# Official Journal C 70/2009

| | ISSN 1725-2423 |
| --- | --- |
| Official Journal
  of the European Union | C 70 |
| | |
| English edition | Information and Notices | Volume 5224 March 2009 |

ISSN 1725-2423

Official Journal

of the European Union

C 70

English edition

Information and Notices

Volume 5224 March 2009

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| Notice No | Contents | page |
| --- | --- | --- |
| | I   Resolutions, recommendations and opinions |
| | OPINIONS |
| | Council |
| 2009/C 070/01 | Council opinion of 10 March 2009 on the updated stability programme of Italy, 2008-2011 | 1 |
| 2009/C 070/02 | Council opinion of 10 March 2009 on the updated convergence programme of Lithuania, 2008-2011 | 8 |
| 2009/C 070/03 | Council opinion of 10 March 2009 on the updated stability programme of Luxembourg, 2008-2010 | 13 |

Notice No

Contents

page

I   Resolutions, recommendations and opinions

OPINIONS

Council

2009/C 070/01

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

1

2009/C 070/02

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

8

2009/C 070/03

Council opinion of 10 March 2009 on the updated stability programme of Luxembourg, 2008-2010

13

| | II   Information |
| --- | --- |
| | INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES |
| | Commission |
| 2009/C 070/04 | Non-opposition to a notified concentration (Case COMP/M.5427 — Dexia Credit Local/Dexia Kommunalkredit Bank) (
  1
  ) | 19 |
| 2009/C 070/05 | Authorisation for State aid pursuant to Articles 87 and 88 of the EC Treaty — Cases where the Commission raises no objections | 20 |

II   Information

INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

2009/C 070/04

Non-opposition to a notified concentration (Case COMP/M.5427 — Dexia Credit Local/Dexia Kommunalkredit Bank) (
  1
  )

1

19

2009/C 070/05

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

20

| | IV   Notices |
| --- | --- |
| | NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES |
| | Council |
| 2009/C 070/06 | List of appointments made by the Council — January and February 2009 (social field) | 22 |
| | Commission |
| 2009/C 070/07 | Euro exchange rates | 24 |
| | NOTICES FROM MEMBER STATES |
| 2009/C 070/08 | Information communicated by Member States regarding State aid granted under Commission Regulation (EC) No 1628/2006 on the application of Articles 87 and 88 of the EC Treaty to national regional investment aid (
  1
  ) | 25 |

IV   Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Council

2009/C 070/06

List of appointments made by the Council — January and February 2009 (social field)

22

Commission

2009/C 070/07

Euro exchange rates

24

NOTICES FROM MEMBER STATES

2009/C 070/08

Information communicated by Member States regarding State aid granted under Commission Regulation (EC) No 1628/2006 on the application of Articles 87 and 88 of the EC Treaty to national regional investment aid (
  1
  )

1

25

| | V   Announcements |
| --- | --- |
| | OTHER ACTS |
| | Commission |
| 2009/C 070/09 | Publication of an application pursuant to Article 6(2) of Council Regulation (EC) No 510/2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs | 27 |

V   Announcements

OTHER ACTS

Commission

2009/C 070/09

Publication of an application pursuant to Article 6(2) of Council Regulation (EC) No 510/2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs

27

| | Corrigenda |
| --- | --- |
| 2009/C 070/10 | Corrigendum to list of natural mineral waters recognised by Member States (OJ C 54, 7.3.2009) | 32 |

Corrigenda

2009/C 070/10

Corrigendum to list of natural mineral waters recognised by Member States (OJ C 54, 7.3.2009)

(OJ C 54, 7.3.2009)

32

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

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(1)   Text with EEA relevance

1

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

EN

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I Resolutions, recommendations and opinions

OPINIONS

Council

| 24.3.2009 | EN | Official Journal of the European Union | C 70/1 |
| --- | --- | --- | --- |

24.3.2009

EN

Official Journal of the European Union

C 70/1

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COUNCIL OPINION

of 10 March 2009

on the updated stability programme of Italy, 2008-2011

(2009/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 10 March 2009, the Council examined the updated stability programme of Italy, which covers the period 2008 to 2011. |
| --- | --- |

(1)

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

| (2) | Adding to the long-standing structural weaknesses that have prevented satisfactory productivity growth for several years, the global downturn is strongly impacting on the Italian economy, even though the low indebtedness of the Italian private sector and a relatively solid financial system have so far provided some shelter from the direct impact of the financial crisis. A marked slowdown of real GDP growth in Italy was already under way in mid-2007, well before the deepening of the financial market crisis. It turned into recession in the second half of 2008, driven by faltering domestic demand and declining exports. Restoring business and consumer confidence, ensuring access to credit, in particular for SMEs, facilitating adjustment in the labour market to deal with rising unemployment and improving the conditions for productivity growth and enhanced cost competitiveness are key near-term challenges. In light of the very high government debt and the associated interest burden, the Italian government's response to these challenges must be carefully balanced with the need to avoid a substantial deterioration of public finances. The planned fiscal stance in 2009 is broadly neutral. Within this context, the government adopted a recovery package in November 2008 in line with the European Economic Recovery Plan (EERP), aiming at supporting low-income households and firms, while accelerating public investment. Further measures were adopted in February 2009 to support demand for energy-efficient durable goods. Still, the economic downturn is weighing heavily on the Italian public finances. |
| --- | --- |

(2)

Adding to the long-standing structural weaknesses that have prevented satisfactory productivity growth for several years, the global downturn is strongly impacting on the Italian economy, even though the low indebtedness of the Italian private sector and a relatively solid financial system have so far provided some shelter from the direct impact of the financial crisis. A marked slowdown of real GDP growth in Italy was already under way in mid-2007, well before the deepening of the financial market crisis. It turned into recession in the second half of 2008, driven by faltering domestic demand and declining exports. Restoring business and consumer confidence, ensuring access to credit, in particular for SMEs, facilitating adjustment in the labour market to deal with rising unemployment and improving the conditions for productivity growth and enhanced cost competitiveness are key near-term challenges. In light of the very high government debt and the associated interest burden, the Italian government's response to these challenges must be carefully balanced with the need to avoid a substantial deterioration of public finances. The planned fiscal stance in 2009 is broadly neutral. Within this context, the government adopted a recovery package in November 2008 in line with the European Economic Recovery Plan (EERP), aiming at supporting low-income households and firms, while accelerating public investment. Further measures were adopted in February 2009 to support demand for energy-efficient durable goods. Still, the economic downturn is weighing heavily on the Italian public finances.

| (3) | The macro-economic scenario underlying the programme envisages that, after falling by 0,6 % in 2008, real GDP will contract further in 2009, by 2 %. Real GDP growth is expected to recover mildly, to 0,3 %, in 2010 and more decisively, to 1 %, in 2011. These macro-economic projections take into account the recovery measures adopted on 28 November, the expected economic impact of which is however not quantified. Assessed against currently available information (2), released after the cut-off date for the programme projections, economic growth could be even lower than projected in the programme. Also in the light of this, the 2009 projections for employment in the programme seem to be rather optimistic, in particular as concerns hours worked. By contrast, the projections for inflation appear realistic. The programme's inflation prospects and the underlying moderation in unit labour cost growth in the medium term imply some containment of the competitiveness loss that Italy has been experiencing since the late 1990s. |
| --- | --- |

(3)

The macro-economic scenario underlying the programme envisages that, after falling by 0,6 % in 2008, real GDP will contract further in 2009, by 2 %. Real GDP growth is expected to recover mildly, to 0,3 %, in 2010 and more decisively, to 1 %, in 2011. These macro-economic projections take into account the recovery measures adopted on 28 November, the expected economic impact of which is however not quantified. Assessed against currently available information (2), released after the cut-off date for the programme projections, economic growth could be even lower than projected in the programme. Also in the light of this, the 2009 projections for employment in the programme seem to be rather optimistic, in particular as concerns hours worked. By contrast, the projections for inflation appear realistic. The programme's inflation prospects and the underlying moderation in unit labour cost growth in the medium term imply some containment of the competitiveness loss that Italy has been experiencing since the late 1990s.

| (4) | The Commission services' January 2009 interim forecast estimates that the general government deficit increased to 2,8 % of GDP in 2008, compared to the 2,2 % deficit target in the November 2007 update of the programme. The higher-than-expected outcome occurred in spite of a positive base effect, as the 2007 deficit is now reported at 1,6 % of GDP as against 2,4 % expected in the previous programme. The better 2007 starting position was more than offset by developments in 2008, partly related to the adverse economic conditions. In addition, higher interest rates entailed increased debt servicing costs. A shortfall in revenue growth going over and above the impact of the economic slowdown reflects the implementation of various discretionary measures, namely: the take-up by employers in 2008 of the cut in the labour tax wedge (for workers on permanent contracts) foreseen for 2007, the complete abolition of the tax on primary residential property and the postponement to 2009 of some tax payment deadlines adopted with the economic recovery package at the end of 2008. The structural deficit — that is, the cyclically-adjusted deficit net of one-off and other temporary measures — is estimated to have increased by 0,5 percentage point of GDP relative to 2007. This compares with a 0,25 percentage point improvement planned in the November 2007 update of the programme. |
| --- | --- |

(4)

The Commission services' January 2009 interim forecast estimates that the general government deficit increased to 2,8 % of GDP in 2008, compared to the 2,2 % deficit target in the November 2007 update of the programme. The higher-than-expected outcome occurred in spite of a positive base effect, as the 2007 deficit is now reported at 1,6 % of GDP as against 2,4 % expected in the previous programme. The better 2007 starting position was more than offset by developments in 2008, partly related to the adverse economic conditions. In addition, higher interest rates entailed increased debt servicing costs. A shortfall in revenue growth going over and above the impact of the economic slowdown reflects the implementation of various discretionary measures, namely: the take-up by employers in 2008 of the cut in the labour tax wedge (for workers on permanent contracts) foreseen for 2007, the complete abolition of the tax on primary residential property and the postponement to 2009 of some tax payment deadlines adopted with the economic recovery package at the end of 2008. The structural deficit — that is, the cyclically-adjusted deficit net of one-off and other temporary measures — is estimated to have increased by 0,5 percentage point of GDP relative to 2007. This compares with a 0,25 percentage point improvement planned in the November 2007 update of the programme.

| (5) | According to the programme, the deficit is targeted to increase to 3,7 % of GDP in 2009, above the 3 % of GDP deficit reference value, from 2,6 % of GDP in 2008. This compares with a projection of a deficit of 3,8 % in the Commission services' interim forecast. The widening of the deficit reflects the operation of the automatic stabilisers, while the planned fiscal stance is broadly neutral. In particular, primary expenditure growth, albeit moderate by historical standards (3,1 % in nominal terms compared to 4,5 % on average during the period 1999-2007), is assumed largely to outpace nominal GDP growth. Revenue growth would slow down considerably, but by less than the tax base, also reflecting a combination of one-off and permanent discretionary measures adopted with the recovery and the three-year fiscal packages, as well as positive social contribution developments. Lower interest rates would drive interest expenditure marginally down, despite a higher debt, thus providing some limited relief to the public finances. As a result of these developments the structural balance recalculated by the Commission services on the basis of the information in the programme would improve by 0,25 percentage point of GDP compared to 2008. |
| --- | --- |

(5)

According to the programme, the deficit is targeted to increase to 3,7 % of GDP in 2009, above the 3 % of GDP deficit reference value, from 2,6 % of GDP in 2008. This compares with a projection of a deficit of 3,8 % in the Commission services' interim forecast. The widening of the deficit reflects the operation of the automatic stabilisers, while the planned fiscal stance is broadly neutral. In particular, primary expenditure growth, albeit moderate by historical standards (3,1 % in nominal terms compared to 4,5 % on average during the period 1999-2007), is assumed largely to outpace nominal GDP growth. Revenue growth would slow down considerably, but by less than the tax base, also reflecting a combination of one-off and permanent discretionary measures adopted with the recovery and the three-year fiscal packages, as well as positive social contribution developments. Lower interest rates would drive interest expenditure marginally down, despite a higher debt, thus providing some limited relief to the public finances. As a result of these developments the structural balance recalculated by the Commission services on the basis of the information in the programme would improve by 0,25 percentage point of GDP compared to 2008.

| (6) | Regarding the medium-term budgetary strategy, the programme confirms the commitment to the medium-term objective (MTO) of a balanced budgetary position in structural terms, but not the 2011 target date for its achievement. The economic downturn implies a delay in the budgetary consolidation plan enshrined in the three-year fiscal package approved in summer 2008. The pledge to the expenditure-based adjustment that was spelled out in that package is restated, in particular by broadly confirming the medium-term projections for individual spending categories and the measures for its achievement. However, although planned to be budgetary neutral, the implementation of the recovery package implies some backloading of the expenditure-based adjustment, due to the acceleration of investment and the one-off payments to households in 2009. After the sharp increase projected in 2009, the primary expenditure-to-GDP ratio would gradually return to a level similar to that estimated for 2008 thanks to improved economic conditions and very subdued annual increases planned over 2010-2011 (0,8 % on average in nominal terms). The revenue-to-GDP ratio is projected to increase slightly between 2008 and 2011. After peaking in 2009, the headline deficit is planned to decline to 3,3 % of GDP in 2010 and 2,9 % of GDP in 2011. A projected rebound in interest expenditure from 2010 implies that the primary balance is planned to improve at a faster pace. The recalculated structural balance would continue improving in 2010 and 2011, by a cumulative 1 percentage point of GDP. The planned fiscal consolidation over 2010-2011 is driven by the constraints stemming from the very high government debt. Having increased to just below 106 % of GDP in 2008, also reflecting the precautionary accumulation of liquid assets held with the Bank of Italy, the government gross debt ratio is projected to continue increasing in 2009 and 2010, to a peak of 112 % of GDP, before slightly declining to 111,6 % in 2011. The main drivers of these developments are the planned low primary surpluses and subdued nominal GDP growth. The stock-flow adjustment projected in the programme is relatively small but it does not incorporate the possible implementation of the bank recapitalisation scheme adopted with the recovery package, as it has not yet been utilised. |
| --- | --- |

(6)

Regarding the medium-term budgetary strategy, the programme confirms the commitment to the medium-term objective (MTO) of a balanced budgetary position in structural terms, but not the 2011 target date for its achievement. The economic downturn implies a delay in the budgetary consolidation plan enshrined in the three-year fiscal package approved in summer 2008. The pledge to the expenditure-based adjustment that was spelled out in that package is restated, in particular by broadly confirming the medium-term projections for individual spending categories and the measures for its achievement. However, although planned to be budgetary neutral, the implementation of the recovery package implies some backloading of the expenditure-based adjustment, due to the acceleration of investment and the one-off payments to households in 2009. After the sharp increase projected in 2009, the primary expenditure-to-GDP ratio would gradually return to a level similar to that estimated for 2008 thanks to improved economic conditions and very subdued annual increases planned over 2010-2011 (0,8 % on average in nominal terms). The revenue-to-GDP ratio is projected to increase slightly between 2008 and 2011. After peaking in 2009, the headline deficit is planned to decline to 3,3 % of GDP in 2010 and 2,9 % of GDP in 2011. A projected rebound in interest expenditure from 2010 implies that the primary balance is planned to improve at a faster pace. The recalculated structural balance would continue improving in 2010 and 2011, by a cumulative 1 percentage point of GDP. The planned fiscal consolidation over 2010-2011 is driven by the constraints stemming from the very high government debt. Having increased to just below 106 % of GDP in 2008, also reflecting the precautionary accumulation of liquid assets held with the Bank of Italy, the government gross debt ratio is projected to continue increasing in 2009 and 2010, to a peak of 112 % of GDP, before slightly declining to 111,6 % in 2011. The main drivers of these developments are the planned low primary surpluses and subdued nominal GDP growth. The stock-flow adjustment projected in the programme is relatively small but it does not incorporate the possible implementation of the bank recapitalisation scheme adopted with the recovery package, as it has not yet been utilised.

