MT    MT  KUMMISSJONI TAL-KOMUNITAJIET EWROPEJ 
Brussel, 7.4.2004 
KUMM (2004) 238 finali 
  
RAKKOMANDAZZJONI TAL-KUMMISSJONI 
dwar l-aġġornament ta’ l-2004 dwar il-Linji ta’ Gwida Ġenerali tal-Politka Ekonomika 
ta’ l-Istati Membri u tal-Komunità (g ħall-perjodu 2003-2005) 
(ippreżentat skond l-Artikolu 99( 2) tat-Trattat KE) 
 
MT 2   MT WERREJ 
I. Linji Ta’ Gwida Ġenerali Dwar Il-Politika EKONOMIKA ........................................ 3 
1. L-istrate ġija preżenti tibqa' valida................................................................................ 3 
2. Sfond ekonomiku mtejjeb ............................................................................................ 3 3. L-integrazzjoni ta' l-g ħaxar Stati Membri ġodda fil-BEPGs ta' l-2003-05 .................. 4 
3.1 It-tkabbir ekonomiku u l-politika makroekonom ika orjentata lejn l-istabbilità........... 5 
3.2 Riformi ekonomi ċi sabiex ji żdied il-potenzjal ta’ l-Ewropa g ħat-tkabbir ekonomiku 7 
3.3 It-tis ħiħ tas-sostenibbiltà .............................................................................................. 9 
II. Linji ta’ Gwida Ta’ Politika Ekonomika Spe ċifika Għall-Pajjiż............................... 10 
1. Il-Bel ġju ..................................................................................................................... 10 
2. Id-Danimarka ............................................................................................................. 10 3. Il- Ġermanja ................................................................................................................ 10 
4. Il-Gre ċja ..................................................................................................................... 11 
5. Spanja...................................................................................................................... ... 11 
6. Franza...................................................................................................................... ... 11 
7. L-Irlanda................................................................................................................... .. 12 
8. L-Italja.................................................................................................................... .... 12 
9. Il-Lussemburgu .......................................................................................................... 13 10. L-Olanda ................................................................................................................... . 13 
11. L-Awstrija ................................................................................................................. . 14 
12. Il-Portugall ............................................................................................................... .. 14 
13. Il-Finlandja............................................................................................................... .. 15 
14. L-Isvezja.................................................................................................................. ... 15 
15. Ir-Renju Unit .............................................................................................................. 15 
16. Ċipru........................................................................................................................... 16 
17. Ir-Repubblika Ċeka .................................................................................................... 18 
18. L-Estonja.................................................................................................................. .. 22 
19. L-Ungerija................................................................................................................. . 25 
20. Il-Latvja.................................................................................................................. .... 29 
21. Il-Litwanja................................................................................................................ .. 32 
22. Malta ...................................................................................................................... .... 36 
23. Il-Polonja................................................................................................................. ... 39 
24. Is-Slovakkja ............................................................................................................... 44 
25. Is-Slovenja ................................................................................................................ . 48 
 
MT 3   MT I. L INJI TA’ GWIDA ĠENERALI DWAR IL-POLITIKA EKONOMIKA 
1. L- ISTRATE ĠIJA PRE ŻENTI TIBQA ' VALIDA  
Il-Kunsill adotta rakommandazzjoni fis-26 ta’ Ġunju 2003 dwar il-Linji ta’ Gwida Ġenerali dwar il-
Politika Ekonomika ta’ l-Istati Membri u tal-Komunità g ħall-perjodu bejn l-2003-20051. Dawn il-Linji 
ta' Gwida Ġenerali dwar il-politika ekonomika (BEPGs) jikostitwixxu l-istrate ġija tal-politika 
ekonomika fuq i ż-żmien mezzan ta l-UE. Il-BEPGs jiffokaw fuq il-kontribuzzjoni li l-politika 
ekonomika tista’ tag ħmel biex twettaq l-iskop strate ġiku ta’ Lisbona. Huma kkon ċentrati madwar: 
• politika makroekonomika msejsafuq it-tkabbir u l-istabbilità; 
• riformi ekonomi ċi sabiex jog ħla l-potenzjal tat-tkabbi r ekonomikuta' l-Ewropa; u 
• it-tisħiħ tas-sostenibilità. 
Fl-isfond tar-ri żultati ta’ l-ewwel valutazzjoni tar-rapport mog ħti lill-BEPGs ta’ l-2003-05 kif 
ippreżentat fir-Rapport ta’ Implimentazzjoni2 u l-pariri mill-Kunsill Ewropew tar-Rebbieg ħa ta’ l-
2004, din ir-rakkomandazzjoni ta ġġorna u tikkompleta l-istrate ġija preżenti. L-ebda emendi kbar tal-
politika m’huma meqjusa ne ċessarji tant li jkun hemm b żonn bidla fil-linji ta’ gwida ġenerali. L-enfa żi 
f’dan l-a ġġornament hu dwar l-integrazzjoni ta’ l-g ħaxar Stati Membri ġodda fil-qafas ta’ 
koordinazzjoni tal-politika ekonomika pre żenti. 
L-ewwel Parti ta’ dan l-a ġġornament tikkon ċentra fuq il-konsiderazzjonijiet rilevanti sabiex ji ġu 
applikati l-linji ta’ gwida fil-BEPGs ta’ l- 2003.05 lill-Istati Membri. Il-linji ta’ gwida ġenerali pre żenti 
jibqgħu validi u ma jinbidlux. G ħandhom japplikaw fl-Istati Membri  u fil-Komunità. Bl-iskop li ti ġi 
kkompletata l-istrate ġija preżenti, il-Parti II tippre żenta rakommandazzjonijiet spe ċifiċi għall-pajjiżi 
ta’ l-għaxar Stati Membri ġodda. Tinkludi wkoll a ġġornamenti tan-noti tal-pajji ż għall-Ġermanja, il-
Greċja, Franza, l-Italja, l-Olanda, il-Portugall u r-Ren ju Unit biex tippermetti emendi tal-politika fis-
settur tal-politika tal-ba ġit. 
2. S FOND EKONOMIKU MTEJJEB  
L-irkupru ta’ l-ekonomija fl-a ħħar qed ise ħħ fl-UE, appo ġġjat mit-titjib ġenerali fl-ambjent 
internazzjonali. It-tkabbir tal-GDP beda jissa ħħaħ bil-mod il-mod mill-adozzjoni tal-BEPGs fis-sajf ta’ 
l-2003, bl-esportazzjonijiet b ħala l-mutur ewlieni g ħall-bidu ta’ dan l-irkupru, minkejja t-tis ħiħ ta’ l-
ewro. Il-kundizzjonijiet huma wkoll miste nnija jitjiebu fit-talba domestiku: il-fidu ċja fost il-kumpaniji 
u l-konsumaturi qabdet,  ir-rati ta’ l-img ħax qatt ma kienu daqsekk ba xxi, u l-prezzijiet ta' l-ishma 
qegħdin jerġgħu jirkupraw. Fuq dan l-isfond, it-T ħabbir Ekonomiku tar-Rebbieg ħa 2004 ibassar 
irkupru ie ħor u t-tkabbir ekonomiku huwa mistenni li jil ħaq il-potenzjal lejn l-a ħħar ta’ l-2004. Hemm 
bżonn li jissa ħħu dawn l-ewwel sinjali tat-tkabbir ekonomiku. Il-Kunsi ll Ewropew approva 
uffiċjalment f’Di ċembru 2004 l-inizjattivi g ħat-tnedija ta’ azzjoni mmirata bil-g ħan li jiġi ffaċilitat 
tkabbir ekonomiku sostenibbli.  
                                                 
1 Rakkomandazzjoni tal-Kunsill tas-26 ta’ Ġunju 2003 dwar il-Linji Ta’ Gwida Ġenerali dwar il-politika 
ekonomika ta’ l-istati Membri u tal-Komunità (g ħall-perjodu 2003.05), 2003/555/KE, ippubblikata fil-
Ġurnal Uffi ċjali Nru L 195/1 ta’ l-ewwel ta’ Awissu 2003. 
2 Komunikazzjoni tal-Kummissjoni ‘L-ewwel Rapp ort ta’ l-Implmentazzjoni tal-Linji ta’ Gwida Ġenerali 
tal-Politika Ekonomika’ KUMM(2004)20 finali,  adottata fil-21 ta’ Jannar 2004. 
 
MT 4   MT L-inflazzjoni hi mistennija li taqa’ ta ħt it-2 fil-mija waqt l-2004 u li ter ġa’ tonqos fl-2005. Filwaqt li 
żjidiet fil-prezzijiet amministratti u t-ta xxi indiretti sejrin ikollom effet li jg ħollu l-prezzijiet fl-2004, 
it-tneħħija ta’ l-effett temporanju mill-a ħħar żjidiet fil-prezzijiet ta’ l-ikel g ħandhom l-effett oppost. 
Bl-istess mod, i ż-żjieda fil-valur ta’ l-ewro sejra żżomm iż-żjieda fil-prezzijiet. Per e żempju, din 
assorbit bil-kbir i ż-żjieda fil-prezz f’dollari ta ż-żejt. Minbarra dan, il-moderazzjoni tal-pagi hi 
mistennija tkompli fi ż-żmien mezzan u bl-irkupru ċikliku tal-produttività tax-xog ħol, it-tkabbir fl-
unità nominali ta’ l-ispejjez tax-xog ħol jistgħu jaqgħu konsiderevolment u b’hekk jikontribwixxu 
għall-istabbiltà tal-prezzijiet. 
Is-sitwazzjoni tas-suq tax-xog ħol għandha t-tendenza li tirrifletti l-i żvilupp ekonomiku b’lura. Wara 
waqfa fl-2003, l-impjieg hu mistenni jibbe nefika mill- attività ekonomika totali li re ġgħet qabdet fit-
tieni nofs tas-sena l-o ħra. Madankollu, min ħabba li l-irkupru jse ħħ gradwalment, l-impjiegi huma 
mistennija jog ħlew modestament din is-sena u ji żdiedu b’qawwa ikbar is-sena d-die ħla.  
B’mod ġenerali, l-i żviluppi ekonomi ċi jwettqu l-istennija prevalenti meta ti ġi adottata l-istrate ġija tal-
politika ekonomika fuq i ż-żmien mezzan; l-ekonomija qieg ħda tirkupra g ħalkemm b' pass moderat, u 
l-prospetti g ħall-2004.05 ma jippuntaw lejn l-ebda żbilanċ makroekonomiku li je ħtieġ bidla fil-
politika. Fl-istess ħin, it-tbassir juri li l- ħila ta’ l-a ġġustament ta’ l-ekonomija ta’ l-UE u t-tkabbir 
potenzjali g ħadhom kajmani. Huwa g ħalhekk essenzjali li t-titjib tal-kundizzjonijiet ekonomi ċi 
għandhom ji ġu sfruttati kompletament sabiex jkun hemm progress de ċisiv fl-geħluq tad- "differenza 
tal-kunsinna" f’termini ta ’ diskrepanza bejn il-mi żuri tar-riforma strutturali kkunsidrati u dawk 
eventwalment adottati. Il-funzjonament mill- ġdid ta’ l-attività ekonomika b ħalissa jista’ jissa ħħaħ 
aktar permezz ta’ politika makroekono mika soda u permezz ta’ implim entazzjoni ddeterminata tar-
riformi ekonomi ċi għat-tisħiħ tat-tkabbir ekonomiku msemmija  fil-BEPGs ta’ l-2003-05.  
3. L- INTEGRAZZJONI TA' L-GĦAXAR STATI MEMBRI ĠODDA FIL -BEPG S TA' L-2003-05  
L-adeżjoni ta’ Ċipru, ir-Repubblika Ċeka, l-Estonja, l-Ungerija, il-Latvja, il-Litwanja, Malta, il-
Polonja, is-Slovakkja u s-Slovenj a fl-1 ta’ Mejju 2004 sejra tkun ġrajja importanti ħafna fl-istorja ta’ l-
Unjoni. 
It-tkabbir se jikkontribwixxi g ħal dinami żmu ekonomiku ġdid b’effetti ta’ tis ħiħ reċiproku. Il-
potenzjal tat-tkabbir ekonomiku ta’ l-Istati Membri l- ġodda hu stmat g ħal madwar 4 fil-mija kull sena, 
li jirrefletti inter alia  il-progress sod tag ħhom f’dawn l-a ħħar snin b’rifomi strutturali u istituzzjonali. 
Is-Suq Intern g ħanhu jitkabbar g ħal 455 miljun ċittadin. Minkejja l-progress re ċenti, hemm b żonn li 
jingħaraf li l-punt tat-tluq tag ħhom kien differenti u li l-pajji żi ta’ l-ade żjoni sejrin g ħall-bidu jg ħoddu 
biss għal 5 fil-mija tal-GDP ta' l-Unjoni. B’livelli ta’ d ħul ta’ inqas min-nofs ta’ l-UE-15 medja (ara t-
Tabella 1), l-isfidi ewlenien g ħall-pajjiżi ta' l-ade żjoni huma li ji żguraw konver ġenza vera fuq medda 
twila ta’ żmien, filwaqt li fl-istess ħin jiksbu konver ġenza nominali fit-terminu qasir sa medju. 
 
MT 5   MT Graff 1: GDP per capita 2003 (UE-15=100)  
0102030405060708090
CY SI MT CZ HU SK AC10 PL EE LT LV 
Sors: Servizzi tal-Kummissjoni (Eur ostat, Indikaturi strutturali).  
 
L-isfidi strutturali li j ħabbtu wiċċhom mag ħhom l-Istati Membri ġodda mhumiex fundamentalment 
differenti minn dawk ta’ l- istai attwali, anke jekk ċerti sfidi jitolbu iktar attenzjoni3. L-istraġija tal-
politika ekonomika pre żenti għalhekk tidher b ħala xierqa b’mod ġenerali. L-iskala ta’ l-isfidi ffa ċċjati 
minn dawn il-pajji żi tagħmilha kru ċjali li jitfittex bilan ċ xieraq bejn il- ħtiġijiet politi ċi differenti. Per 
eżempju, b’kunsiderazzjoni tal-bidla strutturali li g ħadha ma tlestietx lejn ekonomija tas-suq modewrn 
ibbażata fuq is-servizzi servizz modern ibba żat fuq suq ta’ l-ekonomija, ħafna mill-pajji żi ta’ l-
adeżjoni għandhom b żonn politika li tiffavorixxi konver ġenza vera. L-UE sejra tikkontribwixxi b’mod 
siewi għall-konver ġenza vera billi tinvesti fir-re ġjuni li baqg ħu lura bis-sa ħħa tal-fondi strutturali u ta’ 
koeżjoni kif ukoll tal-Bank Ewropew ta’ l-Investimenti. Madankollu, il-ba ġits nazzjonali g ħandhom 
ikopru r-rekwi żiti finanzjarji importanti maqg ħuda mal-b żonn biex tittejjeb il-ba żi kapitali fi żika u 
umana, u l-awtoritajiet fiskali g ħandhom b żonn ilaħħqu mal-pressjonijiet tan-nefqa li ġejjin mit-tlestija 
tar-riformi ta’ transizzjoni, waqt li jassiguraw onestà fiskali. Fl-istess waqt u b’konsiderazzjoni g ħall-
iżbilanċ fl-estimi medji inizjali ta' xi 6 fil-mija tal-GDP, hemm b żonn li ti ġi ggarantita l-
konsolidazzjoni ne ċessarja għall-finanzi pubbli ċi biex tissa ħħaħ l-istabbilità makroekonomika. 
It-taqsimiet sussegwenti jirrevedu l-istrate ġija tal-politika ekonomika e żistenti u jag ħtu importanza lil 
dawk il-linji ta’ gwida ġenerali jew setturi tal-politika, fejn i ċ-ċirkustanza spe ċifika ta’ bosta mill-
pajjiżi ta’ l-ade żjoni huma tali li perjodu itwal ta’ a ġġustament ikun me ħtieġ. Hemm b żonn li jiġi 
enfasizzat li d-differenzi huma differenti skond il-pajji żi ta’ l-ade żjoni. B’konsiderazzjoni tad-
differenzi fir-rendiment, il-prospetti, l-istrutturi u l-istituzzjonijiet ekonomi ċi tagħhom, il-Parti II ta’ 
dan l-aġġornament tippre żenta r-rakkomandazzjonijiet spe ċifiċi għall-pajjiż lill kull pajji ż ta’ l-
adeżjoni. 
3.1 It-tkabbir ekonomiku u l- politika makroekonomika orjentata lejn l-istabbilità  
Politika makroekonmika soda g ħandha rwol kru ċjali sabiex tappo ġja t-tkabbir u l-impjieg u sabiex 
iżżomm sod l-istabbiltà tal-prezzijiet. L-Istati Membri ġodda għandhom, b ħal dawk attwali, jimmiraw 
biex jiksbu tkabbir ekonomiku ibbilan ċjat sew li jwettaq kompletament il- potenzjal ta’ dan it-tkabbir. 
                                                 
3 L-Ekonomija ta’ l-Ewropa, karta okka żjonali Nru 4 “Sfidi strutturali ewlenija fil-pajji żi ta’ l-ade żjoni: l-
intergrazzjoni tal-pajji żi ta’ l-ade żjoni fil-pro ċessi ta’ koordinazzjoni tal-politika ta’ l-ekonomija tal-
Komunità” ming ħand il-Kumitat tal-Politika ta’ l-Ekonomija, Lulju 2003. 
 
