

n.d.

n.d.

Output gap

(% of potential GDP)

SP Dec 2006 (5)

– 1,3

– 0,9

– 0,9

– 0,8

– 0,7

– 0,5

– 0,5

COM Nov 2006 (9)

– 1,4

– 1,0

– 1,0

– 1,1

n.a.

n.a.

n.a.

SP Dec 2005 (5)

– 1,5

– 1,2

– 1,0

– 0,8

– 0,6

n.a.

n.a.

General government balance

(% of GDP)

SP Dec 2006 (11)

– 4,1

– 5,7

– 2,8

– 2,2

– 1,5

– 0,7

0,1

COM Nov 2006

– 4,1

– 4,7

– 2,9

– 3,1

n.a.

n.a.

n.a.

SP Dec 2005

– 4,3

– 3,5

– 2,8

– 2,1

– 1,5

n.a.

n.a.

Primary balance (10)

(% of GDP)

SP Dec 2006 (11)

0,7

– 0,9

2,2

2,8

3,4

4,2

5,0

COM Nov 2006

0,5

– 0,1

1,8

1,7

n.a.

n.a.

n.a.

SP Dec 2005

0,6

1,3

1,9

2,6

3,2

n.a.

n.a.

Cyclically-adjusted balance

(% of GDP)

SP Dec 2006 (5)
   (11)

– 3,5

– 5,3

– 2,3

– 1,8

– 1,2

– 0,4

0,3

COM Nov 2006

– 3,4

– 4,1

– 2,4

– 2,5

n.a.

n.a.

n.a.

SP Dec 2005 (5)

– 3,5

– 2,9

– 2,3

– 1,7

– 1,2

n.a.

n.a.

Structural balance (6)

(% of GDP)

SP Dec 2006 (5)
   (7)

– 4,0

– 3,9

– 2,5

– 1,9

– 1,2

– 0,4

0,3

COM Nov 2006 (8)

– 3,9

– 3,6

– 2,5

– 2,6

n.a.

n.a.

n.a.

SP Dec 2005 (5)

– 4,1

– 3,2

– 2,3

– 1,7

– 1,2

n.a.

n.a.

Government gross debt

(% of GDP)

SP Dec 2006

106,6

107,6

106,9

105,4

103,5

100,7

97,8

COM Nov 2006

106,6

107,2

105,9

105,7

n.a.

n.a.

n.a.

SP Dec 2005

108,5

108,0

106,1

104,4

101,7

n.a.

n.a.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

(1)  OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:

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

(2)  The tables in the 2006 Stability Programme do not incorporate the 0,9 % of GDP higher one-off government expenditure due to the cancellation of the railway company's debt, which the programme text refers to. This additional expenditure brings the targeted deficit for 2006 to 5,7 % of GDP, from the 4,8 % reported in the tables, and also affects other budgetary data.

(3)  Following a Eurostat decision of 23 May 2005 (see Eurostat News Release No 65/2005), according to which this railway company's debt was already booked as government liability, the government decision has no impact on the debt.

(4)  In particular, there is no breakdown of the budget consistent with the deficit targets for the years 2008-2011.

(5)  Commission services calculations on the basis of the information in the programme

(6)  Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures

(7)  One-off and other temporary measures taken from the programme (0,5 % of GDP in 2005, 0,1 % in 2007 and 2008; deficit-reducing. In 2006, 1,4 % of GDP deficit-increasing)

(8)  One-off and other temporary measures taken from the Commission services' autumn 2006 forecast (0,5 % of GDP in 2005, 0,1 % in 2007 and 2008; deficit-reducing. In 2006, 0,5 % of GDP deficit-increasing).

(9)  Based on estimated potential growth of 1,2 %, 1,3 %, 1,4 % and 1,5 % respectively in the period 2005-2008.

(10)  Data on the primary balance in the programme and in the Commission services' forecasts are not directly comparable because of a different treatment of FISIM. Data in the programme follow the definitions required by the code of conduct. To be comparable with data in the programme, Commission data on the primary balance need to be adjusted by around + 0,2 % of GDP.

(11)  The budgetary data in the programme for 2006 have been amended to include 0,9 % of GDP of expenditure due to the cancellation by the State of the railway company's debt related to the high-speed project, announced in the stability programme and approved with the final amendment to the 2007 Budget Law.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

| 27.3.2007 | EN | Official Journal of the European Union | C 70/21 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/21

---

COUNCIL OPINION

of 27 February 2007

on the updated stability programme of the Netherlands, 2006-2009

(2007/C 70/06)

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 27 February 2007 the Council examined the updated stability programme of the Netherlands, which covers the period 2006 to 2009. |
| --- | --- |

(1)

On 27 February 2007 the Council examined the updated stability programme of the Netherlands, which covers the period 2006 to 2009.

| (2) | The macroeconomic scenario underlying the programme envisages that real GDP will grow by 3

  % in 2006, 3 % in 2007 and 1

  % per year over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions for 2006 and 2007 and cautious ones thereafter. The programme's projections for inflation appear realistic until 2007 and seem to be on the low side thereafter in light of the expected tightness of the labour market. |
| --- | --- |

(2)

Formula

Formula

| (3) | For 2006, the general government position is estimated to be balanced in the Commission services' autumn 2006 forecast, against a target of -1,5 % of GDP set in the previous update of the stability programme. This mainly reflects a strongly improved cyclical outlook resulting in higher tax revenues as well as higher receipts from the sale of natural gas. Information that has become available since the autumn forecast (monthly data on the general government balance) points to an even better budgetary outcome. The latest official estimate, contained in the Autumn 2006 memorandum, puts the outturn for 2006 at a surplus of 0,4 % of GDP. |
| --- | --- |

(3)

For 2006, the general government position is estimated to be balanced in the Commission services' autumn 2006 forecast, against a target of -1,5 % of GDP set in the previous update of the stability programme. This mainly reflects a strongly improved cyclical outlook resulting in higher tax revenues as well as higher receipts from the sale of natural gas. Information that has become available since the autumn forecast (monthly data on the general government balance) points to an even better budgetary outcome. The latest official estimate, contained in the Autumn 2006 memorandum, puts the outturn for 2006 at a surplus of 0,4 % of GDP.

| (4) | The medium-term budgetary strategy in the programme aims at addressing the challenge of the cost of ageing through further fiscal consolidation. The programme projects the general government surplus to improve from 0,1 % of GDP in 2006 to 0,9 % in 2009. The primary surplus is targeted to improve from 2,4 % of GDP in 2006 to 2,9 % in 2009, which is fully concentrated in the final year of the programme, reflecting in large part the expected refunding in that year of the EU own resources contribution paid over the period 2007-2009. The nominal adjustment is fully explained by a fall in the expenditure-to-GDP ratio, which more than compensates a 0,2 percentage point decline in the revenue-to-GDP ratio. Compared to the previous update of the stability programme, the level of the general government balance is markedly higher throughout the programme period. This mainly reflects higher gas receipts, the improved macroeconomic situation in 2005 and outlook for 2006. |
| --- | --- |

(4)

The medium-term budgetary strategy in the programme aims at addressing the challenge of the cost of ageing through further fiscal consolidation. The programme projects the general government surplus to improve from 0,1 % of GDP in 2006 to 0,9 % in 2009. The primary surplus is targeted to improve from 2,4 % of GDP in 2006 to 2,9 % in 2009, which is fully concentrated in the final year of the programme, reflecting in large part the expected refunding in that year of the EU own resources contribution paid over the period 2007-2009. The nominal adjustment is fully explained by a fall in the expenditure-to-GDP ratio, which more than compensates a 0,2 percentage point decline in the revenue-to-GDP ratio. Compared to the previous update of the stability programme, the level of the general government balance is markedly higher throughout the programme period. This mainly reflects higher gas receipts, the improved macroeconomic situation in 2005 and outlook for 2006.

| (5) | The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is expected to deteriorate by around half a percentage point of GDP in 2007, stabilise in 2008 and improve by around half a percentage point of GDP in 2009. As in the previous update of the stability programme, the medium-term objective (MTO) for the budgetary position presented in the programme is a structural deficit ranging from 0,5 to 1 % of GDP, which the programme plans to maintain throughout the programme period. As the lower bound of the MTO range is equal to the minimum benchmark (estimated at a deficit of around 1 % of GDP), achieving the MTO should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO lies within the range indicated for euro-area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term. |
| --- | --- |

(5)

The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is expected to deteriorate by around half a percentage point of GDP in 2007, stabilise in 2008 and improve by around half a percentage point of GDP in 2009. As in the previous update of the stability programme, the medium-term objective (MTO) for the budgetary position presented in the programme is a structural deficit ranging from 0,5 to 1 % of GDP, which the programme plans to maintain throughout the programme period. As the lower bound of the MTO range is equal to the minimum benchmark (estimated at a deficit of around 1 % of GDP), achieving the MTO should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO lies within the range indicated for euro-area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term.

| (6) | The risks to the budgetary projections in the programme appear broadly balanced from 2007 onwards. On the one hand, the possibility of a positive carry-over into 2007 of the higher tax receipts in 2006 constitutes a positive risk to the budgetary outcome in 2007. Furthermore, for 2008 and 2009, a positive risk to the budgetary position stems from the cautious macroeconomic scenario. On the other hand, gas receipts may turn out lower than currently anticipated throughout the period. |
| --- | --- |

(6)

The risks to the budgetary projections in the programme appear broadly balanced from 2007 onwards. On the one hand, the possibility of a positive carry-over into 2007 of the higher tax receipts in 2006 constitutes a positive risk to the budgetary outcome in 2007. Furthermore, for 2008 and 2009, a positive risk to the budgetary position stems from the cautious macroeconomic scenario. On the other hand, gas receipts may turn out lower than currently anticipated throughout the period.

| (7) | In view of this risk assessment, the budgetary stance in the programme seems sufficient to maintain the MTO throughout the programme period, as envisaged in the programme. In addition, it provides a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations throughout the programme period. Nevertheless, there is a risk that the fiscal policy stance implied by the programme may turn out to be pro-cyclical in 2007, when good times are expected. This would not be in line with the Stability and Growth Pact. |
| --- | --- |

(7)

