EXPLANATORY MEMORANDUM

1. Background to the Recommendation

According to Article 126(1) of the Treaty on the Functioning of the European Union (TFEU), Member States shall avoid excessive government deficits. Government deficit and debt data relevant for the application of Articles 121 TFEU and 126 TFEU, or for the application of the Protocol on the excessive deficit procedure annexed to the Treaties, is an essential input to economic policy coordination in the Union.

Regulation (EU) No 1173/2011 of the European Parliament and of the Council of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area sets out a system of sanctions for enhancing the enforcement of budgetary surveillance in the euro area. In this context, in order to deter against the misrepresentation, whether intentional or due to serious negligence, of government deficit and debt data, Article 8(1) of the Regulation provides that the Council, acting upon a recommendation by the Commission, may decide to impose a fine on the Member State responsible.

Article 8(3) of Regulation (EU) No 1173/2011 empowers the Commission, when it finds that there are serious indications of facts liable to constitute a misrepresentation of government deficit and debt data, to conduct all investigations necessary. On 3 May 2016, the Commission launched an investigation related to the manipulation of statistics in Austria.

The preliminary findings of the investigation related to manipulation of statistics in Austria were sent to Austria for its observations on 20 December 2016, as required by Article 6 of Commission Delegated Decision 2012/678. The Commission invited Austria to submit written observations on the preliminary findings by 19 January 2017. Austria provided its written observations on 25 January 2017.

On 22 February 2017, the Commission adopted its Report on the investigation related to the manipulation of statistics in Austria as referred to in Regulation (EU) No 1173/2011 (the Report), taking into account the observations of Austria.

The Report concludes that the Landesrechnungshof (LRH), the State Office and the State Government of Land Salzburg, i.e. entities within the general government sector of the Republic of Austria, were seriously negligent in not ensuring appropriate compilation controls and reporting procedures. Thereby those entities facilitated the fact that the Budget Unit of the State Office of Land Salzburg could misrepresent and conceal financial transactions, leading to the misrepresentation in 2012 and 2013 of Austria’s debt data regarding years 2008-2012 to Eurostat, i.e. after the entry into force of Regulation (EU) 1173/2011.

Moreover, the Report concluded that Statistics Austria (hereinafter “STAT”) was aware of the possibility of misrepresentation of the accounts of Land Salzburg since, at least, 6 December 2012, but that it only informed the Commission (Eurostat) accordingly on 10 October 2013.

The conditions set out in Article 8(1) of Regulation (EU) No 1173/2011 for recommending that the Council impose a fine on the Member State are present, as regards the misrepresentation of debt data which took place when Austria reported the incorrect data to Eurostat in March and September 2012 and March and September 2013, and thus after the entry into force of the Regulation on 13 December 2011.

2. Calculation of the fine

According to Article 14 of Commission Delegated Decision 2012/678/EU of 29 June 2012 on investigations and fines related to the manipulation of statistics as referred to in Regulation (EU) No 1173/2011, the Commission shall ensure that the fine to be recommended is effective, proportionate and dissuasive. The fine is established using a two-step methodology. First, the Commission determines the reference amount. Second, it may modulate that reference amount upwards or downwards taking into account the specific circumstances of the case.

According to Article 14(2) of Delegated Decision 2012/678/EU, the reference amount is equal to 5 % of the larger impact of misrepresentation of the general government debt of Austria for the relevant years covered by the notification in the context of the excessive deficit procedure (EDP). The revision to the debt for the year 2012 reported by the Republic of Austria in the April 2014 EDP Notification amounted to EUR 1 192 million. The reference amount thus equals EUR 59.6 million.

Taking into account the criteria set out in Article 14(3)(d) of Delegated Decision 2012/678/EU, the point of departure is that the reference amount shall be the highest magnitude detected, multiplied by the number of years, across the four years of the last notification, in which the relevant misrepresentation occurred. The highest magnitude detected, as mentioned above, was of EUR 1 192 million in 2012. Moreover, the last notification in which the relevant misrepresentation occurred was the October 2013 EDP notification, covering years 2009 to 2012. However, in view of the fact that Regulation (EU) No 1173/2011 only entered into force on 13 December 2011 and that no sanctions were foreseen for misrepresentation of government deficit and debt data prior to that date, only the misrepresentation for years 2011 and 2012, as misreported in the 2012 and the 2013 EDP notifications respectively, are of relevance. In this sense, the reference amount shall be multiplied by two, amounting to EUR 119.2 million.

Taking into account the criteria set out in Article 14(3)(a) of Delegated Decision 2012/678/EU, the Commission in its report concludes that the misrepresentation of data did not have a significant impact on the functioning of the strengthened economic governance of the Union, due to the limited impact on the debt of the Republic of Austria as a whole. In this sense, the Commission considers that in view of the concrete circumstances, the Republic of Austria could be granted a reduction of the fine on this account.

Taking into account the criteria set out in Article 14(3)(b) of Delegated Decision 2012/678/EU, the Report indicates that the misrepresentation was the result of serious negligence. The Report does not conclude that the misrepresentation was intentional in an EDP context (see in particular section 4 of the Report). Therefore, no modulation is applied on this account under the concrete circumstances.

Taking into account the criteria set out in Article 14(3)(c) of Delegated Decision 2012/678/EU, the Report concludes that the misrepresentation of data was facilitated by the fact, that three entities of the general government sector of the Republic of Austria were seriously negligent in not ensuring appropriate compilation controls and reporting procedures (see in particular sections 3 and 4 of the Report). Nevertheless, the Commission does not consider this to be a concerted action by those entities and hence the Republic of Austria could be granted a reduction of the fine on this account under the concrete circumstances.

Taking into account the criteria set out in Article 14(3)(e) of Delegated Decision 2012/678/EU, the Report concludes that STAT and all entities concerned have shown a high degree of cooperation in the course of the investigation. In this respect, the Commission has had some regard to its practice in the area of competition, where fines may be reduced significantly on account of cooperation with the Commission in the course of an investigation.

Nevertheless, it has been ascertained that STAT, even if it was fully and directly informed by the State Office, at least since 22 January 2013, that misrepresentation had occurred in the accounts of Land Salzburg, failed to immediately inform the Commission (Eurostat) of these facts. This element would normally justify an increase in the amount of the fine. As a combined result of the two above elements, the Commission considers that the Republic of Austria could still be granted a certain reduction of the fine on this account.