# C_2008074EN.01000501.xml

| 20.3.2008 | EN | Official Journal of the European Union | C 74/5 |
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20.3.2008

EN

Official Journal of the European Union

C 74/5

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COUNCIL OPINION

COUNCIL OPINION

of 4 March 2008

on the updated stability programme of Slovenia, 2007-2010

(2008/C 74/02)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (1), and in particular Article 5(3) thereof,

1

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

| (1) | On 4 March 2008, the Council examined the updated stability programme of Slovenia, which covers the period 2007 to 2010. |
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(1)

On 4 March 2008, the Council examined the updated stability programme of Slovenia, which covers the period 2007 to 2010.

| (2) | Slovenia's generally strong GDP growth throughout the last decade peaked during the first year of membership in the euro area. However, a marked pick-up in inflation, mainly due to commodity price developments in conjunction with a lack of competition in some sectors, was also registered in 2007, with spill-overs to wages being a risk for 2008.
  Against the background of the strong economic growth during the run-up to EU and euro area entry, good progress in consolidating public finances was made. For the future, enhancing labour productivity, keeping wages in line with productivity and continued fiscal efforts will be needed to foster macroeconomic stability, including lower inflation. Addressing the recent acceleration of inflation in Slovenia would help preserve the competitiveness of this export-oriented economy. Moreover, the long-term sustainability of public finances remains a challenge in view of the significant expected effects of ageing on the budget in the absence of further pension reform. To support the economy's ongoing catching-up process, it will be important to continue with structural reforms, especially regarding labour and product markets. In the same context, further redirecting public expenditure towards growth-enhancing categories, while tackling budget rigidity and improving the efficiency of spending, will also be beneficial. |
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(2)

Slovenia's generally strong GDP growth throughout the last decade peaked during the first year of membership in the euro area. However, a marked pick-up in inflation, mainly due to commodity price developments in conjunction with a lack of competition in some sectors, was also registered in 2007, with spill-overs to wages being a risk for 2008.

Against the background of the strong economic growth during the run-up to EU and euro area entry, good progress in consolidating public finances was made. For the future, enhancing labour productivity, keeping wages in line with productivity and continued fiscal efforts will be needed to foster macroeconomic stability, including lower inflation. Addressing the recent acceleration of inflation in Slovenia would help preserve the competitiveness of this export-oriented economy. Moreover, the long-term sustainability of public finances remains a challenge in view of the significant expected effects of ageing on the budget in the absence of further pension reform. To support the economy's ongoing catching-up process, it will be important to continue with structural reforms, especially regarding labour and product markets. In the same context, further redirecting public expenditure towards growth-enhancing categories, while tackling budget rigidity and improving the efficiency of spending, will also be beneficial.

| (3) | The macroeconomic scenario underlying the programme envisages that real GDP growth will slow from 5,8 % in 2007 to 4,6 % in 2008 and 4,1 % in 2009 before picking up to reach 4,5 % by the end of the programme period. Assessed against currently available information (2), this scenario appears to be based on plausible growth assumptions, although risks for 2008 stemming from the external environment have increased since the completion of the stability programme. After the unexpected increase in inflation in 2007, the programme's projections for inflation are significantly higher than in last year's scenario. Nevertheless, they still appear to be on the low side for 2008 given recent developments in food and energy prices. Second-round effects from the strong pick-up in inflation in 2007 as well as public sector wage increases spilling over to the private sector could lead to a larger inflation differential with the rest of the euro area. If persistent, this would entail less favourable competitiveness developments than implied by the programme. |
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(3)

The macroeconomic scenario underlying the programme envisages that real GDP growth will slow from 5,8 % in 2007 to 4,6 % in 2008 and 4,1 % in 2009 before picking up to reach 4,5 % by the end of the programme period. Assessed against currently available information (2), this scenario appears to be based on plausible growth assumptions, although risks for 2008 stemming from the external environment have increased since the completion of the stability programme. After the unexpected increase in inflation in 2007, the programme's projections for inflation are significantly higher than in last year's scenario. Nevertheless, they still appear to be on the low side for 2008 given recent developments in food and energy prices. Second-round effects from the strong pick-up in inflation in 2007 as well as public sector wage increases spilling over to the private sector could lead to a larger inflation differential with the rest of the euro area. If persistent, this would entail less favourable competitiveness developments than implied by the programme.