MT 6   MT Minbarra dan, g ħal dak li g ħandu x’jaqsam ma’ bosta mill-pajji żi ta’ l-ade żjoni, il-politika 
makroekonomika g ħandha tappo ġġja wkoll il-bidla strutturali li fadal lejn ekonomika b’iktar servizzi. 
L-Istati Membri ġodda għandhom b żonn ifittxu siner ġija b’saħħitha bejn ir-riformi strutturali 
neċessarji u l-politika makroekonomika li ssa ħħaħ l-istabbilità. L-iskemi tar-rata tal-kambju 
jikkostitwixxu parti importanti tal-qafas tal- politika ekonomika u monetarja kumplessiva u g ħandhom 
jiġu orjentati sabiex jiksbu konver ġenza nominali reali u sostenibbli. Il-parte ċipazzjoni fl-ERM II, f’xi 
fażi wara l-ade żjoni, għandha tg ħin dawk it-tentattivi. Politika monetarja kredibbli g ħandha 
tippermetti i żjed tnaqqis fir-rati ta’ l-img ħax fit-tul li jwassal g ħal kemm g ħall-investiment g ħoli tant 
meħtieġ kif ukoll g ħall-konsolidazzjoni fiskali. 
Għal dak li g ħandu x’jaqsam mal-b żonn li “jintla ħqu u jinżammu po żizzjonijiet ba ġitarji sodi”, 
għandha tinstab medda ta’ żmien xierqa bejn il- ħeffa tal-konsolidazzjoni tal-ba ġit neċessarja u l-
pożizzjoni fiskali xierqa li tappo ġġja t-transizzjoni. Is-sorveljanza tal-ba ġit għal dak li jikkon ċerna l-
Istati Membri ġodda għandha tibda bl-e żami tal-Programmi ta’ Konver ġenza tagħhom. Għandha 
tingħata attenzjoni partikolari li ċ-ċirkostanzi spe ċifiċi tal-pajji ż, b’mod partikolari lill-po żizzjonijiet 
tal-baġit tal-bidu, il-bidliet strutturali li g ħaddejjin fl-ekonomiji u r-riskji possibbli li jirri żultaw mill-
iżbilanċi fil-kontijiet kurrenti u t-tkabbir qawwi tal-kreditu . Jista’ jkun xieraq, minn punt ekonomiku, li 
jitħalla perjodu g ħall-aġġustament annwali f’ ċerti każijiet fejn hemm b żonn li jiġi korrett defi ċit ta’ 
iktar minn 3 fil-mija. Dan ji ppermetti lill-Istati Membri biex  jikkonsolidaw il-finanzi pubbli ċi tagħhom 
b’mod sostenibbli, filwaqt li fl-istess ħin itemmu r-ristrutturar ta’ l-ekonomija. B’mod ġenerali, l-
effiċjenza ta’ l-infiq pubbliku tista’ tittejjeb konsiderevolem ent, inter alia bis-sa ħħa ta’ ridirezzjoni ta’ 
l-infiq pubbliku lejn investimenti li j ġibu t-tkabbir u li jipprodu ċu riżultati effettivi g ħal infiq li 
mhuwiex e ċċessiv: investimenti fil-kapital fi żiku u uman u fir-ri ċerka u l-innovazzjoni. Barra minn 
dan, twessig ħ tal-bażi tat-taxxi fuq ix-xog ħol u titjib tal- ġbir tat-taxxi sabiex ji ġi żgurat id-d ħul 
meħtieġ jista’ jiffa ċilita tnaqqis fir-rati ta' taxxa fuq ix-xog ħol (inklużi rati għolja ta’ kontribuzzjonijiet 
tas-sigurtà so ċjali). 
Tabella 1: Indikaturi Makroekonomi ċi għall-Istati Membri ġodda u dawk pre żenti fl-2003  
 AC10 UE15 
Tkabbir GDP (reali, % p.a.) 3.6 0.8 
Inflazzjoni (% p.a.) 2.1 2.0 
Kont kurrenti(% tal-GDP) -3.7 0.2 
   
Qgħad (%) 14.3 8.0 
Bilanċ tal-Gvern (% tal-GDP) -5.7 -2.6 
AC10= l-g ħaxar pajji żi ta’ adeżjoni. 
Sors:  Servizzi tal-Kummissjoni (inklu ż Eurostat, Indikaturi strutturali). 
Id-defiċit attwali kien jg ħodd għal medja xi 4.5 fil-mija tal-GDP fl-2003 fl-Istati Membri ġodda, u dan 
jirrifletti l-pro ċess li qed jg ħaddu minnu dawn il-pajji żi biex ilaħħqu ma’ l-o ħrajn u l-lakuni kbar fiit-
tfaddil-investiment domestiku. Sfida kbira tal-politika makroekonomika g ħal xi uħud minn dawn il-
pajjiżi ta’ l-ade żjoni tikkonsisti g ħalhekk f’li j żommu defi ċits relattivament g ħolja fil-limiti li fihom 
jista’ jiġi żgurat finazjament estern sod. F’dan ir-rigward, it-tra żżin fiskali u l- ħtieġa li tiġi evitata 
politika pro- ċiklika se jkunu essenzjali sabiex jitnaqqsu d-defi ċits attwali, min ħabba li l-finazjament 
tagħhom jista’ jsir aktar diffi ċli wara li jitlesta g ħal kollox il-pro ċess ta’ privatizzazzjoni. 
Ambjent makroekonomiku stabbli je ħtieġ żjidiet nominali fil-pagi li huma konsistenti kemm ma’ l-
istabbilità tal-prezzijiet kif ukoll mal-kisbiet fil-produttività. Se jkun importanti wkoll g ħall-ħolqien 
tal-pagi fil-pajji żi ta’ l-ade żjoni li jkun appo ġġ għar-ristrutturar ta’ l-ekonomija li  jsir mezz biex il-pagi 
jirriflettu a ħjar id-differenzi fil-kundizzjonijiet tas-suq tax-xog ħol lokali li hemm bejn ditti, setturi, 
 
MT 7   MT reġunijiet u xog ħlijiet differenti. Lil hinn min dan, żviluppi reali fil-pagi jridu jappo ġġjaw il-
kompettività esterna fl-Istati Membri fid-dawl ta’ l- ħtieġa li jiġi attirat l-investiment barrani dirett. 
3.2 Riformi ekonomi ċi sabiex ji żdied il-potenzjal ta’ l-Ewropa g ħat-tkabbir 
ekonomiku 
Il-proċess ta’ tla ħħiq ma’ l-o ħrajn fil-livelli tad-d ħul huwa pro ċess fuq medda twila ta’ żmien. Se jkun 
kruċjali li tidjieq il-qasma bejn ir-rati ta’ l-imp jieg u l-livelli ta’ produttività bejn il-pajji żi ta’ l-
adeżjoni u l-UE-14. Il-linji ta’ gwida e żistenti li jimmiraw g ħal ‘ xogħol aktar u a ħjar’ u ‘ż-żjieda fil-
produttività u d-dinami żmu tan-negozju’ huma implimentati l-a ħjar b’mod komprensiv u koordinat. 
Il-kontibuzzjoni li l-politika ta’ l-impjiegi tista’ tag ħti hija riflessa fil-linji ta’ gwida e żistenti li jag ħfsu 
fuq il-kun ċett ta’ li ‘n ġiegħlu x-xogħol iħallas’ u fuq li nipprezzaw in-nies lura fix-xog ħol, l-aktar 
dawk ta’ ħiliet u snajja’ limitati jew dawk li jg ħixu f’reġjuni ifqar. Il-qag ħda tas-suq tax-xog ħol hija 
konsiderevolment ag ħar fil-pajji żi ta’ l-ade żjoni, b’ rati ta’ l-impjiegi huma jew weqfin jew inkella 
neżlin, rati ta’ qg ħad għoljin (li wkoll g ħandhom tendenza jkunu fuq medda twila ta’ żmien u jolqtu l-
aktar liż-żgħażagħ), numri kbar ta’ persuni mhux attivi u setturi informali mdaqqsin. Se jkun g ħalhekk 
essenzjali li l-isforzi politi ċi jagħfsu fuq numru żgħir ta’ oqsma prioritarji li aktarx jista’ jkollhom l-
akbar impatt fuq ir-rendiment tas-suq tax-xog ħol: li jkun żgurat li l-i żviluppi reali fil-pagi jirriflettu t-
tkabbir fil-produttività; it-tijtib ta’ l-in ċentivi finazjarji g ħax-xogħol bis-saħħa ta’ riforma fuq is-
sistemi tat-taxxa / tal-benefi ċċji soċjali; it-titjib tal-formazzjoni tal-kapital uman; u t-te ħid ta’ riformi 
xierqa fir-regolamenti tas-suq tax-xog ħol. Il-politika dwar l-impjiegi trid tappo ġġja l-proċess li 
għaddej taċ-ċaqliq strutturali kbir fil-kompo żizzjoni settorjali u re ġjonali ta’ l-impjiegi. 
Graff 2: Impjiegi u livelli ta’ produttivi tà fl-Istati Membri ta’ l-UE  
u pajjiżi ta’ adeżjoni (2002)  
AC-10ATBE
DEDKESFIFR
ELIE
ITLU
NL
PTSEUKCY
CZ
EEHU
LTLVMT
PLSI
SKEU 15
30405060708090100110120130140
50 55 60 65 70 75 80
Employment rate as % of working age populationLabour productivity per person employed
 EU-15 = 100 (2002)
Lisbon target
 
Sors: Servizzi tal-Kummissjoni Euro stat, Indikaturi strutturali ). 
Se jkun essenzjali li ji żdiedu r-rati ta’ l-impjieg u li fl-istess ħin jittejjeb it-tkabbir tal-produttività 
għall-Istati Membri (ara Graff nru 2). Ir-ristrutturar li g ħaddej fl-ekomomija ta’ dawn il-pajji żi huwa 
strumentali fit-titjib tal-livell ta’ produttività li ġeneralment huwa baxx. It-transizzjoni minn 
speċjalizzazzjoni f’attivitajiet ta’ valur mi żjud baxx jew valur tax-xog ħol baxx lejn attivitajiet ta’ valur 
miżjud għoli għandu jqis il-vanta ġġi komparattivi attwali. L-integrazzjoni ekonomika akbar fis-Suq 
 
MT 8   MT Intern u l-mi żuri li jakkumpanjawha sabiex jipprom wovu l-kompetizzjoni fl-ekomomija g ħandhom 
jgħaġġlu l-proċess tar-ristruttar fl-Istati Membri ġodda. Il-kompetizzjoni akbar te ħtieġ proċess aktar 
mgħaġġel fil-privatizzazzjoni, tnaqqis fil-pi ż regolatorju fuq in-negozju u appo ġġ akbar g ħall-
intraprenditorjat. F’dan il-kuntest, trid tissa ħħaħ il-ħila ta’ l-awtoritajiet ċentrali u lokali biex jinfurzaw 
il-ħtiġijiet leġislattivi, l-aktar f’dak li g ħandu x’ jaqsam mar-regoli legali dwar id-d ħul fis-suq u l- ħruġ 
minnu tal-kumpaniji. 
Tabella 2: Indikaturi Ekonomi ċi għall-Istati Membri ġodda u dawk pre żenti fl-2003  
 AC10 UE15 
GDP per capita 1 48.7 100 
Produttività g ħal kull persuna impjegata 2 53.6 100 
Rata ta’ Impjiegi (fl-2002) 3  55.9 64.3 
   
Investimenti tan-Negozju (% tal-GDP)4 17.9 17.2 
Total ta’ FDI inflows (% tal-GDP) 5 5.0 4.4 
Nefqa R&D (% tal-GDP)6 0.83 1.98 
1 f’ PPS, livell, UE15=100. 2 GDP f’ PPS g ħal kull persuna impjegata, livell, UE15=100. 
3 Rata ta’ impjiegi totali – Persuni impjegati li g ħandhom età ta’ 15-64 b ħala porzjoni tal-popolazzjoni totali 
ta’ l-istess faxxa ta’ età, 2002. 4 Investmenti ta’ kapital gross fiss mis-settur privat, 2001 g ħal AC10 u 2002 
għal UE15. 5 2002. 6 Nefqa gross domestika fuq R&D, 2001. 
Sors:  Servizzi tal-Kommissjoni (inklu ż Eurostat, indika turi strutturali). 
It-tkabbir fil-produttività se jitjieb aktar bit-transizzjoni ta’ l-Istati Membri ġodda għal ekonomija 
msejsa fuq l-g ħerf, li hija fil-qofol ta’ l-istrate ġija UE ta’ Lisbona. Barra minn dan, l-Inizjattiva 
Ewropea g ħat-Tkabbir Ekonomiku tis ħaq dwar l-importanza ta’ l-investimenti f’ netwerks u fir-ri ċerka 
bħala passi kru ċjali lejn l-g ħoti ta’ spinta lit-tkabbir ekonomiku, integrazzjoni a ħjar ta’ Ewropa 
mkabbra, u t-titjib ta’ produttività u l-kompetittività. G ħall-Istati Membri ġodda, it-tixrid u t-
tasferimenti teknolo ġiċi R&D huwa importanti kemm b ħala investiment R&D kif ukoll b ħala għodda 
biex jgħaġġlu t-transizzjoni lejn attivitajiet ta’ valur mi żjud ogħla. Huwa essenzjali li ji ġi sostnut livell 
għoli ta’ investiment dirett barrani f’dan l-isforz kollu, b ħal ma huwa daqstant importanti li jkun hemm 
tweġiba aħjar u akbar g ħas-sistema ta’ edukazzjoni u ta ħriġ għall-ħtiġijiet li dejjem qed jinbidlu tas-
suq tax-xog ħol. Ir-riformi tas-sistemi ta’ edukazzjoni u ta ħriġ jistgħu wkoll jg ħinu sabiex j ħeġġu għal 
mixja lejn attivitajiet li huma aktar innova ttivi u msejsa b’mod instensiv fuq l-g ħerf, kif ukoll l-
investimenti fit-teknolo ġija ambjentali. 
Rwol importanti fl-allokazzjoni u d-direzzjoni ta’ flejjes lejn investimenti produttivi u lejn fidu ċja 
akbar ta’ l-investitur ji nvolvi is-swieq kapitali żviluppati li ja ħdmu ming ħajr xkiel żejjed. Filwaqt li, 
fil-pajjiżi ta’ l-ade żjoni, is-swieq kapitali ilhom jikbru mill-bidu tad-Disg ħinjiet (kemm f’dak li 
għandu x’jaqsam ma’ da qs u valur), jibqg ħu ġeneralment sottosviluppati fil-konfront ta’ bosta Stati 
Membri attwali (minbarra Ċipru u Malta). L-integrazzjoni rapida fis-suq uniku g ħas-servizzi 
finanzjarji bis-sa ħħa ta’ traspo żizzjoni u implimentazzjoni f’waqtha ta’ l- acquis  kollu f’dan il-qasam, 
se jkun dejjem aktar importanti g ħall-appoġġ ta’ l-iżvilupp ta’ setttur finanzja rju sod u kkapitalizzat 
sew u għaż-żamma ta’ ambjent ugwali g ħal kulħadd f’dak li g ħandu x’jaqsam ma’ l-istituzzjonijiet 
finanzjarji f’  Unjoni Ewropea mkabbra. Barra minn hekk, is-swieq kapitali f’bosta Stati 
Membri ġodda huma kkaratterizzati minn livell g ħoli ta’ intermedjazzjoni bankarja 
(tipikament aktar minn 80 fil-mija ta’ l-assi finanzjarji totali fl-Ewropa Ċentrali u l-Istati 
Baltiċi) u fenomenu estensiv ta’ sidien barranin ta’ banek tal-pajji ż (minbarra f’ Ċipru u s-
Slovenja), filwaqt li bosta qed jaraw żvilupp mg ħaġġel ta’ intermedjarji finanzjarji o ħra bħal 
fondi tal-pensjonijiet (e ż. Il-Polonja). F’ dan il-kuntest, se jkun partikolarment importanti 
għall-Istati Membri ġodda li jkomplu jsa ħħu l-arranġamenti ta’ supervi żjoni finanzjarja 
 
MT 9   MT tagħhom u jtejbu l-kooperazzjoni minn fruntiera g ħall-oħra fis-supervi żjoni finanzjarja u fil-
crisis management finanzjarju . 
3.3 It-tis ħiħ tas-sostenibbiltà 
Il-BEPGs jag ħmlu enfażi konsiderevoli fuq li ji ġi żgurat li t-tkabbir ekonomiku huwa sostenibbli fl-
UE, billi ji ġu integrati s-sostenibbiltà ekonomika, so ċjali u ambjentali fl-istrate ġija tal-politika 
ekonomika. 
Popolazzjoni li qed tixjie ħ sejra timplika sfidi simili g ħas-sostenibbiltà ekonomika fl-Istati Membri u 
fl-UE 15. Filwaqt li ġeneralment il-punt tat-tluq tag ħhom huwa a ħjar (b’liveli ta’ dejn inqas f’bosta 
każi), il-ġejjieni demografiku x’aktarx ikollu implikazzjonijiet ekonomi ċi u soċjali) akbar. 
Tabella 3: Indikaturi ta’ sostenibilità g ħall-Istati Membri ġodda u dawk pre żenti 
 AC10 UE15 
Dejn tal-Gvern (2003, % tal-GDP)  42.2 64.0 
Rata ta' impjiegi ta’ ħaddiema anzjani1 30.4 40.1 
Rata ta' impjiegi fit-tul1 8.1 3.0 
   
Emissjonijiet ta’ Greenhouse gas2 69 98 
Intensità ta’ ener ġija3  709 194 
1 Figuri għal 2002. 2Figuri għal 2001, 1990 sena ba żi =100. 3 konsum ta’ l-ener ġija fl-2001 divi ż mill-GDP b’ 
prezzijiet kostanti, kilogramma ta’ żejt ekwivalenti g ħal kull 1000 Ewro. 
Sors:  Servizzi tal-Kummissjoni (inklu ż. Eurostat, indika turi strutturali). 
Fil-qofol, il-politika ekonomika soda tag ħti kontribut importanti lis-sostenibbiltà so ċjali minħabba li x-
xogħol għandu sehem vitali f’li jo ħroġ in-nies mill-faqar u mill-esklu żjoni soċjali. Fl-Istati Membri 
ġodda, trid issir enfa żi addizzjonali fuq l-immodernizzar tas-sistemi ta’ protezzjoni so ċjali u t-titjib tal-
ħiliet tal-ħaddiema, bil-g ħan li jiżdiedu r-rati ta’ parte ċipazzjoni u tittejjeb il-mob ilità. Ir-rati baxxi ta’ 
qgħad, kemm tal- ħaddiema żgħażagħ kif ukoll ta’ dawk ikbar, te ħtieġ attenzjoni spe ċjali f’dan ir-
rigward. G ħandhom ji ġu indirizzati d-differenzi re ġjonali l-kbar, l-aktar billi ji ġi żgurat li jkun hemm 
investimenti effi ċjenti u differenzjazzjoni xierqa tal-pagi (li tirrifletti d-differenzi fil-produttività). 
Barra minn hekk, l-ambjent tan-negozju g ħandu jitjieb, spe ċjalment bis-sa ħħa ta’ miżuri għall-bini ta’ 
ħiliet fit-tmexxija pubblika. Dan g ħandu wkoll itejjeb l-effi ċjenza fl-u żu tal-fondi Strutturali u ta’ 
Koeżjoni ta’ l-UE. 
L-investimenti sostanzjali fl -infrastruttura ta' l-ener ġija u t-trasport li huma tant me ħtieġa fil-biċċa l-
kbira ta’ l-Istati Membri ġodda għandhom il-g ħan li jnaqqsu l-impatti ambjentali ta’ l-u żu ta’ l-
enerġija u t-trasport u li jtejbu l-effi ċjenza ta’ l-ener ġija. Investimenti b ħal dawn se jkunu kru ċjali 
minħabba li l-intensitajiet ener ġetiċi tagħhom jaqb żu ‘l dawk ta’ l-Istati Membri attwali kwa żi b’ 4 
darbiet, ara Tabella Nru 3, minke jja titjieb ta’ 6% fis-sena tul l-a ħħar għaxar snin. Se jkun 
partikolarment essenzjali li jitqiesu sew l-ispejje ż involuti fil-konfront tad- dannu ambjentali meta jsiru 
deċiżjonijiet dwar l-investiment, inklu ż it-tnaqqis tas-sussidji g ħall-enerġija u l-introduzzjoni ta’ taxxi 
u charges xierqa, g ħal per eżempju il-konsum ta’ l-ener ġija u/jew l-u żu tat-trasport. 
 
