EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 7.5.2008 
SEC(2008) 571 final 
  
Recommendation for a  
COUNCIL DECISION 
abrogating Decision 2005/185/ EC on the existence  
of an excessive deficit in the Czech Republic 
(presented by the Commission) 
 
EN 2   EN EXPLANATORY MEMORANDUM  
1. B ACKGROUND  
Article 104 of the Treaty estab lishes that Member States shoul d avoid excessive deficits and 
lays down a procedure for their identification an d correction. The excessive deficit procedure 
(EDP) is further specified in Council Re gulation (EC) No 1467/97 on “speeding up and 
clarifying the implementation of the excessive deficit procedure”1, which is part of the 
Stability and Growth Pact. Acco rding to Article 104(2) of the Treaty, the Commission has to 
monitor compliance with budgetar y discipline on the basis of  two criteria, namely: (a) 
whether the planned or actual government defi cit exceeds the reference value of 3% of GDP 
(unless either the deficit ratio has declined substantially and continuously and reached a level 
that comes close to the reference value; or, a lternatively, the excess over the reference value is 
only exceptional and temporary an d the ratio remains close to the reference value); and (b) 
whether government debt exceeds the reference va lue of 60% of GDP (unl ess the debt ratio is 
sufficiently diminishing and approaching the reference value at a satisfactory pace). 
In accordance with the Protocol on the excessive  deficit procedure annexed to the Treaty, the 
Commission provides the data for the implementati on of the EDP. As part  of the application 
of this Protocol, Member States have to notif y data on government deficits and debt and other 
associated variables twice a year, namely before  1 April and before 1 October, in accordance 
with Article 4 of Council Regulation (EC) No 3605/932,3. 
On 12 May 2004, the Commission initiated the ED P for the Czech Republic with the adoption 
of a report under Article 104(3), based on a gene ral government deficit of 12.9% of GDP in 
20034 (5.9% of GDP excluding a major one-off opera tion related to imputed state guarantees). 
On 5 July 2004, the Council decided, on a r ecommendation from the Commission, that the 
Czech Republic was in excessive de ficit according to Article 104(6)5. At the same time, and 
also based on a Commission recommendation, the Council addressed recommendations under 
Article 104(7) to the Czech Republic with a view  to bringing the situation of an excessive 
government deficit to an end, by 2008 at the latest.  
                                                 
1 OJ L 209, 2.8.1997, p. 6. Regulation as amended by Regulation (EC) No 1056/2005 (OJ L 174, 
7.7.2005, p. 5). 
2 OJ L 332, 31.12.1993, p. 7. Regulation as last amended by Regulation (EC) No 2103/2005 (OJ L 337, 
22.12.2005, p. 1). 
3 The most recent notification of th e Czech Republic can be found at: 
 http://epp.eurostat.ec.europa.eu/portal/page?_p ageid=2373,58110711&_dad=portal&_schema=portal. 
4 SEC(2004) 575. In the meantime the 2003 deficit outturn has been revised downwards to 6.6% of GDP 
(no longer including any one-offs). 
5 OJ L 62, 9.3.2005, p. 20. 
 