In view of this risk assessment, the budgetary stance in the programme seems sufficient to maintain the MTO throughout the programme period, as envisaged in the programme. In addition, it provides a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations throughout the programme period. Nevertheless, there is a risk that the fiscal policy stance implied by the programme may turn out to be pro-cyclical in 2007, when good times are expected. This would not be in line with the Stability and Growth Pact.

| (8) | Thanks to the sharp reduction in the general government deficit in 2004 and 2005, government gross debt is estimated to have fallen to 50,2 % of GDP in 2006, further below the 60 % of GDP Treaty reference value. The programme projects the debt ratio to further decline by 6 percentage points over the programme period. |
| --- | --- |

(8)

Thanks to the sharp reduction in the general government deficit in 2004 and 2005, government gross debt is estimated to have fallen to 50,2 % of GDP in 2006, further below the 60 % of GDP Treaty reference value. The programme projects the debt ratio to further decline by 6 percentage points over the programme period.

| (9) | The long-term budgetary impact of ageing in the Netherlands is higher than the EU average, influenced notably by a relatively high increase in pension expenditure as a share of GDP over the coming decades. The initial budgetary position, albeit not as strong as in 2005, contributes to easing the projected long-term budgetary impact of an ageing population, but it is not sufficient to fully cover it. The projected future rise of revenues as a share of GDP, mainly due to deferred taxation of pensions, would partly compensate for the increase in public expenditure over the long term. Ensuring high primary surpluses over the medium term and/or implementing reform measures that curb the projected increase in age-related expenditure would contribute to containing risks to the sustainability of public finances. Overall, the Netherlands appears to be at low risk with regard to the sustainability of public finances. |
| --- | --- |

(9)

The long-term budgetary impact of ageing in the Netherlands is higher than the EU average, influenced notably by a relatively high increase in pension expenditure as a share of GDP over the coming decades. The initial budgetary position, albeit not as strong as in 2005, contributes to easing the projected long-term budgetary impact of an ageing population, but it is not sufficient to fully cover it. The projected future rise of revenues as a share of GDP, mainly due to deferred taxation of pensions, would partly compensate for the increase in public expenditure over the long term. Ensuring high primary surpluses over the medium term and/or implementing reform measures that curb the projected increase in age-related expenditure would contribute to containing risks to the sustainability of public finances. Overall, the Netherlands appears to be at low risk with regard to the sustainability of public finances.

| (10) | The stability programme does not contain a qualitative assessment of the overall impact of the 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme, although its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, both programmes describe the recent health care reform, the modifications to the corporate tax system and planned extra outlays, for instance on infrastructure. |
| --- | --- |

(10)

The stability programme does not contain a qualitative assessment of the overall impact of the 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides no systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme, although its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, both programmes describe the recent health care reform, the modifications to the corporate tax system and planned extra outlays, for instance on infrastructure.

| (11) | The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. |
| --- | --- |

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

| (12) | 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 (2). |
| --- | --- |

(12)

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 (2).

The Council considers that the medium-term budgetary position is sound and the budgetary strategy provides an example of fiscal policies conducted in compliance with the Stability and Growth Pact. Nevertheless, an important risk is that the current high level of gas receipts may not persist but overall the risks attached to the achievement of the budgetary targets are broadly neutral.

In view of the above assessment and the good growth prospects, the Netherlands is invited to maintain a strong structural position in 2007 and beyond, thereby avoiding pro-cyclical fiscal policies in good times.

Comparison of key macroeconomic and budgetary projections

| | 2005 | 2006 | 2007 | 2008 | 2009 |
| --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Nov 2006 | 1,5 | 3 | 3 | 1 | 1 |
| COM Nov 2006 | 1,5 | 3,0 | 2,9 | 2,6 | n.a. |
| SP Dec 2005 | | 2 | 2 | 2 | n.a. |
| HICP inflation
  (%) | SP Nov 2006 | 1,5 | 1 | 1 | 1 | 1 |
| COM Nov 2006 | 1,5 | 1,6 | 1,8 | 2,3 | n.a. |
| SP Dec 2005 | 1,5 | 1,5 | 1,1 | n.a. | n.a. |
| Output gap
  (% of potential GDP) | SP Nov 2006 (3) | – 1,9 | – 0,5 | 0,6 | 0,6 | 0,3 |
| COM Nov 2006 (7) | – 2,0 | – 1,2 | – 0,4 | 0,0 | n.a. |
| SP Dec 2005 (3) | – 2,3 | – 1,5 | – 0,9 | – 0,6 | n.a. |
| General government balance
  (% of GDP) | SP Nov 2006 | – 0,3 | 0,1 | 0,2 | 0,3 | 0,9 |
| COM Nov 2006 | – 0,3 | 0,0 | 0,1 | 0,3 | n.a. |
| SP Dec 2005 | – 1,2 | – 1,5 | – 1,2 | – 1,1 | n.a. |
| Primary balance
  (% of GDP) | SP Nov 2006 | 2,1 | 2,4 | 2,4 | 2,4 | 2,9 |
| COM Nov 2006 | 2,1 | 2,3 | 2,3 | 2,3 | n.a. |
| SP Dec 2005 | 1,4 | 1,1 | 1,4 | 1,5 | n.a. |
| Cyclically-adjusted balance
  (% of GDP) | SP Nov 2006 (3) | 0,8 | 0,4 | – 0,1 | 0,0 | 0,7 |
| COM Nov 2006 | 0,9 | 0,6 | 0,4 | 0,3 | n.a. |
| SP Dec 2005 (3) | 0,0 | – 0,7 | – 0,6 | – 0,6 | n.a. |
| Structural balance (4)

  (% of GDP) | SP Nov 2006 (5) | 0,8 | 0,4 | – 0,1 | 0,0 | 0,4 |
| COM Nov 2006 (6) | 0,9 | 0,6 | 0,4 | 0,3 | n.a. |
| SP Dec 2005 | 0,0 | – 0,7 | – 0,6 | – 0,6 | n.a. |
| Government gross debt
  (% of GDP) | SP Nov 2006 | 52,7 | 50,2 | 47,9 | 46,3 | 44,2 |
| COM Nov 2006 | 52,7 | 50,5 | 47,8 | 45,4 | n.a. |
| SP Dec 2005 | 54,4 | 54,5 | 53,9 | 53,1 | n.a. |
| Source:


  Stability programme; Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations |

2005

2006

2007

2008

2009

Real GDP

(% change)

SP Nov 2006

1,5

3 Formula

3

1 Formula

1 Formula

COM Nov 2006

1,5

3,0

2,9

2,6

n.a.

SP Dec 2005

Formula

2 Formula

2 Formula

2 Formula

n.a.

HICP inflation

(%)

SP Nov 2006

1,5

1 Formula

1 Formula

1 Formula

1 Formula

COM Nov 2006

1,5

1,6

1,8

2,3

n.a.

SP Dec 2005

1,5

1,5

1,1

n.a.

n.a.

Output gap

(% of potential GDP)

SP Nov 2006 (3)

– 1,9

– 0,5

0,6

0,6

0,3

COM Nov 2006 (7)

– 2,0

– 1,2

– 0,4

0,0

n.a.

SP Dec 2005 (3)

– 2,3

– 1,5

– 0,9

– 0,6

n.a.

General government balance

(% of GDP)

SP Nov 2006

– 0,3

0,1

0,2

0,3

0,9

COM Nov 2006

– 0,3

0,0

0,1

0,3

n.a.

SP Dec 2005

– 1,2

– 1,5

– 1,2

– 1,1

n.a.

Primary balance

(% of GDP)

SP Nov 2006

2,1

2,4

2,4

2,4

2,9

COM Nov 2006

2,1

2,3

2,3

2,3

n.a.

SP Dec 2005

1,4

1,1

1,4

1,5

n.a.

Cyclically-adjusted balance

(% of GDP)

SP Nov 2006 (3)

0,8

0,4

– 0,1

0,0

0,7

COM Nov 2006

0,9

0,6

0,4

0,3

n.a.

SP Dec 2005 (3)

0,0

– 0,7

– 0,6

– 0,6

n.a.

Structural balance (4)

(% of GDP)

SP Nov 2006 (5)

0,8

0,4

– 0,1

0,0

0,4

COM Nov 2006 (6)

0,9

0,6

0,4

0,3

n.a.

SP Dec 2005

0,0

– 0,7

– 0,6

– 0,6

n.a.

Government gross debt

(% of GDP)

SP Nov 2006

52,7

50,2

47,9

46,3

44,2

COM Nov 2006

52,7

50,5

47,8

45,4

n.a.

SP Dec 2005

54,4

54,5

53,9

53,1

n.a.

Source:

Stability programme; Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

(1)  OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:

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

(2)  In particular, the functional breakdown of government expenditures for 2009 is missing.

(3)  Commission services calculations on the basis of the information in the programme.

(4)  Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures.

(5)  One-off and other temporary measures taken from the programme (0,3% of GDP in 2009; deficit-reducing).

(6)  There are no one-offs and other temporary measures in the Commission services' autumn 2006 forecast.

(7)  Based on estimated potential growth of 1,9 %, 2,1 %, 2,2 % and 2,1 % respectively in the period 2005-2008.