MT 10   MT II. L INJI TA ’ GWIDA TA’ POLITIKA EKONOMIKA SPEĊIFIKA GĦALL-PAJJIŻ 
Part II contains updates of the country-notes for Germany, Greece, France, Italy, the Netherlands, 
Portugal and the United Kingdom. It also presents country-notes for the ten new Member States. 
The Council adopted the broad guidelines of the economic policies for the 2003-05 period for the 
current Member States on 26 June 2003. The co untry-specific recommendations therein generally 
remain valid, although some of them need to be updated to allow for necessa ry policy adjustments in 
the area of budgetary policies.  
It is important to note that, even when measures ha ve been taken that partly or even fully address a 
particular recommendation, that recommendation is not updated until a full assessment of their impact 
can be carried out. The pace and nature of progress in the implementation of the various guidelines is 
reviewed in the annual Implementation Report. 
1. Il-Bel ġju 
No update. 
2. Id-Danimarka 
No update. 
3. Il- Ġermanja 
One of the challenges facing Germany is to “red uce rapidly the general government deficit to 
below 3 per cent of GDP  and keep government finances on a steady  consolidation path”. In order to 
achieve this, Germany was recommended in th e 2003 version of the Broad Economic Policy 
Guidelines to: 
• ensure a rigorous budget execution and implement the announced or compensatory measures for 
2003 amounting to 1 per cent of GDP and put an en d to the present excessive deficit situation by 
2004 at the latest (recommendation 6); and 
• lower the cyclically-adjusted deficit by at least one percentage point of GDP between the end of 
2003 and 2005 (recommendation 7). 
These two recommendations were similar to those addressed by the Council to Germany on 
21 January 2003 in accordance with Articles 104(7)  of the Treaty. On 18 November 2003, the 
Commission adopted two recommendations on the basis of Article 104(8) and 104(9) respectively for 
the Council to decide (1) that action taken by German y was inadequate to bring the excessive deficit to 
an end and (2) to give notice to Germany to ta ke the necessary measures to bring the general 
government deficit below 3 per cent of GDP in 2005 at the latest. On 25 November 2003, the Council 
did not adopt the two Commission recommendations but adopted instead a set of conclusions endorsing, inter alia , the commitments made by Germany to reduce the cyclically-adjusted deficit by 
0.6 per cent of GDP in 2004, and by 0.5 per cent of GDP or a larger amount in 2005 so as to ensure that the general government deficit would be brought  below 3 per cent of GDP in 2005. In its Opinion 
on the 2003 update of the st ability programme of Germany
4, the Council reaffirmed these conclusions. 
                                                 
4 OJ C68, 18.3.2004. 
 
MT 11   MT In the light of these developments and bearing in  mind that budgetary plans for the years beyond 2005 
are to an important extent formed wi thin the period covered by the BEPGs ( inter alia  in the multi-
annual stability programmes), recommendations 6 and 7 are replaced by the following:  
“6. achieve an annual reduction in the cyclically-a djusted deficit of 0.6 per cent of GDP in 2004 
and of at least 0.5 per cent of GDP or a larger amount in 2005 so as to ensure that the general government deficit is brought below 3 per cent of GDP in 2005 (GL 1); 
7. should the recovery in economic activity be stronger than currently expected, allocate any 
higher-than-expected revenues to deficit reduction and accelerate the reduction in the 
cyclically-adjusted deficit; 
7bis ensure that the budgetary consolidation continu es in the years after 2005, namely through a 
steady reduction in the cyclically-adjusted budgeta ry deficit by at least 0.5 percentage points 
of GDP per year or more if necessary to achieve the medium term position of government finances close to balance or in surplus and bri ng back the debt ratio to a declining path (GL 
1).”
 
4. Il-Gre ċja 
One of the challenges facing Greece is  to “ensure the long-term sustainability of public finances in the 
face of population ageing, in particular in view of th e high government debt rati o”. In order to achieve 
this, Greece was inter alia recommended in the 2003 version of the Broad Economic Policy 
Guidelines to: 
• ensure effective control of government current  primary spending by addressing resolutely the 
problem of the inelastic elements of expend itures, e.g. the wage bill (recommendation 2). 
The fiscal data for 2003 show that the general govern ment deficit stayed only just below the 3 per cent 
of GDP reference value. This represents a consid erable widening of the deficit compared to 2002 in 
spite of a positive output gap, refl ecting the pro-cyclical, expansionary  nature of Greek fiscal policies. 
For 2004, there is a distinct risk that the refere nce value for the deficit may be breached. Greece is 
moving further away from a budgetary position of close to balance or in surplus..  
In the light of these developments, recomme ndation 2 is replaced by the following: 
“2. until a medium-term position of close to bala nce or in surplus is achieved, ensure an 
improvement in the cyclically-adjusted budget ba lance of at least 0.5 per cent of GDP per 
year, specifically through effective control of government current primary spending, and 
stand ready to take further measures to avoid the occurrence of an excessive deficit (GL 1).” 
5. Spanja 
No update. 
6. Franza 
One of the challenges facing Fran ce is to “reduce rapidly the general government deficit to 
below 3 per cent of GDP and keep government finan ces on a steady consolidation path”. In order to 
achieve this, France was recommended in the 2003 ve rsion of the Broad Economic Policy Guidelines 
to: 
• achieve a significantly larger improvement in th e cyclically-adjusted deficit in 2003 than that 
currently planned (recommendation 1); 
 
MT 12   MT • implement measures ensuring that the cyclically-a djusted deficit is reduced in 2004 by 0.5 per 
cent of GDP, or by a larger amount, so as to ensu re that the cumulative improvement in 2003-2004 
is enough to bring the nominal deficit below 3 pe r cent in 2004 at the latest (recommendation 2); 
and 
• limit the increase in the general government gross debt to GDP ratio in 2003 (recommendation 3). 
These three recommendations were similar to those addressed by the Council to France on 
3 June 2003 in accordance with Article 104(7) of th e Treaty. On 8 and 21 October 2003 respectively, 
the Commission adopted two recommendations on the b asis of Article 104(8) and 104(9) respectively 
for the Council to decide (1) that no effective act ion had been taken by France in response to the 
recommendation of 3 June and (2) to give notice to France to take the necessary measures to bring the 
government deficit below 3 per cent of GDP in 2005 at the latest. On 25 November 2003, the Council 
did not adopt the two Commission recommendations but adopted instead a set of conclusions endorsing, inter alia , the commitments made by France to re duce the cyclically-adjusted deficit by 
0.8 per cent of GDP in 2004, and by 0.6 per cent of GDP or a larger amount in 2005 so as to ensure that the general government deficit would be brought  below 3 per cent of GDP in 2005. In its Opinion 
on the 2003 update of the stability programme of France
5, the Council reaffirmed and further clarified 
these conclusions. 
In the light of these developments and bearing in  mind that budgetary plans for the years beyond 2005 
are to an important extent formed wi thin the period covered by the BEPGs ( inter alia  in the multi-
annual stability programmes), recommendations 1,  2 and 3 are replaced by the following: 
“1. achieve an annual reduction in the cyclically-a djusted deficit of 0.8 per cent of GDP in 2004 
and of at least 0.6 per cent of GDP or a larger amount in 2005 so as to ensure that the general 
government deficit is brought below 3 per cent of GDP in 2005 (GL 1); 
2. should the recovery in economic activity be stronger than currently expected, allocate any 
higher-than-expected revenues to deficit reduction and accelerate the reduction in the 
cyclically-adjusted deficit through the implem entation of additional measures. In addition, 
any budgetary margin stemming from a slower than planned increase in expenditures should 
be allocated to deficit reduction; 
3. ensure that the budgetary consolidation conti nues in the years after 2005, namely through a 
steady reduction in the cyclically-adjusted budgeta ry deficit by at least 0.5 percentage points 
of GDP per year or more if necessary to achieve the medium term position of government finances close to balance or in surplus and bri ng back the debt ratio to a declining path (GL 
1).” 
7. L-Irlanda 
No update. 
8. L-Italja 
One of the challenges facing Italy is to “rapidly c onsolidate public finances”. In order to achieve this, 
Italy was inter alia recommended in the 2003 ve rsion of the Broad Economic Policy Guidelines to: 
• Until a medium-term budget position of close to bala nce or in surplus is achieved, ensure a 
reduction in the cyclically-adjusted deficit of at least 0.5 per cent of GDP per year, replacing one-
off measures by measures of a more permanent character (recommendation 1). 
                                                 
5 OJ C43, 19.2.2004. 
 
MT 13   MT The fiscal data for 2003 show that the general gove rnment deficit was 2.4 per cent of GDP, almost 
unchanged compared to 2002 (2.3 per cent). In a context of weak economic growth, the authorities 
have continued to rely on temporary measures to rest rain the deficit. Such measures are estimated to 
have improved the budgetary outturn by slightly more than 2 percentage points of GDP (around 1.5 
percentage points in 2002). Markedly lower interest  expenditure compared to the previous year also 
helped stave off a larger increas e in the deficit. In 2004, with reliance of one-off measures to be 
reduced by half, there is a distinct risk that the 3 per cent of GDP reference value for the deficit may 
be exceeded. With the output gap practically unchange d, the development in the cyclically-adjusted 
balance is also unfavourable. The adjustment toward s a position close to balance in cyclically-adjusted 
terms is further set back. 
In light of these developments, recommendation 1 is replaced by the following: “1. until a medium-term position of close to bala nce or in surplus is achieved, ensure an 
improvement in the cyclically-adjusted budget ba lance of at least 0.5 per cent of GDP per 
year, replacing one-off measures by measures of a more permanent character, and stand 
ready to take further measures to avoid the occurrence of an excessive deficit (GL 1).” 
9. Il-Lussemburgu 
No update. 
10. L-Olanda 
One of the challenges facing the Netherlands is to  “pursue budgetary adjustment in the coming years 
in the face of weaker potential growth, and the budgeta ry costs of ageing”. In order to achieve this, the 
Netherlands was recommended in the 2003 version of the Broad Economic Policy Guidelines to: 
• continue to contain government expenditure within  clearly defined ceilings set in real terms, 
consistent with a budgetary position close to  balance or in surplus (recommendation 1). 
The fiscal data for 2003 show that the general govern ment deficit stayed only just below the 3 per cent 
of GDP reference value. This is linked to the sh arp economic downturn, which led to a stronger-than-
expected increase in the deficit, despite a substantial package of fiscal savings. For 2004, there is a risk 
that the 3 per cent of GDP reference value for th e deficit might be exceeded. However, taking into 
account the widening of the output gap, the developm ent of the cyclically-adjusted balance is more 
favourable. In cyclically-adjusted terms an adjust ment towards a position close to balance is well 
underway.  
In the light of these developments, recomme ndation 1 is replaced by the following: 
“1. continue to contain government expenditure w ithin clearly defined ceilings set in real terms, 
consistent with a medium-term budgetary position close to balance or in surplus and stand 
ready to take further measures to avoid the occurrence of an excessive deficit (GL 1 and 
14).” 
 
MT 14   MT 11. L-Awstrija 
No update. 
12. Il-Portugall 
One of the challenges facing Portugal is to “accelerate the consolidati on of public finances and address 
the strong dynamics of government expenditure”. In order to achieve this, Portugal was inter alia 
recommended in the 2003 version of the Broad Economic Policy Guidelines to: 
• ensure that the government deficit is further re duced in 2003 as planned and that the cyclically-
adjusted deficit is thereafter lowered by at least  0.5 per cent of GDP a year in order to reach a 
budget position that is close to balance (recommendation 1). 
The fiscal data for 2003 show a general government  deficit of 2.8 per cent of GDP, thereby in 
compliance with the Council Recommendation of 5 November 2002 addressed to Portugal under 
Article 104(7) of the Treaty, which called for a government deficit below the 3 per cent of GDP 
reference value by 2003 at the latest. The larg e negative output gap associated with the economic 
recession of 2003 hindered considerably the process of budgetary consolidation, because of the massive shortfall in tax revenue  that developed during 2003 (excluding the one-off measure on the 
sale of tax and social contributions arrears). Alt hough the government has b een broadly successful in 
securing the planned restraint of expenditure (i.e. gr owth in current primary expenditure continued to 
decelerate from 8.9 per cent in 2001 to 7.8 per cent in 2002 and 4.1 per cent in  2003), the shortfall in 
tax revenue induced by the recession led the governme nt to rely, to a significant degree, on one-off 
measures for a second consecutive year (1.5 and 2. 1 per cent of GDP in 2002 and 2003 respectively). 
For 2004, there is a distinct risk that the reference value for the deficit may again be exceeded in view 
of slow growth and the only partial replacement planned so far of the significant amount of one-off 
measures adopted in 2003.  
In light of these developments, recommendation 1 is replaced by the following: “1. until a medium-term position of close to bala nce or in surplus is achieved, ensure an 
improvement in the cyclically-adjusted budget ba lance of at least 0.5 per cent of GDP per 
year, replacing one-off measures by measures of a more permanent character, and stand 
ready to take further measures to avoid that the deficit breaches the 3 per cent of GDP 
reference value again (GL 1).” 
 
MT 15   MT 13. Il-Finlandja 
No update. 
14. L-Isvezja 
No update. 
15. Ir-Renju Unit 
The fiscal data for 2003 show that the general gove rnment deficit was 3.2 per cent of GDP, above the 
3 per cent of GDP reference value.  The budgetary position deteriorated  more than planned in 2003 due 
principally to weaker-than-expected direct tax re ceipts. In the medium term, both the headline and 
cyclically-adjusted deficits are projected to decline to just below 2 per cent of GDP, in the context of 
continuing increases in planned expenditure aimed at addressing past under-investment by the public 
sector and under-provision of public services. The pr ojected deficit path does not, however, allow a 
sufficient safety margin to prevent a breach of th e 3 per cent of GDP reference value with normal 
macroeconomic fluctuations. Furthermore, there ar e risks to the budgetary projections stemming from 
the assumed autonomous rise in the revenue ratio.  
In the light of these developments, the Un ited Kingdom faces an additional challenge compared to 
the 2003 version of the Broa d Economic Policy Guidelines , namely to: 
Strengthen the budgetary position so as to avoid emerging budgetary imbalances  
In order to strengthen the budgetary position so as  to ensure sound public finances, the United 
Kingdom is recommended to: 
“6. improve the cyclically-adjusted position to cons olidate the public finances, consistent with a 
budgetary position of close to balance or in su rplus in the medium term, and stand ready to 
take further measures so as to endeavour to a void the occurrence of an excessive deficit (GL 
1).” 
 
MT 16   MT 16. Ċipru 
The small economy, with tourism as a mainstay, has shown some resilience in the face of a difficult 
international environment. At first, steady and high real GDP growth averaging 4.2 per cent for 1997-2001 was driven both by domestic demand and continue d high growth in tourist arrivals. However, 
after 11 September 2001 the economy was hit by the slum p in tourism linked to international terrorist 
threats, war in Afghanistan and Iraq, and SARS, w ith the decline continuing in 2003. Growth therefore 
more than halved but still reached 2 per cent in 2002 and 2003, supported by moderate domestic 
demand. This is however below potential growth. 
The relatively good growth performance was suppor ted by a market economy dominated by the 
private sector and with, inter alia , a highly developed financial and legal system, generally prudent 
economic policies, and a flexible labour market . The latter has been operating close to full 
employment and with high participation rates; w ith unemployment rates fluctuating between 3-5 per 
cent, Cyprus effectively does not have an unemplo yment problem. At the same time, the crisis in 
(mass-) tourism in Cyprus has underlined the increasing economic dependence on this sector, while 
traditional sources of export earnings, particularly wi thin the manufacturing sector, show a structural 
decline. Therefore, Cyprus may have an interest in increasing its diversification towards higher value 
added activities. To this end, Cyprus may accel erate the transition toward a knowledge-based 
economy and continue to simplify the business environment. 
A fiscal consolidation plan was introduced in 1999 and revised and extended in following years. 
However, fiscal performance in 2002 and 2003 s lipped again and consolidation was effectively 
abandoned as deficits increased to 4.6 per cen t and 6.3 per cent of GDP respectively. The 
expansionary fiscal stance contributed to an incr ease in domestic demand and a current account deficit 
projected at 4.4 per cent of GDP for 2003. The government  intends to tackle anew the fiscal deficit for 
this and following years, thus working toward s a more favourable policy mix and supporting a 
narrowing of the current account deficit. 
Policies in Cyprus should aim at achieving a high de gree of sustainable convergence, in particular as 
regards the consolidation of public finances. Both  the further consolidation of public finances and 
management of the increasing tourism dependence n eed to be supported by policies which assist in 
perpetuating the strong growth performance into the me dium and long term. This requires in particular 
a strengthening of the growth and employment base and Cyprus should continue  its further transition 
to a knowledge-based economy. Against this b ackground, Cyprus faces two major challenges:  
• Ensure a reduction of the general government deficit on a sustainable basis,  
• Increase the diversification of the economy  towards higher value added activities.  
Ensure a reduction of the general gover nment deficit on a sustainable basis 
Fiscal consolidation went increasingly off target in  2002 and 2003. The original fiscal consolidation 
plan, introduced in 1999, was revised in 2001 and ag ain in 2002. It aimed at reducing the deficit to 
2.0 per cent of GDP by 2002 while reaching fiscal ba lance by 2005. However, lower growth in 2002 
brought the budget shortfall to 4.6 per cent of GDP, instead of a previously planned 2.6 per cent. For 
2003 further slippage occurred, linke d to continued modest growth and tax avoidance with marked 
revenue shortfalls, while spending increased thr ough higher defence outlays and expansionary 
measures introduced to offset subdued external dema nd. This effectively rendered the consolidation 
program defunct, and the government deficit for 2003  reached 6.3 per cent of GDP. The expansionary 
fiscal stance contributed to an increase of domestic  demand and to a continue d relatively high current 
account deficit projected at 4.4 per cent of GDP for 2003. The government intends to tackle anew the 
fiscal deficit, thus working towards a more fa vourable policy mix and supporting a narrowing of the 
current account deficit. To put fiscal consolidati on on track again significant corrective measures are 
 
MT 17   MT required. The quality of public finances should impr ove due to a comprehensive fiscal reform, to be 
finished by end-2004. These reforms will support fu rther deficit reductions and assist in keeping the 
current account deficit in sustainable territory if private net saving should become less favourable 
again. 
Increase the diversification of the econ omy towards higher value added activities 
While tourism accounts for around 15-20 per cent of GDP and employment, the economy has shown 
some resilience in the face of a difficult interna tional environment. However, in a longer term 
perspective, Cyprus may have an interest to up- grade tourism activities and to develop other value 
added activities. In this respect, the Cypriot govern ment has initiated a number of reforms to facilitate 
the transition towards a knowledge based economy. Ne vertheless the low level of R&D expenditure, 
particularly by the business sector, and the lack of IT related skills may still be handicaps. Finally, 
both e-commerce and the percentage of households with internet access are quite limited. 
A better business environment is also key to improving the efficiency of product markets. First, the 
Cypriot economy is dominated by small family en terprises whose expansion may be partly hindered 
by access to finance. Second, competition in the netw ork industries is still limited. For example, the 
unbundling of the transmission system operator is still lacking in the electricity market. In November 
2003, the regulator for the telecommunications and postal services sectors issued two decrees 
advancing but not completing the un bundling of the local loop in these sectors. Finally, barriers to 
market access remain in air transport and the acquis  in the maritime sector still has to be fully 
implemented.  
Country specific recommendations to Cyprus 
Meeting the challenges outlined above requires broad st ructural reforms as they are laid down in the 
general guidelines (GL) in Part I of the Broad Economic Policy Guidelines.  
In order to ensure a reduction of the general gove rnment deficit on a sustainable basis, Cyprus is 
recommended to:  
1. reduce the general government deficit in a credible and sustainable way within a multi-
annual framework in line with th e decisions to be taken by the Council in the context of the 
forthcoming budgetary surveillance exercise (GL 1). 
In order to increase the diversifi cation of the economy towards higher value added activities, Cyprus is 
recommended to:  
2. step up efforts to increase the adequacy of skilled human capital, promote R&D and 
innovation, in particular in the business sect or, and improve conditions to facilitate ICT 
diffusion (GL 9, 13). 
3. continue to simplify the busin ess and taxation environment (GL 11). 
 