| (7) | The deficit outcomes could be higher than projected in the programme throughout the covered period. First, economic growth could be lower. Second, the subdued increase in primary expenditure planned over 2010-2011 requires strict implementation, at all levels of government, of the expenditure-based adjustment underlying the three-year package adopted in summer 2008. Third, the programme's projections for social contributions, notably for 2009, may not materialise, also given the rather favourable underlying assumptions for employment growth. Finally, although planned to be fully financed, the recovery package adopted in November 2008 and the new fiscal incentives for the purchase of durable goods adopted in February 2009 (not incorporated into the programme) might affect the 2009 budgetary outcome. For the same reasons, the evolution of the debt ratio from 2009 onwards might be less favourable than projected in the programme. The gross debt ratio could also be affected by possible capital injections into the banking sector. |
| --- | --- |

(7)

The deficit outcomes could be higher than projected in the programme throughout the covered period. First, economic growth could be lower. Second, the subdued increase in primary expenditure planned over 2010-2011 requires strict implementation, at all levels of government, of the expenditure-based adjustment underlying the three-year package adopted in summer 2008. Third, the programme's projections for social contributions, notably for 2009, may not materialise, also given the rather favourable underlying assumptions for employment growth. Finally, although planned to be fully financed, the recovery package adopted in November 2008 and the new fiscal incentives for the purchase of durable goods adopted in February 2009 (not incorporated into the programme) might affect the 2009 budgetary outcome. For the same reasons, the evolution of the debt ratio from 2009 onwards might be less favourable than projected in the programme. The gross debt ratio could also be affected by possible capital injections into the banking sector.

| (8) | 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 adopted pension reforms. Yet, pension expenditure as a share of GDP remains among the highest in the EU and the projections hinge upon the assumption that the adopted reforms are fully implemented, in particular that revised actuarial coefficients that are fully consistent with the contributory principle underlying the reformed pension system are applied as of 2010. Additional measures could be considered, notably a further increase in the retirement age, in particular for women. This would allow reallocating social expenditure so as to move towards a more comprehensive and uniform unemployment benefit system that ensures appropriate work incentives and effective activation policies. The budgetary position in 2008 as estimated in the programme, which is worse than the starting position of the previous programme, would be sufficient to stabilise the current debt ratio but would not contribute to offsetting the projected long-term budgetary impact of ageing. Moreover, the current level of gross debt is well above the Treaty reference value. Achieving and maintaining high primary surpluses over the medium term would contribute to reducing the medium risks to the sustainability of public finances. |
| --- | --- |

(8)

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 adopted pension reforms. Yet, pension expenditure as a share of GDP remains among the highest in the EU and the projections hinge upon the assumption that the adopted reforms are fully implemented, in particular that revised actuarial coefficients that are fully consistent with the contributory principle underlying the reformed pension system are applied as of 2010. Additional measures could be considered, notably a further increase in the retirement age, in particular for women. This would allow reallocating social expenditure so as to move towards a more comprehensive and uniform unemployment benefit system that ensures appropriate work incentives and effective activation policies. The budgetary position in 2008 as estimated in the programme, which is worse than the starting position of the previous programme, would be sufficient to stabilise the current debt ratio but would not contribute to offsetting the projected long-term budgetary impact of ageing. Moreover, the current level of gross debt is well above the Treaty reference value. Achieving and maintaining high primary surpluses over the medium term would contribute to reducing the medium risks to the sustainability of public finances.

| (9) | Significant progress has been achieved in recent years to improve the fiscal framework, a key pre-condition for a credible medium-term strategy of expenditure-based adjustment underpinned by enhanced cost-effectiveness and efficiency of public expenditure. The three-year fiscal package adopted in summer 2008 strengthens the medium-term fiscal framework by spelling out detailed yearly caps for individual expenditure items and backing them up with broad measures. Several other initiatives were introduced to improve budgetary institutions. The structure of the State budget was rationalised by introducing a programme-based classification that allows a better allocation of resources in line with government policy objectives. Enhanced flexibility is allowed to line ministries to reallocate resources between spending programmes according to priorities. A pilot spending review exercise was conducted in five ministries to assess cost-effectiveness of public expenditure and there is now the intention to make this an integral part of the budgetary process. Enforcement mechanisms of the Domestic Stability Pact, governing fiscal relations between the different levels of government, have been strengthened. Finally, important steps are being taken to improve the efficiency and cost-effectiveness of the public administration, inter alia by promoting a more rational use of available resources and better rewarding merit. Going forward, a major challenge for fiscal governance is to design a new framework for fiscal federalism that ensures the accountability of local governments and fosters efficiency. |
| --- | --- |

(9)

Significant progress has been achieved in recent years to improve the fiscal framework, a key pre-condition for a credible medium-term strategy of expenditure-based adjustment underpinned by enhanced cost-effectiveness and efficiency of public expenditure. The three-year fiscal package adopted in summer 2008 strengthens the medium-term fiscal framework by spelling out detailed yearly caps for individual expenditure items and backing them up with broad measures. Several other initiatives were introduced to improve budgetary institutions. The structure of the State budget was rationalised by introducing a programme-based classification that allows a better allocation of resources in line with government policy objectives. Enhanced flexibility is allowed to line ministries to reallocate resources between spending programmes according to priorities. A pilot spending review exercise was conducted in five ministries to assess cost-effectiveness of public expenditure and there is now the intention to make this an integral part of the budgetary process. Enforcement mechanisms of the Domestic Stability Pact, governing fiscal relations between the different levels of government, have been strengthened. Finally, important steps are being taken to improve the efficiency and cost-effectiveness of the public administration, inter alia by promoting a more rational use of available resources and better rewarding merit. Going forward, a major challenge for fiscal governance is to design a new framework for fiscal federalism that ensures the accountability of local governments and fosters efficiency.

| (10) | At the end of 2008, in response to the global financial crisis, the Italian authorities adopted a series of measures aimed at protecting savers and maintaining adequate levels of bank liquidity and capitalisation. These allow the government, until end 2009, to inject capital into banks in situations of capital inadequacy and to guarantee new bank liabilities for up to five years. Moreover, a supplementary State guarantee for retail bank deposits was offered, further strengthening Italy's already relatively high level of protection offered by the interbank deposit insurance scheme (that provides coverage for just above EUR 100 000). Finally, with the aim to strengthen the system's overall ability to finance economic activity, the Ministry of Economy and Finance has been allowed to underwrite financial instruments issued by sound listed banks that would qualify as regulatory capital.
  The public intervention, estimated in the programme at EUR 10 billion (around 0,7 % of GDP), is intended to be temporary and banks availing of it must commit to lending to households and SMEs on appropriate terms and conditions. |
| --- | --- |

(10)

At the end of 2008, in response to the global financial crisis, the Italian authorities adopted a series of measures aimed at protecting savers and maintaining adequate levels of bank liquidity and capitalisation. These allow the government, until end 2009, to inject capital into banks in situations of capital inadequacy and to guarantee new bank liabilities for up to five years. Moreover, a supplementary State guarantee for retail bank deposits was offered, further strengthening Italy's already relatively high level of protection offered by the interbank deposit insurance scheme (that provides coverage for just above EUR 100 000). Finally, with the aim to strengthen the system's overall ability to finance economic activity, the Ministry of Economy and Finance has been allowed to underwrite financial instruments issued by sound listed banks that would qualify as regulatory capital.

The public intervention, estimated in the programme at EUR 10 billion (around 0,7 % of GDP), is intended to be temporary and banks availing of it must commit to lending to households and SMEs on appropriate terms and conditions.

| (11) | Within a broadly neutral fiscal position, the government took measures to support the economy, in line with the EERP, amounting to around 0,4 % of GDP in 2009 and 0,2 % in 2010. The budgetary impact of these measures is, according to official estimates, fully offset by one-off revenues and some permanent tax increases, mostly originating from fighting tax evasion and avoidance. Measures to support disposable income of households and restore consumer confidence include a one-off cash transfer to low-income households, extensions of unemployment benefits to atypical workers and freezes on some utility tariffs. Support to companies is granted mainly in the form of the postponement of tax payment deadlines and a reduction of the corporate income tax burden. Tax relief on performance-related pay tries to foster productivity while reducing labour costs. Finally, the government is trying to re-allocate available EU or national funds so as to accelerate the implementation of priority infrastructural projects. The measures are targeted and timely, provided that the planned acceleration of public investment is achieved, and most of them are temporary in nature. Thus, their reversibility is ensured, although not in full. The package is an adequate response to the economic downturn in view of the very high debt ratio. In this context, and given the need to address the productivity challenge and improve the external competitive position, structural reforms, including strengthening the framework for competition, are particularly relevant for Italy. A number of announced structural measures, if already operational in 2009, may further support the recovery and improve the resilience of the economy. These include initiatives to foster industrial innovation, promote the use of renewable energy sources and energy saving and reduce the administrative burden. Recent steps by the social partners to modify the wage-bargaining framework, supported by the above-mentioned fiscal incentives on performance-related pay, may lead to better alignment of wage and productivity developments. These measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs. |
| --- | --- |

(11)

Within a broadly neutral fiscal position, the government took measures to support the economy, in line with the EERP, amounting to around 0,4 % of GDP in 2009 and 0,2 % in 2010. The budgetary impact of these measures is, according to official estimates, fully offset by one-off revenues and some permanent tax increases, mostly originating from fighting tax evasion and avoidance. Measures to support disposable income of households and restore consumer confidence include a one-off cash transfer to low-income households, extensions of unemployment benefits to atypical workers and freezes on some utility tariffs. Support to companies is granted mainly in the form of the postponement of tax payment deadlines and a reduction of the corporate income tax burden. Tax relief on performance-related pay tries to foster productivity while reducing labour costs. Finally, the government is trying to re-allocate available EU or national funds so as to accelerate the implementation of priority infrastructural projects. The measures are targeted and timely, provided that the planned acceleration of public investment is achieved, and most of them are temporary in nature. Thus, their reversibility is ensured, although not in full. The package is an adequate response to the economic downturn in view of the very high debt ratio. In this context, and given the need to address the productivity challenge and improve the external competitive position, structural reforms, including strengthening the framework for competition, are particularly relevant for Italy. A number of announced structural measures, if already operational in 2009, may further support the recovery and improve the resilience of the economy. These include initiatives to foster industrial innovation, promote the use of renewable energy sources and energy saving and reduce the administrative burden. Recent steps by the social partners to modify the wage-bargaining framework, supported by the above-mentioned fiscal incentives on performance-related pay, may lead to better alignment of wage and productivity developments. These measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs.

| (12) | After further increasing in 2009, the deficit is projected gradually to narrow over the programme period. However, a reduction of the headline deficit below 3 % of GDP by 2011, as envisaged in the programme, will require strong commitment to fiscal discipline and standing ready to adopt additional measures if necessary. The debt ratio will be increasing over the programme period, moving further away from the reference value. |
| --- | --- |

(12)

After further increasing in 2009, the deficit is projected gradually to narrow over the programme period. However, a reduction of the headline deficit below 3 % of GDP by 2011, as envisaged in the programme, will require strong commitment to fiscal discipline and standing ready to adopt additional measures if necessary. The debt ratio will be increasing over the programme period, moving further away from the reference value.

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

(13)

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

The overall conclusion is that fiscal policy and the economic recovery package for 2009 are in line with the European Economic Recovery Plan (EERP) and can be regarded as adequate in view of the very high debt ratio. Reflecting the strong economic downturn associated with the financial crisis, the headline deficit is expected to increase significantly in 2009 to above the 3 % of GDP reference value. In 2010 and 2011, the programme foresees an expenditure-based adjustment, which would bring the deficit just below 3 % of GDP in 2011. However, the achievement of the deficit targets throughout the programme period might be hampered as economic growth could be even lower than planned. In addition, possible slippages in the implementation of the planned restraint in primary expenditure may materialise, even though the improved fiscal framework enhances the conditions for fiscal discipline and spending efficiency. The debt ratio is set to increase from 104,1 % of GDP in 2007 to over 111 % of GDP by the end of programme period. The gross debt ratio might increase further also as a result of possible capital injections into the banking sector. Finally, important structural weaknesses still hamper sustained productivity growth in Italy and weigh on its external competitive position, while the current composition of social spending is not supportive of adjustment in the labour market.

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

| (i) | implement the planned fiscal policy for 2009 and carry out with determination the adjustment path planned over the programme period in order to set the very high debt ratio on a steadily declining path and ensure the long-term sustainability of public finances; |
| --- | --- |

(i)

implement the planned fiscal policy for 2009 and carry out with determination the adjustment path planned over the programme period in order to set the very high debt ratio on a steadily declining path and ensure the long-term sustainability of public finances;

| (ii) | continue the progress made to improve fiscal governance and the work on a new framework for fiscal federalism that ensures the accountability of local governments and underpins fiscal discipline; |
| --- | --- |

(ii)

continue the progress made to improve fiscal governance and the work on a new framework for fiscal federalism that ensures the accountability of local governments and underpins fiscal discipline;

| (iii) | pursue efforts to improve the quality of public finances by focussing on spending efficiency and composition, also by reallocating social expenditure so as to create room for a more comprehensive and uniform unemployment benefit system that ensures appropriate work incentives and effective activation policies, without compromising the fiscal consolidation process. |
| --- | --- |

(iii)

pursue efforts to improve the quality of public finances by focussing on spending efficiency and composition, also by reallocating social expenditure so as to create room for a more comprehensive and uniform unemployment benefit system that ensures appropriate work incentives and effective activation policies, without compromising the fiscal consolidation process.

Comparison of key macro-economic and budgetary projections

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

  (% of potential GDP) | SP Feb 2009 | 1,7 | 0,3 | – 2,3 | – 2,7 | – 2,5 |
| COM Jan 2009 (5) | 1,8 | 0,3 | – 2,3 | – 2,7 | n.a. |
| SP Nov 2007 | – 0,6 | – 0,6 | – 0,6 | – 0,6 | – 0,6 |
| Net lending/borrowing vis-à-vis the rest of the world
  (% of GDP) | SP Feb 2009 | – 1,6 | – 1,6 | – 1,3 | – 1,1 | – 0,9 |
| COM Jan 2009 | – 1,6 | – 2,2 | – 1,3 | – 1,5 | n.a. |
| SP Nov 2007 | – 1,3 | – 0,8 | – 0,6 | – 0,4 | – 0,2 |
| General government revenue
  (% of GDP) | SP Feb 2009 | 46,6 | 46,4 | 46,8 | 46,8 | 46,6 |
| COM Jan 2009 | 46,6 | 46,4 | 46,5 | 46,5 | n.a. |
| SP Nov 2007 | 46,2 | 46,3 | 45,9 | 45,8 | 45,7 |
| General government expenditure
  (% of GDP) | SP Feb 2009 | 48,2 | 49,0 | 50,5 | 50,0 | 49,5 |
| COM Jan 2009 | 48,2 | 49,2 | 50,3 | 50,2 | n.a. |
| SP Nov 2007 | 48,6 | 48,5 | 47,9 | 47,3 | 47,0 |
| General government balance
  (% of GDP) | SP Feb 2009 | – 1,6 | – 2,6 | – 3,7 | – 3,3 | – 2,9 |
| COM Jan 2009 | – 1,6 | – 2,8 | – 3,8 | – 3,7 | n.a. |
| SP Nov 2007 | – 2,4 | – 2,2 | – 1,5 | – 0,7 | 0,0 |
| Primary balance
  (% of GDP) | SP Feb 2009 | 3,4 | 2,5 | 1,3 | 1,9 | 2,6 |
| COM Jan 2009 | 3,4 | 2,3 | 1,0 | 1,2 | n.a. |
| SP Nov 2007 | 2,5 | 2,6 | 3,4 | 4,2 | 4,9 |
| Cyclically-adjusted balance (4)

  (% of GDP) | SP Feb 2009 | – 2,4 | – 2,7 | – 2,6 | – 1,9 | – 1,6 |
| COM Jan 2009 | – 2,5 | – 2,9 | – 2,7 | – 2,4 | n.a. |
| SP Nov 2007 | – 2,0 | – 1,9 | – 1,2 | – 0,4 | 0,2 |
| Structural balance (6)

  (% of GDP) | SP Feb 2009 | – 2,5 | – 2,9 | – 2,7 | – 2,0 | – 1,7 |
| COM Jan 2009 | – 2,6 | – 3,1 | – 2,8 | – 2,5 | n.a. |
| SP Nov 2007 | – 2,2 | – 2,0 | – 1,3 | – 0,5 | 0,2 |
| Government gross debt
  (% of GDP) | SP Feb 2009 | 104,1 | 105,9 | 110,5 | 112,0 | 111,6 |
| COM Jan 2009 | 104,1 | 105,7 | 109,3 | 110,3 | n.a. |
| SP Nov 2007 | 105,0 | 103,5 | 101,5 | 98,5 | 95,1 |
| Stability programme (SP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations. |

2007

2008

2009

2010

2011

Real GDP

(% change)

SP Feb 2009

1,5

– 0,6

– 2,0

0,3

1,0

COM Jan 2009

1,5

– 0,6

– 2,0

0,3

n.a.