2

| (4) | For 2007, the general government deficit is estimated at 0,7 % of GDP in the Commission services' autumn 2007 forecast, against a target of 1,5 % of GDP set in the 2006 programme. The difference is mainly explained by a positive base effect from the 2006 outcome and by higher-than-projected nominal GDP growth in 2007. At the same time, also according to the 2007 update of the programme, more positive-than-planned revenue developments were partly offset by higher expenditure growth than planned in the 2006 programme. However, more recent information on a cash basis points to a better 2007 outturn, possibly a slight surplus. Overall, budgetary implementation in 2007 was in line with the Council opinion of 27 February 2007 on the 2006 stability programme (3), which invited Slovenia to speed up the achievement of the MTO taking advantage of the good economic conditions, including the better-than-expected budgetary outcome in 2006. The Council notes that the budgetary implementation in 2007 is also consistent with the April 2007 Eurogroup orientations for budgetary policies. |
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(4)

For 2007, the general government deficit is estimated at 0,7 % of GDP in the Commission services' autumn 2007 forecast, against a target of 1,5 % of GDP set in the 2006 programme. The difference is mainly explained by a positive base effect from the 2006 outcome and by higher-than-projected nominal GDP growth in 2007. At the same time, also according to the 2007 update of the programme, more positive-than-planned revenue developments were partly offset by higher expenditure growth than planned in the 2006 programme. However, more recent information on a cash basis points to a better 2007 outturn, possibly a slight surplus. Overall, budgetary implementation in 2007 was in line with the Council opinion of 27 February 2007 on the 2006 stability programme (3), which invited Slovenia to speed up the achievement of the MTO taking advantage of the good economic conditions, including the better-than-expected budgetary outcome in 2006. The Council notes that the budgetary implementation in 2007 is also consistent with the April 2007 Eurogroup orientations for budgetary policies.

3

| (5) | The main goal of the medium-term budgetary strategy in the update is to respect the medium-term objective (MTO), which is a structural deficit (i.e. a cyclically-adjusted deficit net of one-off and other temporary measures) of 1 % of GDP, by a growing margin over the programme period, although some weakening is planned for 2008. This change vis-à-vis the previous programme's goal to reach the MTO by 2009 follows from the above-mentioned better-than-expected 2006 outturn (mainly reflecting higher nominal GDP growth), which implied that the MTO had already been broadly met in 2006. Compared to the 2006 programme, the headline deficit planned in the 2007 update is about 0,5 percentage point of GDP lower throughout the programme period, against the background of a better starting position.
  The deficit is planned to widen to 0,9 % of GDP in 2008 and then to gradually close, with the largest adjustment planned in the final year. Following a similar path, the primary surplus is projected to reach just above 1 % of GDP by 2010. The planned consolidation results from expenditure restraint more than offsetting, except in 2008, the gradual decline in the revenue ratio. The projected decline of primary expenditure over the programme period amounts to 2,25 percentage points of GDP. While relatively broad-based, it reflects especially contained developments of social spending, representing 1/3 of the total consolidation. Largely influenced by the ongoing tax reform, the gradual decline in the revenue ratio, by 1,75 percentage points, is mainly driven by indirect taxes, while a slight increase in the direct tax burden is projected. |
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(5)

The main goal of the medium-term budgetary strategy in the update is to respect the medium-term objective (MTO), which is a structural deficit (i.e. a cyclically-adjusted deficit net of one-off and other temporary measures) of 1 % of GDP, by a growing margin over the programme period, although some weakening is planned for 2008. This change vis-à-vis the previous programme's goal to reach the MTO by 2009 follows from the above-mentioned better-than-expected 2006 outturn (mainly reflecting higher nominal GDP growth), which implied that the MTO had already been broadly met in 2006. Compared to the 2006 programme, the headline deficit planned in the 2007 update is about 0,5 percentage point of GDP lower throughout the programme period, against the background of a better starting position.