MT 18   MT 17. Ir-Repubblika Ċeka 
After the economic slowdown of 1997-1998, the Czech  Republic’s annual real GDP growth averaged 
about 3 per cent, with the exception of 2002 when the country was hit by serious floods and GDP 
growth reached only 2 per cent. The HICP inflation reached very low levels (1.4 per cent in 2002 and -
0.1 per cent in 2003) and the monetary authorities were undershooting the inflation target. The growth 
performance has been underpinned by restructuring efforts, but output has not yet fully reached its 
estimated potential. The main restructuring pro cess took place in the banking sector. The restructuring 
of the banking sector was accompanied by substantia l fiscal costs as the state took over bad assets in 
the banks’ balance sheets. Moreover, fiscal policy ha s been until recently somewhat relaxed, causing 
the general government deficit to surge. The expa nsionary fiscal stance contributed to a domestic 
demand boom and an increasingly consumption-driven widening of the current account deficit to more 
than 6 per cent of GDP. 
Policies in the Czech Republic should aim at achiev ing a high degree of sustainable convergence, in 
particular as regards the consolidation of public  finances. The economy has been characterised by 
relatively low growth in comparison with the ot her new Member States. Therefore, the further 
consolidation of public finances needs to be suppor ted by policies which assist in accelerating the 
growth performance into the medium and long term. This requires, in particular, an effort to tackle the 
remaining structural shortcomings, notably in the labour market and in the business environment, and 
to speed up the transition towards a knowledge-base d economy. Against this background, the Czech 
Republic faces four major challenges:  
• Urgently ensure a further reduction of the genera l government deficit on a sustainable basis and the 
long-term sustainability of public finances, 
• Continue to address the structural problems in the labour market,  
• Improve conditions for an accelerated productivity growth, 
• Promote entrepreneurship and SMEs.  
Urgently ensure a further reduction of the general government deficit on a sustainable 
basis and the long-term sustainability of public finances 
The general government deficit increased from 6.4 per cent of GDP in 2002 to 12.9 per cent of GDP in 
20036, thereby giving impetus for further worsening of the current account deficit. In 2003, the 
government has introduced a fiscal consolidatio n programme which aims to reduce the general 
government deficit to 4 per cent of GDP in 2006. Th e fiscal consolidation will support further deficit 
reductions and assist in bringing the current account de ficit in more sustainable territory if private net 
saving should become less favourable.  
However, improvement in the quality of public fi nances will largely depend on the implementation of 
the fiscal reform. A very important feature of the fi scal reform is the modification of the institutional 
framework, with the introduction of the medium -term expenditure frameworks and performance-
oriented budgets. In particular, the expenditure frameworks should diminish the central government’s 
incentives to provide state guarantees, which remain a source of substantial fiscal risk. In addition, 
given the ongoing decentralisation of public administ ration, the lack of budgetary rules at regional and 
local levels represents a risk to a sound fiscal pos ition in the future. As a positive development, it is 
worth mentioning that in its reform plans the gove rnment does not foresee a lowering of the share of 
public investment expenditures as a percentage of GDP in the coming years. 
                                                 
6 This deficit is partly due to one single imputed st ate guarantee, which is about 6.3 per cent of PGD. 
 
MT 19   MT As far as the long-term sustainability of public fi nances is concerned, extra-budgetary spending and 
rapidly increasing social security and health car e expenditures are reasons for major concern. 
Although the current level of government debt in th e country is not high, developments regarding the 
items above contributed to a rapid increase in re cent years (from 25.2 per cent of GDP in 2001 to 
37.6 per cent of GDP in 2003). 
Continue to address the structural  problems in the labour market 
Between 1990 and 2002 the Czech labour  market experienced substan tial structural changes. The 
share of people employed in the primary sector fell from 12.4 per cent to 4.8 per cent of the labour force, from 45.1 per cent to 39.6 per cent in the secondary sector and increased from 42.5 per cent to 
55.6 per cent in the tertiary sector. The unemploymen t rate was 7.3 per cent at the end of 2002, and 
has since risen up to 8.1 per cent in the fourth quarter of 2003. In addition to the restructuring process, unemployment is likely to be affected by public  finance reform, according to which 2 per cent of 
public sector jobs are to be lost annually over th e period 2004-2006. The impact of trade unions on 
wage formation is low. The wage negotiation process is decentralised with wage setting mostly at the 
enterprise level. Bargaining coordination across firm s and sectors is weak. Despite the fact that the 
employment rate is high (65.5 per cent in 2002) a nd the unemployment rate is around the EU average, 
the Czech labour market displays a number of structural shortcomings. First, regional disparities in unemployment are very high. The rate of unemployment in structurally weak regions is more than four 
times higher than in Prague and in some regions it exceeds 25 per cent. Second, the share of long-term 
unemployed (more than one year) is very high as it reached 40.3 per cent by the end of 2003. In 
addition, the average period of registration at the la bour offices is becoming longer. Third, the rate of 
youth unemployment (people under 25 years old) is very high. The average share of youth unemployed was almost 23 per cent with substantial regional disparities. 
On the labour supply side, long-term unemploymen t and low occupational flexibility stem from the 
disincentives embedded in the tax and benefit system , from the underdeveloped system of life-long 
learning programmes, and from shortcomings of the education and training systems. As regards the 
latter, they do not sufficiently provide skills that are adapted to the needs of the labour market, in 
particular to the demands of the knowledge-based economy. The structural shortcomings in the Czech 
labour market also mirror low geographical mobility , which results from two principal shortcomings: 
First, the regulation of housing prices weakens ince ntives for supply of housing in regions where jobs 
are created. And second, the weak transport infr astructure increases the costs of commuting and 
creates obstacles for investment and setting up of ne w enterprises in the structurally weak regions.  
On the labour demand side, the high rate of heal th and social security contributions might have 
negative effects. The total rate of health and soci al security contributions has reached 47.5 per cent of 
gross wage of which about ¼ is paid by employees and about ¾ by employers. 
Improve conditions for an accelerated productivity growth 
Productivity growth in the Czech Republic has been comparatively low. Over the period 1996-2002, 
labour productivity grew by 2.1 per cent annually, the lowest rate among the new members. Moreover, 
the level of productivity is still very low in comp arison with the EU (around 55 per cent of the EU 15 
average in 2003). Factors contributing to this situa tion could be the limited flexibility of the education 
system, the low effectiveness of R&D and innovation,  and the low use of ICT. The limited flexibility 
of the education and training system in responding to  the changing skills requirements manifests itself 
through the qualification mismatches in the labour ma rket. Educational attainment (the percentage of 
the population aged 20-24 with at least upper secondary education) is very high (92 per cent), but the 
share of tertiary graduates is one of the lowest in  the EU. Despite a relatively high level of expenditure 
on R&D in comparison with the new members, the resulting innovation activity, as measured by the 
number of patents, is very low, pointing to low effectiveness of R&D. There seems to be only limited 
cooperation between the research institutions (e.g. universities and the Czech Academy of Sciences) 
 
MT 20   MT and the private sector. Recognising these problem s, the government has adopted the National R&D 
Policy for 2004-2008 to promote R&D but results w ill largely depend on its full implementation.  
Promote entrepreneurship and SMEs 
Despite the progress in establishing a well-func tioning competition framework and continuous 
developments in the legal environment there seem to remain significant barriers to entrepreneurship in 
the Czech Republic. This is reflected inter alia  in the low share of GDP accounted for by SMEs (less 
than 40 per cent). The gross-birth rate of enterprises as a percentage of all enterprises is relatively low 
in comparison with other new members. 
Factors contributing to this situation appear to be  the weaknesses in the business environment which 
have a disproportionately heavier impact on SMEs, e.  g. regarding regulations  and legal enforcement, 
excessive administrative burden on companies an d limited access to finances. The administrative 
process of setting up a new company is very lengthy  and complicated. The ineffective and often non-
transparent operation of the Commercial Register is  frequently criticised by entrepreneurs. Also the 
bankruptcy legislation does not allow for effective market exit or restructuring of troubled companies. Several legislative proposals to tackle some of th ese problems are currently being prepared but the 
progress has proven to be slow. Notwithstanding im provements in the qualification of judges, the 
quality and timeliness of legal enforcement remain  fundamental weaknesses. In addition, new 
businesses find it excessively difficult to find external sources of financing. 
Country specific recommendations to the Czech Republic 
Meeting the challenges outlined above requires broad st ructural reforms as they are laid down in the 
general guidelines (GL) in Part I of the Broad Economic Policy Guidelines.  
In order to urgently ensure a further reduction of the general government deficit on a sustainable basis 
and the long-term sustainability of public fina nces, the Czech Republic is recommended to:  
1. reduce the general government deficit in a cr edible and sustainable way within a multi-
annual framework in line with th e decisions to be taken by the Council in the context of the 
forthcoming budgetary surveillance exercise (GL 1).  
2. reform the health care and pension systems to  ensure their financial sustainability, in 
particular to counter the expected increase in  the old-age dependency ratio and take measures 
to reduce fiscal risk stemming from the rising st ock of contingent liabilities; and to ensure 
that incentives to work are enhanced and th e high social policy contribution rates are 
lowered (GL 4, 14 and 16).  
In order to continue to address the structural pr oblems in the labour market, the Czech Republic is 
recommended to:  
3. strengthen labour supply by reforming tax benefit systems to eliminate disincentives to work 
and enhance occupational and regional m obility by reducing skill mismatches, whilst 
ensuring the efficiency of retraining measures and other active labour market policies, 
deregulating the housing market, and improving tr ansport infrastructure (GL 4, 7, 8 and 13).  
In order to improve conditions for an accelerated productivity growth, the Czech Republic is 
recommended to: 
 
MT 21   MT 4. improve the efficiency and quality of th e education and training system and its 
responsiveness to changing skills requirements (GL 13).  
5. improve the efficiency of R&D and innovation activities, foster the transfer of knowledge 
through FDI and support the diffusion of knowledge (GL 13).  
In order to promote entrepreneurship and SMEs, the Czech Republic is recommended to: 
6. improve the business climate by, in particul ar, removing administrative burdens, improving 
and enforcing the legal framework and increasing access to finance (GL 11 and 12).  
 
MT 22   MT 18. L-Estonja 
Against the background of weak external demand, macroeconomic performance in Estonia remained 
solid in 2003, but the current account deficit widened to 13.7 per cent of GDP. GDP growth of 4.8 per cent was underpinned both by buoyant investment and private consumption growth. The latter was 
driven by strong credit expansion, higher wage s and modest employment growth. Against the 
backdrop of a protracted investment sluggishness in  the euro area, capital spending in Estonia grew 
briskly at over 11 per cent, due to strong FDI infl ows and low interest rates. Inflation, which had 
accelerated to almost 7 per cent in mid-2001, receded to 1.3 per cent in 2003. The general government surplus widened to 1.8 per cent of GDP in 2002 and further to 2.6 per cent in 2003, on account of 
strong activity and improved tax collection, and d espite additional spending approved by parliament. 
Some local governments continued to exert a drag on public finances.  
Policies in Estonia should aim at achieving a high degree of sustainable convergence, and a narrowing 
of the current account deficit. Fiscal policy can have a significant impact on the current account, while structural policies, particularly those that aim at improving productivity and increasing competition, 
can raise the economy's growth potential, and in tu rn further improve the saving-investment balance 
and the current account. Additionally, the labour ma rket, and specifically the high unemployment rate, 
remains an important challenge for the authorities following the restructuring of the economy after 
independence. Against this background, Estonia faces four major challenges: 
• Address the sizeable current account deficit, to which an appropriate fiscal policy should 
contribute, 
• Address the structural problems in the labour market, 
• Improve conditions for increasing productivity, 
• Develop effective competition in network industries. 
Address the sizeable current account deficit, to which an appropriate fiscal policy should 
contribute 
A mismatch between domestic a nd foreign demand was manifested in a robust demand for imports 
(7.9 per cent increase), and a relatively sluggish  export performance (4.2 per cent increase), and 
consequently in a deterioration in the current account deficit to 13.7 per cent of GDP in 2003. A 
number of large one-off items, concerning mainly the import of investment goods, and a negative 
income balance accounted for a large part of the deficit, while the cap ital account remained in surplus, 
thanks to strong FDI inflows. Th e low level of public debt (around  5 per cent of GDP) and the positive 
credit rating of the country help to allay immedi ate stability concerns about the financing of the 
current account deficit. In addition, the central government has accumulated a “stability reserve” 
amounting to 9 per cent of GDP, which has been financed from budget surpluses and privatisation 
revenues since 1997.  
Structural policies enhancing the external compe titiveness of Estonian goods and services, primarily 
through a rapid improvement of the country’s infr astructure as well as investments in human capital, 
with a particular focus on the country’s disadvant aged regions, are therefore essential to decisively 
reduce this major macroeconomic imbalance of the Estonian economy in the medium-term. 
The continuation of prudent fiscal policies plays a ke y role in addressing the current account deficit. 
While the general government surplus increased from 1. 8 per cent of GDP in 2002 to 2.6 per cent of 
GDP in 2003, some local governments continued to exert a drag on public finances with budget 
slippages in both 2002 and 2003. D espite the fiscal surpluses of recent years and the low public debt, 
plans for additional expenditures and tax cuts along with commitments related to EU accession will 
 
MT 23   MT make for higher budgetary pressure in the near futu re. This may lower national savings further and 
thus have a negative impact on the overall policy mix,  particularly against the background of a very 
high current account deficit. On the whole, the Est onian general government balance should remain in 
balance or in surplus over the next few years, even  with some fiscal easing. Moreover, an easing of 
fiscal policy over the first few years of EU member ship is likely to coincide with an economic 
upswing. A pro-cyclical effect of the envisaged fiscal policy stance may not be ruled out. Thus, the implementation of the medium-term fiscal policy pr ogram in Estonia requires a prudent and flexible 
approach.  
Address the structural probl ems in the labour market  
Conditions in the labour market in Estonia have  deteriorated gradually following the country's 
independence. The restructuring of the economy, a nd the resulting skill mismatch, appear to be the 
main factors behind the rise in unemployment to 14½ per cent by mid-2000 (based on the ILO definition). The employment rate which had declin ed from 65 per cent in 1997 to 60.6 per cent in 
2000, edged up to 61.1 per cent in 2002 for the first time since the country’s independence 
contributing to a turnaround in the labour market , resulting in a fall in the unemployment rate to 
10.3 per cent in 2002. However, this improvement w as the result of modest employment gains, and a 
significant decline in the economically active popula tion; employment increased by some 2 per cent 
over 1997-2002 while the economically active popul ation declined by almost 2.5 per cent. 
The rising unemployment over 1997-2002 was associat ed with a steady increase in the proportion of 
long-term unemployed, and of discouraged workers, and consequently an increase in the structural 
unemployment rate. However, the share of those without  a job for more than a year declined to 41 per 
cent of the unemployed in 2002, or almost to th e same level as in 1997, after having increased 
considerably to 60 per cent during this period. Ev en so, the number of long-term unemployed remains 
particularly high, suggesting that a large number  of the unemployed do not possess the skills required 
to reintegrate successfully into the labour mark et. Regional disparities continue to persist and 
unemployment remains considerably higher in th e Northeast (at around 19 per cent of the labour 
force) than compared with the South (8½–9 per cent).  
Improve conditions for increasing productivity  
In Estonia, the level of productivity is still very low compared to the EU average (42 per cent of the 
EU 15 level in 2002). While labour productivity gr owth remained strong (7 per cent per annum) over 
the period 1997-2000, it has slowed down since 2000.  Two main factors could constitute a handicap 
for future increases in productivity growth: the lack  of qualifications in the workforce and the low 
level of R&D and innovation. These two factors also e xplain that FDI are mainly concentrated in areas 
that do not require important R&D and qualifications.  
The lack of qualifications in the workforce results  from inefficiencies in the education system, as 
public expenditures on education are relatively high (6.7 per cent of GDP in 2000). Particularly 
worrying is the fact that the education system is  not sufficiently close to the needs of the labour 
market, creating a mismatch.  
A well-designed R&D policy can also have an important role in increasing productivity growth. 
Currently Estonia has a relatively low level of R& D expenditures, below that of other European 
countries (0.8 per cent of GDP in 2001), and th e lowest rate of business R&D among the new 
members. This is partly due to the weak li nks between the academic sector and the business 
community. In this area, a new strategy has been  approved which foresees a significant increase in 
total R&D expenditures over the period 2002-2006. 
Develop effective competitio n in network industries 
 
MT 24   MT While the liberalisation of network industries has star ted in Estonia, competition is still very limited in 
the electricity market. The country has negotiated a long transition period for the liberalisation of this 
sector, in light of its dependence on oil shale as a sour ce of electricity generation. The restructuring of 
the oil-shale sector has started, but the progress made  in the planned liberalisation of the market is 
limited. The electricity market is dominated by a State-owned, vertically integrated company with 
operations in supply, generation, monopoly transmission and distribution. The declared current market 
opening of 10 per cent, is below most of the othe r new member states’ degree of market opening. One 
of the most important obstacles to liberalisation of the electricity market is the imposition of strict import licence rules by the authorities. Ensuring the independence of the energy regulator is also 
important given the State’s ownership of the incumbent in the electricity market.  
The problems are less acute in gas and telecommuni cation. The gas market is privatised and open, 
with a single supplier operating on the market. The telecommunication market has been also liberalised. However, some problems might arise b ecause the owner of the network also operates as a 
distributor. 
Country specific recommendations for Estonia 
Meeting the challenges outlined above requires broad st ructural reforms as they are laid down in the 
general guidelines (GL) in Part I of the Broad Economic Policy Guidelines. 
In order to address the sizeable current account defic it, to which an appropriate fiscal policy should 
contribute, Estonia is recommended to: 
1. implement a fiscal policy that is in line w ith the decisions to be taken by the Council 
in the context of the forthcoming budgetary  surveillance exercise (GL 1), and which 
is consistent with the objective of avoiding pro-cyclical policies that may exacerbate 
the external imbalance (GL 2). 
In order to address the structural problems in the labour market, Estonia is recommended to: 
2. adopt policies with particular em phasis on re-integrating the long-term unemployed , 
particularly in regions worst hit by the restructuring of the economy, by promoting 
vocational training and life-long learning, and by setting up an effective institutional framework that is supporting job creation (GLs 4, 6 and 8).
 
