(10)

Based on the assessment of the Stability Programme pursuant to Article 5(1) of Regulation (EC) No 1466/97, the Council is of the opinion that the macroeconomic scenario underpinning the budgetary projections in the Programme is broadly plausible for 2013 and subject to some downside risks in 2014 and beyond compared with the Commission services 2013 spring forecast. Although the Stability Programme projects growth to be lower over the 2014-2016 period compared to the Commission services 2013 spring forecast, the latter is based on a no-policy-change assumption and hence does not take into account the fiscal consolidation that will be needed to attain the budgetary targets in the Stability Programme. The objective of the budgetary strategy outlined in the Stability Programme is to bring the general government deficit below the 3 %-of-GDP reference value by 2016. The consolidation relies mainly on expenditure restraint with the expenditure ratio decreasing by 3,7 percentage points over the 2012-16 period, but also on some revenue-increasing measures. Based on the (recalculated) structural balance (5) the annual improvement of the structural deficit planned in the Stability Programme is 1,2 %, 0,4 %, 0,9 % and 0,9 % of GDP for the years 2013 to 2016. Following the correction of the excessive deficit, the Stability Programme confirms the medium-term objective (MTO) of a balanced budgetary position in structural terms, which would be achieved by 2018. The MTO is more ambitious than required by the Stability and Growth Pact. The envisaged pace of adjustment in structural terms in 2017-2018 represents sufficient progress towards the MTO. The Stability Programme projects the government debt ratio to peak in 2016 and to start declining thereafter. The deficit and debt adjustment paths are subject to downside risks. Measures to support the deficit targets are not sufficiently specified, especially at regional level. For 2016, the Stability Programme does not present any measures and previous temporary measures are extended only to 2014. Planned savings from the local government reform are subject to significant implementation risks. Moreover, there are uncertainties surrounding the economic, labour market and financial situation as well as revenue developments in the context of persisting large macroeconomic imbalances. Fully implementing the adopted early retirement reform and reaching an agreement on the sustainability factor would mitigate risks in the social security system. A further risk stems from contingent liabilities linked with asset protection schemes/guarantees. There has been major progress in the reporting of budgetary execution, but there is scope for a more transparent and timely implementation of the Budgetary Stability Law’s preventive and corrective mechanisms. Systematic and timely reporting on government arrears, whose large outstanding stock required an ad-hoc repayment scheme, is missing. The establishment of an independent fiscal council has been lagging behind schedule. A proposed revision of indexation rules for all public revenues and expenditures would bring budgetary savings and a higher responsiveness of prices to economic conditions. The National Reform Programme also acknowledges the need to further improve cost-effectiveness in healthcare and pharmaceutical expenditure, for example by revising reference prices and centralising purchasing of pharmaceutical products, or extending co-payments.