Source:

Stability programme; Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

| 27.3.2007 | EN | Official Journal of the European Union | C 70/24 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/24

---

COUNCIL OPINION

of 27 February 2007

on the updated stability programme of Luxembourg, 2006-2009

(2007/C 70/07)

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 27 February 2007 the Council examined the updated stability programme of Luxembourg, which covers the period 2006 to 2009. |
| --- | --- |

(1)

On 27 February 2007 the Council examined the updated stability programme of Luxembourg, which covers the period 2006 to 2009.

| (2) | The macroeconomic scenario underlying the programme envisages that real GDP growth will decelerate from 5,5 % in 2006 to 4,3 % on average over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. The programme's projections for inflation also appear realistic. |
| --- | --- |

(2)

The macroeconomic scenario underlying the programme envisages that real GDP growth will decelerate from 5,5 % in 2006 to 4,3 % on average over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. The programme's projections for inflation also appear realistic.

| (3) | For 2006, the general government deficit is estimated at 1.0 % of GDP in the Commission services' autumn 2006 forecast, against a target of 1,8 % of GDP set in the previous update of the stability programme. This is partly explained by the downward revision of the 2005 deficit outcome, from 2,3 % of GDP in the previous programme to 1,0 % according to the most recent data. The 2006 deficit outturn may also be better than estimated in the new programme (1,5 % of GDP) due to favourable cyclical conditions and buoyant tax revenues, notably in the last quarter. |
| --- | --- |

(3)

For 2006, the general government deficit is estimated at 1.0 % of GDP in the Commission services' autumn 2006 forecast, against a target of 1,8 % of GDP set in the previous update of the stability programme. This is partly explained by the downward revision of the 2005 deficit outcome, from 2,3 % of GDP in the previous programme to 1,0 % according to the most recent data. The 2006 deficit outturn may also be better than estimated in the new programme (1,5 % of GDP) due to favourable cyclical conditions and buoyant tax revenues, notably in the last quarter.

| (4) | In April 2006, following the 14 February 2006 Council opinion, the government and social partners agreed upon a reform and budget consolidation package which was subsequently implemented. In line with this ‘Tripartite agreement’, the main goal of the programme's medium-term budgetary strategy is to regain a balanced position within the programme horizon. This is to be achieved through a progressive improvement of the general government balance from an estimated deficit of 1,5 % of GDP to a small surplus in 2009 (0,1 % of GDP). The reduction in the primary balance would be parallel to the decrease in the headline deficit. The adjustment relies on a reduction in the expenditure ratio amounting to 3,8 percentage points of GDP, which would more than compensate for a 2,1 point of GDP decrease in the revenue ratio. This strategy is similar to that described in the 2005 programme, which, against the background of a broadly similar macroeconomic outlook, projected the deficit to reach its peak in 2005 rather than 2006 and a broadly balanced position to be achieved in 2008 instead of 2009. |
| --- | --- |

(4)

In April 2006, following the 14 February 2006 Council opinion, the government and social partners agreed upon a reform and budget consolidation package which was subsequently implemented. In line with this ‘Tripartite agreement’, the main goal of the programme's medium-term budgetary strategy is to regain a balanced position within the programme horizon. This is to be achieved through a progressive improvement of the general government balance from an estimated deficit of 1,5 % of GDP to a small surplus in 2009 (0,1 % of GDP). The reduction in the primary balance would be parallel to the decrease in the headline deficit. The adjustment relies on a reduction in the expenditure ratio amounting to 3,8 percentage points of GDP, which would more than compensate for a 2,1 point of GDP decrease in the revenue ratio. This strategy is similar to that described in the 2005 programme, which, against the background of a broadly similar macroeconomic outlook, projected the deficit to reach its peak in 2005 rather than 2006 and a broadly balanced position to be achieved in 2008 instead of 2009.

| (5) | The structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is planned to improve from a deficit of around 1

  % of GDP in 2006 to a surplus of about 1 % at the end of the programme period. As in the previous update of the stability programme, the medium-term objective (MTO) for the budgetary position presented in the programme is a structural deficit of 0,8 % of GDP. The programme aims to achieve the MTO by 2007, one year earlier than in the previous update. As the MTO is (slightly) more demanding than the minimum benchmark (estimated at a deficit of around 1 % of GDP), achieving it should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO lies within the range indicated for euro-area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential output growth in the long term. |
| --- | --- |

(5)

Formula

| (6) | The budgetary outcomes could be better than projected in the programme. In particular, tax projections seem rather cautious, especially for 2007. Indeed, budgetary outcomes have very often been better than projected in Luxembourg in recent years, generally because of significantly higher-than-expected revenues. However, the programme justifies the generally cautious tax projections by the fact that due to the smallness and openness of the economy, economic growth and thus tax revenues are highly volatile. |
| --- | --- |

(6)

The budgetary outcomes could be better than projected in the programme. In particular, tax projections seem rather cautious, especially for 2007. Indeed, budgetary outcomes have very often been better than projected in Luxembourg in recent years, generally because of significantly higher-than-expected revenues. However, the programme justifies the generally cautious tax projections by the fact that due to the smallness and openness of the economy, economic growth and thus tax revenues are highly volatile.

| (7) | In view of this risk assessment and assuming that expenditure targets are adhered to strictly and that no new measures having an adverse effect on the budget balance are adopted, the budgetary stance in the programme seems sufficient to ensure that the MTO is achieved by 2007, as envisaged in the programme. In addition, it seems to provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations from 2007 onwards. The pace of the adjustment towards the MTO implied by the programme is fully in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times. After the achievement of the MTO, the fiscal policy stance implied by the programme is also fully in line with the Pact. |
| --- | --- |

(7)

In view of this risk assessment and assuming that expenditure targets are adhered to strictly and that no new measures having an adverse effect on the budget balance are adopted, the budgetary stance in the programme seems sufficient to ensure that the MTO is achieved by 2007, as envisaged in the programme. In addition, it seems to provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations from 2007 onwards. The pace of the adjustment towards the MTO implied by the programme is fully in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times. After the achievement of the MTO, the fiscal policy stance implied by the programme is also fully in line with the Pact.

| (8) | Government gross debt is estimated to have reached 7,5 % of GDP in 2006, well below the 60 % of GDP Treaty reference value. The programme projects the debt ratio to rise slightly to 8,5 % of GDP by the end of the programme period. |
| --- | --- |

(8)

Government gross debt is estimated to have reached 7,5 % of GDP in 2006, well below the 60 % of GDP Treaty reference value. The programme projects the debt ratio to rise slightly to 8,5 % of GDP by the end of the programme period.

| (9) | The long-term budgetary impact of ageing in Luxembourg is among the highest in the EU, influenced notably by a very considerable increase in pension expenditure, by 7

  percentage points of GDP, and in total age-related public spending, by 8

  points, from 2004 to 2050 (compared to EU average increases of 2

  and 3

  percentage points of GDP, respectively). The current level of gross debt is very low and considerable assets have been accumulated by the social security system. However, while the current size of these assets (estimated at around 25 % of GDP) contributes significantly to public finance sustainability, it will not be sufficient to offset the impact on the debt ratio in the long term resulting from the sizeable increase in age-related expenditure. Therefore, while keeping a strong budgetary position will help to alleviate part of the cost of ageing, as recognised by the authorities, some changes to the pension scheme are necessary so as to contain the future increase in public expenditure and reduce the risks to the long-term sustainability of public finances. Overall, Luxembourg appears to be at medium risk with regard to the sustainability of its public finances. |
| --- | --- |

(9)

Formula

Formula

Formula

Formula

| (10) | The stability programme contains a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides some information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, the government's intention, confirmed by the programme, to keep public investment at a high level seems to reflect the identification as priority actions by the NRP of the increase in R&D, the encouragement of the sustainable use of resources and the improvement of the rail connections with neighbouring countries. |
| --- | --- |

(10)

The stability programme contains a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides some information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, the government's intention, confirmed by the programme, to keep public investment at a high level seems to reflect the identification as priority actions by the NRP of the increase in R&D, the encouragement of the sustainable use of resources and the improvement of the rail connections with neighbouring countries.

| (11) | The budgetary strategy outlined in the programme is partly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. In particular, no significant pension reforms have been undertaken to date. |
| --- | --- |

(11)

The budgetary strategy outlined in the programme is partly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. In particular, no significant pension reforms have been undertaken to date.

| (12) | 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 (2). In addition, it deviates on some material points from the model structure specified in the code of conduct (3). |
| --- | --- |

(12)

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 (2). In addition, it deviates on some material points from the model structure specified in the code of conduct (3).

The Council welcomes that, in a context of strong growth prospects, the programme is making rapid progress towards the MTO, which should be achieved from 2007 onwards, and envisages a further narrowing of the deficit thereafter. However, most of the expenditure-curbing measures recently decided are only temporary (i.e. until 2009).

Taking into account the above assessment and in view of the projected increase in age-related expenditure, the Council invites Luxembourg to improve the long-term sustainability of public finances by implementing structural reform measures (especially in the area of pensions).

Comparison of key macroeconomic and budgetary projections

| | | 2005 | 2006 | 2007 | 2008 | 2009 |
| --- | --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Nov 2006 | 4,0 | 5,5 | 4,0 | 5,0 | 4,0 |
| COM Nov 2006 | 4,0 | 5,5 | 4,5 | 4,2 | n.a. |
| SP Nov 2005 | 4,0 | 4,4 | 4,9 | 4,9 | n.a. |
| HICP inflation
  (%) | SP Nov 2006 | 3,8 | 2,9 | 1,4 | 2,0 | 2,0 |
| COM Nov 2006 | 3,8 | 3,2 | 2,2 | 1,8 | n.a. |
| SP Nov 2005 | 3,7 | 2,6 | 2,0 | 1,8 | n.a. |
| Output gap
  (% of potential GDP) | SP Nov 2006 (4) | – 1,6 | – 0,3 | – 0,8 | – 0,5 | – 1,6 |
| COM Nov 2006 (8) | – 2,2 | – 0,9 | – 0,7 | – 0,9 | n.a. |
| SP Nov 2005 (4) | – 1,7 | – 1,3 | – 0,7 | – 0,6 | n.a. |
| General government balance
  (% of GDP) | SP Nov 2006 | – 1,0 | – 1,5 | – 0,9 | – 0,4 | 0,1 |
| COM Nov 2006 | – 1,0 | – 1,0 | – 0,5 | – 0,3 | n.a. |
| SP Nov 2005 | – 2,3 | – 1,8 | – 1,0 | – 0,2 | n.a. |
| Primary balance
  (% of GDP) | SP Nov 2006 | – 0,8 | – 1,3 | – 0,8 | – 0,2 | 0,3 |
| COM Nov 2006 | – 0,8 | – 0,8 | – 0,3 | – 0,1 | n.a. |
| SP Nov 2005 | – 2,1 | – 1,7 | – 0,7 | 0,1 | n.a. |
| Cyclically-adjusted balance
  (% of GDP) | SP Nov 2006 (4) | – 0,2 | – 1,3 | – 0,5 | – 0,1 | 0,9 |
| COM Nov 2006 | 0,0 | – 1,1 | – 0,2 | 0,1 | n.a. |
| SP Nov 2005 (4) | – 1,5 | – 1,2 | – 0,6 | 0,1 | n.a. |
| Structural balance (5)

  (% of GDP) | SP Nov 2006 (6) | – 0,2 | – 1,3 | – 0,5 | – 0,1 | 0,9 |
| COM Nov 2006 (7) | 0,0 | – 1,1 | – 0,2 | 0,1 | n.a. |
| SP Nov 2005 | – 1,5 | – 1,2 | – 0,6 | 0,1 | n.a. |
| Government gross debt
  (% of GDP) | SP Nov 2006 | 6,1 | 7,5 | 8,2 | 8,5 | 8,5 |
| COM Nov 2006 | 6,0 | 7,4 | 7,3 | 7,1 | n.a. |
| SP Nov 2005 | 6,4 | 9,6 | 9,9 | 10,2 | n.a. |
| Source:

  Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations |

2005

2006

2007

2008

2009

Real GDP

(% change)

SP Nov 2006

4,0

5,5

4,0

5,0

4,0

COM Nov 2006

4,0

5,5

4,5

4,2

n.a.