3. encourage social partners to ensu re that wage developments—including changes  to the 
minimum wage legislation—do not hinder empl oyment growth, and hold up the recovery in 
the labour market (GL 3and 5).  
In order to improve conditions for increasing productivity, Estonia is recommended to: 
4. improve the efficiency and quality of the e ducation system and vocational training in order 
to reduce the mismatch on the labour market (GL 13).  
5. implement the R&D strategy approved in 2001 and, in particular, promote the stronger 
involvement of the business sector in R&D spending (GL 13).  
In order to develop effective competition in network industries: 
6. proceed with the liberalisation of the electri city market, strengthen the independence of the 
regulator and ensure effective competition in telecommunications (GL 9). 
 
MT 25   MT 19. L-Ungerija 
Following a relatively high real GDP growth of 3.5 per cent in 2002, real GDP growth in 2003 slowed 
to below 3 per cent. While unemployment is am ong the lowest of the acceding countries, the 
participation rate is very low compared to the EU  average. Serious structural shortcomings in the 
labour market render further increase in employment difficult: notably a lack of regional mobility, 
skill mismatches and disincentives from the benefit systems. Achieving a high degree of sustainable convergence requires regaining and maintaining comp etitiveness at a sustainable high level. A return 
to reasonable real wage development and the crea tion of a more investment-promoting environment 
seems therefore crucial in order to ensure a balanced medium-term growth.  
After the high fiscal deficit of 9.3 per cent of GD P in 2002, fiscal policy became restrictive again in 
2003. However, the general government deficit s till reached 5.9 per cent of GDP. The significant 
overshooting of the fiscal deficit targets during th e last two years contributed to the consumption-
driven widening of the current account deficit to above 5 ½ per cent of GDP. Together with other 
problems in the macroeconomic policy mix (such as the high real wage growth and very high real 
interest rates) and the high volatility of the exchange  rate, this has led to a general loss in financial 
markets’ confidence and to a loss in overall competitiveness.  
Policies in Hungary should aim at achieving a high de gree of sustainable convergence, in particular as 
regards the consolidation of public  finances. Hungary implemented a number of structural reforms and 
has achieved important catch-up with the EU. Howe ver there are areas which pose further challenges 
to the country. Hungary should aim to adopt measur es in order to make the education system more 
effective and R&D has to be encouraged in order to achieve higher produc tivity. Competition in the 
network industries needs to be further improved a nd the independence of the regulators has to be 
strengthened. Against this background, Hungary faces five major challenges:  
• Ensure a further reduction of the general gove rnment deficit on a sustainable basis,  
• Increase employment rates and address the structural problems in the labour market, 
• Enhance cost-competitiveness by pursuing policies that induce wage moderation, 
• Improve conditions for increasing productivity, 
• Develop effective competition in network industries.  
Ensure a further reduction of the general government deficit on a sustainable basis  
After the high deficit of 9.3 per cent of GDP in  2002, fiscal policy became restrictive in 2003. 
However, the general government deficit of 20 03 was still 5.9 per cent of GDP. While for 2004 a 
further reduction of the deficit is foreseen, the st arting position for the achieve ment of the 2004 deficit 
target seems rather difficult. While initially ai ming at comprehensive public finance reforms, a 
significant number of expenditure items have not been  addressed at all in the budget of 2004, and still 
seem not to have been considered in the consolida tion plans. Meanwhile, savings are intended to result 
mainly from cuts in current and operational expen ses. The previous expansionary fiscal stance, along 
with high real wage growth, contributed to hi gh domestic demand and an increasingly consumption-
driven widening of the current account  deficit, to somewhat above 5½  per cent of GDP. A reduction in 
the high government sector level of borrowing is also  crucial in order to improve the current account. 
Households’ savings can not be expected to be suff icient to finance the rise  in private investment 
(including those related to EU accession). This is  expected to put further pressure on the current 
account. Even maintaining the present current account de ficit, while allowing investment to take place, 
would thus require additio nal budgetary constraint. A return to sustainable policies in Hungary has to 
be based on a consolidatio n of public finances.  
 
MT 26   MT Increase employment rates and address the st ructural problems in the labour market  
Hungary has one of the lowest unemployment rates among the acceding countries (5.8 per cent in 
2003). However, this is accompanied by a stagnati ng labour force and a low participation rate 
(59.7 per cent in the 15-64-year age-bracket for 2002)  compared to the EU average. Consequently, the 
low unemployment rate does not reflect the substan tial disengagement from the labour market and the 
high level of inactivity particularly in the end-of career working age population.  
The labour market is also characterised by structur al shortcomings. Regional di fferences can mostly be 
observed in the form of increasing urbanisation and the East-West axis, with a less developed 
infrastructure and higher unemployment in the Eastern part of the country. Internal mobility is low in 
international comparison, with housing and tran sport as the main impediments. Furthermore, a 
significant number of unemployed are young adults (the youth unemployment rate is 11.4 per cent). 
Enhance cost-competitiveness by pursuing policies that induce wage moderation  
While showing a slight improvement since the begi nning of 2003, Hungary’s cost competitiveness has 
shown a significant deterioration in the years 2000-2002. The decline in cost competitiveness was 
partly due to the fast increase in wages. Real wa ge growth exceeded productivity growth in the last 
three years, led by a rise in minimum wages and by  the public sector, but also by a delayed adaptation 
of the corporate sector to the new low-inflation environment . Although wage growth slowed down 
towards the end of the year, real wages still grew by 9.2 per cent in 2003 (w ith 7.3 per cent in the 
business sector and 12.7 per cent in the public secto r). They have negatively influenced cost-
competitiveness, and led to decreasing employment in  some low-skill segments of the labour market. 
While this process has contributed to a change in  the structure of industrial production towards high 
skilled labour, increasing unit labour costs have le d to a deterioration in the overall competitive 
position of the country, not just in labour-intensive activities.  
Improve conditions for increasing productivity 
Productivity growth has been decreasing since 2000, although it remained slightly above the average 
of the new Member States. While labour productivity  growth was 4.2 per cent in 2000 it decreased to 
2.4 per cent in 2003. Factors contributing to th e slowdown in productivity growth have been the 
relatively low level of R&D (0.95 per cent of GDP in  2001), inefficiencies in the education system, 
and instability in the business environment.  
While some measures have been taken to improve th e flexibility of the education system in order to 
better adapt to the changing needs of the labour market, there is still a lack of “middle-skilled” and high-skilled workers in the labour market. The number of PhD students is increasing but many terminate their studies before obtaining their diploma. The number of total tertiary graduates in 
science and technology per 1000 of pop ulation (aged 20-29) has been decreasing during the last years: 
in 2001 it was 3.7 which is one of the lowest in the EU. In the field of research and development, 
applied research is lagging behind,  partly due to the low level of business R&D expenditures and 
limited cooperation between compan ies and research institutes. P ublic R&D expenditures are also 
relatively low, not only as a share of GDP but also as a share of total govern ment expenditures (R&D 
expenditures by the government represented 0.9 pe r cent of total government expenditures in 2001). 
Another factor which might negatively affect prod uctivity growth is the frequently shifting policy 
environment. Regulations and govern ment strategies have often been changed during the last decade, 
which reduced the predictability of policies and tr ust in the government, and hampered longer term 
planning.  
Develop effective competitio n in network industries  
While liberalisation has started in most of the netw ork industries, effective competition is still limited 
in these sectors. One of the most liberalised markets is telecommuni cation. However, even in this 
 
MT 27   MT market, competition is restricted due to the str ong dominant position of the previously State owned 
enterprise in the fixed line market and the quasi duopoly situation on the mobile market. Electricity 
and gas markets have been opened up for big cust omers. However, long-term purchase agreements 
and the low availability of interconnection capaciti es continue to pose obstacles to competition in 
electricity. Finally, in certain of these sectors the St ate has retained its capab ilities to intervene in the 
activities of the network regulators. This is the case in the electricity an d gas markets where the 
government has the possibility to influence prices.  
Country specific recommendations to Hungary 
Meeting the challenges outlined above requires broad st ructural reforms as they are laid down in the 
general guidelines (GL) in Part I of the Broad Economic Policy Guidelines.  
In order to ensure a further reduction of the ge neral government deficit on a sustainable basis, 
Hungary is recommended to:  
1. reduce the general governmen t deficit in a credible a nd sustainable way within a 
multi-annual framework in line with the de cisions to be taken by the Council in the 
context of the forthcoming budgetary  surveillance exercise (GL 1). 
In order to increase employment rates and to a ddress the structural problems in the labour market, 
Hungary is recommended to: 
2. strengthen labour supply by removing obst acles to regional mobility through appropriate 
measures in the housing and transportation polic y, and by encouraging disadvantaged groups 
(ethnic minorities, disabled and homeless people) to (re-)enter the la bour market (GL 7 and 
8). 
3. ensure  that the tax and benefit systems support employment and provide incentives to enter 
or remain in the labour market (make work pa y- principle) – the high tax burden of labour 
force should be further reduced (GL 4).  
In order to enhance cost-competitiv eness by pursuing policies that induce wage moderation, Hungary 
is recommended to: 
4. encourage a reform of wage setting whic h allows wages to better reflect productivity. 
Promote multi-annual wage agreements with the so cial partners in order to keep real wage 
development in line with productivity growth (GL 5).  
In order to improve conditions for increasing productivity, Hungary is recommended to: 
5. promote the stronger involvement of the pr ivate sector in R&D and innovation, strengthen 
the link between business and research instituti ons, ensure sufficient resources to improve 
the quality of research and support the tran sfer of knowledge through FDI (GL 13).  
6. improve the efficiency of the education system , increase its flexibility in order to better adapt 
to the skill needs of the market and ensure adequate resources for vocational training and 
education (GL 13).  
7. ensure stability of legislation and govern ment policies to create a business environment, 
more supportive to entrepreneurship (GL 11).  
In order to develop effective competition in network industries, Hungary is recommended to:  
 
MT 28   MT 8. proceed with the liberalisation of the network industries, increase effectiveness of 
competition and the independence of the network regulators (GL 9).  
 
MT 29   MT 20. Il-Latvja 
Robust economic performance was registered in Latv ia in recent years despite a weak external 
environment. It is expected that GDP growth will remain at potential growth of 5-6 per cent per year 
in the medium term. Private consumption and gross fixed capital formation have been particularly 
strong and are the driving factors for growth. D espite high private consumption growth, inflation 
remained modest. External trade has expanded rapidly and since imports are outpacing exports, 
the current account deficit has increased to 9.3 per cent of GDP in 2003 and is expected to remain at 
this high level in the medium term. Latvia made  remarkable progress implementing structural reforms 
in recent years, but still faces some challenges, that if  not fully met, may impair its ability to stay on a 
path of strong growth. 
The unemployment rate declined slowly and varies considerably across regions. The smooth 
functioning of the labour market is hampered by a number of structural problems, including 
inadequate education and training systems, sk ills mismatches and low geographical mobility. 
Competition on Latvian product markets has been boos ted by the privatisation of most State-owned 
companies, and the level of State aid remains lower than the EU average. The few remaining 
competition problems are mainly concentrated in network industries. Although Latvia benefits from 
low labour costs and taxes, the low level of labour productivity remains a major concern. 
The decreasing trend in the general government defic it was interrupted in 2002, when it rose to 3 per 
cent of GDP, from 1.6 per cent in 2001. In 2003  better than expected tax revenues and close 
monitoring of expenditure by the government help ed to reduce the general government deficit to 
1.8 per cent of GDP and in 2004 the deficit is pla nned to be 2 per cent of GDP. However, Latvia’s 
fiscal position depends on the strength of the commitment to ensure budgetary discipline; 
consequently, a pro-cyclical stance characterizes La tvia’s fiscal policy. On the other hand, the general 
government debt remains low at 15.6 per cent of GDP. 
Policies in Latvia should aim at achieving a high degr ee of sustainable convergence, in particular as 
regards the consolidation of public finances. Both  the further consolidation of public finances and 
solutions to address the under-utilisation of Latvia’s human resources need to be supported by policies 
which assist in perpetuating the strong growth performance into the medium and long term. This 
requires in particular a strengthening and divers ification of the growth and employment base by 
fostering the entrepreneurial climate. Furthermore, the productivity level needs to be raised and Latvia 
should prepare for the eventual transition to a knowledge-based economy. Against this background, 
Latvia faces four major challenges:  
• Address the sizeable current account deficit, to which an appropriate fiscal policy should 
contribute, 
• Improve conditions for increasing productivity, 
• Address the structural problems in the labour market, 
• Develop effective competition in network industries. 
Address the sizeable current account deficit, to which an appropriate fiscal policy should 
contribute 
Latvian domestic demand for importe d goods remains stronger than the external demand for Latvian 
goods, thus, the current account deficit has increased to  9.3 per cent of GDP in 2003. Export growth in 
2002 and 2003 was very strong despite the internationa l slowdown; however, impor ts grew even faster 
than exports. In the next few years the trade bala nce is expected to wor sen even more, because of 
strong and growing investment needs as the economy c ontinues to develop and restructure. This will 
 
MT 30   MT lead to a broadening of the current account defic it. Although export prices grew faster than import 
prices in 2003, the terms of trade do not show cons istently favourable developments over the last 
years, thus adding uncertainty regarding pot ential future pressures on the current account. 
The modest pace of fiscal consolidation was disrupted by fiscal slippage in 2002, despite strong 
economic growth of the Latvian economy. Consequen tly, the general government fiscal deficit rose to 
3 per cent of GDP. Even though the Latvian auth orities maintain a commitment to balancing the 
budget in the medium term, the current pro-cyclical fiscal stance, and a limited ability of the government to increase tax revenues in a period of high economic growth, put Latvia in a difficult 
position from which to meet future spending ne eds related to EU and NATO accession. These 
spending pressures are also likely to exacerbate the current account deficit. In the face of a weak 
external demand and already high domestic demand,  a spending surge in late 2002, strong credit 
growth, significant tax reduction in early 2003, an d further fiscal loosening are a cause for concern. 
The key economic policy challenge is  to avoid a pro-cyclical fiscal stimulus that could overheat 
domestic demand and aggravate the current account deficit. 
Improve conditions for increasing productivity  
Labour productivity in Latvia is the lowest in the EU (under 40 per cent of the EU-15 average). Over 
the period 1995-2003, it has increased relatively to th e EU average but its growth rate slowed down in 
recent years. Several factors bear on Latvia’s pr oductivity performance. First, although reforms have 
been initiated, the educational system still suffers from efficiency, contents, and external partnerships 
problems, and the links between higher education and industries are still underdeveloped. Second, 
R&D – in particular the share of business R&D - a nd innovation activities appear to be limited, both 
because of a lack of funding and the absence of criti cal mass for most Latvian companies to carry out 
research activities. Productivity growth is also constr ained by the low level of entrepreneurial activity 
as companies face heavy local regulations, diff iculties in accessing finance, and a nascent 
entrepreneurial culture. Despite hi gh levels of business investments, productivity levels are still held 
back by low capital deepening and a still relatively low level of physical infrastructure. All these 
factors also contribute to explain why Latvia remain s specialised in relativel y low-tech sectors and in 
transit activities without much value-added. 
Address the structural probl ems in the labour market 
The Latvian labour market displays a number of stru ctural shortcomings, the main being high regional 
differences in unemployment, and a high share of  long-term unemployment and youth unemployment. 
In 2002, the participation rate reached 68.8 per cen t and the employment rate was 60.5 per cent. The 
unemployment rate was 12.1 per cent at the end of 2002 and has declined in 2003. 
The smooth functioning of the labour market is hampered by a number of structural problems. First, 
the under-utilisation of human resources stems from f eeble entrepreneurial climate. Latvia has the 
lowest rate of business start-ups in the EU , which underlines the necessity to facilitate 
entrepreneurship and the development of small and me dium size enterprises, in this way fostering the 
employment base. Second, the labour tax wedge is hi gh in Latvia and creates a disincentive to work in 
the official economy. In addition, given the low wag es, even modest social benefits make working or 
returning to work costly decisions and therefore discourage labour market participation. Third, the 
high rate of unemployment reflects to some ex tent skills mismatches between labour supply and 
demand. Moreover, the education system fails to meet  the demand for more flexible and modern forms 
of training. The Latvian authorities have recently proposed a comprehensive reform of the education 
system to better adapt it to the requirements of a market economy, however, implementation of the 
reform might be both costly and lengthy. Fina lly, regional discrepancies in employment and 
unemployment are also the result of low geographi cal mobility, which could be enhanced through 
improvements in transport infrastructure. 
 
MT 31   MT Develop effective competitio n in network industries. 
Steps to liberalise network industries have only b een recently taken place with full liberalisation of 
voice telecommunications in 2003 and progressive libera lisation of other network industries to comply 
with EU legislation. All network industries are s till dominated by the respective incumbents - some of 
them being gradually privatised – facing low e ffective competition and benefiting from the absence of 
a real choice of supplier. Low effective competition has several sources. In some cases, technical and 
practical barriers impede competition to develop, as is the case in telecommunications, where local 
loop unbundling, carrier selection and number portability are trailing behind. In some other cases, the 
legal base for more effective competition is not yet fully in place, such as in  energy. One additional 
source of low effective competition is a lack of in terconnection. Latvia’s ra ilways connections are not 
well-developed with Baltic ne ighbours and other European countries. In  gas, the Latvian market is still 
dominated upstream by very few importers and is de facto  dependent on Russian gas supply. Finally, 
cross-border interconnections in electricity between  Baltic States and other Member States may be 
insufficient to cope with long-term demand. 
Country specific recommendations to Latvia 
Meeting the challenges outlined above requires broad st ructural reforms as they are laid down in the 
general guidelines (GL) in Part I of the Broad Economic Policy Guidelines. 
In order to address the sizable current account defic it, to which an appropriate fiscal policy should 
contribute, Latvia is recommended to: 
1. reduce the general governmen t deficit in a credible a nd sustainable way within a 
multi-annual framework in line with the de cisions to be taken by the Council in the 
context of the forthcoming budgetary surveillance exercise (GL 1 and 2). 
In order to improve conditions for increasi ng productivity, Latvia is recommended to: 
2. increase the efficiency, qua lity and accessibility of the educa tion and training systems, and 
their responsiveness to the labour markets’ needs (GL 13 and 14).  
3. encourage R&D and innovati on, in particular in the business sector (GL 13 and 14).  
4. encourage an entrepreneurial culture (GL 11).  
In order to address the structural problems in the labour market, Latvia is recommended to: 
5. revise the tax and benefit system in order to make work pay more, in particular by increasing 
the efficiency of social spending (GL 4).  
6. strengthen labour supply by pursuing effo rts to better adapt the qualifications of the 
workforce to the requirements of the labour market and by facilitating labour mobility, 
especially through improvements in transport infrastructure (GL 7 and 13).  
In order to develop effective competition in ne twork industries, Latvia is recommended to: 
7. take legal measures to enhance effective co mpetition in network industries and to strengthen 
the role of the regulator (GL 9).  
8. increase physical interconnections with  other European networks (GL 9).  
 
