Recommendation for a

COUNCIL DECISION

abrogating Decision 2010/401/EU on the existence of an excessive deficit in Cyprus

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 126(12) thereof,

Having regard to the recommendation from the Commission,

Whereas:

(1)On 13 July 2010 following a recommendation from the Commission, the Council decided, by Decision 2010/401/EU in accordance with Article 126(6) of the Treaty that an excessive deficit existed in Cyprus. The Council noted that according to data notified by the Cypriot Authorities in April 2010, the general government deficit in Cyprus reached 6.1% of GDP in 2009, thus exceeding the 3% of GDP Treaty reference value. The general government gross debt was planned to reach 62% of GDP in 2010, thus above the 60%-of-GDP Treaty reference value.

(2)On the same date, in accordance with Article 126(7) of the Treaty and Article 3(4) of Council Regulation (EC) No 1467/97, the Council, based on a recommendation from the Commission, addressed a recommendation to Cyprus with a view to bringing an end to the situation of an excessive government deficit by 2012 at the latest. That Council recommendation was made public.

(3)On 27 January 2011, the Commission concluded that, on the basis of information available at the time, Cyprus had taken action representing adequate progress towards the correction of the excessive deficit within the time limits set by the Council. On 11 January 2012, the Commission again confirmed that Cyprus had taken effective action towards a timely and sustainable correction of the excessive deficit.

(4)The Cypriot authorities requested financial assistance from the European Union, the Member States whose currency is the euro and the International Monetary Fund (IMF) with a view to supporting the return of Cyprus' economy to sustainable growth. On 25 April 2013, the Council addressed a decision to Cyprus on specific measures to restore financial stability and sustainable growth. In parallel, the European Stability Mechanism (ESM) granted a financial assistance facility to Cyprus. In this context, a Memorandum of Understanding on Specific Economic Policy Conditionality (the "Memorandum of Understanding") was signed on 26 April 2013 by the Cypriot authorities and the Commission, acting on behalf of the ESM.

(5)On 16 May 2013, in accordance with Article 3(5) of Council Regulation (EC) No 1467/97, the Council concluded that effective action had been taken but that unexpected adverse economic events with major unfavourable consequences for government finances had occurred after the adoption of the recommendation in 2010. Therefore, the Council, following a recommendation from the Commission, considered that the conditions envisaged in Article 3(5) of Regulation (EC) No 1467/97 were fulfilled and issued a revised recommendation to Cyprus under Article 126(7) TFEU, with a view to bringing the excessive deficit situation to an end by 2016.

(6)On 6 September 2013, the Commission concluded that Cyprus had taken effective action towards correcting the excessive deficit by 2016 as recommended by the Council on 16 May 2013.

(7)In line with Article 10(2), letter (a), of Regulation (EU) No 472/2013, Cyprus was exempted from a separate reporting under the excessive deficit procedure and reported in the framework of its macroeconomic adjustment programme.

(8)In March 2016, Cyprus exited its three-year macroeconomic adjustment programme which included the implementation of an ambitious reform agenda and contributed to ensuring financial stability, improving public finances and restoring sustainable economic growth.

(9)In accordance with Article 4 of the Protocol on the excessive deficit procedure annexed to the Treaties, the Commission provides the data for the implementation of the procedure. As part of the application of this Protocol, Member States are to notify 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 3 of Council Regulation (EC) No 479/2009.

(10)The Council should take a decision to abrogate a decision on the existence of an excessive deficit on the basis of notified data. Moreover, a decision on the existence of an excessive deficit should be abrogated only if the Commission forecasts indicate that the deficit will not exceed the 3% of GDP Treaty reference value over the forecast horizon.