SP Nov 2007

1,9

1,5

1,6

1,7

1,8

HICP inflation

(%)

SP Feb 2009

2,0

3,5

1,2

1,7

2,0

COM Jan 2009

2,0

3,5

1,2

2,2

n.a.

SP Nov 2007

1,9

2,0

2,0

1,8

1,9

Output gap (4)

(% of potential GDP)

SP Feb 2009

1,7

0,3

– 2,3

– 2,7

– 2,5

COM Jan 2009 (5)

1,8

0,3

– 2,3

– 2,7

n.a.

SP Nov 2007

– 0,6

– 0,6

– 0,6

– 0,6

– 0,6

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

(% of GDP)

SP Feb 2009

– 1,6

– 1,6

– 1,3

– 1,1

– 0,9

COM Jan 2009

– 1,6

– 2,2

– 1,3

– 1,5

n.a.

SP Nov 2007

– 1,3

– 0,8

– 0,6

– 0,4

– 0,2

General government revenue

(% of GDP)

SP Feb 2009

46,6

46,4

46,8

46,8

46,6

COM Jan 2009

46,6

46,4

46,5

46,5

n.a.

SP Nov 2007

46,2

46,3

45,9

45,8

45,7

General government expenditure

(% of GDP)

SP Feb 2009

48,2

49,0

50,5

50,0

49,5

COM Jan 2009

48,2

49,2

50,3

50,2

n.a.

SP Nov 2007

48,6

48,5

47,9

47,3

47,0

General government balance

(% of GDP)

SP Feb 2009

– 1,6

– 2,6

– 3,7

– 3,3

– 2,9

COM Jan 2009

– 1,6

– 2,8

– 3,8

– 3,7

n.a.

SP Nov 2007

– 2,4

– 2,2

– 1,5

– 0,7

0,0

Primary balance

(% of GDP)

SP Feb 2009

3,4

2,5

1,3

1,9

2,6

COM Jan 2009

3,4

2,3

1,0

1,2

n.a.

SP Nov 2007

2,5

2,6

3,4

4,2

4,9

Cyclically-adjusted balance (4)

(% of GDP)

SP Feb 2009

– 2,4

– 2,7

– 2,6

– 1,9

– 1,6

COM Jan 2009

– 2,5

– 2,9

– 2,7

– 2,4

n.a.

SP Nov 2007

– 2,0

– 1,9

– 1,2

– 0,4

0,2

Structural balance (6)

(% of GDP)

SP Feb 2009

– 2,5

– 2,9

– 2,7

– 2,0

– 1,7

COM Jan 2009

– 2,6

– 3,1

– 2,8

– 2,5

n.a.

SP Nov 2007

– 2,2

– 2,0

– 1,3

– 0,5

0,2

Government gross debt

(% of GDP)

SP Feb 2009

104,1

105,9

110,5

112,0

111,6

COM Jan 2009

104,1

105,7

109,3

110,3

n.a.

SP Nov 2007

105,0

103,5

101,5

98,5

95,1

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

---

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

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

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

(3)  Gaps in the optional data include expenditure by function and some details on the breakdown of general government debt developments.

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

(5)  Based on estimated potential growth of 1,1 %, 0,9 %, 0,6 % and 0,7 % respectively in the period 2007-2010.

(6)  Cyclically-adjusted balance excluding one-off and other temporary measures. One-off and other temporary measures are 0,1 % of GDP in 2007, 0,2 % in 2008 and 0,1 % 2009-2011; all deficit-reducing according to the most recent programme and in the Commission services' January interim forecast.

Source:

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

---

| 24.3.2009 | EN | Official Journal of the European Union | C 70/8 |
| --- | --- | --- | --- |

24.3.2009

EN

Official Journal of the European Union

C 70/8

---

COUNCIL OPINION

of 10 March 2009

on the updated convergence programme of Lithuania, 2008-2011

(2009/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 9(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

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

(1)

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

| (2) | Lithuania's economy started to slow rapidly in 2008 after a sustained boom centred on growth of domestic demand that started in 2003. In the context of the currency board framework, monetary and credit conditions tightened in 2008 amid higher country risk perceptions and a continued appreciation of the real effective exchange rate. The period of high recent growth created overheating pressures: macro-economic imbalances increased, with both inflation and the external deficit peaking in the first half of 2008. Wage growth exceeded productivity growth by far, thus weakening the country's competitiveness. Fiscal policy was expansionary throughout the boom period and no reserves were accumulated to prepare for changing cyclical conditions. Lithuania's large external imbalances have amplified its vulnerability in view of the tightening global credit conditions and lower growth in export markets. The global financial crisis and weak external demand are expected to add to the ongoing fall in domestic demand and contribute to the contraction of the economy. The immediate economic policy challenge for Lithuania is to manage the economic slowdown so as to preserve macro-economic stability. Given the need to correct the country's high imbalances the authorities adopted in December 2008 a fiscal austerity package to facilitate the adjustment process and help maintain market confidence. This should also limit the worsening of the public deficits during the downturn. |
| --- | --- |

(2)

Lithuania's economy started to slow rapidly in 2008 after a sustained boom centred on growth of domestic demand that started in 2003. In the context of the currency board framework, monetary and credit conditions tightened in 2008 amid higher country risk perceptions and a continued appreciation of the real effective exchange rate. The period of high recent growth created overheating pressures: macro-economic imbalances increased, with both inflation and the external deficit peaking in the first half of 2008. Wage growth exceeded productivity growth by far, thus weakening the country's competitiveness. Fiscal policy was expansionary throughout the boom period and no reserves were accumulated to prepare for changing cyclical conditions. Lithuania's large external imbalances have amplified its vulnerability in view of the tightening global credit conditions and lower growth in export markets. The global financial crisis and weak external demand are expected to add to the ongoing fall in domestic demand and contribute to the contraction of the economy. The immediate economic policy challenge for Lithuania is to manage the economic slowdown so as to preserve macro-economic stability. Given the need to correct the country's high imbalances the authorities adopted in December 2008 a fiscal austerity package to facilitate the adjustment process and help maintain market confidence. This should also limit the worsening of the public deficits during the downturn.

| (3) | The macro-economic scenario underlying the programme estimates real GDP to have grown by 3,5 % in 2008. It projects a sharp contraction by 4,8 % in 2009 and a further small decline by 0,2 % in 2010, before a recovery to growth of 4,5 % in 2011. Assessed against currently available information (2), this scenario is based on plausible growth assumptions until 2009 but markedly favourable ones thereafter. Growth assumptions appear optimistic from 2010 on, considering that worsening growth prospects in trading partner countries and domestic demand in Lithuania due to constrained credit are likely to be more pronounced and protracted than assumed in the programme. The estimated potential growth in 2011 is rather on the high side. The programme's projection for inflation is realistic for 2009 while it could be on the low side for 2010, notably because of the impact on energy prices from the closure of the Ignalina nuclear power plant scheduled by the end of 2009. Compared to the Commission services' January 2009 interim forecast, the programme projects a much faster unwinding of external imbalances in 2009 which is due to the more severe contraction of the domestic demand and the more favourable developments in export markets envisaged in the convergence programme. |
| --- | --- |

(3)

The macro-economic scenario underlying the programme estimates real GDP to have grown by 3,5 % in 2008. It projects a sharp contraction by 4,8 % in 2009 and a further small decline by 0,2 % in 2010, before a recovery to growth of 4,5 % in 2011. Assessed against currently available information (2), this scenario is based on plausible growth assumptions until 2009 but markedly favourable ones thereafter. Growth assumptions appear optimistic from 2010 on, considering that worsening growth prospects in trading partner countries and domestic demand in Lithuania due to constrained credit are likely to be more pronounced and protracted than assumed in the programme. The estimated potential growth in 2011 is rather on the high side. The programme's projection for inflation is realistic for 2009 while it could be on the low side for 2010, notably because of the impact on energy prices from the closure of the Ignalina nuclear power plant scheduled by the end of 2009. Compared to the Commission services' January 2009 interim forecast, the programme projects a much faster unwinding of external imbalances in 2009 which is due to the more severe contraction of the domestic demand and the more favourable developments in export markets envisaged in the convergence programme.

| (4) | For 2008, the general government deficit is estimated in the Commission services' interim forecast at 2,9 % of GDP, against a deficit target of 0,5 % of GDP set in the previous update of the convergence programme. This significantly worse-than-expected outturn reflects mainly considerable expenditure overruns on public sector wages and social transfers for families and pensioners following policy decisions adopted during the year and thus not included in the 2008 budget and to a lesser extent lower tax revenues than initially projected by the authorities, in particular because of sharply slowing economic activity towards the end of the year. Investment expenditure and EU funds absorption were lower than planned. |
| --- | --- |

(4)

For 2008, the general government deficit is estimated in the Commission services' interim forecast at 2,9 % of GDP, against a deficit target of 0,5 % of GDP set in the previous update of the convergence programme. This significantly worse-than-expected outturn reflects mainly considerable expenditure overruns on public sector wages and social transfers for families and pensioners following policy decisions adopted during the year and thus not included in the 2008 budget and to a lesser extent lower tax revenues than initially projected by the authorities, in particular because of sharply slowing economic activity towards the end of the year. Investment expenditure and EU funds absorption were lower than planned.

| (5) | The new government that took office on 9 December 2008 adopted a programme of significant fiscal retrenchment. In line with this, the 2009 budget adopted by Parliament on 22 December 2008 includes a fiscal consolidation package aimed at restoring market confidence and limiting the government's financing needs. Fiscal consolidation is based on a comprehensive tax reform and substantial cuts in budgetary expenditure, both expected to contribute to a similar extent to fiscal consolidation. The budget targets a general government deficit of 2,1 % of GDP, which in the absence of the consolidation measures would have been substantially higher. Tax changes aim to shift the tax burden from direct to indirect taxes and from labour to capital and to broaden the tax base by removing exemptions. The main revenue measures include a 1 percentage point increase in VAT and excise duties, a 3 percentage points cut in the rate of personal income tax with restricted eligibility to the initial tax-free threshold and a 5 percentage points increase in the rate of corporate income tax as well as the removal of most VAT and personal income tax exemptions and broadening the tax base, particularly by including more persons into the social security system. The estimated net effect of these tax changes according to the programme is around 1,8 % of GDP. The budget also plans significant expenditure cuts, estimated at around 2 % of GDP, including public sector wages, other current expenditure and planned investment.
  However, some measures underpinning the budget have been rejected by the parliament either in full or in part and therefore need to be substituted by new measures. The overall fiscal stance in 2009, as measured by the 3 % of GDP reduction in the structural balance (cyclically-adjusted net of one-off and other temporary measures), is estimated to be strongly restrictive (3). |
| --- | --- |

(5)

The new government that took office on 9 December 2008 adopted a programme of significant fiscal retrenchment. In line with this, the 2009 budget adopted by Parliament on 22 December 2008 includes a fiscal consolidation package aimed at restoring market confidence and limiting the government's financing needs. Fiscal consolidation is based on a comprehensive tax reform and substantial cuts in budgetary expenditure, both expected to contribute to a similar extent to fiscal consolidation. The budget targets a general government deficit of 2,1 % of GDP, which in the absence of the consolidation measures would have been substantially higher. Tax changes aim to shift the tax burden from direct to indirect taxes and from labour to capital and to broaden the tax base by removing exemptions. The main revenue measures include a 1 percentage point increase in VAT and excise duties, a 3 percentage points cut in the rate of personal income tax with restricted eligibility to the initial tax-free threshold and a 5 percentage points increase in the rate of corporate income tax as well as the removal of most VAT and personal income tax exemptions and broadening the tax base, particularly by including more persons into the social security system. The estimated net effect of these tax changes according to the programme is around 1,8 % of GDP. The budget also plans significant expenditure cuts, estimated at around 2 % of GDP, including public sector wages, other current expenditure and planned investment.

However, some measures underpinning the budget have been rejected by the parliament either in full or in part and therefore need to be substituted by new measures. The overall fiscal stance in 2009, as measured by the 3 % of GDP reduction in the structural balance (cyclically-adjusted net of one-off and other temporary measures), is estimated to be strongly restrictive (3).

| (6) | The main goal of the medium-term budgetary strategy in the programme is to achieve the MTO of a general government structural deficit of 1 % of GDP by 2010, and to reach a balanced headline budget in later years. The general government headline deficit is expected to narrow to 1,0 % of GDP in 2010 and to be in balance in 2011. The adjustment is foreseen to be achieved by a substantial increase in the revenue-to-GDP ratio and a modest reduction in the expenditure ratio. The government has begun a more detailed review of current expenditure, including public sector employment, which could lead to further expenditure savings to be proposed in later years. Higher revenue growth can mainly be explained by the tax changes introduced in the 2009 budget. However, the programme explicitly acknowledges that achievement of the budgetary targets presented in the programme requires additional measures of around 0,5 % of GDP in 2010 and around 1,5 % of GDP in 2011. |
| --- | --- |

(6)

The main goal of the medium-term budgetary strategy in the programme is to achieve the MTO of a general government structural deficit of 1 % of GDP by 2010, and to reach a balanced headline budget in later years. The general government headline deficit is expected to narrow to 1,0 % of GDP in 2010 and to be in balance in 2011. The adjustment is foreseen to be achieved by a substantial increase in the revenue-to-GDP ratio and a modest reduction in the expenditure ratio. The government has begun a more detailed review of current expenditure, including public sector employment, which could lead to further expenditure savings to be proposed in later years. Higher revenue growth can mainly be explained by the tax changes introduced in the 2009 budget. However, the programme explicitly acknowledges that achievement of the budgetary targets presented in the programme requires additional measures of around 0,5 % of GDP in 2010 and around 1,5 % of GDP in 2011.

| (7) | The budgetary outcomes are subject to significant downside risks. This concerns all programme years: in 2009 the main risk is that revenues could be significantly lower than projected in the programme, mainly related to the risk that discretionary revenue-increasing measures, particularly the indirect tax increases, will not lead to higher tax revenue to the extent planned in the programme, and that not all proposed expenditure cuts, especially on subsidies and public sector employee compensation, may be implemented; in 2010 and 2011 risk arises from the projected fiscal consolidation being based on markedly favourable growth assumptions and requiring additional measures to underpin the budgetary targets. |
| --- | --- |

(7)

The budgetary outcomes are subject to significant downside risks. This concerns all programme years: in 2009 the main risk is that revenues could be significantly lower than projected in the programme, mainly related to the risk that discretionary revenue-increasing measures, particularly the indirect tax increases, will not lead to higher tax revenue to the extent planned in the programme, and that not all proposed expenditure cuts, especially on subsidies and public sector employee compensation, may be implemented; in 2010 and 2011 risk arises from the projected fiscal consolidation being based on markedly favourable growth assumptions and requiring additional measures to underpin the budgetary targets.