EN 3   EN In view of the forecast of a marked budgetary slippage in 2007 and a continuing excess of the 
deficit over the reference valu e in 2008, based on budgetary plan s proposed before the June 
2006 general election, the Counc il adopted a decision under Article 104(8) on 10 July 2007, 
based on a recommendation from the Commission, stating that th e action being taken by the 
Czech Republic did not appear to be adequate to correct the excessive deficit by the deadline 
of 2008. On 10 October 2007, the Council issu ed a new recommendation under Article 
104(7), based on a recommendation from the Commission, recommending the Czech 
Republic to further contain th e budgetary deterior ation in 2007 and conf irming the original 
target year of 2008 to put an end to the excessi ve deficit situation. The Czech authorities had 
to bring the deficit below the 3% of GDP re ference value in a credible and sustainable 
manner. To this end, on the basis of then ava ilable projections the Council recommended the 
Czech authorities to ensure an improvement in  the structural balance (i.e. the cyclically-
adjusted balance net of one-off and other tempor ary measures) of at least ¾% of GDP in 2008 
compared to 2007. The Council set a deadline of  9 April 2008 for the Czech authorities to 
take effective action. 
In addition, the Council invited the Czech Republic  “to ensure that budgetary consolidation 
towards its medium-term objective (MTO) for the budgetary position of a structural deficit of 
1% of GDP is sustained after th e excessive deficit has been corrected and to achieve the MTO 
by the original deadline of 2012 at the latest.” 
Table 1: Adjustment endorsed by the Council on 10 October 2007 
% of GDP, unless indicated otherwise  2006 2007 2008 
General government balance  
change in structural balance 
p.m.: Real GDP growth (%) -2.7 
 
6.0 better than -3.3 
 
5.0 deficit < 3 
at least ¾ 
4.9 
Notes : Structural balance = cyclically-adjusted balance excluding one-off and other temporary measures. 
Source : Council recommendation under Article 104(7), adopted on 10 October 2007, and Commission services’ 
Spring 2007 forecast 
After the expiry of the deadline set by the C ouncil, the Commission habitually makes a formal 
assessment of the action taken by the au thorities in respons e to the Council’s 
recommendations, taking into account the most recent Commission services’ forecasts. This represents an intermediate assessment of whether the country is on track to correct the excessive deficit in time. In th e case of the Czech Republic, this  intermediate assessment is 
subsumed under and replaced by the current document. It takes into account the Czech government’s note on corrective measures  adopted under the EDP of April 2008
6. 
According to Article 104(12), a Council decision on the existence of an excessive deficit is to 
be abrogated, on the basis of a Commission re commendation, when the ex cessive deficit in 
the Member State concerned has, in th e view of the Council, been corrected. 
                                                 
6 Letter of 10 April 2008 addressed by the Czech Mini ster of Finance to the Co mmissioner for Economic 
and Monetary Affairs. 
 
EN 4   EN 2. R ECENT DEFICIT DEVELOPMENTS  
The general government deficit reached a high of  6.6% of GDP in 2003. Thereafter, with the 
exception of 2005 (3½% of GDP), the general gove rnment deficit has not been above 3% of 
GDP. The nominal deficit developments since 2 004 have been better than the recommended 
(nominal) deficit reduction path in the 104(7) recommendation of 5 July 2004. The 
improvement in the general government deficit has been due to better-than-expected revenues from higher-than-anticipated growth, which ha s exceeded 6% annually since 2005, as well as 
expenditure restraint. General government expenditure has fallen gradually as a percentage of 
GDP from 45% of GDP in 2004 to 42.4% of GDP in 2007. This is partly due to government 
consumption which has been lowered by about 2%  of GDP and also dimi nishing costs related 
to the consolidation of the banking sector
7. 
Based on data provided by the Commission (Eur ostat), following the reporting by the Czech 
Republic before April 20088,9, the general government defic it stood at 1.6% of GDP in 200710 
which is significantly below the target of 4% of GDP, set in the March 2007 update of the convergence programme. In the outturn, revenues , as a percentage of GDP, were 0.8% of 
GDP higher than projected in the March 2007 convergence programme, and government 
expenditure was 1.8% of GDP lower. The much  better-than-expected  outturn appears to 
mainly reflect containment of social expenditure , which was projected to rise by about 1% of 
GDP. Other elements of public expenditure including compensation of employees and 
intermediate consumption were also contained. In addition, grow th turned out at 6.5% of GDP 
compared to 4.9% of GDP, as expected in the March 2007 convergence programme, and tax 
elasticities were better than predicted. 
Both revenues and expenditures were positively affected by a stronger than expected rise in 
employment. Social contributi ons grew more than anticipated and social transfers only 
increased marginally, as a percentage of GDP. 
Compared to 2006, the headline de ficit declined by 1.1% of GDP, of which about one half is 
due to measures taken, as illustrated by the im provement in the structural balance, and the 
other half is thanks to stronger growth. To tal expenditures decreased by 1.2% of GDP while 
total revenues decreased by 0.2% of GDP.  The improvement in 2007 represents an 
overachievement of the Council’s recommenda tion to “further co ntain the budgetary 
deterioration” that was at the time expected for 2007. 
                                                