MT 32   MT 21. Il-Litwanja 
In spite of a weak external environment, L ithuania’s macroeconomic performance remained 
particularly strong in the last two years. Real GD P growth accelerated rapidly to 8.9 per cent in 2003, 
primarily supported by strong investment and priv ate consumption, although export growth remained 
robust. A large nominal effective appreciation of the litas, together with strong productivity growth 
that attenuated wage inflation, led to a decline in price levels. The decline (measured in HICP) 
amounted to 1.1 per cent in 2003. Strong economic  growth was positively reflected in the labour 
market, although high unemployment remains as a ma jor weakness in the Lithuanian economy.  
The decreasing trend in the genera l government deficit initiated in 2000 was interrupted in 2003, when 
the deficit increased slightly to 1.7 per cent of GDP, from 1.4 per cent in 2002. Significant increases in 
both current and capital expenditure, partly associ ated with EU accession related expenditure, are 
approved in the budget for 2004 and are expected to result in a further rise of the deficit. Fiscal 
consolidation is expected to resume in 2005. Moderate budget deficits in previous years have 
contributed to maintaining sustainable current account  deficits, which have to a large extent been 
financed by foreign direct investment. The currency board arrangement has proved a successful 
nominal anchor for monetary policy, contributing to  macroeconomic stabilisation and historically low 
inflation rates. The enhanced macroeconomic stabil ity has allowed for a decreasing trend in interest 
rates in the last few years, contributing to high domestic credit growth a nd consequently to rapid 
growth of investment and consumption.  
Policies in Lithuania should aim at achieving a high degree of sustainable convergence. The labour 
market is a source of concern. Decreasing the high unemployment rate and a further consolidation of 
public finances will be crucial to enhance macroe conomic stability in the medium term. Preserving 
Lithuania’s competitiveness will be of paramount importance for a rapid and sustained convergence 
with the EU economies. Further structural cha nges will be necessary to maintain the current 
productivity growth trend, which is required to  close the substantial productivity gap between 
Lithuania and the EU average. In this regard, adapting the education system to the needs of the labour 
market and developing R&D and innovation are re quired to facilitate much-needed progress towards 
the transition to the knowledge-based economy. Agains t this background, Lithuania faces four major 
challenges:  
• Address the structural problems in the labour market, 
• Maintain low general government deficits, 
• Improve conditions for increasing productivity, 
• Develop effective competition in network industries. 
Address the structural probl ems in the labour market 
Despite visible improvements in the labour market in the last two years, the unemployment rate 
remained high at 12.7 per cent in 2003 and major structural weaknesses persist. Large regional 
disparities are evident, with sev eral regions recording unemployment rates around 20 per cent. The 
youth unemployment rate remained high at 23 per cent in 2002,  whereas the long-term unemployment 
rate stood at 7 per cent. Close to 17 per cent of employment lies in the low-productivity agricultural 
sector, where significant labour shedding is likely to take place and exert upward pressure on unemployment in the next years.  
Major structural shortcomings in the labour ma rket are related to th e limited occupational and 
geographic mobility of the workforce, mismatches between supply and demand of skills and education 
deficiencies. Despite enjoying high participation ra tes in higher education, professional qualifications 
of the Lithuanian workforce are often specialised  in areas that do not match properly the current 
 
MT 33   MT demand for skills. Labour shortages are emergi ng in the areas of information technologies, 
management and several categories of engineer ing. Enhancing the links between educational 
institutions and business would help to better adapt vocational training and tertiary education to the 
current needs. At the same time, lifelong lear ning activities, which are essential to increase the 
workforce’s capacity to adapt to fu ture demands, are currently at one of the lowest levels among the 
acceding countries. Further efforts to improve the qu ality and availability of vocational training would 
be beneficial, especially in the least developed re gions. The high share of low-qualified workers in 
unemployment calls for special attention to training activities for this category of workers. Improving 
the educational infrastructure, particularly in poorer regions, would contribute to establishing better 
framework conditions for attracting investment a nd increase the workforce’s capacity and willingness 
to move. Further efforts to improve the business environment would help to create employment and offset redundancies stemming from industrial and ag ricultural restructuring. The unemployment 
benefits system needs to be streamlined, the size of  unemployment benefits are not linked to previous 
wages, coverage of the insurance is not clearly de fined in the legislation and the links between the 
contributions and benefits of the unemp loyment insurance system are unclear. 
Maintain low general government deficits  
The authorities have held to their fiscal consolid ation plans. Accordingly, the general government 
deficit decreased from 5.7 per cent of GDP in 1999 to 1.4 per cent in 2002. However, the deficit 
reversed its decreasing trend and picked up slightly to 1.7 per cent in 2003. Against the background of higher revenue collection than expected in the first half of 2003, the government decided to allocate 
additional expenditure by means of a supplementary  budget in July 2003. The amendments resulted in 
significant increases in current expenditure that pr evented a further reduction of the deficit in 2003, 
mainly in the form of compensations for the loss of rouble savings
7 (about 0.4 per cent of GDP) and 
agricultural subsidies (0.2 per cent of GDP). The 2004 budget foresees a further increase of the deficit, 
largely related to a surge in public investment a nd higher expenditure related to the social security 
system and public sector wages, as well as significant transition costs of the pension reform. Spending 
pressures stemming from high investment needs and sizeable fiscal obligations and contingent 
liabilities denote a risk for the consolidation of public finances in the medium-term.  
Despite efforts made to improve the tax system, there is considerable room for improvement as 
regards the efficiency of tax collection. Government  revenues as a percentage of GDP have decreased 
from 38.1 per cent in 1998 to 33.8 per cent in 2002 , while expenditure has remained largely stable. 
Additional expenditure to the budget plans is frequently allocated in the second half of the year, which 
prevents a faster consolidation of public finances. A pro-cyclical fiscal policy stance could entail some 
risks as additional spending pressures are intensifyi ng. Although low budget deficits have contributed 
to alleviate pressures on the current account in the last years, fiscal policy might need to play a role in 
mitigating a potential deterioration of the private s ector’s savings-investment balance, which could be 
stimulated by the present rapid credit growth dynamics.  
Improve conditions for increasing productivity 
Lithuania has had high productivity growth after th e Russian crisis in 1999, but the productivity level 
is still very low at 42 per cent of the EU 15 average. Also the recent high productivity growth seems to 
have been partly caused by one-off effects due to be tter capacity utilisation of existing resources. With 
a GDP per capita level at 39 per cent of the EU 15 average in 2002 a high and sustainable productivity 
growth is necessary to reduce the income gap with  the EU. In this respect, deficiencies of the 
education system and the low level of R&D and innovation are a handicap. 
                                                 
7 The government committed to compensate citizens for the loss of rouble savings in the first years of 
transition and to restitute ownership rights or pay pecuniary compensations for real estate property 
confiscated during Soviet times. The outstanding amounts to be paid accounted for about 6.7 per cent of 
PGD at the end of 2003. 
 
MT 34   MT Firstly, despite high public spending on education a nd a high number of tertiary graduates there is a 
mismatch between the skills acquired in the edu cation and training systems and the needs in the 
business sector as described in the first key challenge . The government is preparing a program for the 
implementation of an education strategy stretching to 2012, but further efforts may be necessary to 
adapt the education and training systems to the fu ture needs as the economic structure develops. 
Secondly, a large share of the current economic structure is based on low technology activities. A change of the structure will require higher R&D and more innovation, which currently are among the 
lowest in the new Member States. Maintaining hi gh levels of FDI could act as a catalyst through 
knowledge transfer and thereby contribute to faster  structural changes in the economy towards higher 
value-added sectors and improved productivity. Furthe r development of the physical infrastructure 
could also contribute to maintaining the high pr oductivity growth. IT expenditure has increased 
slightly from a very low level and low IT penetr ation could be a hindering factor for improving 
productivity. 
Develop effective competitio n in network industries 
Despite deregulation in most network industries, ef fective competition remains weak in all of them, 
except mobile telephony and road transport. The fi xed telephony market was fully liberalised in 
January 2003, but the incumbent is still the only play er in the market. The telephone market regulator 
does not yet seem to have adequate resources to effectively promote competition. The implementation 
of the EU legislation on railway market opening has not yet been completed and the infrastructure is 
poorly developed, especially the in terconnections with Poland.  
The opening-up of the energy markets have led to few visible benefits for consumers and high 
concentration ratios persist, both in supply and di stribution. The electricity market was opened-up for 
large customers in January 2002, corresponding to a fourth of the electricity consumption. Further deregulation is foreseen in steps and a privatisation of electricity distributors is currently underway. 
However, about 80 percent of all electricity is produced by a nuclear power plant and a lack of interconnection capacity with other acceding countries prevents integration with the EU electricity 
market. Also the gas market has been liberalised for large custom ers, corresponding to 80 per cent of 
consumption. However, there are few independe nt players in the market and there is no 
interconnection with the Western European gas network. 
Country specific recommendations to Lithuania 
Meeting the challenges outlined above requires broad st ructural reforms as they are laid down in the 
general guidelines (GL) in Part I of the Broad Economic Policy Guidelines.  
In order to address the structural problems in the labour market, Lithuania is recommended to:  
1. enhance regional mobility and reduce skill mismatches, whilst ensuring the 
efficiency of education, re training measures and other ac tive labour market policies 
(GL 4, 7 and 8). 
2. improve  the combined incentive effects of taxes and benefits (GL 4).  
In order to maintain low general government defic its, Lithuania is in particular recommended to:  
3. pursue low budget deficits in a credible  and sustainable way within a multi-annual 
framework in line with the d ecisions to be taken by the Council in the context of the 
forthcoming budgetary surveillance exercise (GL 1).  
 
MT 35   MT 4. avoid pro-cyclical fiscal policies that prev ent a further reduction of the general government 
deficit, in particular by a voiding budget amendments that a llocate additional expenditure in 
response to higher than expected revenues (GL 2).  
In order to improve conditions for increasing productivity, Lithuania is recommended to: 
5. improve the efficiency and quality of th e education and training systems and their 
responsiveness to labour market needs (GL 13).  
6. promote R&D and innovation, strengthen th e links between research institutes and the 
business sector and support knowledge transfer  through FDI and higher IT penetration (GL 
13). 
In order to develop effective competition in ne twork industries, Lithuania is recommended to: 
7. pursue liberalisation and enforce effective co mpetition in energy, telecommunication and 
railway markets (GL 9).  
8. create and improve interconnection capacities w ith neighbouring EU Member States (GL 9).  
 
MT 36   MT 22. Malta 
In-natura miftu ħa li dejjem qed ti żdied ta' l-ekonomija Maltija, id -dipendenza kbira fuq id-d ħul mit-
turiżmu u d-daqs żgħir tagħha jagħmel l-ekonomija iktar vulnerabbli g ħall-ekonomija esterna u x-
xokkijiet ġeopolitiċi. L-ambjent internazzjonali ekonomiku diffi ċli fl-aħħar sentejn u r-ristrutturar tas-
settur pubbliku ġab tkabbir ekonomiku limitat, l-aktar min ħabba konsum kbir mill-pubbliku. It-tkabbir 
reali tal-GDP b ħalissa hu ħafna aktar baxx mill-potenzjal stimat. 
Minkejja tkabbir ekonomiku batut, il-qg ħad ma żdiedx sostanzjalment fil-perjodu bejn Jannar u 
Ottubru tas-sena l-o ħra (5.7 per ċentwali f’Ottubru 2003), g ħalkemm hi mistennija deterjorazzjoni fix-
xhur sussegwenti, marbuta ma’ l-istrutturar fl-industr ija tat-tarzna u fis-setturi tal-manifattura u t-
turiżmu. Il-progress ġenerali ta’ Malta fl-adozzjoni ta’ l- acquis  ma kienx akkumpanjat mit-tkomplija 
tar-riformi ekonomi ċi kruċjali kontra l-isfond tas-s ħubija fl-UE f’Mejju 2004. It-tnaqqis fis-settur 
pubbliku u t-tnaqqis fl-g ħajnuna ta’ l-Istat u s-sussidji u r-riforma tal-pensjonijiet u s-sistemi tas-sa ħħa 
ġew posposti, bir-ri żultat ta’ impatt neggattiv fuq it-tkabbir ekonomiku, il- ħolqien ta’ l-impjiegi u l-
finanzi pubbli ċi. Ir-rata ta’ qg ħad komparabbilment baxxa, partikol arment fost in-nisa, tibqa' ħaga tat-
tħassib. Fil-kuntest ta’ sforzi żgħar biex ji ġu kkonsolidati l-finanzi pubbli ċi, tkabbir tal-GDP inqas 
milli mistenni fis-sena 2003 u n-nefqa pubblika li dejjem qed ti żdied iddeterjoraw i żjed l-iżbilanc tal-
gvern ġenerali, li jpo ġġi pressjoni fuq il-bilan ċ tal-kont kurrenti. Il-politika f’Malta g ħandha tfittex 
livell għoli ta’ konver ġenza sostenibbli, b’mod partikolari fir-rigward tal-konsolidazzjoni tal-finanzi 
pubbliċi. B’din il-mira f’mo ħħna, il-pass tar-riforma fil-pensjonijiet u s-sistemi tal-kura tas-sa ħħa u s-
settur pubbliku g ħandhom jerga’ jibda ji żdied Minkejja li sar certu progress, il-grad tal-kompetizzjoni 
f'ċerti oqsma g ħadu mhux bi żżejjed u l-isforzi tal-privatizzazzjoni  jridu jitkomplew. F’dan l-isfond 
Malta trid t ħabbat wiċċha ma’ tliet sfidi ewlenin: 
• Tiżgura tnaqqis ta’ l-i żbilanc ġenerali tad-defi ċit tal-gvern fuq ba żi sostenibbli u sostenibbilità fit-
tul tal-finanzi pubbli ċi, 
• Żjieda fir-rati ta’ l-impjiegi, spe ċjalment fost in-nisa, 
• Tħeġġeġ kompetitività effettiva billi tqis il-karatteristi ċi speċifiċi ta’ ekonomija domestika żgħira. 
Tiżgura tnaqqis ta’ l-i żbilanc ġenerali tad-defi ċit tal-gvern fuq ba żi sostenibbli u s-
sostenibbiltà fit-tul tal-finanzi pubbli ċi. 
Biex jiffa ċċja l-figuri g ħoljin ta’ l-i żbilanc fil-ba ġit ġenerali tal-gvern, il-gvern qed jippjana li 
jimplimenta sensiela ta’ mi żuri biex isa ħħaħ l-infurzar tat-taxxa biex i żid id-dħul. Huwa interessanti li 
wieħed jinnota li d-d ħul mhux mit-taxxa hu mistenni li jikber aktar mid-dhul mit-taxxa. Primarjament 
dan huwa dovut l-aktar minhabba d-d ħul miġbur taħt l-iskema tar-re ġistrazzjoni barranija u min ħabba 
l-Kumpens tal-Ba ġit ta’ l-UE fil-kwadru  tal-Pakkett ta’ Kopen ħagen. Fir-rigward tat-taxxa diretta, xi 
tnaqqis hu ppjanat min ħabba l-introduzzjoni ta’ taxxa b’ ħames kategoriji (s’issa, hemm tliet 
kategoriji) u ż-żieda fit- threshold  tad-dħul li għandu jkun intaxxat.  
Min-naħa tan-nefqa, il-pi żijiet kbar tal-pagi fis-settur pubbliku, il-pensjonijiet u żjieda fin-nefqa fuq is-
sistema tas-sa ħħa huma ta’ riskju g ħas-sostenibbilità tal-finanzi pubbli ċi. Fir-rigward tan-nefqa 
kurrenti, hemm b żonn ta’ kontroll og ħla ta’ l-approprijazzjoniet tal-benefi ċċji tal- welfare  u programmi 
oħra ta’ għajnuna, barra minbarra t-tnaqqis fis-sussidji. Madankollu, min ħabba bżonnijiet persistenti 
għall-immodernizzar u l-bini ta’ infrastruttura ġdida, in-nefqa kapitali tista’ żżomm n-nefqa globali fl-
livell għoli (maqwar 50 per ċentwali tal-GDP), g ħalkemm hu mistenni li jonqos fl-2006 (g ħal madwar 
46.6 perċentwali tal-GDP). 
Il-popolazzjoni li dejjem tixjie ħ tfisser riskju fiskali relativament sinifikanti g ħas-sostenibbiltà fit-tul 
tal-finanzi pubbli ċi, b’mod partikolari min ħabba livell g ħoli ta’ dejn tal-gvern. I ż-żieda mgħaġġla 
mistennija fir- ratio  tad-dipendenza ta’ l-anzjani bejn is-snin 2000 u 2050 (minn 18% g ħal 38.6%) 
 