| (8) | The long-term budgetary impact of ageing is lower than the EU average, as a result of the pension reform already enacted. However, the budgetary position in 2008, as estimated in the programme, has worsened considerably compared with the starting position of the previous programme and compounds the budgetary impact of population ageing on the sustainability gap. Achieving primary surpluses over the medium term, as foreseen in the programme, would contribute to reducing the medium risks to the sustainability of public finances. |
| --- | --- |

(8)

The long-term budgetary impact of ageing is lower than the EU average, as a result of the pension reform already enacted. However, the budgetary position in 2008, as estimated in the programme, has worsened considerably compared with the starting position of the previous programme and compounds the budgetary impact of population ageing on the sustainability gap. Achieving primary surpluses over the medium term, as foreseen in the programme, would contribute to reducing the medium risks to the sustainability of public finances.

| (9) | Lithuania's medium-term budgetary framework has not succeeded in preventing expenditure overruns in recent years. Buoyant revenue growth has facilitated repeated upward revisions of expenditure targets and the electoral cycle has put additional pressure on the framework as evidenced by the recent deterioration of the headline deficit. With a view to strengthening the framework, a Law on Fiscal Discipline was adopted in November 2007, including notably an expenditure rule. However, the law focused on the preparation and execution of the annual budget and did not as such introduce more of the necessary forward-looking medium-term elements. Hence, the current framework is still rather weak as regards medium-term planning and control of public finances. There is scope for enhancing planning and for reinforcing the binding character of the medium-term expenditure ceilings, which would contribute to restraining expenditure growth. Moreover, the framework needs to ensure fiscal consolidation in good economic times, by preventing that additional revenues entail higher spending. Transparency of the whole budgetary process including appropriate reporting of revenue and expenditure executions also remains weak, including as regards the comparability of the budgetary indicators on cash and accrual bases. |
| --- | --- |

(9)

Lithuania's medium-term budgetary framework has not succeeded in preventing expenditure overruns in recent years. Buoyant revenue growth has facilitated repeated upward revisions of expenditure targets and the electoral cycle has put additional pressure on the framework as evidenced by the recent deterioration of the headline deficit. With a view to strengthening the framework, a Law on Fiscal Discipline was adopted in November 2007, including notably an expenditure rule. However, the law focused on the preparation and execution of the annual budget and did not as such introduce more of the necessary forward-looking medium-term elements. Hence, the current framework is still rather weak as regards medium-term planning and control of public finances. There is scope for enhancing planning and for reinforcing the binding character of the medium-term expenditure ceilings, which would contribute to restraining expenditure growth. Moreover, the framework needs to ensure fiscal consolidation in good economic times, by preventing that additional revenues entail higher spending. Transparency of the whole budgetary process including appropriate reporting of revenue and expenditure executions also remains weak, including as regards the comparability of the budgetary indicators on cash and accrual bases.

| (10) | With a view to stabilising the financial sector, the Lithuanian authorities have increased the guarantee for deposit insurance from the equivalent of EUR 22 000 to EUR 100 000 in October 2008 and the deposit guarantee ratio has been extended to 100 %. The programme acknowledges a possible risk related to deposit guarantees, where the total amount guaranteed at the end of 2008 was around 30 % of GDP. |
| --- | --- |

(10)

With a view to stabilising the financial sector, the Lithuanian authorities have increased the guarantee for deposit insurance from the equivalent of EUR 22 000 to EUR 100 000 in October 2008 and the deposit guarantee ratio has been extended to 100 %. The programme acknowledges a possible risk related to deposit guarantees, where the total amount guaranteed at the end of 2008 was around 30 % of GDP.

| (11) | In line with the EERP agreed in December by the European Council, Lithuania, which is facing significant external and internal imbalances, adopted a budgetary policy which aims at correcting such imbalances. Taking into account the need to correct economic imbalances and the difficulty in securing new financing at acceptable conditions due to market risk aversion, the planned restrictive fiscal stance from 2009 until 2011 is an appropriate response to the macro-economic and budgetary situation. A comprehensive tax reform and a wide range of expenditure-saving measures, including reductions in public wages in 2009, have been taken. Furthermore, the Lithuanian authorities are planning to adopt a comprehensive package of measures aiming at business support by reducing administrative burdens, improving access to finance and facilitating export and investment. One of the priorities includes modernisation of Soviet-type buildings so as to improve energy efficiency. In this context, Lithuania aims to accelerate (and simplify) the absorption of EU structural funds, where the possibilities of financing such investments would be considerably enlarged under the Commission's EERP proposals. These measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs. |
| --- | --- |

(11)

In line with the EERP agreed in December by the European Council, Lithuania, which is facing significant external and internal imbalances, adopted a budgetary policy which aims at correcting such imbalances. Taking into account the need to correct economic imbalances and the difficulty in securing new financing at acceptable conditions due to market risk aversion, the planned restrictive fiscal stance from 2009 until 2011 is an appropriate response to the macro-economic and budgetary situation. A comprehensive tax reform and a wide range of expenditure-saving measures, including reductions in public wages in 2009, have been taken. Furthermore, the Lithuanian authorities are planning to adopt a comprehensive package of measures aiming at business support by reducing administrative burdens, improving access to finance and facilitating export and investment. One of the priorities includes modernisation of Soviet-type buildings so as to improve energy efficiency. In this context, Lithuania aims to accelerate (and simplify) the absorption of EU structural funds, where the possibilities of financing such investments would be considerably enlarged under the Commission's EERP proposals. These measures are related to the medium-term reform agenda and the country-specific recommendations proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs.

| (12) | Lithuania has adopted a consolidation programme, which is an adequate response to the need to correct macro-economic imbalances. However, the budgetary outcomes are subject to significant downside risks. Moreover, the adjustment should be backed by additional measures, particularly in the outer years. Although the safety margin against normal cyclical fluctuations appears to be respected in the programme in all years starting in 2009, this may become insufficient, taking into account the risks including the severe economic downturn, to prevent breaching the 3 % threshold in 2009 and 2010. The fiscal stance is expected to be restrictive from 2009 until 2011 as measured by the change in the structural (primary) balance. In the context of Lithuania's ERM II membership and the need to improve economy's cost competitiveness, correction of previously high wage growth is warranted. |
| --- | --- |

(12)

Lithuania has adopted a consolidation programme, which is an adequate response to the need to correct macro-economic imbalances. However, the budgetary outcomes are subject to significant downside risks. Moreover, the adjustment should be backed by additional measures, particularly in the outer years. Although the safety margin against normal cyclical fluctuations appears to be respected in the programme in all years starting in 2009, this may become insufficient, taking into account the risks including the severe economic downturn, to prevent breaching the 3 % threshold in 2009 and 2010. The fiscal stance is expected to be restrictive from 2009 until 2011 as measured by the change in the structural (primary) balance. In the context of Lithuania's ERM II membership and the need to improve economy's cost competitiveness, correction of previously high wage growth is warranted.

| (13) | 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 (4). |
| --- | --- |

(13)

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

The overall conclusion is that Lithuania is currently facing a severe contraction in domestic demand following years of above-potential economic growth. The deepening global financial crisis and weakening external demand contribute to aggravating the contraction of the economy. For a sustained period wage growth has exceeded productivity growth by far, thus weakening the country's competitiveness hindering prospects of export-led economic recovery. The general government balance deteriorated considerably in 2008 mainly reflecting an expansionary fiscal policy. The programme targets a deficit of 2,1 % of GDP in 2009 and a gradual decline in the headline deficit thereafter to a balanced position in 2011. Taking into account the risks related to the macro-economic scenario and the lack of information on measures needed to underpin fiscal consolidation after 2009, the budgetary outcomes in the programme are subject to significant downside risks, with the headline deficit possibly exceeding the 3 % of GDP threshold in 2009 and 2010, while the debt ratio will remain very comfortably below the 60 % of GDP reference level. The planned restrictive fiscal stance from 2009 until 2011 is an appropriate response in the light of existing imbalances. The current budgetary framework is rather weak as regards medium-term planning and control of public finances, especially in terms of expenditure.

In view of the above assessment and also given the need to ensure sustainable convergence and a smooth participation in ERM II, Lithuania is invited to:

| (i) | implement measures needed to achieve the budgetary target in 2009 by prioritising expenditures and continue targeted fiscal consolidation in the medium-term; |
| --- | --- |

(i)

implement measures needed to achieve the budgetary target in 2009 by prioritising expenditures and continue targeted fiscal consolidation in the medium-term;

| (ii) | implement public sector wage restraint to facilitate the alignment of whole-economy wages with productivity and to strengthen cost competitiveness; |
| --- | --- |

(ii)

implement public sector wage restraint to facilitate the alignment of whole-economy wages with productivity and to strengthen cost competitiveness;

| (iii) | strengthen fiscal governance and transparency, by enhancing the medium-term budgetary framework and reinforcing expenditure discipline. |
| --- | --- |

(iii)

strengthen fiscal governance and transparency, by enhancing the medium-term budgetary framework and reinforcing expenditure discipline.

Comparison of key macro-economic and budgetary projections

| | | 2007 | 2008 | 2009 | 2010 | 2011 |
| --- | --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | CP Jan 2009 | 8,9 | 3,5 | – 4,8 | – 0,2 | 4,5 |
| COM Jan 2009 | 8,9 | 3,4 | – 4,0 | – 2,6 | n.a. |
| CP Dec 2007 | 9,8 | 5,3 | 4,5 | 5,2 | n.a. |
| HICP inflation
  (%) | CP Jan 2009 | 5,8 | 11,2 | 5,4 | 3,6 | – 0,1 |
| COM Jan 2009 | 5,8 | 11,1 | 5,6 | 4,8 | n.a. |
| CP Dec 2007 | 5,8 | 6,5 | 5,1 | 3,6 | n.a. |
| Output gap (5)

  (% of potential GDP) | CP Jan 2009 | 7,1 | 5,4 | – 2,8 | – 5,7 | – 4,0 |
| COM Jan 2009 (6) | 7,7 | 6,6 | – 0,5 | – 4,8 | n.a. |
| CP Dec 2007 | 3,3 | 1,5 | – 0,4 | – 1,3 | n.a. |
| Net lending/borrowing vis-à-vis the rest of the world
  (% of GDP) | CP Jan 2009 | – 12,7 | – 10,2 | – 1,8 | – 4,7 | – 5,7 |
| COM Jan 2009 | – 13,2 | – 10,7 | – 4,8 | – 4,7 | n.a. |
| CP Dec 2007 | – 12,5 | – 12,7 | – 14,5 | – 15,4 | n.a. |
| General government revenue
  (% of GDP) | CP Jan 2009 | 33,9 | 33,8 | 35,8 | 37,3 | 36,4 |
| COM Jan 2009 | 33,9 | 33,9 | 34,8 | 36,0 | n.a. |
| CP Dec 2007 | 35,5 | 37,4 | 38,6 | 39,4 | n.a. |
| General government expenditure
  (% of GDP) | CP Jan 2009 | 35,2 | 36,7 | 37,8 | 38,3 | 36,4 |
| COM Jan 2009 | 35,2 | 36,8 | 37,8 | 39,4 | n.a. |
| CP Dec 2007 | 36,4 | 37,9 | 38,5 | 38,6 | n.a. |
| General government balance
  (% of GDP) | CP Jan 2009 | – 1,2 | – 2,9 | – 2,1 | – 1,0 | 0,0 |
| COM Jan 2009 | – 1,2 | – 2,9 | – 3,0 | – 3,4 | n.a. |
| CP Dec 2007 | – 0,9 | – 0,5 | 0,2 | 0,8 | n.a. |
| Primary balance
  (% of GDP) | CP Jan 2009 | – 0,5 | – 2,3 | – 1,2 | 0,0 | 1,1 |
| COM Jan 2009 | – 0,5 | – 2,2 | – 2,0 | – 2,3 | n.a. |
| CP Dec 2007 | – 0,1 | 0,3 | 0,9 | 1,4 | n.a. |
| Cyclically-adjusted balance (5)

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

  (% of GDP) | CP Jan 2009 | – 2,6 | – 4,9 | – 1,8 | 0,1 | 1,1 |
| COM Jan 2009 | – 2,7 | – 4,6 | – 2,9 | – 2,1 | n.a. |
| CP Dec 2007 | – 1,2 | – 0,9 | 0,3 | 1,1 | n.a. |
| Government gross debt
  (% of GDP) | CP Jan 2009 | 17,0 | 15,3 | 16,9 | 18,1 | 17,1 |
| COM Jan 2009 | 17,0 | 17,1 | 20,0 | 23,3 | n.a. |
| CP Dec 2007 | 17,6 | 17,2 | 15,0 | 14,0 | n.a. |
| Convergence programme (CP); Commission services' January 2009 interim forecasts (COM); Commission services' calculations. |

2007

2008

2009

2010

2011

Real GDP

(% change)

CP Jan 2009

8,9

3,5

– 4,8

– 0,2

4,5

COM Jan 2009

8,9

3,4

– 4,0

– 2,6

n.a.

CP Dec 2007

9,8

5,3

4,5

5,2

n.a.

HICP inflation

(%)

CP Jan 2009

5,8

11,2

5,4

3,6

– 0,1

COM Jan 2009

5,8

11,1

5,6

4,8

n.a.

CP Dec 2007

5,8

6,5

5,1

3,6

n.a.

Output gap (5)

(% of potential GDP)

CP Jan 2009

7,1

5,4

– 2,8

– 5,7

– 4,0

COM Jan 2009 (6)

7,7

6,6

– 0,5

– 4,8

n.a.

CP Dec 2007

3,3

1,5

– 0,4

– 1,3

n.a.

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

(% of GDP)

CP Jan 2009

– 12,7

– 10,2

– 1,8

– 4,7

– 5,7

COM Jan 2009

– 13,2

– 10,7

– 4,8

– 4,7

n.a.

CP Dec 2007

– 12,5

– 12,7

– 14,5

– 15,4

n.a.

General government revenue

(% of GDP)

CP Jan 2009

33,9

33,8

35,8

37,3

36,4

COM Jan 2009

33,9

33,9

34,8

36,0

n.a.

CP Dec 2007

35,5

37,4

38,6

39,4

n.a.

General government expenditure

(% of GDP)

CP Jan 2009

35,2

36,7

37,8

38,3

36,4

COM Jan 2009

35,2

36,8

37,8

39,4

n.a.

CP Dec 2007

36,4

37,9

38,5

38,6

n.a.

General government balance

(% of GDP)

CP Jan 2009

– 1,2

– 2,9

– 2,1

– 1,0

0,0

COM Jan 2009

– 1,2

– 2,9

– 3,0

– 3,4

n.a.

CP Dec 2007

– 0,9

– 0,5

0,2

0,8

n.a.

Primary balance

(% of GDP)

CP Jan 2009

– 0,5

– 2,3

– 1,2

0,0

1,1

COM Jan 2009

– 0,5

– 2,2

– 2,0

– 2,3

n.a.

CP Dec 2007

– 0,1

0,3

0,9

1,4

n.a.

Cyclically-adjusted balance (5)

(% of GDP)

CP Jan 2009

– 3,1

– 4,4

– 1,3

0,5

1,1

COM Jan 2009

– 3,3

– 4,6

– 2,9

– 2,1

n.a.

CP Dec 2007

– 1,8

– 0,9

0,3

1,1

n.a.

Structural balance (7)

(% of GDP)

CP Jan 2009

– 2,6

– 4,9

– 1,8

0,1

1,1

COM Jan 2009

– 2,7

– 4,6

– 2,9

– 2,1

n.a.

CP Dec 2007

– 1,2

– 0,9

0,3

1,1

n.a.

Government gross debt

(% of GDP)

CP Jan 2009

17,0

15,3

16,9

18,1

17,1

COM Jan 2009

17,0

17,1

20,0

23,3

n.a.

CP Dec 2007

17,6

17,2

15,0

14,0

n.a.

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

---

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

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

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

(3)  The projected structural consolidation in the programme of around 4 percentage points of GDP is equal to the nominal value of the consolidation package. However, it differs from the structural balance as recalculated by the Commission services based on the information in the programme, mainly due to different estimates of potential growth and output gap.