The deficit is planned to widen to 0,9 % of GDP in 2008 and then to gradually close, with the largest adjustment planned in the final year. Following a similar path, the primary surplus is projected to reach just above 1 % of GDP by 2010. The planned consolidation results from expenditure restraint more than offsetting, except in 2008, the gradual decline in the revenue ratio. The projected decline of primary expenditure over the programme period amounts to 2,25 percentage points of GDP. While relatively broad-based, it reflects especially contained developments of social spending, representing 1/3 of the total consolidation. Largely influenced by the ongoing tax reform, the gradual decline in the revenue ratio, by 1,75 percentage points, is mainly driven by indirect taxes, while a slight increase in the direct tax burden is projected.

ratio

ratio

| (6) | The risks to the budgetary projections in the programme appear broadly balanced in 2008, whereas budgetary outcomes could be somewhat worse than targeted in the outer years. In 2008, the possibility of a positive base effect due to a potentially better-than-expected 2007 budgetary outturn counterbalances the risks associated with the current deterioration of the external environment. Thereafter, there are certain risks to the implementation of the budgetary strategy due, in particular, to the sizeable magnitude of the back-loaded planned reduction in expenditure, with not all underlying measures spelt out in sufficient detail. To some degree, these risks are mitigated by Slovenia's good track record in the recent past, which suggests that outcomes might be better than expected. |
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(6)

The risks to the budgetary projections in the programme appear broadly balanced in 2008, whereas budgetary outcomes could be somewhat worse than targeted in the outer years. In 2008, the possibility of a positive base effect due to a potentially better-than-expected 2007 budgetary outturn counterbalances the risks associated with the current deterioration of the external environment. Thereafter, there are certain risks to the implementation of the budgetary strategy due, in particular, to the sizeable magnitude of the back-loaded planned reduction in expenditure, with not all underlying measures spelt out in sufficient detail. To some degree, these risks are mitigated by Slovenia's good track record in the recent past, which suggests that outcomes might be better than expected.

| (7) | In view of this risk assessment, the budgetary stance in the programme seems sufficient to maintain the MTO throughout the programme period, but with a possibly smaller margin than planned for the outer years. The slight deterioration of the structural balance envisaged for 2008 may turn out to be pro-cyclical, although downside risks stemming from the external environment have increased. This would not be in line with the Stability and Growth Pact. Furthermore, a tighter fiscal stance than presently envisaged for 2008 appears to be warranted given the current strong inflationary pressures. The Council notes that this would also be consistent with the April 2007 Eurogroup orientations for budgetary policies, which called for carefully designing fiscal policy plans for 2008 to avoid feeding macroeconomic imbalances. After 2008, the fiscal policy stance implied by the programme is in line with the Pact. |
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(7)

In view of this risk assessment, the budgetary stance in the programme seems sufficient to maintain the MTO throughout the programme period, but with a possibly smaller margin than planned for the outer years. The slight deterioration of the structural balance envisaged for 2008 may turn out to be pro-cyclical, although downside risks stemming from the external environment have increased. This would not be in line with the Stability and Growth Pact. Furthermore, a tighter fiscal stance than presently envisaged for 2008 appears to be warranted given the current strong inflationary pressures. The Council notes that this would also be consistent with the April 2007 Eurogroup orientations for budgetary policies, which called for carefully designing fiscal policy plans for 2008 to avoid feeding macroeconomic imbalances. After 2008, the fiscal policy stance implied by the programme is in line with the Pact.

| (8) | Slovenia appears to be at high risk with regard to the sustainability of public finances. The budgetary position in 2007 as estimated in the programme remained roughly unchanged compared with 2006 and is just sufficient to stabilise the debt ratio over the long-term before the budgetary impact of an ageing population is considered. However, the latter is well above the EU average, mainly reflecting a stronger increase in pension expenditure. High primary surpluses over the medium term and, in particular, further measures aimed at curbing the substantial increase in age-related expenditures would contribute to reducing risks to the sustainability of public finances. |
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(8)

Slovenia appears to be at high risk with regard to the sustainability of public finances. The budgetary position in 2007 as estimated in the programme remained roughly unchanged compared with 2006 and is just sufficient to stabilise the debt ratio over the long-term before the budgetary impact of an ageing population is considered. However, the latter is well above the EU average, mainly reflecting a stronger increase in pension expenditure. High primary surpluses over the medium term and, in particular, further measures aimed at curbing the substantial increase in age-related expenditures would contribute to reducing risks to the sustainability of public finances.

