Opinion of the European Central Bank of 14 July 1998 at the request of the Council of the European Union under Article 5(3) of Council Regulation (EC) No 2494/95 of 23 October 1995 and Article 109l(2) of the Treaty establishing the European Community (hereinafter referred to as the 'Treaty') on a proposal for a Council Regulation (EC) amending Commission Regulation (EC) No 1749/96 concerning the coverage of goods and services of the Harmonised Index of Consumer Prices and on a proposal for a Council Regulation (EC) amending Commission Regulation (EC) No 1749/96 concerning the geographic and population coverage of the Harmonised Index of Consumer Prices (CON/98/34)
Date: 1998-07-14
Institutions: European Central Bank
Subjects: EU Member State, consumer price, goods and services, harmonisation of prices, price index

7.10.1999

EN

Official Journal of the European Communities

C 285/7

EUROPEAN CENTRAL BANK

OPINION OF THE EUROPEAN CENTRAL BANK

of 14 July 1998

at the request of the Council of the European Union under Article 5(3) of Council Regulation (EC)
No 2494/95 of 23 October 1995 and Article 109l(2) of the Treaty establishing the European
Community (hereinafter referred to as the (cid:145)Treaty(cid:146)) on a proposal for a Council Regulation (EC)
amending Commission Regulation (EC) No 1749/96 concerning the coverage of goods and services
of the Harmonised Index of Consumer Prices and on a proposal for a Council Regulation (EC)
amending Commission Regulation (EC) No 1749/96 concerning the geographic and population
coverage of the Harmonised Index of Consumer Prices

(CON/98/34)

(1999/C 285/07)

1. On 3 July 1998 the European Central Bank (hereinafter
from the
referred to as the (cid:145)ECB(cid:146)) received a request
Council of
the European Union for an opinion on a
proposal for a Council Regulation (EC) on each of the
abovementioned topies. A document with reference
number COM(1998) 323 final, which contains the two
Draft Council Regulations (EC), was also transmitted to
the ECB. The servcies of
the European
Union also transmitted a document dated 25 June 1998
with reference number 9871/98, which presents
the
current status of discussions on this matter. The ECB’s
opinion is based mainly on the second document.

the Council of

2. In accordance with Article 1091(2) of the Treaty, the ECB
has taken over the advisory functions of the European
Monetary Institute, which went into liquidation upon the
establishment of
the ECB on 1 June 1998. The ECB’s
competence to deliver an opinion is baded on Article 5.3
of Regulation (EC) No 2494/95.

Prices

the coverage of

(EC) concern the
3. The two Draft Council Regulations
the
extension and harmonisation of
(hereinafter
Index of Consumer
Harmonised
referred to as the (cid:145)HICP(cid:146)). The ECB considers it
to be
essential that it should be possible to calculate meaningful
changes in the HICP and its sub-indices when coverage of
the HICP is extended in December 1999 in line with the
two Draft Council Regulations (EC). The ECB therefore
strongly supports the request made by the Commission
of the European Communities that Member States should
provide sufficiently comparable data covering at least each
of the preceding twelve months.

A. Draft Council Regulation (EC) concerning the coverage
of goods and services of the HICP (hereinafter referred to
a the (cid:145)First Draft Regulation(cid:146))

4. The objective of the First Draft Regulation is to extend the
initial coverage of the HICP in December 1999 to health,

education and social services in particular. Furthermore,
harmonisation measures and additions to the coverage of
some items are proposed which are only partly covered or
which are not covered in a fully harmonised manner by
the initial HICP.

5. The

the

(cid:145)household

institutions

concept of

serving households

First Draft Regulation concerns

categories of
consumption for which different theoretical concepts can
provide meanningful results depending on the objective of
the price analysis undertaken. The First Draft Regulation
defines
final monetary
consumption expenditure(cid:146) as a framework for the HICP.
In accordance with this definition, expenditure and prices
are to be measured net of any reimbursements or subsidies
households receive from the government sector or from
non-profit
(hereinafter
referred to as (cid:145)NPISH(cid:146)). As the concept reflects prices
which are actually paid by cosumers and inflation as
perceived by consumers, this is en appropriate concept
for a consumer price index. One conceptual advantage of
the proposal is the definition of household consumption
expenditure according to the distinction between the
household sector and the government and NPISH sectors
as drawn in ESA 95. This helps to strengthen the link with
national accounts statistics. Finally, a further advantage of
the proposal is that its implementation in a very difficult
field of price measurement would be relatively stryight-
forward,
the
measurement of monthly price changes.

being particulary

important

this

for

6. However,

the ECB is aware that

the (cid:145)net approach(cid:146) as
proposed in the First Draft Regulation cannot provide a
fully comprehensive and complete picture of inflation. It
could be supplemented by an anaysis of the reasons for
overall
should significant
structural changes occur in the financing of goods and
services which are consumed by households but which

index changes,

in particular

C 285/8

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Official Journal of the European Communities

7.10.1999

are supplied by the government or NPISH sectors. The ECB
therefore supports the provision contained in Article 5(a)
which requests that the Commission review the implemen-
tation of the proposed concept within two years of the
date on which this first Council Regulation finally enters
into force. The ECB also supports the suggestion that the
HICP be supplemented by more comprehensive measures
of
these
difficulties. However, the development of such measures
impede the
is a long-term project and should not
planned extension of
the HICP as
proposed in the First Draft Regulation.

inflation with a view to overcoming some of

the coverage of

7. Taking into account the fact that the treatment of owner-
occupiers’ housing costs has yet to be settled for the HICP,
the ECB suggests that paragraphs 13 and 14 of Annex I(b)
of the First Draft Regulation be clarified. The provisions
contained therein should not prejudge the coverage of
owner-occupied housing in general or exclude options
for the coverage of this item in future extensions of the
HICP.

8. Commission Regulation (EC) No 2214/96 governs the
publication of HICP sub-indices. The First Draft Regulation
requires the coverage of new items in the HICP. The ECB
proposes that Regulation (EC) No 2214/96 should be
amended accordingly in order
the extended
scope of coverage.

to reflect

9. Finally, Annex I(a) of the latest version of the First Draft
relevant COICOP
all
Regulation does not
sub-categories
(categories 5.6.2, 6., 6.1, 6.1.1, 12.2,
12.2.1, 12.2.2 were omitted). The ECB assumes that this
mistake will be corrected in the final Regulation.

include

the
B. Draft Council Regulation
geographic and pupulation coverage of the HICP (here-
inafter referred to as the (cid:145)Second Draft Regulation(cid:146))

concerning

(EC)

10. The objective of the Second Draft Regulation is to define
and harmonise the geographic and population coverage of
the HICP with effect from December 1999. The Second
Draft Regulation amends the First Draft Regulation on
extended coverage (see paragraphs 4 to 8).

11. Article 3 of Regulation (EC) No 2494/95 on the HICP
(cid:145)The HICP shall be based on the prices of
reads as follows:
economic
for purchase
goods and services available
territory of
the Member State (. . .)(cid:146). The ECB regards the
Second Draft Regulation as representing the consistent
implementation of this rule.

in the

12. The EBC underlines

the importance of a harmonised
concept in particular for the geographic coverage of the
HICP. Harmonised geographical coverage is a pre-condition
for the accurate aggregation of the HICP across the euro
area. Therefore, the ECB supports the measures proposed
by the Commission.

13. This opinion will be published in the Official Journal of the

European Communities.

Done at Frankfurt am Main, 14 July 1998.

For the Governing Council of the
ECB

The President

Willem F. DUISENBERG