SP Nov 2005

4,0

4,4

4,9

4,9

n.a.

HICP inflation

(%)

SP Nov 2006

3,8

2,9

1,4

2,0

2,0

COM Nov 2006

3,8

3,2

2,2

1,8

n.a.

SP Nov 2005

3,7

2,6

2,0

1,8

n.a.

Output gap

(% of potential GDP)

SP Nov 2006 (4)

– 1,6

– 0,3

– 0,8

– 0,5

– 1,6

COM Nov 2006 (8)

– 2,2

– 0,9

– 0,7

– 0,9

n.a.

SP Nov 2005 (4)

– 1,7

– 1,3

– 0,7

– 0,6

n.a.

General government balance

(% of GDP)

SP Nov 2006

– 1,0

– 1,5

– 0,9

– 0,4

0,1

COM Nov 2006

– 1,0

– 1,0

– 0,5

– 0,3

n.a.

SP Nov 2005

– 2,3

– 1,8

– 1,0

– 0,2

n.a.

Primary balance

(% of GDP)

SP Nov 2006

– 0,8

– 1,3

– 0,8

– 0,2

0,3

COM Nov 2006

– 0,8

– 0,8

– 0,3

– 0,1

n.a.

SP Nov 2005

– 2,1

– 1,7

– 0,7

0,1

n.a.

Cyclically-adjusted balance

(% of GDP)

SP Nov 2006 (4)

– 0,2

– 1,3

– 0,5

– 0,1

0,9

COM Nov 2006

0,0

– 1,1

– 0,2

0,1

n.a.

SP Nov 2005 (4)

– 1,5

– 1,2

– 0,6

0,1

n.a.

Structural balance (5)

(% of GDP)

SP Nov 2006 (6)

– 0,2

– 1,3

– 0,5

– 0,1

0,9

COM Nov 2006 (7)

0,0

– 1,1

– 0,2

0,1

n.a.

SP Nov 2005

– 1,5

– 1,2

– 0,6

0,1

n.a.

Government gross debt

(% of GDP)

SP Nov 2006

6,1

7,5

8,2

8,5

8,5

COM Nov 2006

6,0

7,4

7,3

7,1

n.a.

SP Nov 2005

6,4

9,6

9,9

10,2

n.a.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

(1)  OJ L 209, 2.8.1997, p. 1. Regulation as amended by Regulation (EC) No 1055/2005 (OJ L 174, 7.7.2005, p. 1). The documents referred to in this text can be found at the following website:

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

(2)  In particular, the data on sectoral balances are missing (except for the general government).

(3)  The section on the institutional features of public finance is missing.

(4)  Commission services calculations on the basis of the information in the programme.

(5)  Cyclically-adjusted balance (as in the previous rows) excluding one-off and other temporary measures.

(6)  There are no one-off and other temporary measures in the programme.

(7)  There are no one-off and other temporary measures in the Commission services' autumn 2006 forecast.

(8)  Based on estimated potential growth of 4,1 %, 4,1 %, 4,4 % and 4,7 % respectively in the period 2005-2008.

Source:

Stability programme (SP); Commission services' autumn 2006 economic forecasts (COM); Commission services' calculations

---

II Information

INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

| 27.3.2007 | EN | Official Journal of the European Union | C 70/27 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/27

---

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

Cases where the Commission raises no objections

(2007/C 70/08)

| Date of adoption of the decision | 8.2.2007 |
| --- | --- |
| Reference number of the aid | N 308/05 |
| Member State | United Kingdom |
| Region | — |
| Title (and/or name of the beneficiary) | Pig Health Scheme (MLC) |
| Legal basis | Agriculture Act 1967 |
| Type of measure | Scheme |
| Objective | Technical support |
| Form of aid | Grant |
| Budget | GBP 500 000 (EUR 746 046) |
| Intensity | Up to 100 % |
| Duration (period) | From the date of approval until 31 March 2009 |
| Economic sectors | Agriculture |
| Name and address of the granting authority | Meat and Livestock Commission |
| PO Box 44, Winterhill House, Snowdon Drive |
| Milton Keynes MK6 1AX |
| United Kingdom |

Date of adoption of the decision

8.2.2007

Reference number of the aid

N 308/05

Member State

United Kingdom

Region

—

Title (and/or name of the beneficiary)

Pig Health Scheme (MLC)

Legal basis

Agriculture Act 1967

Type of measure

Scheme

Objective

Technical support

Form of aid

Grant

Budget

GBP 500 000 (EUR 746 046)

Intensity

Up to 100 %

Duration (period)

From the date of approval until 31 March 2009

Economic sectors

Agriculture

Name and address of the granting authority

Meat and Livestock Commission

PO Box 44, Winterhill House, Snowdon Drive

Milton Keynes MK6 1AX

United Kingdom

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/

| Date of adoption of the decision | 14.12.2006 |
| --- | --- |
| Reference number of the aid | N 340/05 |
| Member State | Latvia |
| Region | — |
| Title (and/or name of the beneficiary) | “Atbalsts ilggadīgo stādījumu integrētai audzēšanas sistemai” |
| Legal basis | — | Ministru kabineta 2005. gada 25 janvāra noteikumi Nr. 70 “Noteikumi par valsts atbalstu lauksaimniecībai 2005. gadā un tā piešķiršanas kārtība”(Publicēts: Latvijas Vēstnesis Nr. 27; 17.02.2005.) |

Date of adoption of the decision

14.12.2006

Reference number of the aid

N 340/05

Member State

Latvia

Region

—

Title (and/or name of the beneficiary)

“Atbalsts ilggadīgo stādījumu integrētai audzēšanas sistemai”

Legal basis

—

Ministru kabineta 2005. gada 25 janvāra noteikumi Nr. 70 “Noteikumi par valsts atbalstu lauksaimniecībai 2005. gadā un tā piešķiršanas kārtība”(Publicēts: Latvijas Vēstnesis Nr. 27; 17.02.2005.)

| — | Lauksaimniecības un lauku attīstības likums (24.4.2004.) (Publicēts: Latvijas Vēstnesis Nr. 64; 23.4.2004.) |
| --- | --- |

—

Lauksaimniecības un lauku attīstības likums (24.4.2004.) (Publicēts: Latvijas Vēstnesis Nr. 64; 23.4.2004.)

Type of measure

Aid scheme

Objective

Use of environmental planning in farming practice

Form of aid

Agri-environmental aid

Aid for research and development

Budget

Annual budget: LVL 300 000

Intensity

Agri-environmental commitments: variable

Research and development aid: up to 100 %

Duration (period)

Till 2010

Economic sectors

Agricultural sector

Name and address of the granting authority

| Lauku atbalsta dienests |
| --- |
| Republikas laukums 2 |
| LV-1981 Rīga |

Lauku atbalsta dienests

Republikas laukums 2

LV-1981 Rīga

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/

| Date of adoption of the decision | 14.12.2006 |
| --- | --- |
| Reference number of the aid | N 349/05 |
| Member State | Latvia |
| Region | — |
| Title (and/or name of the beneficiary) | “Dārzeņu integrētās sistemas ievišana” |
| Legal basis | — | Ministru kabineta 2005. gada 25 janvāra noteikumi Nr. 70 “Noteikumi par valsts atbalstu lauksaimniecībai 2005. gadā un tā piešķiršanas kārtība”(Publicēts: Latvijas Vēstnesis Nr. 27; 17.02.2005.) |

Date of adoption of the decision

14.12.2006

Reference number of the aid

N 349/05

Member State

Latvia

Region

—

Title (and/or name of the beneficiary)

“Dārzeņu integrētās sistemas ievišana”

Legal basis

—

Ministru kabineta 2005. gada 25 janvāra noteikumi Nr. 70 “Noteikumi par valsts atbalstu lauksaimniecībai 2005. gadā un tā piešķiršanas kārtība”(Publicēts: Latvijas Vēstnesis Nr. 27; 17.02.2005.)

| — | Lauksaimniecības un lauku attīstības likums (24.04.2004.) (Publicēts: Latvijas Vēstnesis Nr. 64; 23.4.2004.) |
| --- | --- |

—

Lauksaimniecības un lauku attīstības likums (24.04.2004.) (Publicēts: Latvijas Vēstnesis Nr. 64; 23.4.2004.)