 
7 In the context of privatisation of the banking sector, the Czech g overnment bore much of the costs 
related to non-performing loans, in particular, thro ugh the creation of the C zech Consolidation Agency. 
Over time, the proportion of these assets has declined.  
8 Eurostat News Release No 54/2008 of 18 April 2008. 
9 In accordance with Article 8g(1)  of Regulation (EC) No 3605/93. 
10 Deficit ratios are usually revised – upwards or downwards – after the publication of the first outcome in 
the spring notification. For most EU Member States, the revisions are usually relatively small and on 
average insignificantly diff erent from zero. For the Czech Republic , in view of the distance between the 
currently reported deficit for 2007 and the deficit reference value, there is a low probability that any 
potential future revision in government accounts will ra ise the 2007 deficit ratio to a level in excess of 
3% of GDP. 
 
EN 5   EN The overall reduction in government expenditure is re flected in the increase in the size of the 
reserve funds which are estimated to have expanded to 2¾% of GDP (from about 2% in 
2006), of which about ¾% of GDP is non-EU f unds related expenditure that is deferred 
expenditure which may swell future deficits. The other 2% are EU-funds related and backed-
up by revenues. 
In structural terms, the deficit decreased fr om 2.9% of GDP in 2006 to 2.3% of GDP in 2007 
due to continued government expenditure restraint including public sector wages. 
3. D EFICIT PROJECTIONS FOR 2008  AND BEYOND  
According to the Commission services’ spring 2 008 forecast, the general government deficit 
is projected to decline furt her, reaching 1.4% of GDP in 2008 and, under a no-policy change 
assumption, 1.1% of GDP in 2009. This is due to  the balance of measures included in the 
stabilisation package, approved on 19 September 2007, which is estimated to have a positive impact amounting to around 0.3% of GDP for each  year (see box I). The level of social 
transfers is expected to fall, as a percen tage of GDP, in 2008 and 2009 as a result of 
legislative measures in the stabilisation pack age. In addition to le gislative measures, the 
consolidation also relies on c ontinuing public sector wage rest raint and a reduction in public 
consumption as a percentage of GDP. Revenues ar e expected to remain stable as a percentage 
of GDP, although the range of tax measures o ccurring at the same time makes forecasting 
difficult. The Commission services’ deficit projec tions in the spring forecast are in line with 
the planned deficit reported in the spring notification (1.5% of GDP). 
Based on the Commission services’ spring 2008 forecast, the structur al balance is expected to 
improve from -2¼% of GDP in 2007 to ar ound -2% of GDP in 2008. The improvement is 
lower than recommended by the Council (at least ¾% of GDP) in light of the much better headline deficit in 2007, underpinned by a structur al improvement in 2007, of about ½% of 
GDP, which was not anticipated at the time of the recommendation. 
The medium-term objective (MTO) of the Czech Re public is a structural deficit to 1% of 
GDP, which according to the most recent convergence programme submitted in November 2007 should be achieved by 2012. The Council opi nion of 4 March 2008 on the programme
11 
invited the Czech authorities to “exploit the high rate of  growth in the economy by 
strengthening the pace of adjust ment so as to build a safety margin against breaching the 
reference value as soon as possible, and achieve the MTO by 2012 at the latest”.  
Box I: Summary of measures in th e stabilisation package of September 2007 
The stabilisation package has shifted the overall tax burden from direct to indirect taxation. 
From 1 January 2008, a 15% flat ra te of personal income tax was introduced, albeit on an 
expanded base, which is planned to be further reduced to 12.5% in 2009. From 1 January 2008, the corporate income tax rate was reduced  from 24% to 21% and will decline further 
to 19% by 2010. Indirect taxes we re increased in January 2008 through an increase in the 
lower band of VAT from 5 to 9 %, increases to  excise taxes, and the introduction of an 
environmental tax on electricity, natural gas and solid fuels. A ceiling has also been 
introduced on the maximum base for payment of  social contributions which will reduce 
                                                 