(4)  In particular, the data on the subcomponents of the stock-flow adjustment, estimates of the contributions to potential growth and some data on long-term sustainability are not provided.

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

(6)  Based on estimated potential growth of 6,1 %, 4,5 %, 2,8 % and 1,8 % respectively in the period 2007-2010.

(7)  Cyclically-adjusted balance excluding one-off and other temporary measures. One-off and other temporary measures are 0,6 % of GDP in 2007; deficit-increasing, 0,5 % in 2008, 0,5 % in 2009 and 0,5 % in 2010; all deficit-reducing according to the most recent programme and 0,6 % of GDP in 2007; deficit-increasing according to the Commission services' January interim forecast.

Source:

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

---

| 24.3.2009 | EN | Official Journal of the European Union | C 70/13 |
| --- | --- | --- | --- |

24.3.2009

EN

Official Journal of the European Union

C 70/13

---

COUNCIL OPINION

of 10 March 2009

on the updated stability programme of Luxembourg, 2008-2010

(2009/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 10 March 2009, the Council examined the updated stability programme of Luxembourg, which covers the period 2008 to 2010 (2). |
| --- | --- |

(1)

On 10 March 2009, the Council examined the updated stability programme of Luxembourg, which covers the period 2008 to 2010 (2).

| (2) | Economic activity slowed down considerably as a result of the global economic downturn and the financial crisis, with real GDP growth falling from 5,2 % in 2007 to about 1 % in 2008. In 2009, economic activity is expected to contract by 0,9 % according to the Commission services' January 2009 interim forecast: the Luxembourg economy, which is both very open and dependant on the performances of its financial sector, will be seriously hit by the projected fall in world trade and the financial crisis, while government spending and, to some extent, private consumption are expected to constitute the only support to growth. The main policy challenges in the downturn are related to the financial sector, whose activity is highly internationalised, and to the support of domestic demand. The downturn will have a significant impact on public finances as the large surplus projected for 2008 is expected to turn in 2009 into a deficit which will widen in 2010. This deterioration in the government balance also takes into account the effect of the support measures decided in recent months, which essentially include important tax cuts, especially in personal income tax, as well as a significant acceleration in the implementation of government investment projects. In view of the favourable budgetary starting position and the very low level of the public debt, these measures are appropriate and welcome. |
| --- | --- |

(2)

Economic activity slowed down considerably as a result of the global economic downturn and the financial crisis, with real GDP growth falling from 5,2 % in 2007 to about 1 % in 2008. In 2009, economic activity is expected to contract by 0,9 % according to the Commission services' January 2009 interim forecast: the Luxembourg economy, which is both very open and dependant on the performances of its financial sector, will be seriously hit by the projected fall in world trade and the financial crisis, while government spending and, to some extent, private consumption are expected to constitute the only support to growth. The main policy challenges in the downturn are related to the financial sector, whose activity is highly internationalised, and to the support of domestic demand. The downturn will have a significant impact on public finances as the large surplus projected for 2008 is expected to turn in 2009 into a deficit which will widen in 2010. This deterioration in the government balance also takes into account the effect of the support measures decided in recent months, which essentially include important tax cuts, especially in personal income tax, as well as a significant acceleration in the implementation of government investment projects. In view of the favourable budgetary starting position and the very low level of the public debt, these measures are appropriate and welcome.

| (3) | The macro-economic scenario underlying the programme, as amended by the addendum, projects real GDP, after decelerating from 5,2 % in 2007 to 1,0 % in 2008, to contract by 0,9 % in 2009 before recovering somewhat and rising by 1,4 % in 2010. Assessed against currently available information (3), this scenario appears to be based on plausible growth assumptions for 2008 to 2010. It is fully in line with the Commission services' January 2009 interim forecast. The programme's projections for inflation and wage developments also appear realistic. |
| --- | --- |

(3)

The macro-economic scenario underlying the programme, as amended by the addendum, projects real GDP, after decelerating from 5,2 % in 2007 to 1,0 % in 2008, to contract by 0,9 % in 2009 before recovering somewhat and rising by 1,4 % in 2010. Assessed against currently available information (3), this scenario appears to be based on plausible growth assumptions for 2008 to 2010. It is fully in line with the Commission services' January 2009 interim forecast. The programme's projections for inflation and wage developments also appear realistic.

| (4) | For 2008, the general government surplus is estimated at 2,0 % of GDP in the programme's addendum, which compares with a target of 0,8 % of GDP set in the previous update of the stability programme. This much better than expected outcome compared with the previous update is for a large part due to the base effect associated with a revision of the general government surplus in 2007 from a previous estimate of 1 % of GDP to 3,2 %, mainly on account of revenue surprises.
  For 2008, this better than expected starting position was partly offset by higher-than-anticipated expenditure growth, in particular in government consumption and investment as well as social transfers. The faster-than-expected increase in government consumption is partly explained by the hiring of new staff required by the development of the University of Luxembourg and other public research centres. |
| --- | --- |

(4)

For 2008, the general government surplus is estimated at 2,0 % of GDP in the programme's addendum, which compares with a target of 0,8 % of GDP set in the previous update of the stability programme. This much better than expected outcome compared with the previous update is for a large part due to the base effect associated with a revision of the general government surplus in 2007 from a previous estimate of 1 % of GDP to 3,2 %, mainly on account of revenue surprises.

For 2008, this better than expected starting position was partly offset by higher-than-anticipated expenditure growth, in particular in government consumption and investment as well as social transfers. The faster-than-expected increase in government consumption is partly explained by the hiring of new staff required by the development of the University of Luxembourg and other public research centres.

| (5) | The programme projects the general government balance to deteriorate from a surplus of 2 % of GDP in 2008 to a deficit of 0,6 % of GDP in 2009. This can be explained in part by the impact of the economic slowdown and the associated normal functioning of automatic stabilisers, especially concerning tax revenue from the financial sector. The 2009 deficit will also result from discretionary measures adopted in the 2009 budget including those decided in response to the economic downturn and in line with the European Economic Recovery Plan, amounting to 1,75 % of GDP. The 2009 budget foresees important tax cuts, especially in personal income tax, amounting ex ante to about 1,25 % of GDP, while some government investment projects initially scheduled for 2010 are planned to be brought forward. Revenues are projected to decline by about 0,5 percentage point of GDP in 2009. This comprises a decrease by 1 percentage point of GDP in direct taxes resulting from the tax cuts and from the impact of the crisis, while social contributions and property income would increase by around 0,25 percentage point of GDP each, thanks to the carry-over resulting from still buoyant employment growth until the end of 2008 and to the interests received on the loans granted in support of the financial sector. Simultaneously, in 2009 general government expenditure is planned to rise by 2,25 percentage point of GDP, mainly as a result of significant increases in government consumption and investment as well as in social transfers, the latter being partly the result of the replacement of the tax reduction for children by a system of tax credit and also of the increase in unemployment forecast for this year. |
| --- | --- |

(5)

The programme projects the general government balance to deteriorate from a surplus of 2 % of GDP in 2008 to a deficit of 0,6 % of GDP in 2009. This can be explained in part by the impact of the economic slowdown and the associated normal functioning of automatic stabilisers, especially concerning tax revenue from the financial sector. The 2009 deficit will also result from discretionary measures adopted in the 2009 budget including those decided in response to the economic downturn and in line with the European Economic Recovery Plan, amounting to 1,75 % of GDP. The 2009 budget foresees important tax cuts, especially in personal income tax, amounting ex ante to about 1,25 % of GDP, while some government investment projects initially scheduled for 2010 are planned to be brought forward. Revenues are projected to decline by about 0,5 percentage point of GDP in 2009. This comprises a decrease by 1 percentage point of GDP in direct taxes resulting from the tax cuts and from the impact of the crisis, while social contributions and property income would increase by around 0,25 percentage point of GDP each, thanks to the carry-over resulting from still buoyant employment growth until the end of 2008 and to the interests received on the loans granted in support of the financial sector. Simultaneously, in 2009 general government expenditure is planned to rise by 2,25 percentage point of GDP, mainly as a result of significant increases in government consumption and investment as well as in social transfers, the latter being partly the result of the replacement of the tax reduction for children by a system of tax credit and also of the increase in unemployment forecast for this year.

| (6) | The programme projects the general government headline deficit to deteriorate further from 0,6 % of GDP in 2009 to 1,5 % of GDP in 2010, while the primary deficit would increase from 0,3 % of GDP to 1,2 %. Luxembourg's medium-term budgetary objective is a structural (that is cyclically-adjusted and net of one-off and other temporary measures) deficit of 0,75 % of GDP. Based on the programme's macro-economic scenario and budgetary projections, this medium-term objective is planned to be fully respected throughout the period covered: the structural balance recalculated according to the commonly agreed methodology based on the information in the programme is projected to remain positive, slightly declining from a surplus of 0,6 % of GDP in 2009 to a surplus of 0,4 % of GDP in 2010. The gross public debt, which doubled from 7 % of GDP in 2007 to 14,4 % of GDP in 2008 as a result of the financing of the supporting loans to the Luxembourg subsidiaries of systemically relevant foreign banks, is projected to increase to 15 % of GDP in 2009 and to 17 % in 2010. However, despite its doubling in 2008, it will remain by far the lowest inside the euro area. |
| --- | --- |

(6)

The programme projects the general government headline deficit to deteriorate further from 0,6 % of GDP in 2009 to 1,5 % of GDP in 2010, while the primary deficit would increase from 0,3 % of GDP to 1,2 %. Luxembourg's medium-term budgetary objective is a structural (that is cyclically-adjusted and net of one-off and other temporary measures) deficit of 0,75 % of GDP. Based on the programme's macro-economic scenario and budgetary projections, this medium-term objective is planned to be fully respected throughout the period covered: the structural balance recalculated according to the commonly agreed methodology based on the information in the programme is projected to remain positive, slightly declining from a surplus of 0,6 % of GDP in 2009 to a surplus of 0,4 % of GDP in 2010. The gross public debt, which doubled from 7 % of GDP in 2007 to 14,4 % of GDP in 2008 as a result of the financing of the supporting loans to the Luxembourg subsidiaries of systemically relevant foreign banks, is projected to increase to 15 % of GDP in 2009 and to 17 % in 2010. However, despite its doubling in 2008, it will remain by far the lowest inside the euro area.

| (7) | The risks to the budgetary projections in the programme appear broadly balanced. On the one hand, some downside risks to the macro-economic scenario could materialise. In particular, private consumption might prove less resilient than forecast. Moreover, the impact of the crisis on tax revenue, especially those from the financial sector, could be even larger than currently expected. On the other hand, the 2008 outcome might be better than projected in the programme (as was already the case in 2007) since budgetary projections in Luxembourg are traditionally renowned for being cautious. |
| --- | --- |

(7)

The risks to the budgetary projections in the programme appear broadly balanced. On the one hand, some downside risks to the macro-economic scenario could materialise. In particular, private consumption might prove less resilient than forecast. Moreover, the impact of the crisis on tax revenue, especially those from the financial sector, could be even larger than currently expected. On the other hand, the 2008 outcome might be better than projected in the programme (as was already the case in 2007) since budgetary projections in Luxembourg are traditionally renowned for being cautious.

| (8) | The main concern for Luxembourg's public finances remains their long-term sustainability in view of the very large projected increase in age-related public expenditure and the fact that no measures have been taken to date in order to address this issue: the long-term budgetary impact of ageing is among the highest in the EU, influenced notably by a very considerable projected increase in pension expenditure. The budgetary position in 2008 as estimated in the programme, which is better than the starting position of the previous programme, the low debt ratio, the significant assets accumulated in social security, and a structural primary surplus contribute to offsetting the projected long-term budgetary impact of ageing populations. However, this is not sufficient to cover the sizeable increase in age-related expenditure. Achieving high primary surpluses over the medium term and, as recognised by the authorities, implementing measures aimed at curbing the substantial increase in age-related expenditures, including by increasing the effective pension age, would contribute to reducing the medium risk to the sustainability of public finances. The risks to sustainability stemming from the financial sector support operations performed in recent months do not seem considerable at the moment, despite the sizeable increase in public debt that these operations required, even though potential liabilities could be comparatively important due to the very large size of the financial sector. Moreover, a large part of the costs (or even all of them) generated by these support operations could be recouped in the future. |
| --- | --- |

(8)

The main concern for Luxembourg's public finances remains their long-term sustainability in view of the very large projected increase in age-related public expenditure and the fact that no measures have been taken to date in order to address this issue: the long-term budgetary impact of ageing is among the highest in the EU, influenced notably by a very considerable projected increase in pension expenditure. The budgetary position in 2008 as estimated in the programme, which is better than the starting position of the previous programme, the low debt ratio, the significant assets accumulated in social security, and a structural primary surplus contribute to offsetting the projected long-term budgetary impact of ageing populations. However, this is not sufficient to cover the sizeable increase in age-related expenditure. Achieving high primary surpluses over the medium term and, as recognised by the authorities, implementing measures aimed at curbing the substantial increase in age-related expenditures, including by increasing the effective pension age, would contribute to reducing the medium risk to the sustainability of public finances. The risks to sustainability stemming from the financial sector support operations performed in recent months do not seem considerable at the moment, despite the sizeable increase in public debt that these operations required, even though potential liabilities could be comparatively important due to the very large size of the financial sector. Moreover, a large part of the costs (or even all of them) generated by these support operations could be recouped in the future.

| (9) | The structure of public finance seems comparatively favourable in Luxembourg: government expenditure and the tax burden are relatively low and expenditure as well as revenue systems seem relatively efficient, compared with other Member States. In particular, government consumption and taxation of labour income are comparatively low while public investment is one of the highest in the whole EU. |
| --- | --- |

(9)

The structure of public finance seems comparatively favourable in Luxembourg: government expenditure and the tax burden are relatively low and expenditure as well as revenue systems seem relatively efficient, compared with other Member States. In particular, government consumption and taxation of labour income are comparatively low while public investment is one of the highest in the whole EU.

| (10) | With a view to stabilising the financial sector, the Luxembourg government decided in September and October 2008 to grant a convertible loan to the local subsidiaries of two large foreign banks for a total amount of EUR 2,776 billion (7,6 % of GDP). In order to improve its access to finance, it was also decided to guarantee the new commitments contracted by one of these banks towards institutional investors and with a maximum maturity of three years. Finally, in order to restore depositors' confidence, the amount covered by the deposit guarantee scheme was raised from EUR 20 000 to EUR 100 000 per deposit. It should be noted that the general government holds large financial assets, accumulated from the recurrent surpluses recorded in the last decades and augmented by the loans granted at the end of 2008 to the subsidiaries of these two foreign banks. These assets amounted to about 32 % of GDP in 2008, of which about one third held by the central government and two thirds by the social security system. Consequently, the net financial position of the general government is widely positive. |
| --- | --- |

(10)

With a view to stabilising the financial sector, the Luxembourg government decided in September and October 2008 to grant a convertible loan to the local subsidiaries of two large foreign banks for a total amount of EUR 2,776 billion (7,6 % of GDP). In order to improve its access to finance, it was also decided to guarantee the new commitments contracted by one of these banks towards institutional investors and with a maximum maturity of three years. Finally, in order to restore depositors' confidence, the amount covered by the deposit guarantee scheme was raised from EUR 20 000 to EUR 100 000 per deposit. It should be noted that the general government holds large financial assets, accumulated from the recurrent surpluses recorded in the last decades and augmented by the loans granted at the end of 2008 to the subsidiaries of these two foreign banks. These assets amounted to about 32 % of GDP in 2008, of which about one third held by the central government and two thirds by the social security system. Consequently, the net financial position of the general government is widely positive.