MT 37   MT għandha tħalli pressjoni fiskali sinifikanti fuq il-finanzi pubbli ċi fil-futur. Filwaqt li riforma fl-ewwel 
pilastru ta’ l-iskema tal-pensjoni qed ti ġi ppjanata, m’huwiex ċar meta se tkun implimentata. 
Il-livell sostenibbli g ħall-garanziji ta’ l-istat li g ħad baqa’ (22 fil-mija ta’- GDP fl-2002) qed thedded il-
pożizzjoni fiskali tal-gvern. Il-pjanijiet tal-gvern huma li fil-futur jillimita l- ħrug ta’ garanziji ġodda 
(tnaqqis fl-ammont g ħal 15% tal-GDP fl-2006), li g ħandha ssir mill-infurzar strett tar-regoli tal-ba ġit li 
jirregolaw il- ħruġ tal-garanziji. Dan g ħandu jikkontribwixxi g ħal tnaqqis ippjanat f’terminu medju fil-
livell tad-djun kontin ġenti impli ċiti u jnaqqas ir-riskju e żistenti espost, li jirri żulta mill-ħrug ta’ ittri ta’ 
konfort jew fa ċilitajiet tal-krediti. 
jŻieda fir-rati ta’ l-impjiegi, spe ċjalment fost in-nisa 
F’Malta, is-suq tax-xog ħol jidher li hu flessibbli bi żżejjed biex ja ġġusta għax-xokkijiet ekonomi ċi 
mingħajr ma ji ġġenera perjodi twal ta’ qg ħad għoli. Madankollu, f’Settemb ru 2003 ir-rata ta’ l-
impjiegi (53.7%) kienet iktar baxxa meta mqa bbla mal-medja ta’ l-UE. Ir-rata ta’ l-impjiegi 
relattivament baxxa kienet attribwita g ħar-rata baxxa ta’ impjiegi femminili  (33.1 fil-mija) peress illi l-
figura ekwivalenti maskili (74.2%) kienet og ħla mill-medja ta' l-UE. I ż-żjieda fir-rata totali u fir-rata 
ta’ l-impjieg tan-nisa hi ta’ im portanza kbira biex titwessa’ l-ba żi għall-kontribuzzjonijiet tas-sigurtà 
socjali, fid-dawl ta’ popolazzjoni li dejjem qed tixjie ħ. F’dan ir-rigward, dan l-a ħħar ittieħdu xi miżuri 
li jinkoragixxu l-parte ċipazzjoni femminili, g ħax il-preżenza baxxa tan-nisa fis-suq tax-xoghol hi, sa 
ċertu punt, min ħabba fatturi kulturali li jistg ħu jingħelbu maż-żmien. 
Kif il-gvern jirrealizza l-importanza li ti żdied il-parte ċipazzjoni femminili fix-xenarju ta’ rati tat-
twelid li qed jonqsu u popolazzjoni li qed tixjie ħ, inizjattivi mmirati lejn i ż-żieda fir-rata tal-
parteċipazzjoni femminili huma inklu żi fl-Att dwar l-Impjiegi u r-Re lazzjonijiet Industrijali (ERA), li 
daħlu fis-seħħ f'Diċembru 2002 u kienu kkump limetati bi tmien avvi żi legali (wie ħed minnhom 
jikkonċerna r-Regolament dwar id-Dritt tal-Leave tal- Ġenituri). Inizjattivi o ħrajn f’dan il-qasam huma 
l-Iskema ta’ Childmining, u Pjan ta’ Azzjoni dwar l-Ugwaljanza bejn is-Sessi u mainstreaming tas-sessi fis-settur pubbliku. I żjed minn hekk, it-tlestija tal-pro ċess tal-privatizzazzjoni u t-tnaqqis fis-
settur pubbliku jistg ħu jikkontribwixxu lejn ri żorsi iktar effi ċjenti għall-vantaġġ tas-settur privat u 
jkunu jistg ħu jagħtu spinta lill-ekonomija u lill-impjiegi. 
Taxxi għoljin fuq il-pagi jfixklu kemm id-domanda kif ukoll il-provvista tax-xog ħol, fil-waqt li l-
attività tiġi trasferita lejn l-ekonomija informali. Id-d ifferenza bejn il-paga minima u l-benefi ċċji tal-
qgħad, speċjalment g ħall-familji kbar, tibqa’ baxxa ħafna u tnaqqas l-in ċentivi għax-xogħol. Skemi ta’ 
irtirar kmieni u żati bħala mezz g ħar-ristrutturar ta’ l-entitajiet tas-settur pubbliku g ħandhom ikunu 
limitati wkoll, bl-isforzi ji ġu indirizzati lejn it-ta ħrig mill-ġdid. L-ERA jirregola wkoll l-impjegati 
part-time u l-kuntratti ta’ servizzi g ħal terminu fissi biex i żid il-fessibilità fis-suq tax-xog ħol. L-
Attivitajiet Edukattivi Vokazzjonali żdiedu mill-2001, meta ġie mwaqqaf il-Kullegg Malti g ħall-Arti, 
Xjenza u Teknolo ġija, għalkemm g ħandhom isiru iktar sforzi biex titjieb ir-rata ta’ su ċċess fl-
edukazzjoni sekondarja u jitnaqqas in-numru ta' dawk li j ħallu l-iskola kmieni. Fl-2003 in ħolqu tliet 
istituti ġodda fl-oqsma tal-Mekkanika, ta' l-In ġinerija, l-A żjendi Agrikoli u s-Servizzi fil-Komunità. 
Huwa importanti li wie ħed jinnota il-livell e ċċezzjonalment g ħoli tal-kisbiet fl-edukazzjoni 
sekondarja, u l-livell baxx ħafna miksub fil-livelli sekondarji g ħoljin u dawk terzjarji. 
It-tħeġġiġ tal-kompetitività effettiva billi jittie ħdu in konsiderazzjoni l-karatteristici spe ċifiċi 
ta’ ekonomija domestika żgħira 
Numru sinifikanti ta’ riformi ġew introdotti biex i żidu l-kompetizzjoni fl-ekonomija Maltija. Fl-
industriji tan-netwerks, is-settur tat-telekomunikazzj oni huwa issa lliberalizzat, filwaqt li s-settur tas-
servizzi postali qed jinfeta ħ iżjed. Fit-trasport bl-ajru, il-monopolju ta’ l-attivitijajiet ta’ assistenza fuq 
l-art (groundhandling) tne ħħa wara li ħarġet sejħa internazzjonali g ħall-offerti. Fir-rigward tat-trasport 
marittimu, l-implimentazzjoni ta’ l-acquis g ħandha trid ti ġi kompluta. F’xi setturi ta’ l-ekonomija 
 
MT 38   MT Maltija, il-kompetizzjoni hija dg ħajfa, bħal fit-tħin tal-qam ħ u fiż-żrieragħ ta’ -likel, u fis-settur tal-
bini tal-vapuri, fejn l-g ħajnuna ta’ l-istat g ħandha titnaqqas flimkien mal-pro ċess ta’ l-istrutturar. 
Rakkomandazzjonijiet spe ċifici għal Malta 
Biex jintla ħqu l-isfidi msemmija hawn fuq hemm b żonn riformi struttrali kif inhuma stabbiliti fil-linji 
ta’ gwida ġenerali (GL) f’Parti I tal-Linji ta ’ Gwida tal-Politika Ekonomika Wiesa’. 
Biex tassigura tnaqqis ta’ l-i żbilanc ġenerali tal-gvern fuq ba żi sostenibbli u s-sostenibbiltà fit-tul tal-
finanzi pubbli ċi, Malta qed ting ħata l-parir li: 
1. tnaqqas l-i żbilanc tal-gvern b’mod kredibbli u sostenibbli fi kwadru multi-anwali fil-
linja mad-de ċiżjonijiet me ħuda mill-kunsill fil-kuntest ta’ l-e żerċizzju tas-sorveljanza 
tal-baġit li jmiss(GL 1). 
Biex iżżid r-rati ta’ l-impjiegi, spe ċjalment fost in-nisa, Malta qed ting ħata parir sabiex:  
2. tirran ġa l-interazzjoni tas-sistema tal-benefi ċċji fiskali biex issa ħħah l-inċentivi għax-
xogħol u tnaqqas it-taxxa fuq ix-xog ħol sabiex ittejjeb il-kompetitività .(GL 4). 
3. ittejjeb il-kwalità ta’ l-edukazzjoni sekondarja u t-tahrig vokazzjonali (GL 8). 
4. issa ħħaħ it-taħriġ mill-ġdid tal-ħaddiema u tag ħmilhom iktar flessibbli f’ka ż ta’ bdil 
tax-xogħol u tiffaċilita r-ritorn lejn id-dinja tax-xog ħol ta' nisa ta’ età medja (GL 8). 
Biex tħeġġeġ il-kompetitività effettiva meta wie ħed iqis il-karatterisit ċi speċifiċi ta’ 
ekonomija domestika żgħira, Malta qed ting ħata l-parir li : 
5. tag ħmel sforzi biex i żżid il-kompetizzjoni f’ ċerti setturi b ħal fl-industriji tan-
netwerks , l-industriji ta’ l-ikel, u t-tarznari (GL 9). 
 
MT 39   MT 23. Il-Polonja 
After a record of strong growth during most of the 1990s, Poland experienced a sharp economic 
slowdown in 2001-2002. Since the end of 2002, the r ecovery has gradually gained strength, and real 
GDP growth accelerated to 3.7 per cent in 2003. In 2004, growth is likely to reach its potential level 
estimated at around 4.5 per cent.  
Despite remarkable progress in recen t years, Poland still faces serious structural problems that may 
impair its capacity to stay on a path of strong growth. The unemployment rate has increased rapidly 
since 1999 and is now, at about 20 per cent, the highest among the acceding countries. In parallel, the employment rate has fallen markedly and almost ha lf of the working age population is without work. 
The smooth functioning of the labour market is hampered by a number of structural problems, 
including limited responsiveness of wages to labour conditions, disincentives from the tax and benefit 
system, skills mismatches and low geographical mobility.  
Poland’s fiscal position has deteriorated significan tly since 2000, as a result of both cyclical factors 
and the relaxation of fiscal policy. The general gove rnment deficit increased from 1.8 per cent of GDP 
in 2000 to 3.6 per cent in 2002. Until recently, the aut horities have shown some reluctance to tackle 
the fiscal problems, including the rapidly rising debt ratio. The public finance reform adopted by the 
government early this year envisages substantia l spending cuts but postpones the needed fiscal 
adjustment until 2005.  
Policies in Poland should aim at achieving a high de gree of sustainable convergence, in particular as 
regards the consolidation of public finances. Mo reover, stability-oriented macroeconomic policies 
need to be complemented by structural reforms aiming at improving Poland’s growth performance. In 
addition to the under-utilisation of human resources,  the relatively low productivity level limits the 
capacity of the Polish economy to increase both actual and potential output growth. To address this issue, continued efforts are needed to improve th e education and training system and also to create 
favourable conditions for R&D and technology transfer . In addition, the economy, in particular the 
agriculture sector, calls for more restructuring and there is room to improve the business environment. 
Against this background, the challenges facing Poland are to: 
• Urgently address the deep-seated struct ural problems in the labour market, 
• Ensure a reduction of the general government de ficit on a sustainable b asis and the long-term 
sustainability of public finances, 
• Improve conditions for increasing productivity, 
• Speed up the restructuring of the economy and accelerate privatisation in industry, 
• Improve the business environment. 
Urgently address the deep-seated struct ural problems in the labour market 
Poland has the highest unemployment rate (19.8 pe r cent in 2002) and the lowest employment rate 
(51.5 per cent) among the acceding countries. The employment rate is exceptionally low among 
elderly people and young people. In addition, the Po lish labour market displays the following features: 
a high youth unemployment rate, a high long-term unemployment rate, significant differences across 
regions and a high share of unemployed in rural areas. 
The smooth functioning of the labour market is hampered by a number of structural problems. First, 
the concentration of unemployment in particular re gions and among certain groups reflects in part the 
imperfect adjustment  of wages to regional differences in prod uctivity and individua l skill levels. The 
wage-setting process lacks flexibility and in particular  has proved so far ineffective in imposing wage 
 
MT 40   MT discipline in state-owned enterprises and in the ge neral government sector. In addition, the nationally-
set minimum wage is high relative to average wag es in many regions and hence contributes to the 
persistence of high unemployment am ong young and low-skilled workers.  
Second, the labour tax wedge is high in Poland an d creates a disincentive to  work in the official 
economy. In addition, the combined effects of tax and benefit systems make working or returning to 
work a costly decision and therefore discourage labour  market participation. Tightening the eligibility 
criteria for disability pensions and phasing out early re tirement benefits would be a first step towards  
increasing the attractiveness of work.  
Third, the high rate of unemployment reflects to so me extent skills mismatch es between labour supply 
and demand. Moreover, education levels in the adult population are relatively low. The Polish 
authorities have recently launched a comprehensive refo rm of the education system to better adapt it to 
the requirements of a market economy. Finall y, regional discrepancies in employment and 
unemployment are also the result of low geographi cal mobility, which could be enhanced through 
reforms of the housing market and improvements in transport infrastructure.  
Ensure a reduction of the general government deficit on a sustainable basis and the long-
term sustainability of public finances 
Poland’s fiscal position has deteriorated significantly since 2000, only partly for cyclical reasons. The 
general government deficit reached 3.6 per cent of GDP in 2002 and is estimated to have increased 
further to 4.1 per cent in 2003. The fiscal expansion over the last two years is to a large extent due to a 
loosening of the fiscal stance. Fiscal policy is  expected to remain pro-cyclical in 2004. The 
government has recently adopted a public finance reform which provides for savings in social 
spending and administrative expenditure over the period 2004-2007. However, there remains 
uncertainty with regard to the approval of the full fi scal reform package by Parliament. Reining in the 
government deficit is also crucial to maintain th e current account deficit at sustainable levels, 
especially in case the current savings -investment surplus of the private sector should diminish sharply 
in the coming years. 
The deterioration of fiscal accounts together with th e slowdown in privatisation has resulted in a sharp 
increase in the government debt ratio since 2001. Although still relatively low by international 
standards, the debt level is rapidly rising and ap proaching the thresholds that trigger corrective 
mechanisms under the fiscal rules la id down in the Polish Constitution and the Public Finance Act. In 
view of the government’s growing borrowing needs,  the exposure of the budget to foreign exchange 
risk and risks stemming from contingent liabilities,  debt dynamics is a major matter of concern. 
Contingent liabilities constitute potentially a serious ri sk to the sustainability of public finances. State-
owned companies in the sectors in need of restruct uring are an important source of such liabilities. The 
stock of outstanding guarantees is rapidly increasi ng and will put pressure on public finances in the 
coming years. 
The demographic structure in Poland is still relativ ely favourable. Nevertheless, the pension system 
underwent a major reform in 1999in order to adjust  it to the demographic and labour force changes 
and to counter the consequences of the expected sh arp increase in the old-age dependency ratio (from 
18 per cent in 2000 to 50 per cent in 2050). 
Improve conditions for increasing productivity 
Despite reasonable productivity gains over the pe riod 1995-2002, labour productivity per person 
employed (in PPS) in Poland was less than half that  of the EU15 in 2002 and below the average of the 
 
MT 41   MT new Member States. The catching-up process is therefore not satisfactory yet. This relatively low 
productivity level may be explained by various factors.  
First, there is the high share of employment in ag riculture, a sector with particularly low productivity 
levels. The difficulty of new firms to grow a nd the lack of mobility may be slowing down the 
transition of workers from agriculture to other activities. Second, Poland remains below the EU15 
average in terms of investment in ICT and R&D.  The low level of business investment in R&D is 
particularly problematic (only 30 per cent of the to tal R&D expenditure is financed by firms). Reasons 
cited include insufficient cooperation between resear ch establishments and business, a lack of highly-
skilled human capital and the fact that for firms shor t-term financial consider ations tend to override 
long-term interests. An increase in the skills of th e workforce is also to be achieved by promoting 
tertiary education and life-long learning. The low productivity is indeed related to the structural 
problems in the labour market, particularly a mismat ch between skills taught in the education system 
and those required by the market place, together with  a need for investment in physical infrastructure. 
Speed up the restructuring of the economy and accelerate privatisation in industry  
After a slow start, privatisation peaked in 2000 ( as testified by a peak in FDI of 5.7 per cent of GDP 
which was boosted by a few large one-off privatisa tion transactions), but it has slowed down again 
since then, as the most attractive assets have been  sold. The traditional sectors remain state-owned 
(among others mining, chemicals, defence sect ors and railway). In these sectors, the Polish 
government has favoured a policy of consolidation before privatisation with the aim of creating 
“national champions” able to compete on EU mark ets. The pressure to limit short-term social 
disruption and the substantial cons ultation required with social part ners and several ministers slow 
down the privatisation process. As a result, the attrac tiveness of firms to be priv atised is considerably 
reduced, often deterring potential investors. Yet, there is evidence that the FDI inflows have 
contributed to restructuring the manufacturing sector and improved the export capacity and distribution networks. This is partly because, followi ng privatisation, strategic investors have injected 
substantial equity capital and know-how into their firms which has resulted in large productivity gains. 
The liberalisation of the electricity and gas sectors has started. Local and long-distance 
telecommunication services were fully liberalised in January 2002 and international services since January 2003. However, the level of competition in network industries is not satisfactory. In the gas 
sector, there is currently no unbundling at all. In  telecommunications, the incumbent has retained its 
dominant position in the market. Prices for intern ational calls are among the highest. Moreover, the 
Competition Office has repeatedly found the incumb ent guilty of using its dominant position to the 
disadvantage of competitors.  
State aid remains high (in form of tax and social security arrears) and state-owned firms have large 
debts to other companies, damaging those compani es’ finances. With resp ect to the enforcement 
record, shortcomings have been identified in the handling of rescue and restructuring aid as well as 
research and development aid. 
Improve the business environment  
Poland has made substantial progress in developing a large SME sector thanks to recent reforms. In 
particular, a new enterprise register is being set  up, which creates a “one-stop shop” for firms from 
January 1, 2004. Since January 2004 a single 19 per cent corporate tax is also in application. Finally, a 
new solvency law was adopted in 2003 bringing  the bankruptcy framework in line with the 
requirements of a modern market economy. The SME sector accounts for around two-thirds of 
employment and half of GDP and e xports in Poland. However, SMEs continue to face difficulties in 
growing. Despite the recent reforms to support entrep reneurship, the firm size remains small and the 
 
MT 42   MT entrepreneurship environment can s till be improved. This is due to the lack of human capital, the lack 
of labour mobility, the underdeveloped infrastruct ure (especially the road and telecommunication 
networks), the high tax-burden (social security contributions in partic ular) and the liquidity 
constraints. These factors limit company creation and growth. Therefore, there are concerns that the 
problems just mentioned may reduce Poland’s attractiveness to foreign investors (FDI). 
Country-specific recommendations to Poland 
Meeting the challenges outlined above requires broad st ructural reforms as they are laid down in the 
general guidelines (GL) in Part I of the Broad Economic Policy Guidelines.  
In order to urgently address the d eep-seated structural problems in the labour market, Poland is in 
particular recommended to:  
1. increase the flexibility of the wage-setting process to ensure that wages better reflect 
differences in productivity across skills, firms and regions (GL 5). 
2. lower the tax burden on labour, together with efforts to widen the tax base on labour and to 
improve the efficiency of the tax collection a nd enforcement system, and reform the tax and 
benefit systems to eliminate financial disincentiv es to work, in particular high inactivity traps 
for married couples, and to increase the e fficiency of social spending (GL 4).  
3. strengthen labour supply by pursuing effo rts to better adapt the qualifications of the 
workforce to the requirements of the labour market and by removing obstacles to regional 
mobility, especially through reforms of the housing market and improvements in  transport 
infrastructure (GL 7 and 13).  
In order to ensure a reduction of the general gove rnment deficit on a sustainable basis and the long-
term sustainability of public fi nances, Poland is recommended to: 
4. reduce the general government deficit in a credible and sustainable way within a multi-
annual framework in line with th e decisions to be taken by the Council in the context of the 
forthcoming budgetary surveillance exercise (GL 1 and 2).  
5. monitor the reform of the pension system to counter the expected increase in the old-age 
dependency ratio, and take measures to reduce th e fiscal risk stemming from the rising stock 
of contingent liabilities (GL 15 and 16).  
In order to improve conditions for increasi ng productivity, Poland is recommended to: 
6. pursue and reinforce efforts to improve the efficiency and quality of the education and 
training system and its responsiveness to changing skills requirements (GL 13).  
7. promote R&D and innovation, in particular in the business sector, and support the transfer of 
knowledge through FDI (GL 13).  
In order to speed up the restructuring of the ec onomy and accelerate privatisation in industry, Poland 
is recommended to: 
 
MT 43   MT 8. reduce the overall level of State aids, wh ilst reorienting aid towards horizontal objectives 
(GL 9 and 14).  
9. encourage market entry and effective comp etition in network industries while pursuing a 
greater connectivity of national markets (GL 9).  
In order to improve the business envi ronment, Poland is recommended to: 
10. continue reducing administrative burden, si mplifying regulation and supporting the growth 
of SMEs, in particular, by improving access to finance (GL 11). 
 