11 OJ C 74, 20.3.2008, p. 24. 
 
EN 6   EN revenue. 
The stabilisation package introduced new legi slation aimed at reducing expenditure in 
primarily the area of social benefits, including child benefits, social care benefits, parental 
allowances, maternity benefits, foster care bene fits, benefits for school supplies, and funeral 
benefits. In addition to fixed reductions, most social care benefits have  ceased to be indexed 
to the minimum subsistence level, which in tu rn has been changed to a discretionary basis 
by the government.  The stabilisation package also intr oduced service charges for healthcare 
services from January 2008. This includes char ges for medical consultations, prescription 
medicines, and hospitalisation. These changes are estimated to have a small positive impact on government revenues by generating addition al income and reducing expenditure by 
lowering demand.  
 
The government tabled a proposal on 23 January 2008 to compensate churches for confiscated 
religious property (see box II). Pursuant to its approval by the Czech parliament, the financial compensation will be registered as a one-off deficit-increasing expenditure amounting to 2.2% of GDP in the year in which the gove rnment liability is recognised, though most 
effective payment will be deferre d over a very long period of 60 years. This transaction was 
not considered in the Commission services’ spring 2008 forecasts based on the usual no-policy change assumption, since it was not clear whether and when the government proposal 
would be adopted by Parliament. This transaction was not considered either in the projections 
of the convergence programme. In case the proposal became effective in 2008 or 2009, the government deficit (including this transaction) would on current projections be temporarily in 
excess of 3% of GDP for that year. 
Box II: The Czech proposal for compensation for the confiscation of religious property 
On 23 January 2008, the Czech Government tabled in parliament a proposal to compensate 
the church for religious property confiscat ed during the period 1948-1990. Two ways of 
compensation are foreseen: restitution in kind and financial compensation when restitution in kind is no longer possible. According to th e proposal, as far as the financial compensation 
is concerned, the churches will receive from the government 60 yearly cash instalments of 
CZK 4274.9 million (0.1% of the 2008 GDP). Given an  annual interest rate of 4.85%, this 
corresponds to a principal of CZK 83.0 b illion (2.2% of the 2008 GDP) and CZK 173.5 
billion of interest
12. 
The Czech statistical office has required Eu rostat to clarify the appropriate accounting 
implications of the proposal for compensation. Euro stat clarified that the restitutions in kind 
have no impact on the government deficit. When the returned asset is the same as 
confiscated in the past, the tr ansaction is recorded in ES A accounts as other changes in 
volume without any direct impact on the gove rnment revenue and expenditure accounts. 
When the returned good is not the same, the re stitution is booked as a capital transfer paid 
offset by negative investment. 
In relation to the financial compensation, Eurostat clarified that, according to its 
interpretation of ESA accounti ng rules, the principal to be  paid should be booked as 
government expenditure when the legal act is approve d, instead of when cash payments take 
                                                 
12 According to information provided by the Czech authorities, part of th e compensation deal is also that 
state support to churches (e.g. payment of priests’  salaries) will be phased out. This state support 
amounts to CZK 1406 million (0.04% of GDP in 2008). 
 