| (11) | Some fiscal support measures had already been decided in the 2009 budget, which was drafted before the aggravation of the financial crisis. They consisted for the most part of cuts in income tax, the cost of which is estimated by the programme at about 1,2 % of GDP. The budget also foresaw a reduction of the corporate tax rate, which will affect revenues from 2010 onwards. In addition, in line with the European Economic Recovery Plan agreed in December by the European Council, Luxembourg has adopted other support measures, among which the most relevant refer to an acceleration in government investment as well as subsidies for the purchase of energy-efficient durables and for energy-saving investments. Furthermore, the employers' share of the unemployment benefit in case of part-time unemployment will be reimbursed by the government until the end of 2009. In total, these stimulus measures will amount to about 1,75 % of GDP. Thanks to the non-negligible surplus recorded in 2008 and to the very low level of the public debt, the available room for manoeuvre is especially large in Luxembourg. The fiscal stimulus package for 2009 and 2010 appears to constitute an adequate response to the current economic downturn, although a large part of the stimulus measures is not supposed to be temporary, in particular the cuts in income tax, which were primarily designed to compensate for the non-indexation of income tax brackets since 2001. Luxembourg also took several measures and will take additional ones in the coming years in order to create a more attractive economic environment and to implement the energy and climate-change package. These measures are related to the medium-term reform agenda proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs. |
| --- | --- |

(11)

Some fiscal support measures had already been decided in the 2009 budget, which was drafted before the aggravation of the financial crisis. They consisted for the most part of cuts in income tax, the cost of which is estimated by the programme at about 1,2 % of GDP. The budget also foresaw a reduction of the corporate tax rate, which will affect revenues from 2010 onwards. In addition, in line with the European Economic Recovery Plan agreed in December by the European Council, Luxembourg has adopted other support measures, among which the most relevant refer to an acceleration in government investment as well as subsidies for the purchase of energy-efficient durables and for energy-saving investments. Furthermore, the employers' share of the unemployment benefit in case of part-time unemployment will be reimbursed by the government until the end of 2009. In total, these stimulus measures will amount to about 1,75 % of GDP. Thanks to the non-negligible surplus recorded in 2008 and to the very low level of the public debt, the available room for manoeuvre is especially large in Luxembourg. The fiscal stimulus package for 2009 and 2010 appears to constitute an adequate response to the current economic downturn, although a large part of the stimulus measures is not supposed to be temporary, in particular the cuts in income tax, which were primarily designed to compensate for the non-indexation of income tax brackets since 2001. Luxembourg also took several measures and will take additional ones in the coming years in order to create a more attractive economic environment and to implement the energy and climate-change package. These measures are related to the medium-term reform agenda proposed by the Commission on 28 January 2009 under the Lisbon Strategy for Growth and Jobs.

| (12) | The structural balance calculated according to the commonly agreed methodology is projected to remain in surplus, declining from 1,5 % of GDP in 2008 to 0,6 % of GDP in 2009 and 0,4 % of GDP in 2010. The overall fiscal stance is expansionary in 2009, reflecting the response of the Luxembourg government to the downturn, and mildly expansionary in 2010, although the changes in the structural balance are somewhat smaller than the stimulus measures taken. The MTO is projected to be respected over the period covered. |
| --- | --- |

(12)

The structural balance calculated according to the commonly agreed methodology is projected to remain in surplus, declining from 1,5 % of GDP in 2008 to 0,6 % of GDP in 2009 and 0,4 % of GDP in 2010. The overall fiscal stance is expansionary in 2009, reflecting the response of the Luxembourg government to the downturn, and mildly expansionary in 2010, although the changes in the structural balance are somewhat smaller than the stimulus measures taken. The MTO is projected to be respected over the period covered.

| (13) | As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has some gaps in the required and optional data (4). Moreover, the addendum to the programme, which partly replaces the original macro-economic and budgetary scenario, does not provide projections for 2011 (5). |
| --- | --- |

(13)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has some gaps in the required and optional data (4). Moreover, the addendum to the programme, which partly replaces the original macro-economic and budgetary scenario, does not provide projections for 2011 (5).

The overall conclusion is that, in view of the sound budgetary starting position, the measures decided in response to the downturn and presented in the addendum to the stability programme are appropriate and should be welcomed. They are generally in line with the principles (timely, targeted and temporary) of the European Economic Recovery Plan, even though the cuts in income tax, which were decided before the aggravation of the crisis, are not planned to be temporary. Due to the projected sharp economic downturn and to the measures decided in response to the downturn, the government balance will turn into a deficit in 2009, after several years in surplus, but it will remain far from the 3 % reference value and the medium-term objective is planned to be respected throughout the programme period. Risks to the programme's budgetary targets seem broadly balanced. However, concerns remain about the long-term sustainability of public finance, which will have to bear a particularly heavy burden in the coming decades as the increase in age-related public expenditure is projected to be among the strongest in the whole EU.

In view of the above assessment and of the very strong increase in age-related expenditure forecast for the coming decades, Luxembourg is invited to:

| (i) | implement the fiscal plans, including the stimulus measures in line with the EERP and within the framework of the SGP; |
| --- | --- |

(i)

implement the fiscal plans, including the stimulus measures in line with the EERP and within the framework of the SGP;

| (ii) | improve the long-term sustainability of its public finances by implementing structural reform measures, in particular in the area of pensions. |
| --- | --- |

(ii)

improve the long-term sustainability of its public finances by implementing structural reform measures, in particular in the area of pensions.

Comparison of key macro-economic and budgetary projections

| | | 2007 | 2008 | 2009 | 2010 |
| --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Oct 2008 | 5,2 | 1,0 | – 0,9 | 1,4 |
| COM Jan 2009 | 5,2 | 1,0 | – 0,9 | 1,4 |
| SP Nov 2007 | 6,0 | 4,5 | 5,0 | 4,0 |
| HICP inflation
  (%) | SP Oct 2008 | 2,7 | 4,1 | 0,6 | 2,5 |
| COM Jan 2009 | 2,7 | 4,1 | 0,6 | 2,5 |
| SP Nov 2007 | 2,3 | 2,0 | 2,1 | 2,1 |
| Output gap (6)

  (% of potential GDP) | SP Oct 2008 | 3,2 | 1,1 | – 2,5 | – 3,8 |
| COM Jan 2009 (7) | 3,2 | 1,1 | – 2,3 | – 3,5 |
| SP Nov 2007 | 0,5 | 0,1 | 0,2 | – 0,8 |
| Net lending/borrowing vis-à-vis the rest of the world
  (% of GDP) | SP Oct 2008 | n.a. | n.a. | n.a. | n.a. |
| COM Jan 2009 | n.a. | n.a. | n.a. | n.a. |
| SP Nov 2007 | n.a. | n.a. | n.a. | n.a. |
| General government revenue
  (% of GDP) | SP Oct 2008 | 41,0 | 43,2 | 42,8 | 42,8 |
| COM Jan 2009 | 41,0 | 43,6 | 44,0 | 42,9 |
| SP Nov 2007 | 38,5 | 37,8 | 37,9 | 37,8 |
| General government expenditure
  (% of GDP) | SP Oct 2008 | 37,8 | 41,2 | 43,4 | 44,3 |
| COM Jan 2009 | 37,8 | 40,6 | 43,5 | 44,3 |
| SP Nov 2007 | 37,5 | 36,9 | 36,9 | 36,6 |
| General government balance
  (% of GDP) | SP Oct 2008 | 3,2 | 2,0 | – 0,6 | – 1,5 |
| COM Jan 2009 | 3,2 | 3,0 | 0,4 | – 1,4 |
| SP Nov 2007 | 1,0 | 0,8 | 1,0 | 1,2 |
| Primary balance
  (% of GDP) | SP Oct 2008 | 3,5 | 2,3 | – 0,3 | – 1,2 |
| COM Jan 2009 | 3,5 | 3,3 | 1,0 | – 0,9 |
| SP Nov 2007 | 1,2 | 1,1 | 1,2 | 1,5 |
| Cyclically-adjusted balance (6)

  (% of GDP) | SP Oct 2008 | 1,6 | 1,5 | 0,6 | 0,4 |
| COM Jan 2009 | 1,6 | 2,4 | 1,6 | 0,3 |
| SP Nov 2007 | 0,7 | 0,8 | 0,9 | 1,6 |
| Structural balance (8)

  (% of GDP) | SP Oct 2008 | 1,6 | 1,5 | 0,6 | 0,4 |
| COM Jan 2009 | 1,6 | 2,4 | 1,6 | 0,3 |
| SP Nov 2007 | 0,7 | 0,8 | 0,9 | 1,6 |
| Government gross debt
  (% of GDP) | SP Oct 2008 | 7,0 | 14,4 | 14,9 | 17,0 |
| COM Jan 2009 | 7,0 | 14,4 | 15,0 | 15,1 |
| SP Nov 2007 | 6,9 | 7,1 | 7,2 | 7,0 |
| Stability programme (SP), Commission services' January 2009 interim forecasts (COM); Commission services' calculations. |

2007

2008

2009

2010

Real GDP

(% change)

SP Oct 2008

5,2

1,0

– 0,9

1,4

COM Jan 2009

5,2

1,0

– 0,9

1,4

SP Nov 2007

6,0

4,5

5,0

4,0

HICP inflation

(%)

SP Oct 2008

2,7

4,1

0,6

2,5

COM Jan 2009

2,7

4,1

0,6

2,5

SP Nov 2007

2,3

2,0

2,1

2,1

Output gap (6)

(% of potential GDP)

SP Oct 2008

3,2

1,1

– 2,5

– 3,8

COM Jan 2009 (7)

3,2

1,1

– 2,3

– 3,5

SP Nov 2007

0,5

0,1

0,2

– 0,8

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

(% of GDP)

SP Oct 2008

n.a.

n.a.

n.a.

n.a.

COM Jan 2009

n.a.

n.a.

n.a.

n.a.

SP Nov 2007

n.a.

n.a.

n.a.

n.a.

General government revenue

(% of GDP)

SP Oct 2008

41,0

43,2

42,8

42,8

COM Jan 2009

41,0

43,6

44,0

42,9

SP Nov 2007

38,5

37,8

37,9

37,8

General government expenditure

(% of GDP)

SP Oct 2008

37,8

41,2

43,4

44,3

COM Jan 2009

37,8

40,6

43,5

44,3

SP Nov 2007

37,5

36,9

36,9

36,6

General government balance

(% of GDP)

SP Oct 2008

3,2

2,0

– 0,6

– 1,5

COM Jan 2009

3,2

3,0

0,4

– 1,4

SP Nov 2007

1,0

0,8

1,0

1,2

Primary balance

(% of GDP)

SP Oct 2008

3,5

2,3

– 0,3

– 1,2

COM Jan 2009

3,5

3,3

1,0

– 0,9

SP Nov 2007

1,2

1,1

1,2

1,5

Cyclically-adjusted balance (6)

(% of GDP)

SP Oct 2008

1,6

1,5

0,6

0,4

COM Jan 2009

1,6

2,4

1,6

0,3

SP Nov 2007

0,7

0,8

0,9

1,6

Structural balance (8)

(% of GDP)

SP Oct 2008

1,6

1,5

0,6

0,4

COM Jan 2009

1,6

2,4

1,6

0,3

SP Nov 2007

0,7

0,8

0,9

1,6

Government gross debt

(% of GDP)

SP Oct 2008

7,0

14,4

14,9

17,0

COM Jan 2009

7,0

14,4

15,0

15,1

SP Nov 2007

6,9

7,1

7,2

7,0

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

---

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

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

(2)  The original October 2008 programme covered the period 2008-2011. However, the Luxembourg authorities submitted on 2 February an addendum replacing the original macro-economic and budgetary scenario by a fundamentally different one, but which only covers the period 2008-2010. The Commission services could therefore not assess the macro-economic scenario and the budgetary targets in 2011.

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

(4)  In particular, there are no data on sectoral balances with the exception of the general government.

(5)  Article 3(3) of Council Regulation (EC) No 1466/97 foresees that ‘The information about the paths for the general government deficit ratio and debt ratio and the main economic assumptions (...) shall cover, as well as the current and the preceding year, at least the following three years’.

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

(7)  Based on estimated potential growth of 4,2 %, 3,2 %, 2,7 % and 2,8 % respectively in the period 2007-2010.

(8)  Cyclically-adjusted balance excluding one-off and other temporary measures. One-off and other temporary measures are 0 % of GDP in 2009, 2010 and 2011 according to the most recent programme and in the Commission services' January interim forecast.

Source:

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

---

II Information

INFORMATION FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

| 24.3.2009 | EN | Official Journal of the European Union | C 70/19 |
| --- | --- | --- | --- |

24.3.2009

EN

Official Journal of the European Union

C 70/19

---

Non-opposition to a notified concentration

(Case COMP/M.5427 — Dexia Credit Local/Dexia Kommunalkredit Bank)

(Text with EEA relevance)

(2009/C 70/04)

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

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

—

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

| — | in electronic form on the EUR-Lex website under document number 32009M5427. EUR-Lex is the on-line access to European law (http://eur-lex.europa.eu). |
| --- | --- |

—

in electronic form on the EUR-Lex website under document number 32009M5427. EUR-Lex is the on-line access to European law (http://eur-lex.europa.eu).

---

| 24.3.2009 | EN | Official Journal of the European Union | C 70/20 |
| --- | --- | --- | --- |

24.3.2009

EN

Official Journal of the European Union

C 70/20

---

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

Cases where the Commission raises no objections

(2009/C 70/05)

| Date of adoption of the decision | 25.2.2009 |
| --- | --- |
| Reference number of the aid | NN 116/02 ex N 563/02 |
| Member State | The Netherlands |
| Region | — |
| Title (and/or name of the beneficiary) | Tijdelijke noodmaatregel: overname varkens wegens MPA-verontreiniging |
| Legal basis | Artikelen 93 en 26 van de wet op de bedrijfsorganisaties. Algemene Voorwaarden tijdelijke noodmatregel overname varkens wegens MPA-verontreiniging zoals vastgesteld door het Productschap Vee en Vlees |
| Type of measure | One off compensation measure |
| Objective | Animal and Human Health, prevention of the MPA-contamination; prevention of entering into the food chain |
| Form of aid | Compensation for the culling of the pigs on the farms that were suspected of being contaminated with MPA as certain samples of some of the pigs on the farms had tested positive on MPA contamination |
| Budget | EUR 6 350 000 |
| Intensity | Maximum 100 % of the market value of the pigs |
| Duration | August — September 2002 |
| Economic sectors | Agriculture — Livestock sector (pigs) |
| Name and address of the granting authority | Ministerie van Landbouw, Natuur en Voedselkwaliteit |
| Postbus 20401 |
| 2500 EK Den Haag |
| Nederland |

Date of adoption of the decision

25.2.2009

Reference number of the aid

NN 116/02 ex N 563/02

Member State

The Netherlands

Region

—

Title (and/or name of the beneficiary)

Tijdelijke noodmaatregel: overname varkens wegens MPA-verontreiniging

Legal basis

Artikelen 93 en 26 van de wet op de bedrijfsorganisaties. Algemene Voorwaarden tijdelijke noodmatregel overname varkens wegens MPA-verontreiniging zoals vastgesteld door het Productschap Vee en Vlees

Type of measure

One off compensation measure

Objective

Animal and Human Health, prevention of the MPA-contamination; prevention of entering into the food chain

Form of aid

Compensation for the culling of the pigs on the farms that were suspected of being contaminated with MPA as certain samples of some of the pigs on the farms had tested positive on MPA contamination

Budget

EUR 6 350 000

Intensity

Maximum 100 % of the market value of the pigs

Duration

August — September 2002

Economic sectors

Agriculture — Livestock sector (pigs)