ratio

| (9) | The stability programme seems to be consistent with the October 2007 implementation report of the national reform programme. In particular, both documents give account of the main reform measures under implementation, such as the comprehensive tax reform, infrastructure investments as well as changes to the system of social transfers. The programme does not include a detailed qualitative assessment of the overall impact of the national reform programme within the medium-term fiscal strategy. However, while this is not done in a systematic way, information on the direct budgetary impact associated with major reforms envisaged is given and has been taken into account in budgetary projections. |
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(9)

The stability programme seems to be consistent with the October 2007 implementation report of the national reform programme. In particular, both documents give account of the main reform measures under implementation, such as the comprehensive tax reform, infrastructure investments as well as changes to the system of social transfers. The programme does not include a detailed qualitative assessment of the overall impact of the national reform programme within the medium-term fiscal strategy. However, while this is not done in a systematic way, information on the direct budgetary impact associated with major reforms envisaged is given and has been taken into account in budgetary projections.

| (10) | The budgetary strategy in the programme is partly consistent with the country-specific broad economic policy guidelines included in the integrated guidelines and the guidelines for euro area Member States in the area of budgetary policies issued in the context of the Lisbon strategy. In particular, it does not include significant further measures to strengthen the reform of the pension system with a view to ensuring long-term sustainability. |
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(10)

The budgetary strategy in the programme is partly consistent with the country-specific broad economic policy guidelines included in the integrated guidelines and the guidelines for euro area Member States in the area of budgetary policies issued in the context of the Lisbon strategy. In particular, it does not include significant further measures to strengthen the reform of the pension system with a view to ensuring long-term sustainability.

| (11) | 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). |
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(11)

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).

4

The overall conclusion is that Slovenia met its MTO in 2007, two years ahead of previous plans, and that the programme aims at respecting the MTO by a growing margin over the programme period. For 2007, the most recent available information points to a better-than-planned budgetary outturn, possibly a slight surplus. However, for 2008, a slight deterioration of the structural balance is envisaged despite the continuing strong growth prospects. The risks to the budgetary projections are broadly balanced in 2008. In the outer years, budgetary outcomes might be slightly worse than targeted, mainly due to risks associated with the envisaged reliance on expenditure restraint. The fiscal stance in 2008 may turn out to be pro-cyclical. A tighter fiscal stance than presently envisaged for 2008 appears to be warranted also given the current strong inflationary pressures. The high projected increase in public sector wage settlements is also a concern for the inflation outlook. In spite of the current low debt level, Slovenia is assessed to be at high risk with regard to the long-term sustainability of public finances due to the significant projected budgetary impact of ageing.

In view of the above assessment Slovenia is invited to:

| (i) | building on a likely better-than-expected outturn in 2007, aim for stronger budgetary positions in 2008 and beyond than planned in the programme, thereby avoiding pro-cyclical policies; |
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(i)

building on a likely better-than-expected outturn in 2007, aim for stronger budgetary positions in 2008 and beyond than planned in the programme, thereby avoiding pro-cyclical policies;

| (ii) | stand ready to adopt further measures to tame inflationary pressures, complementing the recommended fiscal stance with appropriate wage, labour market and competition policies; |
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(ii)

stand ready to adopt further measures to tame inflationary pressures, complementing the recommended fiscal stance with appropriate wage, labour market and competition policies;

| (iii) | in view of the projected increase in age-related expenditure, improve the long-term sustainability of public finances, in particular by further reforming the pension system. |
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(iii)

in view of the projected increase in age-related expenditure, improve the long-term sustainability of public finances, in particular by further reforming the pension system.

The Council also notes that such actions would be consistent with the April 2007 Eurogroup orientations for fiscal policies.