EN 7   EN place. Interest will be booked as government expenditure over the 60 following years. 
Eurostat also clarified that the outstanding liab ility vis-à-vis the churches will be booked as 
accounts payable13. 
Therefore, in the year the Czech Parliament a dopts the law and the latter enters into force, 
the Czech government accounts will include a very large one-off deficit-increasing 
transaction amounting to 2.2% of GDP. The fact that the liability  vis-à-vis the churches will 
be booked as accounts payable means that it will not constitute government debt in the sense of Regulation (EC) No 3605/93. At the moment  the expenditure is booked, the stock-flow 
adjustment will include an exceptionally large negative cash-accrual difference, which will be progressively offset over 60 years. 
4. D EBT DEVELOPMENTS AND PROJECTIONS  
Despite significant general government deficits  since 2004, the increase of the level of debt 
has been largely contained. Due to record grow th since 2005, and a substantial reduction in 
the general government deficit in 2007 compared  to 2006, the level of government debt has 
decreased from 30.4% of GDP in  2004 to 28.7% of GDP in 2007.  
On the basis of the Commission services’ spring 2008 forecast, the debt ra tio is expected to 
continue on a downward path  to below 28% of GDP in 2009, due to continuing fiscal 
consolidation and sustained macroeconomic growth. 
5. C ONCLUSIONS  
Despite the expectation of a st rong fiscal expansion in 2007, the general government balance 
improved from -2.7% of GDP in 2006 to -1.6% of GDP in 2007. This was due in part to 
expenditure savings as well as higher growth. The structural ba lance, i.e. the cyclically-
adjusted balance net of one-off and other te mporary measures, improved by ½% of GDP in 
2007. 
The Czech government has introduced a range of  legislative measures, effective from 2008, 
with the aim of consolidating public fi nances in 2008 and 2009, including through the 
containment of social spending and the introduct ion of service charges for healthcare, which 
will have a net positive impact on public finan ces. Combined with continuing expenditure 
restraint, and a close monitoring of the impact on revenues of the wide range of tax measures 
implemented in 2008, these measures are expected to lead to a further reduction in the general 
government deficit. According to the Commi ssion services’ spring 2008 forecast, the headline 
deficit is expected to improve further to  1.4% of GDP in 2008 and, on a no-policy change 
basis, to 1.1% in 2009. This indi cates that the deficit has been  brought below the 3% of GDP 
ceiling in a credible and sustainable manner. 
General government gross debt declined from 29.4% of GDP in 2006 to 28.7% in 2007, well 
below the 60% of GDP reference value. Acco rding to the Commission services’ spring 2008 
forecast, the debt ratio is expected to fa ll further to below 28% of GDP by 2009 (on a no-
policy change basis). 
                                                                                                                                                         
13 The Eurostat letter of 14 March 2008 providing ex ante  advice to the Czech statistical office is available 
at: http://epp.eurostat.ec.europa.eu/pls/port al/docs/PAGE/PGP_DS_GF S/PGE_DS_GFS_8/ADV%20-
%20CZ%20-%202008.1%20-%20CONFISCATED%20PROPERTIES.PDF 
 