Name and address of the granting authority

Ministerie van Landbouw, Natuur en Voedselkwaliteit

Postbus 20401

2500 EK Den Haag

Nederland

Other information

Article 87(2)(b) of the EC Treaty — Extraordinary event

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 | 13.1.2009 |
| --- | --- |
| Aid No | N 394/08 |
| Member State | Spain |
| Region | Navarra |
| Title (and/or name of beneficiary) | Ayudas para el fomento de sistemas de producción ganadera sostenibles |
| Legal basis | Orden foral de la Consejería de Desarrollo Rural y Medio Ambiente, por la que se establecen las normas reguladoras para la concesión de las ayudas para el fomento de sistemas de producción ganadera sostenibles |
| Type of measure | Aid scheme |
| Objective | Aid for agri-environmental commitments for adaptation to more sustainable forms of livestock farming on holdings in Navarre |
| Form of aid | Direct grant |
| Budget | EUR 12 000 000 |
| Intensity | Max. EUR 35/ha |
| Duration | Until 31 December 2013 |
| Economic sectors | Agricultural sector |
| Name and address of the granting authority | Departamento de Desarrollo Rural y Medio Ambiente del Gobierno de Navarra |
| C/ Tudela, 20 |
| 31003 Pamplona (Navarra) |
| ESPAÑA |

Date of adoption of the decision

13.1.2009

Aid No

N 394/08

Member State

Spain

Region

Navarra

Title (and/or name of beneficiary)

Ayudas para el fomento de sistemas de producción ganadera sostenibles

Legal basis

Orden foral de la Consejería de Desarrollo Rural y Medio Ambiente, por la que se establecen las normas reguladoras para la concesión de las ayudas para el fomento de sistemas de producción ganadera sostenibles

Type of measure

Aid scheme

Objective

Aid for agri-environmental commitments for adaptation to more sustainable forms of livestock farming on holdings in Navarre

Form of aid

Direct grant

Budget

EUR 12 000 000

Intensity

Max. EUR 35/ha

Duration

Until 31 December 2013

Economic sectors

Agricultural sector

Name and address of the granting authority

Departamento de Desarrollo Rural y Medio Ambiente del Gobierno de Navarra

C/ Tudela, 20

31003 Pamplona (Navarra)

ESPAÑA

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/

---

IV Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Council

| 24.3.2009 | EN | Official Journal of the European Union | C 70/22 |
| --- | --- | --- | --- |

24.3.2009

EN

Official Journal of the European Union

C 70/22

---

List of appointments made by the Council

January and February 2009 (social field)

(2009/C 70/06)

| Committee | End of term of office | Publication in OJ | Person replaced | Resignation/appointment | Member/alternate | Category | Country | Person appointed | Affiliation | Date of Council Decision |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Advisory Committee on Freedom of Movement for Workers | 24.9.2010 | C 253, 4.10.2008 | Mr Gaetan BEZIER | Resignation | Member | Employers | France | Ms Natacha MARQUET | FNSEA | 23.2.2009 |
| Advisory Committee on Safety and Health at Work | 28.2.2010 | L 64, 2.3.2007 | Ms Yolanda PALACIO FERRERO | Resignation | Alternate | Government | Spain | Mr Mario GRAU RIOS | Ministerio de Trabajo e Inmigración | 23.2.2009 |
| Advisory Committee on Safety and Health at Work | 28.2.2010 | L 64, 2.3.2007 | Mr Mikko HURMALAINEN | Resignation | Member | Government | Finland | Mr Leo SUOMAA | Ministry of Social Affairs and Health | 23.2.2009 |
| Advisory Committee on Safety and Health at Work | 28.2.2010 | L 64, 2.3.2007 | Ms Anna-Liisa SUNDQUIST | Resignation | Alternate | Government | Finland | Mr Erkki YRJÄNHEIKKI | Ministry of Social Affairs and Health | 23.2.2009 |
| Advisory Committee on Safety and Health at Work | 28.2.2010 | L 64, 2.3.2007 | Mr Matti LAMBERG | Resignation | Alternate | Government | Finland | Ms Ritva PARTINEN | Ministry of Social Affairs and Health | 23.2.2009 |
| Advisory Committee on Safety and Health at Work | 28.2.2010 | L 64, 2.3.2007 | Ms Renate CZESKLEBA | Resignation | Member | Workers | Austria | Ms Karin ZIMMERMANN | Österreichischer Gewerkschaftsbund Sozialpolitik — Gesundheitspolitik | 23.2.2009 |
| Advisory Committee on Safety and Health at Work | 28.2.2010 | L 64, 2.3.2007 | — | Appointment | Alternate | Workers | Austria | Mr Alexander HEIDER | Bundesarbeitskammer Abteilung Sicherheit, Gesundheit und Arbeit | 23.2.2009 |
| Advisory Committee on Safety and Health at Work | 28.2.2010 | L 64, 2.3.2007 | Mr Miloš JANOUŠEK | Resignation | Alternate | Government | Slovakia | Ms Laurencia JANČUROVÁ | National Labour Inspectorate | 23.2.2009 |
| Governing Board of the European Agency for Safety and Health at Work | 7.11.2010 | C 271, 14.11.2007 | Ms Pilar CASLA BENITO | Resignation | Alternate | Government | Spain | Mr Mario GRAU RIOS | Ministerio de Trabajo e Inmigración | 23.2.2009 |
| Governing Board of the European Agency for Safety and Health at Work | 7.11.2010 | C 271, 14.11.2007 | Mr Miloš JANOUŠEK | Resignation | Member | Government | Slovakia | Ms Laurencia JANČUROVÁ | National Labour Inspectorate | 23.2.2009 |
| Governing Board of the European Foundation for the Improvement of Living and Working Conditions | 30.11.2010 | C 282, 24.11.2007 | Ms Ana Cristina LÓPEZ LÓPEZ | Resignation | Member | Government | Spain | Mr Juan Pablo PARRA GUTIÉRREZ | Ministerio de Trabajo e Immigración | 23.2.2009 |
| Governing Board of the European Foundation for the Improvement of Living and Working Conditions | 30.11.2010 | C 282, 24.11.2007 | Ms Birgit STIMMER | Resignation | Alternate | Government | Austria | Ms Petra HRIBERNIG | Bundesministerium für Wirtschaft und Arbeit | 23.2.2009 |
| Governing Board of the European Foundation for the Improvement of Living and Working Conditions | 30.11.2010 | C 282, 24.11.2007 | Mr Paul CLERINX | Resignation | Alternate | Employers | Belgium | Mr Kris DE MEESTER | VBO-FEB | 23.2.2009 |

Committee

End of term of office

Publication in OJ

Person replaced

Resignation/appointment

Member/alternate

Category

Country

Person appointed

Affiliation

Date of Council Decision

Advisory Committee on Freedom of Movement for Workers

24.9.2010

C 253, 4.10.2008

Mr Gaetan BEZIER

Resignation

Member

Employers

France

Ms Natacha MARQUET

FNSEA

23.2.2009

Advisory Committee on Safety and Health at Work

28.2.2010

L 64, 2.3.2007

Ms Yolanda PALACIO FERRERO

Resignation

Alternate

Government

Spain

Mr Mario GRAU RIOS

Ministerio de Trabajo e Inmigración

23.2.2009

Advisory Committee on Safety and Health at Work

28.2.2010

L 64, 2.3.2007

Mr Mikko HURMALAINEN

Resignation

Member

Government

Finland

Mr Leo SUOMAA

Ministry of Social Affairs and Health

23.2.2009

Advisory Committee on Safety and Health at Work

28.2.2010

L 64, 2.3.2007

Ms Anna-Liisa SUNDQUIST

Resignation

Alternate

Government

Finland

Mr Erkki YRJÄNHEIKKI

Ministry of Social Affairs and Health

23.2.2009

Advisory Committee on Safety and Health at Work

28.2.2010

L 64, 2.3.2007

Mr Matti LAMBERG

Resignation

Alternate

Government

Finland

Ms Ritva PARTINEN

Ministry of Social Affairs and Health

23.2.2009

Advisory Committee on Safety and Health at Work

28.2.2010

L 64, 2.3.2007

Ms Renate CZESKLEBA

Resignation

Member

Workers

Austria

Ms Karin ZIMMERMANN

Österreichischer Gewerkschaftsbund Sozialpolitik — Gesundheitspolitik

23.2.2009

Advisory Committee on Safety and Health at Work

28.2.2010

L 64, 2.3.2007

—

Appointment

Alternate

Workers

Austria

Mr Alexander HEIDER

Bundesarbeitskammer Abteilung Sicherheit, Gesundheit und Arbeit

23.2.2009

Advisory Committee on Safety and Health at Work

28.2.2010

L 64, 2.3.2007

Mr Miloš JANOUŠEK

Resignation

Alternate

Government

Slovakia

Ms Laurencia JANČUROVÁ

National Labour Inspectorate

23.2.2009

Governing Board of the European Agency for Safety and Health at Work

7.11.2010

C 271, 14.11.2007

Ms Pilar CASLA BENITO

Resignation

Alternate

Government

Spain

Mr Mario GRAU RIOS

Ministerio de Trabajo e Inmigración

23.2.2009

Governing Board of the European Agency for Safety and Health at Work

7.11.2010

C 271, 14.11.2007

Mr Miloš JANOUŠEK

Resignation

Member

Government

Slovakia

Ms Laurencia JANČUROVÁ

National Labour Inspectorate

23.2.2009

Governing Board of the European Foundation for the Improvement of Living and Working Conditions

30.11.2010

C 282, 24.11.2007

Ms Ana Cristina LÓPEZ LÓPEZ

Resignation

Member

Government

Spain

Mr Juan Pablo PARRA GUTIÉRREZ

Ministerio de Trabajo e Immigración

23.2.2009

Governing Board of the European Foundation for the Improvement of Living and Working Conditions

30.11.2010

C 282, 24.11.2007

Ms Birgit STIMMER

Resignation

Alternate

Government

Austria

Ms Petra HRIBERNIG

Bundesministerium für Wirtschaft und Arbeit

23.2.2009

Governing Board of the European Foundation for the Improvement of Living and Working Conditions

30.11.2010

C 282, 24.11.2007

Mr Paul CLERINX

Resignation

Alternate

Employers

Belgium

Mr Kris DE MEESTER

VBO-FEB

23.2.2009

---

Commission

| 24.3.2009 | EN | Official Journal of the European Union | C 70/24 |
| --- | --- | --- | --- |

24.3.2009

EN

Official Journal of the European Union

C 70/24

---

Euro exchange rates (1)

23 March 2009

(2009/C 70/07)

1 euro=

| | Currency | Exchange rate |
| --- | --- | --- |
| USD | US dollar | 1,3558 |
| JPY | Japanese yen | 131,12 |
| DKK | Danish krone | 7,4506 |
| GBP | Pound sterling | 0,92945 |
| SEK | Swedish krona | 11,0760 |
| CHF | Swiss franc | 1,5301 |
| ISK | Iceland króna | |
| NOK | Norwegian krone | 8,6345 |
| BGN | Bulgarian lev | 1,9558 |
| CZK | Czech koruna | 26,820 |
| EEK | Estonian kroon | 15,6466 |
| HUF | Hungarian forint | 304,15 |
| LTL | Lithuanian litas | 3,4528 |
| LVL | Latvian lats | 0,7093 |
| PLN | Polish zloty | 4,5703 |
| RON | Romanian leu | 4,2940 |
| TRY | Turkish lira | 2,2674 |
| AUD | Australian dollar | 1,9475 |
| CAD | Canadian dollar | 1,6753 |
| HKD | Hong Kong dollar | 10,5054 |
| NZD | New Zealand dollar | 2,3938 |
| SGD | Singapore dollar | 2,0493 |
| KRW | South Korean won | 1 887,52 |
| ZAR | South African rand | 12,8424 |
| CNY | Chinese yuan renminbi | 9,2623 |
| HRK | Croatian kuna | 7,4667 |
| IDR | Indonesian rupiah | 15 693,39 |
| MYR | Malaysian ringgit | 4,9381 |
| PHP | Philippine peso | 65,060 |
| RUB | Russian rouble | 45,2775 |
| THB | Thai baht | 47,897 |
| BRL | Brazilian real | 3,0522 |
| MXN | Mexican peso | 19,1710 |
| INR | Indian rupee | 68,3040 |

Currency

Exchange rate

USD

US dollar

1,3558

JPY

Japanese yen

131,12

DKK

Danish krone

7,4506

GBP

Pound sterling

0,92945

SEK

Swedish krona

11,0760

CHF

Swiss franc

1,5301

ISK

Iceland króna

NOK

Norwegian krone

8,6345

BGN

Bulgarian lev

1,9558

CZK

Czech koruna

26,820

EEK

Estonian kroon

15,6466

HUF

Hungarian forint

304,15

LTL

Lithuanian litas

3,4528

LVL

Latvian lats

0,7093

PLN

Polish zloty

4,5703

RON

Romanian leu

4,2940

TRY

Turkish lira

2,2674

AUD

Australian dollar

1,9475

CAD

Canadian dollar

1,6753

HKD

Hong Kong dollar

10,5054

NZD

New Zealand dollar

2,3938

SGD

Singapore dollar

2,0493

KRW

South Korean won

1 887,52

ZAR

South African rand

12,8424

CNY

Chinese yuan renminbi

9,2623

HRK

Croatian kuna

7,4667

IDR

Indonesian rupiah

15 693,39

MYR

Malaysian ringgit

4,9381

PHP

Philippine peso

65,060

RUB

Russian rouble

45,2775

THB

Thai baht

47,897

BRL

Brazilian real

3,0522

MXN

Mexican peso

19,1710

INR

Indian rupee

68,3040

---

(1)

Source: reference exchange rate published by the ECB.

---

NOTICES FROM MEMBER STATES

| 24.3.2009 | EN | Official Journal of the European Union | C 70/25 |
| --- | --- | --- | --- |

24.3.2009

EN

Official Journal of the European Union

C 70/25

---

Information communicated by Member States regarding State aid granted under Commission Regulation (EC) No 1628/2006 on the application of Articles 87 and 88 of the EC Treaty to national regional investment aid

(Text with EEA relevance)

(2009/C 70/08)

| Aid No | XR 51/07 |
| --- | --- |
| Member State | Portugal |
| Region | Açores |
| Title of aid scheme or the name of the undertaking receiving ad hoc aid supplement | SIDER — Sistema de Incentivos para o Desenvolvimento Regional dos Açores |
| Legal basis | Decreto Legislativo Regional n.o 13/2005/A, de 1 de Julho.
  Decretos Regulamentares Regionais n.os 25/2005/A, de 6 de Dezembro, 12/2005/A, de 24 de Maio e 6/2006/A, de 16 de Janeiro |
| Type of measure | Aid scheme |
| Annual budget | EUR 3,5 million |
| Maximum aid intensity | 45 % |
| In conformity with Article 4 of the Regulation |
| Date of implementation | 1.1.2007 |
| Duration | 31.12.2007 |
| Economic sectors | All sectors eligible for regional investment aid |
| — |
| Name and address of the granting authority | Secretaria Regional da Economia |
| Rua de São João, 47 |
| 9504-533 Ponta Delgada (S. Miguel) Açores |
| PORTUGAL |
| drace@azores.gov.pt |

Aid No

XR 51/07

Member State

Portugal

Region

Açores

Title of aid scheme or the name of the undertaking receiving ad hoc aid supplement

SIDER — Sistema de Incentivos para o Desenvolvimento Regional dos Açores

Legal basis

Decreto Legislativo Regional n.o 13/2005/A, de 1 de Julho.