MT 44   MT 24. Is-Slovakkja 
After a stabilisation-induced slowdown in 1998, Slov akia’s real GDP growth has steadily accelerated 
and exceeded 4 per cent in 2003, for the second year in  a row. Nevertheless, output has not yet fully 
reached its estimated potential. 
The growth performance has been underpinned by inte nsified structural reform s. Prime examples were 
the restructuring and privatisation in the banking and non-financial sectors. However, this did not 
come without cost: the unemployment rate ratche ted up to more than 19 per cent in 2001 and still 
amounts to around 17 per cent. A broad array of stru ctural shortcomings in the labour market – 
notably a lack of regional mobility, disincentives fro m the benefit systems, wage inflexibilities, and 
skill mismatches – have been hampering its re-abs orption capacity and are only being tackled now. 
Public finance reforms have been very limite d until recently as well and the general government 
deficit surged to more than 7 per cent of GDP in the election year of 2002. The expansionary fiscal 
stance contributed to a domestic demand boom and an  increasingly consumption-driven widening of 
the current account deficit to more than 8 per cen t of GDP. The government in office since 2002 has 
started to tackle the root causes of the fiscal defi cit, thus supporting a si gnificant narrowing of the 
current account deficit in 2003. 
Policies in Slovakia should aim at achieving a high degr ee of sustainable convergence, in particular as 
regards the consolidation of public finances. Both  the further consolidation of public finances and 
solutions to the under-utilisation of Slovakia’s hu man resources need to be supported by policies 
which assist in perpetuating the strong growth performance into the medium and long term. This 
requires in particular a strengthening and divers ification of the growth and employment base by 
fostering the entrepreneurial climate through an improved legal framework and judicial and 
administrative capacity building. Furthermore, the productivity level needs to be raised and Slovakia should prepare itself for its eventual trans ition to a knowledge-based economy. Against this 
background, Slovakia faces four major challenges:  
• Ensure a further reduction of the general government deficit on a sustainable basis, 
• Continue to address the deep-seated structural problems in the labour market,  
• Improve the business environment and support entrepreneurship, 
• Improve conditions for increasing productivity.  
Ensure a further reduction of the general government deficit on a sustainable basis 
The general government deficit decreased from 7.2 per cent of GDP in 2002 to an estimated 5 per cent 
of GDP in 2003, thereby supporting a significant na rrowing of the current account deficit. The major 
part of a comprehensive agenda of public finan ce reforms has already been passed. These reforms will 
support further deficit reductions and assist in ke eping the current account deficit in sustainable 
territory if private net saving should become less favourable again. The scope and speed of reforms 
have been remarkable. However, th ey also lead to non-negligible uncertainties with respect to the 
budget execution in 2004 and beyond. Risks stem in pa rticular from the fundamental nature of the tax 
reforms, notably the introduction of a flat income tax rate of 19 per cent for corporates and individuals. These reforms make revenue forecasts relatively uncertain. Uncertainties also remain on 
the expenditure side, including with respect to furt her health reform measures. Moreover, a substantial 
 
MT 45   MT part of the planned expenditure reduction relies on projected lower interest outlays based on smooth 
nominal convergence. 
Continue to address the deep-seated stru ctural problems in the labour market 
Slovakia has one of the lowest employment ra tes (around 57 per cent) and the second highest 
unemployment rate (currently around 17 per cen t) in the acceding countries. Employment is 
particularly low in the age group over 55. Unem ployment is concentrated among the young (below 24) 
and the low skilled. Regional disparities are high. The underlying structural deficiencies of the labour 
market are multi-faceted and are now being addressed more decisively.  
Incentives to work and to leave th e informal sector are being strengthened by social benefit and 
pension reforms, including an increase of the retir ement age to a still relatively low level of 62. 
Regional mobility is being enhanced by financia l support for commuters a nd housing benefits but 
continues to be limited as the transport infrast ructure and the functioning of the housing market 
improve only gradually. Skill mismatches hinder in particular the reintegration of the long-term 
unemployed, although retraining measures are being inte nsified. A still low alignment of the education 
system with the requirements of a market economy contributes to persistent youth unemployment.  
Job creation has been fostered by recent amendments  to the labour code, which allow more flexible 
work relationships. However, the wage setting m echanism is not yet flexible enough and does not 
sufficiently cater for enterprise-sp ecific conditions. In particular, the possibility of administrative 
extensions of collective wage agreements to enterp rises that have not participated in the negotiations 
runs counter to this goal. In addition, minimu m wages may have negative effects on labour demand 
and may insufficiently reflect local labour market conditions.  
Slovakia’s far-reaching income tax reform, effectiv e since the beginning of 2004, will strengthen both 
job creation and the willingness to work. In contrast, the combined health and social contribution rates 
have only been lowered to a still very high level of almost 48 per cent of gross salary.  
Improve the business environment and support entrepreneurship 
Over the recent years, the government has introduced a number of measures aimed at improving the business environment. The procedure for setting up  a new business has been significantly simplified 
and shortened. New bankruptcy legi slation is being prepared that should replace the current system 
under which bankruptcy proceedings last excessive ly long and allow virtually no scope for the 
restructuring of troubled companies. The busin ess environment was further strengthened by, for 
example, the substantial acceleration in price lib eralisations in 2003 and the introduction of a new 
collateral law. 
Despite these improvements, there still seem to be impor tant barriers to entrepreneurship in Slovakia. 
The gross-birth rate of new enterprises is relativel y low. According to business surveys, the degree of 
legal uncertainty remains a fundame ntal weakness. This stems from th e often insufficient and unstable 
legislative framework and, in particular, weak le gal enforcement, which frequently suffers from lack 
of quality, timeliness and transparency. 
Improve conditions for increasing productivity 
While retaining relatively high la bour productivity growth, the le vel of productivity is still low 
(around 58 per cent of the EU average in 2003). Factors contributing to this situation are the lack of 
 
MT 46   MT flexibility of the education system, coupled with low education expenditures and the weak R&D and 
innovation activity. 
The education system does not seem to respond appropr iately to the labour market needs. This is 
particularly the case for secondary schooling whic h often produces graduates with obsolete skills. 
Moreover, the share of tertiary graduates is very  low. The high share of long-term unemployed poses 
an additional challenge for the vocational and tr aining programmes. Furthermore, expenditure on 
education has dropped to one of the lowest leve ls among the new Member States in 2001. Responding 
to these problems, the government has taken first st eps towards rationalising the system, improving its 
efficiency and increasing the sources of financing. 
In 2002, the expenditures on R&D accounted for only 0. 59 per cent of GDP, less than in most of the 
acceding countries. Innovation activity, as measured by th e number of patent applications, is very low. 
The government has undertaken some measures to improve the situation regarding R&D (e.g. by 
improving the legislative framework for R&D), and is committed to increasing the public resources 
available for R&D support. 
Country specific recommendations to Slovakia 
Meeting the challenges outlined above requires broad st ructural reforms as they are laid down in the 
general guidelines (GL) in Part I of the Broad Economic Policy Guidelines.  
In order to ensure a further reduction of the ge neral government deficit on a sustainable basis, 
Slovakia is recommended to:  
1. reduce the general governmen t deficit in a credible a nd sustainable way within a 
multi-annual framework in line with the de cisions to be taken by the Council in the 
context of the forthcoming budgetary  surveillance exercise (GL 1). 
In order to urgently continue to address the deep -seated structural problems in the labour market, 
Slovakia is in particular recommended to:  
2. strengthen labour supply by removing obst acles to regional mobility and by reducing 
skill mismatches, whilst ensuring the efficiency of retraining measures and other active labour market polic ies (GL 4, 7 and 8).  
3. generate additional labour demand by allowing for more flexibility in the wage 
setting mechanism (GL 5 and 18).  
4. lower the very high combined health and social contribution rates, while observing 
the overall budgetary consolidation constraint s, in particular by additional health 
system reform measures and by considering additional adjustments in the pay-as-you-go pillar of the pension system, in partic ular a further increase of the retirement 
age (GL 4 and 16). 
In order to improve the business environment and support entrepreneurship, Slovakia is recommended 
to: 
 
MT 47   MT 5. strengthen the legislative framework suppor tive to entrepreneursh ip and improve its 
enforceability by, in particular, adopti ng the new bankruptcy legislation and 
increasing the capacity and transparency of the judicial system (GL 11 and 12). 
In order to improve conditions for increasing productivity, Slovakia is recommended to: 
6. improve the efficiency and quality of the education and training system and its 
responsiveness to changing sk ills requirements (GL 13). 
7. encourage R&D and innovation and support the transfer of knowledge through FDI 
(GL 13). 
 
MT 48   MT 25. Is-Slovenja 
Over the last decade, Slovenia has exhibited stab le growth; real GDP has grown steadily at 3-5 per 
cent since 1993. After a recent slow-down, GDP growth is expected to pick up and gradually draw closer to the potential output growth, estimated at around 4 per cent.  
Despite a broadly sound economy and commendable achievements in many policy areas, certain 
weaknesses remain. While having declined steeply in  the last two years, relatively high inflation 
(5.7 per cent in 2003) is still a cause of some concern and has been recognised as a key policy 
challenge. The government designed an apt policy to lower inflation in a sustainable way, aiming to 
create conditions for a successful EU accession. It has pursued structural reforms with the objective to 
facilitate price liberalisation. Currently, administ ered prices represent 16 per cent of the CPI – the 
lowest share of all the acceding coun tries. However, given ineffective competition in the utilities, and 
insufficient flexibility in bo th in the financial sector and the labo ur market a sustainable reduction of 
inflation still needs to be confirmed.  
The restructuring process of the economy has negativ ely affected the situation on the labour market; 
employment in manufacturing industry fell marked ly over the period 1996-2000. A shift of labour 
from this sector to the service sector buffered the ec onomic and social distress, while early retirements 
were used to attenuate a rise in total unemploym ent. Although the overall picture concerning the 
labour market in Slovenia is positive, structural unemployment problems persist. The proportion of 
long-term unemployment is high, in particular am ongst older, low-skilled pe rsons. Furthermore, the 
low employment rate of workers over 55 years of age is a cause of concern, especially with regard to 
the challenges stemming from an ageing population. 
In order to create the necessary job opportunities a nd facilitate participation in the labour market, 
leading in turn to a further improved economic perform ance in the future, continued efforts to promote 
entrepreneurship, to stimulate the innovative capacit y of the business sector and to enforce effective 
competition in all segments of the economy are requi red. Policies in Slovenia should aim at achieving 
a high degree of sustainable convergence. Against this background, Slovenia faces four major 
challenges:  
• Lower inflation in a sustainable way, 
• Increase employment rates, especially for older workers, 
• Improve conditions for sust ained productivity growth, 
• Promote the development of effective competiti on in all segments of the economy, notably in 
network industries. 
Lower inflation in a sustainable way 
Although decreasing, inflation remains relatively high. For 2003, the rate of inflation stood at 5.7 per 
cent, down from 7.5 per cent a year before. The ongoing decline is an encouraging development, 
although it seems partly attributable to special fact ors – related to ceilings on administered price rises 
and indirect taxes as well as frequent adjustment s of excise duties on oil. Inflationary pressure 
continues to be fed by lack of competition in va rious sectors, inflexible labour markets, and still 
widespread indexation mechanisms. Furthermore, ot her important factors contribute to inflation’s 
perseverance; an accommodating monetary policy and a steady, but now slowing, depreciation of the 
currency, in particular, add to inflation inertia.  
 
MT 49   MT In the run-up to EU accession, the government ma de inflation a policy priority and adopted a co-
ordinated anti-inflation policy measures accordin gly. A comprehensive price control plan was 
enforced, regulating the administered price rises a nd tax changes in a way not to exceed the inflation 
rate at the end of the year. As regards the objec tive of proceeding towards a generalised de-indexation 
of the economy, a step forward was made in 2003 with  the official abolition of interest rate indexation 
(the ‘basic interest rate’ or TOM) and the soci al agreement on a new wage adjustment method. A 
forward-looking indexation has already been introduced  for public sector wages, taking effect in July 
2004, whereas for the private sector such a policy ye t needs to be negotiated. Moreover, the public 
finance stance needs to be adjusted  flexibly. Also, a more swift implementation of structural reforms is 
necessary for a sustained disinflation and an improved economic performance. 
Increase employment rates, especially for older workers 
The employment rate in Slovenia – with 63.4 per cent in 2002, close to the EU average – is one of the 
highest among the acceding countries. Also, the unemployment rate – decreasing steadily since 1998 
to have reached 6.0 per cent in 2002 – ranks amongst the lowest in the group. Nevertheless, its long-
term component is high at around 60 per cent, principally among older, low-skilled workers over 55 
years of age. With other structural imbalances present in the labour market (youth unemployment, 
unemployment of disabled persons, gender unemplo yment gap, low educational level of the 
unemployed, high regional disparities) to increase employment of elderly has been identified as a 
particular important challenge. In  2002, the unemployment rate for persons aged 55-64 was 3 per cent, 
while the employment rate stood at 24.5 per cent, a figure very low compared to the EU average of 
40.1 per cent. This is a consequence of the low re tirement age, which in 2001 averaged only 57 years. 
The restructuring of the economy has pushed relatively young individuals into retirement (or unemployment). As a result of the pension reform introduced in 2000, the retirement age has already 
slightly increased. However, the impact of this re form will only gra dually be reflected in a higher 
employment rate for older persons. A large gap be tween the employment rates for older workers in 
Slovenia and the EU is expected to persist.  
The main orientation of the employment policy is  thus to address the problems of unemployment for 
elderly people and to stimulate active forms of in creasing their employability. This is particularly 
important in view of the growing risks of fi nancial unsustainability resulting from unfavourable 
demographic developments. The old-age dependency ra tio is expected to rise from 20 per cent in 2000 
to 38 per cent in 2025 and 66 per cent in 2050. Fu rthermore, the promotion of work and active 
working life is the necessary precondition for combating poverty and social exclusion. 
Improve conditions for a sustained productivity growth 
The level of productivity, while the second highest  amongst the new Member  States, remains well 
below the EU-15 average (69.5 per cent in 2003). Labour productivity growth in Slovenia was relatively rapid over the period 1995-1999, with an average annual rise of 4.8 per cent. However, it 
decelerated thereafter (2 per cent on average in 1999-2002), placing Slovenia amongst the least 
performing acceding countries in this period of time. Two elements may hamper a more rapid 
development in productivity:  
First, the entrepreneurial activity of the active popul ation remains relatively low, notably because the 
administrative burdens affecting both business crea tion and existing businesses are still high. Efforts 
have already been made to simplify procedures fo r start-ups. However, the business legislation and 
administrative environment could be further improv ed since bureaucratic and lengthy procedures as 
well as difficulties in buying land fo r industrial use still persist.  
 
MT 50   MT Second, there is a lack of effec tiveness of R&D expenditure in term s of transfer of know-how to the 
business sector, of patenting and of product or pr ocess innovation. With R&D expenditures reaching 
1.6 per cent of GDP in 2001, Slovenia ranks firs t amongst the new Member States but still remains 
below the EU average. Slovenia also ranks first amongst the new Member States in terms of patent 
applications with the European Patent Office, but its performances in this field (41 per million 
inhabitants in 2001) are well below the EU average. In addition, the share of  researchers employed in 
the business sector is low as compared to the public sector (one-third and two third respectively) and 
innovative activity appears to be weak in the high tech sector.  
Promote the development of effective competi tion in all segments of the economy, notably 
in network industries. 
Slovenia has proceeded towards increasing liberalisati on in product markets and in network industries, 
but effective competition needs to be enhanced. In  particular, while the Competition Protection Office 
is mandated with adequate powers to exercise cont rol over restrictive agreements and any abuse of 
dominant position and mergers, its administrative capacities both in terms of financial and human 
resources are insufficient to ensure its proper func tioning. Moreover, the current legislation does not 
allow it to set deterrent fines on anti-competitive behaviour. 
In recent years, Slovenia has started liberalising its  network industries. In telecommunications, legal 
market opening was introduced in 2001 and an inde pendent regulatory agency was created in 2002. 
However, effective competition has not yet appear ed in fixed telephony for inland calls where the 
incumbent still holds 100 per cent of market shar e. The high price of network interconnections 
together with regulated low price levels for both lo cal and national calls are the main barriers to the 
entry of new operators in fixed te lephony. As regards the energy sector, large electricity customers 
(66 per cent of electricity consumption in Slovenia) are free to choose their supplier and since 2002 the largest ones are allowed to purc hase electricity from abroad. Howe ver, the scope of international 
exchanges is limited to a maximum of 20 per cent of total electricity consumption. In gas, the largest 
consumers are since 1 January 2003 free to choose their own supplier (accounting for 50 per cent of 
gas consumption in Slovenia), but in practice they  can not switch to another supplier because of long-
term contracts up to 2007 with the incumbent. 
Country specific recommendations to Slovenia 
Meeting the challenges outlined above requires broad st ructural reforms as they are laid down in the 
general guidelines (GL) in Part I of the Broad Economic Policy Guidelines.  
In order to lower inflation in a sustainable way, Slovenia is recommended to: 1. step-up structural reforms aimed at liberalisi ng administered prices and advance further with 
de-indexation, in particular of the wage setting mechanism (GL 5). 
In order to increase employment rates, especially  for older workers, Slovenia is recommended to:  
2. review the tax and benefit systems, with a focus on labour market participation of older 
workers, and reassess the measures promoting active ageing by means of lifelong learning 
activities, as well as address 
the imbalance between temporary and permanent work 
conditions (GL 4, 8). 
In order to improve conditions for sustained productivity growth, Sl ovenia is recommended 
to: 
3. further reduce the time and costs necessary  to set up a new company and simplify the 
administrative procedures affecting businesses (GL 11). 
 
MT 51   MT 4. promote R&D and innovation in the business sector and improve the quality of the 
tertiary level education system (GL 13). 
In order to promote the development of effective competition in all segments of the economy, 
notably in network industries  Slovenia is recommended to: 
5. strengthen the administrative capacity of the Competition Protection Office, ease the 
entry of new competitors in network industr ies, and facilitate th e purchase of lands 
for industrial use (GL 9).