EN 8   EN From an overall assessment, it follows that the excessive deficit situation in the Czech 
Republic has been corrected. Accordingly, th e Commission recommends to the Council to 
abrogate its decision on the existence of an  excessive deficit in the Czech Republic. 
Table 2: Budgetary developments, 2003-2009  
2007 2008 2009 
% of GDP, unless indicated otherwise 2003 2004 2005 2006
COM CP(2)COM CP(2) COM(3)CP(2)
General government balance -6.6 -3.0 -3.6 -2.7 -1.6 -3.4 -1.4 -2.9 -1.1 -2.6 
- Total revenues 40.7 42.2 41.4 41.0 40.8 39.8 40.7 39.5 40.7 38.1 
- Total expenditure 47.3 45.2 44.9 43.6 42.4 43.3 42.2 42.4 41.8 40.7 
Of which : - interest expenditure 1.2 1.2 1.2 1.1 1.2 1.2 1.1 1.3 1.1 1.2 
 - gross fixed capital formation 4.5 4.8 4.9 5.0 4.8 5.1 4.8 5.3 4.9 5.4 
Primary balance -5.5 -1.8 -2.4 -1.5 -0.4 -2.3 -0.3 -1.7 0.0 -1.3 
One-off and temporary measures 0.0 -0.7 -1.1 -0.2 0.0 0.0 0.0 0.0 0.0 0.0 Structural balance
(1) -5.5 -1.3 -2.1 -2.9 -2.3 -4.1 -1.9 -3.4 -1.5 -2.8 
Structural primary balance(2) -4.4 -0.1 -1.0 -1.7 -1.2 -2.9 -0.8 -2.2 -0.4 -1.6 
Government gross debt  30.1 30.4 29.7 29.4 28.7 30.4 28.1 30.3 27.2 30.2 
Pm Real GDP growth (%) 3.6 4.5 6.4 6.4 6.5 5.9 4.7 5.0 5.0 5.1 
Pm Output gap -3.0 -2.6 -0.8 0.8 2.0 1.8 1.4 1.4 1.1 0.7 
(1) Cyclically-adjusted (primary) balance excluding one-off and temporary measures. 
(2) Cyclically-adjusted and structural balances and output gaps according to the programme as calculated by 
Commission services on the basis of the information in the programme. 
(3) No-policy change assumption. 
Sources: Commission services’ spring 2008 forecast (COM) and November 2007 update of the convergence 
programme (CP) 
 
EN 9   EN Recommendation for a  
COUNCIL DECISION 
abrogating Decision 2005/185/ EC on the existence  
of an excessive deficit in the Czech Republic 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing th e European Community, and in particular 
Article 104(12) thereof, 
Having regard to the recomm endation from the Commission, 
Whereas: (1) By Council Decision 2005/185/EC
14, following a recommendation from the 
Commission in accordance with Article 104(6) of the Treaty, it was decided that an 
excessive deficit existed in  the Czech Republic. The Counc il noted that the general 
government deficit was 12.9% of GDP in 2003 (5.9% of GDP excluding a major one-
off operation related to imputed state guara ntees), well above the 3% of GDP Treaty 
reference value.  
(2) On 5 July 2004, in accord ance with Article 104(7) of th e Treaty and Article 3(4) of 
Council Regulation (EC) No 1467/97 of 7 Ju ly 1997 on speeding up and clarifying the 
implementation of the excessive deficit procedure15, the Council made, based on a 
recommendation from the Commission, a recommendation addressed to the Czech 
Republic with a view to bringing the excessi ve deficit situation to an end by 2008 at 
the latest. The recommendation was made public. 
(3) In view of the forecast of a marked budgetary slippage in 2007 and a continuing 
excess of the deficit over the reference va lue in 2008, the Council adopted a decision 
under Article 104(8) on 10 July 2007, ba sed on a recommendation from the 
Commission, stating that the action being ta ken by the Czech Republic did not appear 
to be adequate to correct the exce ssive deficit by the deadline of 200816. On 10 
October 2007, the Council issued a new r ecommendation under Article 104(7), based 
on a recommendation from the Commission, recommending the Czech Republic to 
further contain the budgetary deteriora tion in 2007 and reconfirming the excessive 
deficit had to be put to an end by 2008 at the latest, with a deadline of 9 April 2008 for 
the Czech authorities to ta ke effective action. On the basis of then available 
projections the Council invited the Czech aut horities to ensure an improvement in the 
                                                 
14 OJ L 62, 9.3.2005, p. 20. 
15 OJ L 209, 2.8.1997, p. 6. Regulation as amended by Regulation (EC) No 1056/2005 (OJ L 174, 
7.7.2005, p. 5). 
16 OJ L 260, 5.10.2007, p. 13. 
 