Type of measure

Aid scheme

Objective

Use of environmental planning in farming practice

Form of aid

Agri-environmental aid

Aid for research and development

Budget

Annual budget: LVL 302 465

Intensity

Agri-environmental commitments: variable

Research and development aid: up to 100 %

Duration (period)

Till 2010

Economic sectors

Agricultural sector

Name and address of the granting authority

| Lauku atbalsta dienests |
| --- |
| Republikas laukums 2, |
| LV-1981 Rīga |

Lauku atbalsta dienests

Republikas laukums 2,

LV-1981 Rīga

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/

| Date of adoption of the decision | 26.2.2007 |
| --- | --- |
| Reference number of the aid | N 208/06 |
| Member State | Italy |
| Region | Trento |
| Title (and/or name of the beneficiary) | Fondo di rotazione immobiliare a favore di imprese cooperative e agricole (legge provinciale 10 febbraio 2005 n. 1, articolo 26, e deliberazione della Giunta provinciale n. 2479 del 18 novembre 2005) |
| Legal basis | Legge provinciale 10 febbraio 2005 n. 1, articolo 26
  Deliberazione della Giunta provinciale n. 2479 del 18 novembre 2005 |
| Type of measure | Aid scheme |
| Objective | Other (purchase, sale and rental of property) |
| Form of aid | Grants |
| Budget | EUR 4 500 000 |
| Intensity | Measuring not constituting State aid |
| Duration (period) | Until the end of 2008 |
| Economic sectors | Agriculture |
| Name and address of the granting authority | — |
| Other information | — |

Date of adoption of the decision

26.2.2007

Reference number of the aid

N 208/06

Member State

Italy

Region

Trento

Title (and/or name of the beneficiary)

Fondo di rotazione immobiliare a favore di imprese cooperative e agricole (legge provinciale 10 febbraio 2005 n. 1, articolo 26, e deliberazione della Giunta provinciale n. 2479 del 18 novembre 2005)

Legal basis

Legge provinciale 10 febbraio 2005 n. 1, articolo 26

Deliberazione della Giunta provinciale n. 2479 del 18 novembre 2005

Type of measure

Aid scheme

Objective

Other (purchase, sale and rental of property)

Form of aid

Grants

Budget

EUR 4 500 000

Intensity

Measuring not constituting State aid

Duration (period)

Until the end of 2008

Economic sectors

Agriculture

Name and address of the granting authority

—

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/

| Date of adoption of the decision | 19.2.2007 |
| --- | --- |
| Reference number of the aid | N 406/06 |
| Member State | Spain |
| Region | Andalucía |
| Title (and/or name of the beneficiary) | Ayudas a favor de la lucha contra la plaga de la moca del olivo |
| Legal basis | Proyecto de Orden |
| Type of measure | Aid scheme |
| Objective | To control olive fly in Andalusia |
| Form of aid | Direct grant |
| Budget | EUR 1 800 000 |
| Intensity | 75 % of eligible costs |
| Duration | 2006 |
| Economic sectors | Agriculture |
| Name and address of the granting authority | Consejería de Agricultura y Pesca |
| Junta de Andalucía |
| Calle Tabladilla s/n |
| E-41013 Sevilla |

Date of adoption of the decision

19.2.2007

Reference number of the aid

N 406/06

Member State

Spain

Region

Andalucía

Title (and/or name of the beneficiary)

Ayudas a favor de la lucha contra la plaga de la moca del olivo

Legal basis

Proyecto de Orden

Type of measure

Aid scheme

Objective

To control olive fly in Andalusia

Form of aid

Direct grant

Budget

EUR 1 800 000

Intensity

75 % of eligible costs

Duration

2006

Economic sectors

Agriculture

Name and address of the granting authority

Consejería de Agricultura y Pesca

Junta de Andalucía

Calle Tabladilla s/n

E-41013 Sevilla

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/

| Date of the adoption of the decision | 19.2.2007 |
| --- | --- |
| No of the aid | N 577/06 |
| Member | The Netherlands |
| Region | — |
| Title | Catalogus Groen-Blauwe Diensten |
| Legal basis | De kaderwet inzake subsidies van het ministerie van landbouw, natuur en voedselkwaliteit inzake subsidies, de provinciewet, de gemeentewet en de waterschapswet |
| Type of the measure | Aid scheme |
| Objective | The aim of the catalogue for green and blue services is to create an accessible agricultural landscape with a high environmental and cultural value |
| Form of the aid | Payments after an outbreak of a contaminous disease |
| Budget | Around EUR 120 million per year |
| Intensity | Variable |
| Duration | The duration of support measures under the catalogue will vary. Contracts with individual farmers under these measures will last 5 to 7 years |
| Economic sectors | Agriculture |
| Name and address of the granting authority | Both central and local governments in the Netherlands |
| Other information | — |

Date of the adoption of the decision

19.2.2007

No of the aid

N 577/06

Member

The Netherlands

Region

—

Title

Catalogus Groen-Blauwe Diensten

Legal basis

De kaderwet inzake subsidies van het ministerie van landbouw, natuur en voedselkwaliteit inzake subsidies, de provinciewet, de gemeentewet en de waterschapswet

Type of the measure

Aid scheme

Objective

The aim of the catalogue for green and blue services is to create an accessible agricultural landscape with a high environmental and cultural value

Form of the aid

Payments after an outbreak of a contaminous disease

Budget

Around EUR 120 million per year

Intensity

Variable

Duration

The duration of support measures under the catalogue will vary. Contracts with individual farmers under these measures will last 5 to 7 years

Economic sectors

Agriculture

Name and address of the granting authority

Both central and local governments in the Netherlands

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/

| Date of adoption of the decision | 8.2.2007 |
| --- | --- |
| Reference number of the aid | N 583/06 |
| Member State | Italy |
| Region | Basilicata |
| Title (and/or name of the beneficiary) | Interventi compensativi relativi a mancati redditi a favore delle aziende agricole interessate da provvedimenti di abbattimenti totali conseguenti ad infezioni di tubercolosi bovina e/o brucellosi |
| Legal basis | Delibera di giunta Regione Basilicata n. 475 del 3.4.2006 |
| Type of measure | Aid scheme |
| Objective | To combat animal diseases |
| Form of aid | Direct grant |
| Budget | EUR 600 000 |
| Intensity | Up to 100 % of eligible costs |
| Duration | Until 31 December 2008 |
| Economic sectors | A00121-A00122 Agriculture (livestock farming) |
| Name and address of the granting authority | Regione Basilicata |
| Viale della Regione Basilicata, 12 |
| I-85100 Potenza |

Date of adoption of the decision

8.2.2007

Reference number of the aid

N 583/06

Member State

Italy

Region

Basilicata

Title (and/or name of the beneficiary)

Interventi compensativi relativi a mancati redditi a favore delle aziende agricole interessate da provvedimenti di abbattimenti totali conseguenti ad infezioni di tubercolosi bovina e/o brucellosi

Legal basis

Delibera di giunta Regione Basilicata n. 475 del 3.4.2006

Type of measure

Aid scheme

Objective

To combat animal diseases

Form of aid

Direct grant

Budget

EUR 600 000

Intensity

Up to 100 % of eligible costs

Duration

Until 31 December 2008

Economic sectors

A00121-A00122 Agriculture (livestock farming)

Name and address of the granting authority

Regione Basilicata

Viale della Regione Basilicata, 12

I-85100 Potenza

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/

| Date of adoption of the decision | 8.2.2007 |
| --- | --- |
| Reference number of the aid | N 801/06 |
| Member State | Italy |
| Region | Veneto |
| Title (and/or name of the beneficiary) | Interventi nelle zone agricole colpite da calamità naturali (venti impetuosi e trombe d'aria 29 giugno 2006 — province di Treviso, Verona e Vicenza) |
| Legal basis | Decreto legislativo n. 102/2004 |
| Type of measure | Aid scheme |
| Objective | To compensate for damage to agricultural production as a result of bad weather |
| Form of aid | Direct grant |
| Budget | See the approved scheme (NN 54/A/04) |
| Intensity | Up to 100 % of the cost of the damage to farm structures |
| Duration (period) | Until the final payment is made |
| Secteurs économiques | Agriculture |
| Name and address of the granting authority | Ministero delle Politiche agricole alimentari e forestali |
| Via XX Settembre, 20 |
| I-00187 Roma |

Date of adoption of the decision

8.2.2007

Reference number of the aid

N 801/06

Member State

Italy

Region

Veneto

Title (and/or name of the beneficiary)

Interventi nelle zone agricole colpite da calamità naturali (venti impetuosi e trombe d'aria 29 giugno 2006 — province di Treviso, Verona e Vicenza)

Legal basis

Decreto legislativo n. 102/2004

Type of measure

Aid scheme

Objective

To compensate for damage to agricultural production as a result of bad weather

Form of aid

Direct grant

Budget

See the approved scheme (NN 54/A/04)

Intensity

Up to 100 % of the cost of the damage to farm structures

Duration (period)

Until the final payment is made

Secteurs économiques

Agriculture

Name and address of the granting authority

Ministero delle Politiche agricole alimentari e forestali

Via XX Settembre, 20

I-00187 Roma

Other information

Measure applying the scheme approved by the Commission under State aid NN 54/A/04 (Commission letter C(2005)1622 final, dated 7 June 2005)

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/

| Date of adoption of the decision | 13.2.2007 |
| --- | --- |
| Reference number of the aid | N 842/06 |
| Member State | Lithuania |
| Region | — |
| Title (and/or name of the beneficiary) | Parama žemės ūkio veiklos subjektams, patyrusiems nuostolių žuvus ar nukentėjus žemės ūkio augalams dėl stichinių meteorologinių reiškinių 2006 m. |
| Legal basis | — | Lietuvos Respublikos Vyriausybės 2006 m. rugpjūčio 4 d. Nutarimas Nr. 783 „Dėl krašto ekstremalios situacijos žemės ūkyje dėl stichinės sausros paskelbimo“ |

Date of adoption of the decision

13.2.2007

Reference number of the aid

N 842/06

Member State

Lithuania

Region

—

Title (and/or name of the beneficiary)

Parama žemės ūkio veiklos subjektams, patyrusiems nuostolių žuvus ar nukentėjus žemės ūkio augalams dėl stichinių meteorologinių reiškinių 2006 m.