Decretos Regulamentares Regionais n.os 25/2005/A, de 6 de Dezembro, 12/2005/A, de 24 de Maio e 6/2006/A, de 16 de Janeiro

Type of measure

Aid scheme

Annual budget

EUR 3,5 million

Maximum aid intensity

45 %

In conformity with Article 4 of the Regulation

Date of implementation

1.1.2007

Duration

31.12.2007

Economic sectors

All sectors eligible for regional investment aid

—

Name and address of the granting authority

Secretaria Regional da Economia

Rua de São João, 47

9504-533 Ponta Delgada (S. Miguel) Açores

PORTUGAL

drace@azores.gov.pt

Internet address of the publication of the aid scheme

www.azores.gov.pt

Other information

—

| Aid No | XR 52/07 |
| --- | --- |
| Member State | Portugal |
| Region | Açores |
| Title of aid scheme or the name of the undertaking receiving ad hoc aid supplement | Proenergia — Sistema de Incentivos à produção de energia a partir de fontes renováveis |
| Legal basis | Decreto Legislativo Regional n.o 26/2006/A, de 31 de Julho |
| Type of measure | Aid scheme |
| Annual budget | EUR 1 million |
| Maximum aid intensity | 25 % |
| In conformity with Article 4 of the Regulation |
| Date of implementation | 1.1.2007 |
| Duration | 31.12.2013 |
| Economic sectors | All sectors eligible for regional investment aid |
| — |
| Name and address of the granting authority | Secretaria Regional da Economia |
| Rua de São João, 47 |
| 9504-533 Ponta Delgada (S. Miguel) Açores |
| PORTUGAL |
| drace@azores.gov.pt |

Aid No

XR 52/07

Member State

Portugal

Region

Açores

Title of aid scheme or the name of the undertaking receiving ad hoc aid supplement

Proenergia — Sistema de Incentivos à produção de energia a partir de fontes renováveis

Legal basis

Decreto Legislativo Regional n.o 26/2006/A, de 31 de Julho

Type of measure

Aid scheme

Annual budget

EUR 1 million

Maximum aid intensity

25 %

In conformity with Article 4 of the Regulation

Date of implementation

1.1.2007

Duration

31.12.2013

Economic sectors

All sectors eligible for regional investment aid

—

Name and address of the granting authority

Secretaria Regional da Economia

Rua de São João, 47

9504-533 Ponta Delgada (S. Miguel) Açores

PORTUGAL

drace@azores.gov.pt

Internet address of the publication of the aid scheme

www.azores.gov.pt

Other information

—

---

V Announcements

OTHER ACTS

Commission

| 24.3.2009 | EN | Official Journal of the European Union | C 70/27 |
| --- | --- | --- | --- |

24.3.2009

EN

Official Journal of the European Union

C 70/27

---

Publication of an application pursuant to Article 6(2) of Council Regulation (EC) No 510/2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs

(2009/C 70/09)

This publication confers the right to object to the application pursuant to Article 7 of Council Regulation (EC) No 510/2006 (1). Statements of objection must reach the Commission within six months from the date of this publication.

SUMMARY

COUNCIL REGULATION (EC) No 510/2006

‘MAKÓI VÖRÖSHAGYMA’ or ‘MAKÓI HAGYMA’

EC No: HU-PDO-005-0387-21.10.2004

PDO ( X ) PGI ( )

This summary sets out the main elements of the product specification for information purposes.

1.   Responsible department in the Member State:

| Name: | Földművelésügyi és Vidékfejlesztési Minisztérium – Élelmiszerlánc-elemzési Főosztály |
| --- | --- |
| Address: | 1055 Budapest |
| Kossuth Lajos tér 11. |
| MAGYARORSZÁG |

Name:

Földművelésügyi és Vidékfejlesztési Minisztérium – Élelmiszerlánc-elemzési Főosztály

Address:

1055 Budapest

Kossuth Lajos tér 11.

MAGYARORSZÁG

Tel.:

+36 13014419

Fax:

+36 13014808

E-mail:

zobore@fvm.hu

2.   Group:

| Name: | Magyarországi Hagymatermesztők, Feldolgozók, Forgalmazók Szakmaközi Szervezete, Szövetsége és Terméktanácsa |
| --- | --- |
| Address: | 6900 Makó |
| Návay Lajos tér 5-7. |
| MAGYARORSZÁG |

Name:

Magyarországi Hagymatermesztők, Feldolgozók, Forgalmazók Szakmaközi Szervezete, Szövetsége és Terméktanácsa

Address:

6900 Makó

Návay Lajos tér 5-7.

MAGYARORSZÁG

Tel.:

+36 62/212865, +36 62/213676

Fax:

+36 62/213676, +36 62/212865

E-mail:

hagymatanacs@vnet.hu

Composition:

Producers/processors ( X ) Other ( X )

3.   Type of product:

Class 1.6 — Fruit, vegetables and cereals, fresh or processed

4.   Specification:

(Summary of requirements under Article 4(2) of Regulation (EC) No 510/2006)

4.1.   Name:

‘Makói vöröshagyma’ or ‘Makói hagyma’

4.2.   Description:

The ‘Makói vöröshagyma’ or ‘Makói hagyma’ (Allium cepa L.) belongs to the family Alliaceae, which has adapted well to the local conditions of the Makó region. The typical characteristics of the ‘Makói vöröshagyma’ or ‘Makói hagyma’ attributable to the geographical environment are high dry-matter content, strong taste and good shelf-life. Only the ‘Makói CR’ (climate resistant), the ‘Csanád’ and the ‘Makói Bronz’ cultivars are permitted to be used.

The onion has a spherical body, slightly elongated along the longitudinal axis; it has a diameter of 35-80 mm. Bronze red, shiny, with closed skin, the firm multi-layered external tunics completely protecting the internal tunics. Firm, dense flesh, bone-white colour. The production technology typical of the region of Makó and the dry weather at the end of the summer result in a high dry-matter content over 16 %, which is well above the average. It can be stored for a long time, it germinates late and retains its content values throughout the entire winter. Its low moisture content does not favour deterioration. Its typical strong and spicy taste is the result of its high allyl sulphide content.

4.3.   Geographical area:

The ‘Makói vöröshagyma’ or ‘Makói hagyma’ designation of origin may only be applied to onions originating in the production region, which includes the administrative areas of the settlements listed below, which overlap the borders of the two adjacent counties of Csongrád and Békés.

The settlements belonging to the region:

| — | Csongrád county: Makó, Királyhegyes, Apátfalva, Kövegy, Pitvaros, Magyarcsanád, Csanádpalota, Csanádalberti, Ambrózfalva, Nagyér, Földeák, Maroslele, Klárafalva, Ferencszállás, Kiszombor, Nagylak, |
| --- | --- |

—

Csongrád county: Makó, Királyhegyes, Apátfalva, Kövegy, Pitvaros, Magyarcsanád, Csanádpalota, Csanádalberti, Ambrózfalva, Nagyér, Földeák, Maroslele, Klárafalva, Ferencszállás, Kiszombor, Nagylak,

| — | Békés county: Tótkomlós, Békéssámson. |
| --- | --- |

—

Békés county: Tótkomlós, Békéssámson.

4.4.   Proof of origin:

The ‘Makói vöröshagyma’ or ‘Makói hagyma’ designation of origin may only be used for those onions whose production and traceability are documented in the Register of Protected Designations of Origin and Protected Geographical Indications authenticated by the Hagyma Terméktanács (Onion Product Board).

The Spraying Log, updated according to the requirements, is an indispensable part of the Register of Protected Designations of Origin and Protected Geographical Indications.

The Hagyma Terméktanács, upon the initiation of the producer or distributor, controls the whole technological process of production, and if the requirements are fulfilled, the product can be labelled ‘Hagyma Terméktanács által ellenőrzött minőség’ (‘Quality approved by the Onion Product Board’) by the Product Board.

The Product Board helps to inspect compliance with the regulations on geographical indication and the legal use of the designations of origin.

4.5.   Method of production:

Two-year production method:

In the case of the two-year production method, from the tiny flower seeds (so-called black seed) the small onions, the so-called onion sets, which are produced by being densely sowed, serve as the base material (propagation material) for producing developed table onions the following year.

For the purposes of producing onion sets, flat, medium hard, friable, non-clodding soil with high humus and nutrient content and neutral pH is suitable (these are the so-called Makó soil conditions).

In case of crop rotation, one of the prerequisites is that onions should not be planted again within five years.

Onion set production:

Soil preparation: deep ploughing in the autumn, in October of the previous year, finishing-off in the spring. Sowing takes place in the even-surfaced sowing bed with fine crumbly soil at the end of February, beginning of March, in single lines (20 cm spacing) or twin lines (5-30 cm spacing), with 100-120 kg/ha of seed (25-28 million seeds/ha), at a depth of 3-3,5 cm. The dried stem is removed from the onion sets, which have matured by the middle of August. This is followed by picking, removing soil, post-maturing, transporting and classifying by size.

The classified onion sets must be stored in a loose fabric bag during the autumn, and the special Makó production procedure starts with the heat treatment in November. The heat treatment in fact prevents the formation of flower buds and thus the development of the seedstalk in the second year, which would make the onion body valueless. During the heat treatment, the onion sets are gradually heated up over 12 days from the 3-5 °C storage temperature to 30-32 °C and, depending on size, are kept at this temperature for 30-60 days (during which time they are heated up to 32-35 °C for 10 days) and then gradually cooled to 10-14 °C for planting.

Table onion production:

When producing the ‘Makói vöröshagyma’ or ‘Makói hagyma’, the table onion (eating onion) is produced in the second year. In the spring, the onion sets, which have been removed from the heat treatment installation, are cleaned, the seeds are treated against pests, then they are sown in the gradually warming soil up to the middle of April. The soil requirements and the crop rotation are the same as with onion sets. Depending on the quantity, 15-25 are sown per running metre at a depth of 3-5 cm.

It is important to provide the onions with an adequate supply of nutrients and to keep them free of weeds, as well as ensuring integrated plant protection properly documented in the Spraying Log. Harvesting takes place in the second half of August (picking, drying in windrows, loading, delivering), after which the onions are put into storage or sent to market.

One-year (seed sown) production method:

In the one-year form, production begins in March by sowing 5-7 kg/ha of seeds (900 thousand-1,1 million seeds/ha) of the ‘one-year old onions’ propagated with the use of the genetic stock of the ‘Makói vöröshagyma’ or ‘Makói hagyma’ onion sets.

In the propagation period, the production and harvesting operations are the same as with onions grown from onion sets, but the propagation season is longer, harvest takes place in mid-September and this type of production is only assured in irrigated conditions.

The harvested onions must be stored in a cool, dry, well ventilated place, as they can be stored longer than the other cultivars under such conditions without any significant reduction in quality until the following April-May.

‘Makói vöröshagyma’ or ‘Makói hagyma’ are classified, packaged and labelled by the producer or elsewhere under the direct supervision of the producer or the producer's representative within the defined geographical area in 0.5, 1, 2, 5, 10 and 15 kg raschel bags or in bulk in 15, 20, 25 and 50 kg crates or in packages of 3, 5 or 10 pieces. However, other amounts and types of packages are also feasible. The product can be repackaged outside the defined geographical area.

4.6.   Link:

Natural factors:

The onion, which is of Central Asian origin, adapted to the conditions of the Makó region exceedingly well. The soils of the region were formed by the deposit of the river Maros changing its bed; the loess and alluvial soil have high nutrient content. They are rich in trace elements, medium dense, friable, flat-surfaced, and have good air and water retention, characteristics that have a favourable impact on the quality of the onion.

The most characteristic climatic feature of the Makó region is the dry and hot summer. In the propagation period there is a lot of sunshine (2 100 hours of sunshine per year), with prolonged high temperatures. (30 hot days, average temperature 18,1 °C and accumulated radiation 3 340 °C), and the combined effect of these characteristics (85-90 summer days) results in the development of the favourable content values of ‘Makói vöröshagyma’ or ‘Makói hagyma’. The development of the long-day ‘Makói vöröshagyma’ or ‘Makói hagyma’ requires 15 hours of light a day, which condition is satisfied by the characteristic climatic features of the Makó region described above. The formation of the onion head slows down in the warm, dry weather low in precipitation in July-August. The foliage and the roots dry out, the content values become richer, the dry-matter content increases, the outer leaves of the onion body become thin, and the closed, strong (‘armoured’) skin and bronze red colour develop.

Thanks to its high dry-matter content thus developed and the multilayered, closed, strong skin (well-closed at the ‘neck’) ‘Makói vöröshagyma’ or ‘Makói hagyma’ can be stored for a long time.

Human factors:

Onions have been produced in the Makó region for several centuries. Following Turkish rule, the countryside was resettled and the population quickly increased, which led to the division of the available land into small parcels and the onset of land scarcity. In the middle of the 19th century, three quarters of the population consisted of peasant tenant farmers, who were compelled to produce intensive plant cultures in their small fields. For this purpose, the onion was chosen, whose skin and flesh have been extensively used in folk medicine for centuries.

Taking advantage of the geography and the favourable market boom at the end of the last century, the producers of the Makó onion developed high quality regional cultivars with hard work, care, individual selection and high quality soil. In order to achieve this, they developed a unique technology designed specifically for the biology of the onion and the given region (two-year production method). Selling to faraway markets is typical of the entrepreneurial spirit of the local onion growers and their willingness to take risks.

The local onion growers were able to rely on their inbred onion culture to avoid the pressure to emigrate at the turn of the century. They created a truly sound and permanent reputation for this onion, whose excellence was already recognised at the Grand Concours International des Sciences et de l'Industrie in Brussels in 1888 and was followed by further recognition over the years. The cultivation experience passed on from each generation to the next guarantees future onion production in the region.

Written evidence of onion cultivation can be traced to a description by Miklós Szirbik in 1835, which was followed by the books of Imre Palugyai and János Reizman. The region's onion producers — the Makó onion producers — had their own weekly magazine, entitled ‘Onion Gardener’, soon after the turn of the century. In the 1930s Ferenc Erdei did much for the onion grown in the Makó region and the onion producers.

4.7.   Inspection body:

Mezőgazdasági Szakigazgatási Hivatal, as designated inspection body for fruits and vegetables

| Name: | Csongrád Megyei Mezőgazdasági Szakigazgatási Hivatal Növény- és Talajvédelmi Igazgatóság |
| --- | --- |
| Address: | 6800 Hódmezővásárhely |
| Rárósi út 110. |
| MAGYARORSZÁG |

Name:

Csongrád Megyei Mezőgazdasági Szakigazgatási Hivatal Növény- és Talajvédelmi Igazgatóság

Address:

6800 Hódmezővásárhely

Rárósi út 110.

MAGYARORSZÁG

Tel.:

+36 62/535741

Fax:

+36 62/246036

E-mail:

Hodi.Laszlo@csongrad.ontsz.hu

Name:

Békés Megyei Mezőgazdasági Szakigazgatási Hivatal, Növény- és Talajvédelmi Igazgatóság

Address:

| 5602 Békéscsaba |
| --- |
| Szarvasi út 79/1. |
| MAGYARORSZÁG |

5602 Békéscsaba

Szarvasi út 79/1.

MAGYARORSZÁG

Tel.:

+36 66/529-257

Fax:

+36 66/529-265

E-mail:

Mike.Zsolt@bekes.ontsz.hu

4.8.   Labelling:

In addition to the content specified by the legal regulations, the protected designation of origin ‘Makói vöröshagyma’ or ‘Makói hagyma’, as well as (after entering in the Community register) the Community logo, must be indicated on the product packaging.

If approved on the basis of an internal control carried out by the Onion Product Board, ‘Hagyma Terméktanács által ellenőrzött minőség’ (‘Quality approved by the Onion Product Board’) may be indicated on the product packaging.

---

(1)  OJ L 93, 31.3.2006, p. 12.

---

Corrigenda

| 24.3.2009 | EN | Official Journal of the European Union | C 70/32 |
| --- | --- | --- | --- |

24.3.2009

EN

Official Journal of the European Union

C 70/32

---

Corrigendum to list of natural mineral waters recognised by Member States

(
  Official Journal of the European Union C 54 of 7 March 2009
  )

(2009/C 70/10)

On page 72, the list should read as follows:

for:

| ‘Sales description | Name of source | Place of exploitation |
| --- | --- | --- |
| Icelandic spring | Jadar spring area | Reykjavík’ |

‘Sales description

Name of source

Place of exploitation

Icelandic spring

Jadar spring area

Reykjavík’

read:

| ‘Sales description | Name of source | Place of exploitation |
| --- | --- | --- |
| Icelandic Glacial | Ölfus Spring | Hlíðarendi, Ölfus, Selfoss’ |

‘Sales description

Name of source

Place of exploitation

Icelandic Glacial

Ölfus Spring

Hlíðarendi, Ölfus, Selfoss’

---