EN 10   EN structural balance (i.e. the cyclically-a djusted balance net of one-off and other 
temporary measures) of at least ¾% of GDP in 2008 compared to 2007. 
(4) In accordance with Article 104(12) of the Treaty, a Council Decision on the existence 
of an excessive deficit is to be abrogate d when the excessive deficit in the Member 
State concerned has, in the view  of the Council, been corrected. 
(5) In accordance with the Protocol on the excessive deficit pro cedure annexed to the 
Treaty, the Commission provides the data for the implementa tion of the procedure. As 
part of the application of this Protocol , Member States are to notify data on 
government deficits and debt and other a ssociated variables tw ice a year, namely 
before 1 April and before 1 October, in  accordance with Article 4 of Council 
Regulation (EC) No 3605/93 of 22 November  1993 on the application of the Protocol 
on the excessive deficit procedure annexed to the Treaty establishing the European 
Community17. 
(6) Based on data provided by the Commission (Eurostat) in accordance with Article 
8g(1) of Regulation (EC) No 3605/93 fo llowing the notification by the Czech 
Republic before 1 April 2008 and on the Commission services’ sp ring 2008 forecast, 
the following conclusions are warranted: 
– the general government deficit was reduced from 2.7% of GDP in 2006 to 
1.6% of GDP in 2007, which is below the 3% of GDP deficit reference value. 
This compares with a target of 4%  of GDP in the March 2007 convergence 
programme, 
– while tax revenues exceeded expectations due to higher-than-projected 
economic growth, the deficit reduction in  2007 was also the consequence of 
expenditure restraint, in particular with  respect to the compensation of public 
sector employees and intermediate c onsumption. Most of the expenditure 
savings are of a permanent nature. The improvement in the structural balance 
(i.e. the cyclically-adjusted balance net of one-off and other temporary 
measures) is estimated at ju st above ½% of GDP in 2007, 
– for 2008, the spring 2008 forecast projects th e deficit to be reduced further, to 
1.4% of GDP, driven by additional expenditure savings measures, legislative measures to reduce social expenditure and the introduction of partial health 
charges. Revenue as a percentage of GDP is expected to remain broadly 
constant on the back of a wide range of tax measures implemented in 2008. 
The spring forecast is in line with the defi cit target of 1.5% of  GDP in the April 
fiscal notification. For 2009, the spring forecast projects, on a no-policy change 
basis, a further decline in the deficit to 1.1% of GDP. This indicates that the 
deficit has been brought below the 3%  of GDP ceiling in a credible and 
sustainable manner. The structural balan ce is projected to improve by almost ½ 
a percentage point of GDP in 2008 and ag ain, on a no-policy change basis, in 
2009. This has to be seen against the need to make progress towards the medium-term objective (MTO) for the budgetary position, which for the Czech 
                                                
 
17 OJ L 332, 31.12.1993, p. 7. Regulation as last amended by Regulation (EC) No 2103/2005 (OJ L 337, 
22.12.2005, p. 1). 
 
EN 11   EN Republic is a structural deficit of 1%  of GDP, to be reached by 2012 according 
to the November 2007 update of the convergence programme. 
– government debt remains well below th e 60% of GDP reference value. It 
declined from 29.4% of GDP in 2006 to 28.7% in 2007. A ccording to the 
spring 2008 forecast, the debt ratio is proj ected to fall further to below 28% by 
end-2009 (on a no-policy change basis). 
(7) In the view of the Council, the excessi ve deficit in the Czech Republic has been 
corrected and Decision 2005/185/EC should therefore be abrogated. 
HAS ADOPTED THIS DECISION: 
Article 1 
From an overall assessment it follows that the excessive deficit situation in the Czech 
Republic has been corrected. 
Article 2 
Decision 2005/185/EC is hereby abrogated. 
Article 3 
This Decision is addressed to the Czech Republic. 
Done at ,  
 For the Council 
 The President