Comparison of key macroeconomic and budgetary projections

| | 2006 | 2007 | 2008 | 2009 | 2010 |
| --- | --- | --- | --- | --- | --- |
| Real GDP
  (% change) | SP Nov 2007 | 5,7 | 5,8 | 4,6 | 4,1 | 4,5 |
| COM Nov 2007 | 5,7 | 6,0 | 4,6 | 4,0 | n.a. |
| SP Dec 2006 | 4,7 | 4,3 | 4,2 | 4,1 | n.a. |
| HICP inflation
  (%) | SP Nov 2007 | 2,5 | 3,4 | 3,5 | 2,8 | 2,6 |
| COM Nov 2007 | 2,5 | 3,5 | 3,7 | 2,9 | n.a. |
| SP Dec 2006 | 2,7 | 2,7 | 2,5 | 2,2 | n.a. |
| Output gap (5)

  (% of potential GDP) | SP Nov 2007 | – 0,2 | 0,7 | 0,5 | 0,1 | 0,2 |
| COM Nov 2007 (6) | – 0,2 | 0,9 | 0,8 | 0,3 | n.a. |
| SP Dec 2006 | – 0,5 | – 0,2 | 0,0 | 0,3 | n.a. |
| Net lending/borrowing vis-à-vis the rest of the world
  (% of GDP) | SP Nov 2007 | – 2,8 | – 3,5 | – 3,1 | – 2,0 | – 1,6 |
| COM Nov 2007 | – 2,6 | – 3,3 | – 2,6 | – 1,9 | n.a. |
| SP Dec 2006 | n.a. | n.a. | n.a. | n.a. | n.a. |
| General government balance
  (% of GDP) | SP Nov 2007 | – 1,2 | – 0,6 | – 0,9 | – 0,6 | 0,0 |
| COM Nov 2007 | – 1,2 | – 0,7 | – 1,0 | – 0,8 | n.a. |
| SP Dec 2006 | – 1,6 | – 1,5 | – 1,6 | – 1,0 | n.a. |
| Primary balance
  (% of GDP) | SP Nov 2007 | 0,2 | 0,7 | 0,2 | 0,6 | 1,1 |
| COM Nov 2007 | 0,2 | 0,7 | 0,3 | 0,4 | n.a. |
| SP Dec 2006 | 0,1 | – 0,1 | – 0,3 | 0,3 | n.a. |
| Cyclically-adjusted balance (5)

  (% of GDP) | SP Nov 2007 | – 1,1 | – 0,9 | – 1,1 | – 0,7 | – 0,1 |
| COM Nov 2007 | – 1,1 | – 1,1 | – 1,4 | – 1,0 | n.a. |
| SP Dec 2006 | – 1,4 | – 1,4 | – 1,6 | – 1,1 | n.a. |
| Structural balance (7)

  (% of GDP) | SP Nov 2007 | – 1,1 | – 0,8 | – 1,0 | – 0,7 | – 0,1 |
| COM Nov 2007 | – 1,1 | – 1,1 | – 1,4 | – 1,0 | n.a. |
| SP Dec 2006 | – 1,4 | – 1,4 | – 1,6 | – 1,1 | n.a. |
| Government gross debt
  (% of GDP) | SP Nov 2007 | 27,1 | 25,6 | 24,7 | 23,8 | 22,5 |
| COM Nov 2007 | 27,1 | 25,6 | 24,5 | 23,8 | n.a. |
| SP Dec 2006 | 28,5 | 28,2 | 28,3 | 27,7 | n.a. |
| Stability programme (SP); Commission services' autumn 2007 economic forecasts (COM); Commission services' calculations. |

2006

2007

2008

2009

2010

Real GDP

(% change)

SP Nov 2007

SP Nov 2007

5,7

5,7

5,8

5,8

4,6

4,6

4,1

4,1

4,5

4,5

COM Nov 2007

5,7

6,0

4,6

4,0

n.a.

SP Dec 2006

SP Dec 2006

4,7

4,7

4,3

4,3

4,2

4,2

4,1

4,1

n.a.

n.a.

HICP inflation

(%)

SP Nov 2007

SP Nov 2007

2,5

2,5

3,4

3,4

3,5

3,5

2,8

2,8

2,6

2,6

COM Nov 2007

2,5

3,5

3,7

2,9

n.a.

SP Dec 2006

SP Dec 2006

2,7

2,7

2,7

2,7

2,5

2,5

2,2

2,2

n.a.

n.a.

Output gap (5)

5

(% of potential GDP)

SP Nov 2007

SP Nov 2007

– 0,2

– 0,2

0,7

0,7

0,5

0,5

0,1

0,1

0,2

0,2

COM Nov 2007 (6)

6

– 0,2

0,9

0,8

0,3

n.a.

SP Dec 2006

SP Dec 2006

– 0,5

– 0,5

– 0,2

– 0,2

0,0

0,0

0,3

0,3

n.a.

n.a.