Legal basis

—

Lietuvos Respublikos Vyriausybės 2006 m. rugpjūčio 4 d. Nutarimas Nr. 783 „Dėl krašto ekstremalios situacijos žemės ūkyje dėl stichinės sausros paskelbimo“

| — | Lietuvos Respublikos žemės ūkio ministro įsakymo „Dėl paramos žemės ūkio veiklos subjektams, patyrusiems nuostolių žuvus ar nukentėjus žemės ūkio augalams dėl stichinių meteorologinių reiškinių 2006 m. teikimo taisyklių patvirtinimo “projektas |
| --- | --- |

—

Lietuvos Respublikos žemės ūkio ministro įsakymo „Dėl paramos žemės ūkio veiklos subjektams, patyrusiems nuostolių žuvus ar nukentėjus žemės ūkio augalams dėl stichinių meteorologinių reiškinių 2006 m. teikimo taisyklių patvirtinimo “projektas

Type of measure

Aid scheme

Objective

Compensation for the drought in 2006

Form of aid

Aid to compensate farmers for losses caused by adverse weather conditions

Budget

Overall budget: up to LTL 190 million

Intensity

up to 40 % of the eligible losses

Duration

one year after Commission approval

Economic sectors

Agricultural sector

Name and address of the granting authority

| Lietuvos Respublikos žemės ūkio ministerija |
| --- |
| Gedimino pr. 19 |
| LT-01103 Vilnius |

Lietuvos Respublikos žemės ūkio ministerija

Gedimino pr. 19

LT-01103 Vilnius

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/

| Date of adoption of the decision | 19.2.2007 |
| --- | --- |
| Reference number of the aid | N 844/06 |
| Member State | Italy |
| Region | Sicily |
| Title (and/or name of the beneficiary) | Interventi nelle zone agricole colpite da calamità naturali (eccessi termici dal 19 al 30 giugno 2006 — provincia di Catania, Sicilia) |
| Legal basis | Decreto legislativo n. 102/2004 |
| Type of measure | Aid scheme |
| Objective | Compensation for damage to agricultural production as a result of bad weather |
| Form of aid | Direct grant |
| Budget | See the approved scheme (NN 54/A/04) |
| Intensity | Up to 80 % of the damage to agricultural production |
| Duration (period) | Until the final payment is made |
| Economic sectors | Agriculture |
| Name and address of the granting authority | Ministero delle Politiche agricole alimentari e forestali |
| Via XX Settembre, 20 |
| I-00187 Roma |

Date of adoption of the decision

19.2.2007

Reference number of the aid

N 844/06

Member State

Italy

Region

Sicily

Title (and/or name of the beneficiary)

Interventi nelle zone agricole colpite da calamità naturali (eccessi termici dal 19 al 30 giugno 2006 — provincia di Catania, Sicilia)

Legal basis

Decreto legislativo n. 102/2004

Type of measure

Aid scheme

Objective

Compensation for damage to agricultural production as a result of bad weather

Form of aid

Direct grant

Budget

See the approved scheme (NN 54/A/04)

Intensity

Up to 80 % of the damage to agricultural production

Duration (period)

Until the final payment is made

Economic sectors

Agriculture

Name and address of the granting authority

Ministero delle Politiche agricole alimentari e forestali

Via XX Settembre, 20

I-00187 Roma

Other information

Measure applying the scheme approved by the Commission under State aid NN 54/A/04 (Commission letter C(2005) 1622 final, dated 7 June 2005)

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/

| Date of adoption of the decision | 2.2.2007 |
| --- | --- |
| Reference number of the aid | N 846/06 |
| Member State | Italy |
| Region | Piemonte |
| Title (and/or name of the beneficiary) | Interventi nelle zone agricole danneggiate (siccità dal 1o gennaio 2006 al 25 settembre 2006 nelle province di Alessandria, Asti, Biella, Cuneo, Novara, Torino e Vercelli) |
| Legal basis | Decreto legislativo n. 102/2004 |
| Type of measure | Aid scheme |
| Objective | To compensate for damage to farm structures as a result of bad weather |
| Form of aid | Direct grant |
| Budget | See the approved scheme (NN 54/A/04) |
| Intensity | Up to 80 % |
| Duration (period) | Until the final payment is made |
| Economic sectors | Agriculture |
| Name and address of the granting authority | Ministero delle Politiche agricole alimentari e forestali |
| Via XX settembre, 20 |
| I-00187 Roma |

Date of adoption of the decision

2.2.2007

Reference number of the aid

N 846/06

Member State

Italy

Region

Piemonte

Title (and/or name of the beneficiary)

Interventi nelle zone agricole danneggiate (siccità dal 1o gennaio 2006 al 25 settembre 2006 nelle province di Alessandria, Asti, Biella, Cuneo, Novara, Torino e Vercelli)

Legal basis

Decreto legislativo n. 102/2004

Type of measure

Aid scheme

Objective

To compensate for damage to farm structures as a result of bad weather

Form of aid

Direct grant

Budget

See the approved scheme (NN 54/A/04)

Intensity

Up to 80 %

Duration (period)

Until the final payment is made

Economic sectors

Agriculture

Name and address of the granting authority

Ministero delle Politiche agricole alimentari e forestali

Via XX settembre, 20

I-00187 Roma

Other information

Measure applying the scheme approved by the Commission under State aid NN 54/A/04 (Commission letter C(2005) 1622 final, dated 7 June 2005)

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/

---

IV Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

| 27.3.2007 | EN | Official Journal of the European Union | C 70/35 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/35

---

Euro exchange rates (1)

26 March 2007

(2007/C 70/09)

1 euro=

| | Currency | Exchange rate |
| --- | --- | --- |
| USD | US dollar | 1,3265 |
| JPY | Japanese yen | 157,05 |
| DKK | Danish krone | 7,4497 |
| GBP | Pound sterling | 0,67635 |
| SEK | Swedish krona | 9,3083 |
| CHF | Swiss franc | 1,6208 |
| ISK | Iceland króna | 88,21 |
| NOK | Norwegian krone | 8,1270 |
| BGN | Bulgarian lev | 1,9558 |
| CYP | Cyprus pound | 0,5805 |
| CZK | Czech koruna | 27,935 |
| EEK | Estonian kroon | 15,6466 |
| HUF | Hungarian forint | 246,83 |
| LTL | Lithuanian litas | 3,4528 |
| LVL | Latvian lats | 0,7096 |
| MTL | Maltese lira | 0,4293 |
| PLN | Polish zloty | 3,8701 |
| RON | Romanian leu | 3,3604 |
| SKK | Slovak koruna | 33,628 |
| TRY | Turkish lira | 1,8354 |
| AUD | Australian dollar | 1,6456 |
| CAD | Canadian dollar | 1,5416 |
| HKD | Hong Kong dollar | 10,3649 |
| NZD | New Zealand dollar | 1,8588 |
| SGD | Singapore dollar | 2,0143 |
| KRW | South Korean won | 1 244,99 |
| ZAR | South African rand | 9,5704 |
| CNY | Chinese yuan renminbi | 10,2647 |
| HRK | Croatian kuna | 7,3763 |
| IDR | Indonesian rupiah | 12 075,79 |
| MYR | Malaysian ringgit | 4,5797 |
| PHP | Philippine peso | 63,771 |
| RUB | Russian rouble | 34,5940 |
| THB | Thai baht | 43,550 |

Currency

Exchange rate

USD

US dollar

1,3265

JPY

Japanese yen

157,05

DKK

Danish krone

7,4497

GBP

Pound sterling

0,67635

SEK

Swedish krona

9,3083

CHF

Swiss franc

1,6208

ISK

Iceland króna

88,21

NOK

Norwegian krone

8,1270

BGN

Bulgarian lev

1,9558

CYP

Cyprus pound

0,5805

CZK

Czech koruna

27,935

EEK

Estonian kroon

15,6466

HUF

Hungarian forint

246,83

LTL

Lithuanian litas

3,4528

LVL

Latvian lats

0,7096

MTL

Maltese lira

0,4293

PLN

Polish zloty

3,8701

RON

Romanian leu

3,3604

SKK

Slovak koruna

33,628

TRY

Turkish lira

1,8354

AUD

Australian dollar

1,6456

CAD

Canadian dollar

1,5416

HKD

Hong Kong dollar

10,3649

NZD

New Zealand dollar

1,8588

SGD

Singapore dollar

2,0143

KRW

South Korean won

1 244,99

ZAR

South African rand

9,5704

CNY

Chinese yuan renminbi

10,2647

HRK

Croatian kuna

7,3763

IDR

Indonesian rupiah

12 075,79

MYR

Malaysian ringgit

4,5797

PHP

Philippine peso

63,771

RUB

Russian rouble

34,5940

THB

Thai baht

43,550

---

(1)

Source: reference exchange rate published by the ECB.

---

NOTICES FROM MEMBER STATES

| 27.3.2007 | EN | Official Journal of the European Union | C 70/36 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/36

---

Slovak national procedure for the allocation of limited air traffic rights

(2007/C 70/10)

In accordance with Article 6 of Regulation (EC) 847/2004 of the European Parliament and the Council on the negotiation and implementation of air service agreements between Member States and third countries, the European Commission publishes the following national procedure for the distribution among eligible Community carriers of air traffic rights where they are limited under air service agreements with third countries.

‘Ministry of Transport, Posts and Telecommunications of the Slovak Republic

Guideline No 2/2007

of 22 January 2007

on granting limited traffic rights for the provision of air transport services by Community carriers

In accordance with Article 6 of Regulation (EC) No 847/2004 of the European Parliament and of the Council of 29 April 2004 on the negotiation and implementation of air service agreements between Member States and third countries (1), the Ministry of Transport, Posts and Telecommunications of the Slovak Republic (hereinafter referred to as “the Ministry”) issues this Guideline:

Article 1

General Provisions

(1)   This Guideline stipulates the procedure for granting traffic rights for the provision of air transport services by Community air carriers (hereinafter referred to as “Community carriers”) in cases where access to traffic rights is limited by an international agreement.

(2)   This Guideline lays down the principles for granting traffic rights to Community carriers for the operation of air transport services on routes where such traffic rights are limited by international air services agreements between the Slovak Republic and third countries.

Article 2

Traffic Rights and Air Carriers' Need to Use Them

(1)   Information on traffic rights and their utilisation on routes pursuant to international agreements between the Slovak Republic and States that are not European Union Member States (hereinafter referred to as “third States”) shall be available at the Ministry and on the www.telecom.gov.sk website (hereinafter referred to as “websites”).

(2)   The Ministry shall also publish on the websites information on prepared negotiations concerning traffic rights in civil aviation between the Slovak Republic and third States.

(3)   A Community carrier interested in providing air transport services on a route with limited traffic rights, or on a route between the Slovak Republic and a third State with which the Slovak Republic has not concluded an air services agreement, may inform the Ministry about its plans and requirements. The Ministry shall take this information into account when preparing for the negotiations on the air services agreement with the third State.

Article 3

Application for Granting of Traffic Rights

(1)   When a Community carrier expresses interest in unused capacity on a route with limited traffic rights, the Ministry shall post on the websites a notice inviting applications for the granting of traffic rights to provide air transport services on such route. The Ministry shall as a rule send the notice electronically to all Community carriers operating air transport services on routes between the Slovak Republic and the related third State with limited traffic rights, or to the Community carrier that applied for information about the unused traffic rights. The notice shall specify the deadline for submitting the application for the granting of traffic rights.

(2)   The application for the granting of traffic rights shall contain the following in particular:

| a) | at all events a copy of the valid air operator certificate (hereinafter referred to as “AOC”), and of the commercial licence if the licensing State issues one; |
| --- | --- |

a)

at all events a copy of the valid air operator certificate (hereinafter referred to as “AOC”), and of the commercial licence if the licensing State issues one;

| b) | a description of the air transport services the Community carrier plans to operate on the route (weekly frequencies, aircraft to be used for the services, direct point-to-point service or indirect service, any planned intermediate points or points beyond, nature of service — seasonal or year-round); |
| --- | --- |

b)

a description of the air transport services the Community carrier plans to operate on the route (weekly frequencies, aircraft to be used for the services, direct point-to-point service or indirect service, any planned intermediate points or points beyond, nature of service — seasonal or year-round);

| c) | the date of envisaged commencement of the planned services and, where appropriate, the duration of their operation; |
| --- | --- |

c)

the date of envisaged commencement of the planned services and, where appropriate, the duration of their operation;

| d) | the type of services (passenger transport, cargo transport, a combination thereof, or other); |
| --- | --- |

d)

the type of services (passenger transport, cargo transport, a combination thereof, or other);

| e) | customer access to the services and customer support (air-ticket sales network, electronic ticketing, credit card ticketing, services provided with internet support, etc.); |
| --- | --- |

e)

customer access to the services and customer support (air-ticket sales network, electronic ticketing, credit card ticketing, services provided with internet support, etc.);

| f) | all connecting traffic; |
| --- | --- |

f)

all connecting traffic;

| g) | tariff policy for on-route services; |
| --- | --- |

g)

tariff policy for on-route services;

| h) | if the Community carrier comes from a European Union Member State other than the Slovak Republic, the application shall contain information on the form of establishment of the said company or branch thereof on the territory of the Slovak Republic and information on the effective and real operation of air transport activity through a stable unit on that territory, in accordance with the specific rules (2)). |
| --- | --- |

h)

if the Community carrier comes from a European Union Member State other than the Slovak Republic, the application shall contain information on the form of establishment of the said company or branch thereof on the territory of the Slovak Republic and information on the effective and real operation of air transport activity through a stable unit on that territory, in accordance with the specific rules (2)).

(3)   The application shall be submitted to the Ministry in writing in Slovak or English by the deadline specified according to (1) above.

(4)   If a Community carrier expresses interest in capacity on a route with limited traffic rights that has already been allocated, but the rights go unused during two consecutive scheduling periods (IATA flight periods), the Ministry shall publish a notice on the websites inviting applications for the granting of traffic rights to provide air transport services on the said route. The Ministry shall electronically invite the Community carrier that expressed interest in the unused limited traffic rights to submit, along with the application pursuant to (2), a justification and a detailed description concerning how it intends to effectively use the traffic rights concerned. The Ministry shall specify in such invitation the deadline for submitting the application for the granting of traffic rights.

Article 4

Granting of Traffic Rights

(1)   The Ministry shall assess in detail the applications for the granting of traffic rights, and in the decision process:

| I. | shall in particular take into account:






  a) | the completeness of the application pursuant to Article 3(2); |
| --- | --- | --- |

I.

shall in particular take into account:

a)

the completeness of the application pursuant to Article 3(2);

| b) | the need to introduce more transport services for passengers and/or cargo; |
| --- | --- |

b)

the need to introduce more transport services for passengers and/or cargo;

| c) | the need to inject competition into the market; |
| --- | --- |

c)

the need to inject competition into the market;

| d) | satisfaction of all essential categories of public demand for services; |
| --- | --- |

d)

satisfaction of all essential categories of public demand for services;

| e) | the interest of regions located away from main European Union airports in the allocation of traffic rights to/from these regions; |
| --- | --- |

e)

the interest of regions located away from main European Union airports in the allocation of traffic rights to/from these regions;

| f) | the provisions of agreements on air transport services between the Slovak Republic and third States and arrangements stemming from a memorandum or record of negotiations between the civil aviation authorities of the Slovak Republic and the third State involved; |
| --- | --- |

f)

the provisions of agreements on air transport services between the Slovak Republic and third States and arrangements stemming from a memorandum or record of negotiations between the civil aviation authorities of the Slovak Republic and the third State involved;

| g) | the potential impact of granting traffic rights to the Community carrier on the third State carrier and on the potential development of the air transport market on the route concerned; |
| --- | --- |

g)

the potential impact of granting traffic rights to the Community carrier on the third State carrier and on the potential development of the air transport market on the route concerned;

| h) | the air transport policy of the Slovak Republic and the potential effect of the new services on air transport development; |
| --- | --- |

h)

the air transport policy of the Slovak Republic and the potential effect of the new services on air transport development;

| i) | the need to support air transit services crossing through the territory of the Slovak Republic; |
| --- | --- |

i)

the need to support air transit services crossing through the territory of the Slovak Republic;

| j) | the hitherto utilisation of traffic rights by a Community carrier designated by the Slovak Republic and/or a carrier of the respective third State (flight schedule, frequencies, aircraft used, pricing policy, passenger and/or cargo transport statistics, utilisation of points behind, intermediate points and points beyond, how the examined transport services connect to other networks, transit traffic volumes and the benefits for airports of the Slovak Republic, etc.); |
| --- | --- |

j)

the hitherto utilisation of traffic rights by a Community carrier designated by the Slovak Republic and/or a carrier of the respective third State (flight schedule, frequencies, aircraft used, pricing policy, passenger and/or cargo transport statistics, utilisation of points behind, intermediate points and points beyond, how the examined transport services connect to other networks, transit traffic volumes and the benefits for airports of the Slovak Republic, etc.);

| II. | and adhere to the following rules:






  a) | be guided by the principle of balanced development of air transport services on the part of Community carriers; |
| --- | --- | --- |

II.

and adhere to the following rules:

a)

be guided by the principle of balanced development of air transport services on the part of Community carriers;

| b) | at all events verify the validity of the AOC, and of the commercial licence if the licensing State issues one; |
| --- | --- |

b)

at all events verify the validity of the AOC, and of the commercial licence if the licensing State issues one;

| c) | examine the interlinking of the use of historical traffic rights (grandfather traffic rights) by a Slovak carrier or Community carrier, and the preferential application thereof; |
| --- | --- |

c)

examine the interlinking of the use of historical traffic rights (grandfather traffic rights) by a Slovak carrier or Community carrier, and the preferential application thereof;

| d) | evaluate the financial analyses of the different alternatives for the services planned to be provided, also from the view of passengers and cargo (analyses shall describe among other things the situation on the market and the competitiveness situation on the route); |
| --- | --- |

d)

evaluate the financial analyses of the different alternatives for the services planned to be provided, also from the view of passengers and cargo (analyses shall describe among other things the situation on the market and the competitiveness situation on the route);

| e) | assess, with regard to maintenance of air transport safety standards, the actual arrangements and the level involved; |
| --- | --- |

e)

assess, with regard to maintenance of air transport safety standards, the actual arrangements and the level involved;

| f) | consider the negative influence that creating or maintaining a dominant role for the applicant Community carrier may have on the air transport market in relation to the Slovak Republic. |
| --- | --- |

f)

consider the negative influence that creating or maintaining a dominant role for the applicant Community carrier may have on the air transport market in relation to the Slovak Republic.

(2)   The Ministry may allow applicants to present their applications orally, in which case all applicants shall be heard.

(3)   The Ministry shall issue in writing to the air carrier concerned its decision to grant the traffic rights, and shall publish this information on the websites.

(4)   The Ministry shall implement in a transparent manner the process related to monitoring of traffic rights in air transport between the Slovak Republic and third States, notification of current possible routes on the websites, examination of applications from air carriers, the associated decision-taking and the granting of limited traffic rights. Due to the fact that they are restricted, the granting of limited traffic rights cannot be claimed as a right and depends on the air transport policy of the Slovak Republic, taking into account the interests of Community carriers.

(5)   The granted traffic rights shall remain in force until a new notice is issued under Article 3(1) or (4), or until the date determined by the Ministry, if such date is specified in the document granting traffic rights. However, the traffic rights can be terminated by reassessment under Article 5 and revocation or withdrawal under Article 6.

Article 5

Reassessment of Granted Traffic Rights

(1)   The Ministry may reconsider its decision to grant traffic rights. The decision on granting traffic rights must be reassessed if a submission is received from a Community carrier operating air transport to Slovakia, from Slovakia and/or through Slovakia.

(2)   The Community carrier to whom traffic rights were granted by the decision shall be informed of each reassessment of the affected decision on granting traffic rights. A notice shall be posted on the websites stating that the granted traffic rights on a particular route or routes are being reassessed. The notice shall specify the deadline by which Community carriers must submit applications for the granting of traffic rights.

Article 6

Revocation and Withdrawal of Traffic Rights

(1)   If the operation of air transport services for which traffic rights were granted has not commenced before the end of the flying scheduling period following the period in which the decision to grant the traffic rights was issued, or following the period in which the Community carrier was designated to the third State involved, the later of these dates shall be decisive, and if, before the expiration of that period, the Community carrier has not sufficiently demonstrated exceptional circumstances preventing it from operating the services, the Ministry shall revoke the decision on granting the traffic rights.

(2)   The Ministry shall revoke the decision on granting the traffic rights if the relevant Community carrier informs the Ministry in writing that it does not plan to use them any further, or if the competent Member State of the European Union did not issue, withdrew or did not prolong the Community carrier's AOC, or licence if the licensing Member State issues one.