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

vis-à-vis

(% of GDP)

SP Nov 2007

SP Nov 2007

– 2,8

– 2,8

– 3,5

– 3,5

– 3,1

– 3,1

– 2,0

– 2,0

– 1,6

– 1,6

COM Nov 2007

– 2,6

– 3,3

– 2,6

– 1,9

n.a.

SP Dec 2006

SP Dec 2006

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

General government balance

(% of GDP)

SP Nov 2007

SP Nov 2007

– 1,2

– 1,2

– 0,6

– 0,6

– 0,9

– 0,9

– 0,6

– 0,6

0,0

0,0

COM Nov 2007

– 1,2

– 0,7

– 1,0

– 0,8

n.a.

SP Dec 2006

SP Dec 2006

– 1,6

– 1,6

– 1,5

– 1,5

– 1,6

– 1,6

– 1,0

– 1,0

n.a.

n.a.

Primary balance

(% of GDP)

SP Nov 2007

SP Nov 2007

0,2

0,2

0,7

0,7

0,2

0,2

0,6

0,6

1,1

1,1

COM Nov 2007

0,2

0,7

0,3

0,4

n.a.

SP Dec 2006

SP Dec 2006

0,1

0,1

– 0,1

– 0,1

– 0,3

– 0,3

0,3

0,3

n.a.

n.a.

Cyclically-adjusted balance (5)

5

(% of GDP)

SP Nov 2007

SP Nov 2007

– 1,1

– 1,1

– 0,9

– 0,9

– 1,1

– 1,1

– 0,7

– 0,7

– 0,1

– 0,1

COM Nov 2007

– 1,1

– 1,1

– 1,4

– 1,0

n.a.

SP Dec 2006

SP Dec 2006

– 1,4

– 1,4

– 1,4

– 1,4

– 1,6

– 1,6

– 1,1

– 1,1

n.a.

n.a.

Structural balance (7)

7

(% of GDP)

SP Nov 2007

SP Nov 2007

– 1,1

– 1,1

– 0,8

– 0,8

– 1,0

– 1,0

– 0,7

– 0,7

– 0,1

– 0,1

COM Nov 2007

– 1,1

– 1,1

– 1,4

– 1,0

n.a.

SP Dec 2006

SP Dec 2006

– 1,4

– 1,4

– 1,4

– 1,4

– 1,6

– 1,6

– 1,1

– 1,1

n.a.

n.a.

Government gross debt

(% of GDP)

SP Nov 2007

SP Nov 2007

27,1

27,1

25,6

25,6

24,7

24,7

23,8

23,8

22,5

22,5

COM Nov 2007

27,1

25,6

24,5

23,8

n.a.

SP Dec 2006

SP Dec 2006

28,5

28,5

28,2

28,2

28,3

28,3

27,7

27,7

n.a.

n.a.

Stability programme (SP); Commission services' autumn 2007 economic forecasts (COM); Commission services' calculations.

Stability programme (SP); Commission services' autumn 2007 economic forecasts (COM); Commission services' calculations.

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

1

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

(2)  The assessment takes into account notably the Commission services' autumn forecast and the Commission assessment of the October 2007 implementation report of the national reform programme.

2

(3)  OJ C 71, 28.3.2007, p. 9.

3

(4)  In particular, the data on some external assumptions (‘World excluding EU, GDP growth’, ‘World import volumes, excluding EU’) and on some items regarding sectoral balances as well as the breakdown of the stock-flow adjustment of the debt level are missing.

4

(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.

5

(6)  Based on estimated potential growth of 4,2 %, 4,9 %, 4,7 % and 4,5 % respectively in the period 2006-2009.

6

(7)  Cyclically-adjusted balance excluding one-off and other temporary measures. One-off and other temporary measures are 0,1 % of GDP in 2007 and 0,1 % in 2008, both deficit-increasing, according to the most recent programme. The Commission services do not consider these to be one-off measures hence there are no one-off measures in the Commission services' forecast.

7

Sources:

Stability programme (SP); Commission services' autumn 2007 economic forecasts (COM); Commission services' calculations.

Stability programme (SP); Commission services' autumn 2007 economic forecasts (COM); Commission services' calculations.

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