(3)   The Ministry shall withdraw the traffic rights granted to the Community carrier fully, or for a certain period, or for certain routes, if the Community carrier:

| a) | does not operate the air services in accordance with the conditions set out in the document granting the traffic rights; |
| --- | --- |

a)

does not operate the air services in accordance with the conditions set out in the document granting the traffic rights;

| b) | fails to comply with the provisions of the relevant air services agreement under which the traffic rights were granted to it, or infringes other international commitments; |
| --- | --- |

b)

fails to comply with the provisions of the relevant air services agreement under which the traffic rights were granted to it, or infringes other international commitments;

| c) | does not observe the conditions governing the operation of the air transport services and the rules that generally apply to such services; |
| --- | --- |

c)

does not observe the conditions governing the operation of the air transport services and the rules that generally apply to such services;

| d) | has ceased to fulfil the conditions governing establishment of a Community carrier on the territory of the Slovak Republic; |
| --- | --- |

d)

has ceased to fulfil the conditions governing establishment of a Community carrier on the territory of the Slovak Republic;

| e) | has ceased to fulfil the conditions under which it was issued the AOC, or licence. |
| --- | --- |

e)

has ceased to fulfil the conditions under which it was issued the AOC, or licence.

Article 7

Transfer of Rights

The traffic rights granted by the Slovak Republic to a Community carrier are neither transferable nor tradable.

Article 8

Entry into Force

This Guideline shall enter into force on 1 March 2007.

Ľubomír VÁŽNY

Minister’

---

(1)  OJ L 157, 30.4.2004, p. 7.

1

(2)  Regulation (EC) No 847/2004

2

---

V Announcements

ADMINISTRATIVE PROCEDURES

Commission

| 27.3.2007 | EN | Official Journal of the European Union | C 70/40 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/40

---

CALL FOR PROPOSALS — EACEA/03/07

‘Youth in the world’: cooperation with countries other than the neighbouring countries of the European Union

Youth in action programme

(2007/C 70/11)

1.   Objectives and description

This call for proposals seeks to support projects promoting cooperation in the youth sector between Programme Countries and partner countries other than the European Union's neighbouring countries. The aim is:

| — | to promote the exchange of experience and good practice in the field of youth and non-formal education, |
| --- | --- |

—

to promote the exchange of experience and good practice in the field of youth and non-formal education,

| — | to contribute to the development of youth policies, youth work and the voluntary sector, as well as to capacity-building and leadership development for youth organisations/structures, |
| --- | --- |

—

to contribute to the development of youth policies, youth work and the voluntary sector, as well as to capacity-building and leadership development for youth organisations/structures,

| — | to develop sustainable partnerships and networks between youth organisations. |
| --- | --- |

—

to develop sustainable partnerships and networks between youth organisations.

Projects must deal with one of the following themes:

| 1. | Strengthening of civil society, citizenship and democracy |
| --- | --- |

1.

Strengthening of civil society, citizenship and democracy

| 2. | Fight against racism and xenophobia |
| --- | --- |

2.

Fight against racism and xenophobia

| 3. | Inter-ethnic and inter-religious dialogue |
| --- | --- |

3.

Inter-ethnic and inter-religious dialogue

| 4. | Post-conflict resolution and reconstruction |
| --- | --- |

4.

Post-conflict resolution and reconstruction

| 5. | The active role of women in society |
| --- | --- |

5.

The active role of women in society

| 6. | Minority rights. |
| --- | --- |

6.

Minority rights.

The cooperation is addressed to persons working in the youth sector, youth workers and youth leaders, young people themselves and other actors involved in youth organisations/structures interested in running projects promoting cooperation in this field.

This call for proposals concerns Action 3.2 of the ‘Youth in Action ’programme. The implementation of the call will depend on the Commission's adoption of the annual work programme relating to the ‘Youth in Action ’programme and the Agency's delegation act. The call is therefore not binding on the Agency, and may be amended in line with these two points.

2.   Eligible applicants

Proposals must be submitted by non-profit-making organisations, non-governmental organisations or by local, regional and national public bodies. Only applicants legally established in one of the Programme Countries are eligible to apply.

The Programme Countries are:

| — | the Member States of the European Union (1); |
| --- | --- |

—

the Member States of the European Union (1);

| — | the countries of the European Free Trade Association (EFTA) which are parties to the agreement on the European Economic Area (EEA): Iceland, Liechtenstein and Norway (2); |
| --- | --- |

—

the countries of the European Free Trade Association (EFTA) which are parties to the agreement on the European Economic Area (EEA): Iceland, Liechtenstein and Norway (2);

| — | the candidate countries for which a pre-accession strategy has been established, in accordance with the general principles and general terms and conditions laid down in the framework agreements concluded with these countries with a view to their participation in EU programmes: Turkey. |
| --- | --- |

—

the candidate countries for which a pre-accession strategy has been established, in accordance with the general principles and general terms and conditions laid down in the framework agreements concluded with these countries with a view to their participation in EU programmes: Turkey.

Projects must involve partners from at least four different countries (including the applicant organisation), including at least two Programme Countries, of which at least one must be an EU Member State, and two Partner Countries.

3.   Budget and duration of projects

The total budget allocated to co-financing projects under this call for proposals is estimated at approximately EUR 2 285 000.

Financial assistance may not be granted for more than 80 % of a project's total eligible expenses. The maximum grant may not exceed EUR 100 000 per project.

Projects must start between 15 December 2007 and 15 February 2008. They will have a minimum duration of 6 months and a maximum duration of 12 months.

4.   Deadline for submitting applications

Applications must be sent to the Education, Audiovisual and Culture Executive Agency (EACEA) no later than 31 May 2007 (as evidenced by the postmark).

5.   additional information

The full version of this call for proposals and the application forms are available at the following web address:

http://eacea.ec.europa.eu/static/en/youth/calls2007/action32/index.htm

Applications must comply with the requirements set out in the full version of this call for proposals and be submitted using the form provided.

---

(1)  Individuals from an Overseas Country and Territory (OCT), and where applicable the relevant public and/or private bodies and institutions in an OCT, shall be eligible for the Youth in Action Programme, subject to the rules of the Programme and the arrangements applicable to the Member State with which they are connected. The concerned OCTs are listed in Annex 1A of Council decision of 27 November 2001 on the association of the overseas countries and territories with the European Community (2001/822/EC), (OJ L 314, 30.11.2001, p. 1).

(2)  Subject to the entry into force of the Decision of the EEA Joint Committee.

---

| 27.3.2007 | EN | Official Journal of the European Union | C 70/42 |
| --- | --- | --- | --- |

27.3.2007

EN

Official Journal of the European Union

C 70/42

---

CALL FOR PROPOSALS — EACEA/02/07

Call for proposals for projects promoting innovation and quality in the youth sector

youth in action Programme

(2007/C 70/12)

1.   Objectives and Description

This call for proposals concerns Action 4.4 of the Youth in Action programme. The intention is to support projects that seek to adopt, implement and encourage innovative and good quality approaches in the fields of non-formal education for young people and youth work.

Such innovative approaches may refer to

| — | the content and objectives, bearing in mind developments in the framework for European cooperation in the field of youth and the priorities of the Youth in Action programme; and/or, |
| --- | --- |

—

the content and objectives, bearing in mind developments in the framework for European cooperation in the field of youth and the priorities of the Youth in Action programme; and/or,

| — | the applied methodology, based on novel approaches in the field of non-formal education and in the youth sector. |
| --- | --- |

—

the applied methodology, based on novel approaches in the field of non-formal education and in the youth sector.

The projects will seek to support the integration of young people with fewer opportunities living in suburban areas in Europe, in line with the programme's general priorities which are intended to encourage participation by young people, cultural diversity, European citizenship, social inclusion and 2007's special priority, promoting equal opportunities (2007, European Year of Equal Opportunities for All).

The implementation of the call for proposals will depend on the Commission's adoption of the annual work programme relating to the ‘Youth in Action ’programme and the Agency's delegation act. The call for proposals is therefore not binding on the Agency, and may be amended in line with these two points.

2.   Eligible applicants

Proposals should be submitted by non-profit-making organisations or associations or by local, regional or national bodies. Only applicants with a legal personality who are established in one of the programme countries are eligible to apply. This condition applies equally to partner organisations.

The programme countries are:

| — | Member States of the European Union (1); |
| --- | --- |

—

Member States of the European Union (1);

| — | Those countries of the European Free Trade Association (EFTA) which are parties to the agreement on the European Economic Area (EEA): Iceland, Liechtenstein and Norway (2); |
| --- | --- |

—

Those countries of the European Free Trade Association (EFTA) which are parties to the agreement on the European Economic Area (EEA): Iceland, Liechtenstein and Norway (2);

| — | Candidate countries for which a pre-accession strategy has been established, in accordance with the general principles and general terms and conditions laid down in the framework agreements concluded with these countries with a view to their participation in EU programmes (Turkey). |
| --- | --- |

—

Candidate countries for which a pre-accession strategy has been established, in accordance with the general principles and general terms and conditions laid down in the framework agreements concluded with these countries with a view to their participation in EU programmes (Turkey).

Projects must include partner organisations from at least 4 different countries (this includes the applicant) at least one of which must have their statutory head office in one of the EU Member States.

Natural persons are not eligible for grants under this call for proposals.

3.   Budget and duration of projects

The total budget allocated to co-financing projects under this call for proposals is estimated to be approximately EUR 600 000.

Financial assistance may not be granted for more than 65 % of a project's total eligible expenses. The maximum amount a project may be awarded per working year (12 months) is EUR 100 000. The total maximum grant may not exceed EUR 200 000.

Work must start between 1 December 2007 and 31 January 2008. Projects must run for at least 12 months but no more than 24 months.

4.   Deadline for submitting applications

Applications must be sent to the Education, Audiovisual and Culture Executive Agency (EACEA) by 30 June 2007 at the latest (as evidenced by the postmark).

5.   Additional information

The full version of this call for proposals, together with the application forms, are available at the following web address:

http://eacea.ec.europa.eu/static/en/youth/calls2007/action44/index.htm

Applications must comply with the requirements set out in the full version of this call for proposals and be submitted using the form provided.

---

(1)  Individuals from an Overseas Country and Territory (OCT), and where applicable the relevant public and/or private bodies and institutions in an OCT, shall be eligible for the Youth in Action Programme, subject to the rules of the Programme and the arrangements applicable to the Member State with which they are connected. The concerned OCTs are listed in Annex 1A of Council decision of 27 November 2001 on the association of the overseas countries and territories with the European Community (2001/822/EC), (OJ L 314, 30.11.2001, p. 1).

(2)  Subject to the decision of the EEA joint committee coming into force

---