COUNCIL OPINION of 8 February 1999 on the stability programme of Italy, 1999-2001
Date: 1999-02-08
Institutions: Council of the European Union
Subjects: Italy, economic policy, economic stabilisation

11.3.1999

EN

Official  Journal  of  the  European  Communities

C  68/1

I

(Information)

COUNCIL

COUNCIL  OPINION

of  8  February  1999

on  the  stability  programme  of  Italy,  1999(cid:220)2001

(1999/C  68/01)

THE  COUNCIL  OF  THE  EUROPEAN  UNION,

Having  regard  to  the  Treaty  establishing  the  European
Community,

Having  regard  to  Council  Regulation  (EC)  No  1466/97
of  7  July  1997  on  the  strengthening  of  the  surveillance  of
budgetary  positions  and  the  surveillance  and  coordi(cid:220)
nation  of  economic  policies(cid:216)(˛),  and  in  particular  Article
5(1)  and  (2)  thereof,

Having 
Commission,

regard 

to 

the 

recommendation  of 

the

After  consulting  the  Economic  and  Financial  Committee,

HAS  DELIVERED  THIS  OPINION:

the  1999  budget  act  agreed  by 

On  8  February  1999 
the  Council  examined  Italy’s
stability  programme,  which  covers  the  period  1999(cid:220)2001.
in  the  Italian
The  Council  notes  that  the  objectives 
stability  programme  go  in  the  direction  of  meeting  the
requirements  of  the  Stability  and  Growth  Pact.  The
Council  notes  that  the  programme,  which  was  the  basis
Italian
for 
Government  and  approved  by  the  Italian  Parliament,  is
based  on  macroeconomic  projections  made  than  five
months  ago.  The  Italian  authorities  will  revise  these
projections,  in  the  light  of  the  latest  developments,  on
the  occasion  of  the  definition  of  the  new  three(cid:220)year
budget  plan  (2000(cid:220)2002)  which  will  be  presented  in  May.
The  most  likely  outturn  of  the  revision  will  be  economic
growth  slower  than  previously  expected,  at  least  for
1999,  and  lower  interest  rates.

the 

The  Council  notes  with  satisfaction  that  in  spite  of  these
revisions,  the  Italian  Government  intends  to  strengthen
the  progress  achieved  in  public  finance  in  recent  years.
The  composition  of  the  deficit  between  revenue  and

is 

to  GDP 

in  2001.  The  reduction  of 
targeted 

expenditure  may  be  affected,  but  the  Italian  government
remains  committed  to  the  overall  target,  in  particular  the
reduction  of  the  general  government  deficit  by  around
half  a  percentage  point  of  GDP  per  year,  to  reach  1(cid:216)%
the  ratio  of
of  GDP 
government  debt 
to  continue
steadily,  to  reach  a  level  of  107(cid:216)%  of  GDP  in  2001.
These  objectives  are  in  line  with  the  Council  Recommen(cid:220)
dation  of  6  July  1998  on  the  broad  guidelines  of  the
economic  policies  of 
the
Community(cid:216)(ˇ).  The  Council  remarks,  however,  that  the
the  same  macro(cid:220)
stability  programme 
economic  framework  as  the  Document  for  Economic
and  Financial  Planning  1999(cid:220)2001  (DPEF)  presented  in
May  1998.  This  framework  now  seems  clearly  too  opti(cid:220)
initial  years  of  the
mistic  as  regards  growth 
programme.

the  Member  States  and 

is  based  on 

in  the 

The  Council  considers  that  the  strategy  of  budgetary
consolidation  presented  in  the  programme,  based  on  the
stabilisation  of  the  primary  surplus  at  a  high  level  (5,5(cid:216)%
of  GDP)  and  on  the  reduction  of  current  expenditure  as
a  percentage  of  GDP,  in  parallel  with  some  easing  of  the
fiscal  burden  and  an  expansion  of  fixed  capital  expen(cid:220)
diture  goes  in  the  right  direction,  particularly  in  view  of
the  need  to  foster  growth  and  employment  in  Italy.  The
strategy  is  in  line  with  the  announcement  made  by  the
Italian  Government  in  April  1998,  to  reduce  the  public
deficit  to  1(cid:216)%  of  GDP  in  2001,  to  keep  the  primary
surplus  until  2001  above  5,5(cid:216)%  of  GDP  and  to  reduce
the  debt  below  100(cid:216)%  of  GDP  in  2003.  The  Council
encourages  the  Italian  Government  to  pursue  it  with
determination.

The  measures  included  in  the  1999  Budget  Law  seem
broadly  consistent  with  the  overall  budgetary  strategy.
However,  the  Council  notes  that  there  are  risks  that  the
deficit  target  of  2(cid:216)%  of  GDP  for  1999  could  be  missed,
namely  because  of  lower(cid:220)than(cid:220)projected  growth,  which
also  negatively  affected  the  1998  deficit  outturn.  In  this
event,  the  1999  outcome  would  have  a  negative  impact
on  the  following  two  years.  Thus,  reaching  the  objective

(˛)(cid:217)OJ  L  209,  2.8.1997,  p.  1.

(ˇ)(cid:217)OJ  L  200,  16.7.1998,  p.  34.

C  68/2

EN

Official  Journal  of  the  European  Communities

11.3.1999

of  1(cid:216)%  of  GDP 
in  2001  could  require  additional
corrective  measures  on  a  larger  scale  than  identified  in
the  programme.  The  Council  welcomes  the  commitment
on  the  part  of  the  Italian  government  to  take  such
additional  measures  if  needed.

from 

interest  payments 

The  Council  recalls  that,  besides  the  maintenance  of  a
high  primary  surplus,  Italy  should  seize  all  opportunities
to  secure  a  faster  decline  in  the  debt  ratio.  To  that  end,
the  Council  considers  that  any  additional  budgetary
savings  arising 
than
expected  in  the  programme  should  be  used  to  confirm
and  possibly  tighten  the  announced  budgetary  targets,
even  in  a  scenario  of  weaker  economic  growth.  But  as
the  dynamics  of  the  debt  are  highly  sensitive  to  the
growth  performance,  the  negative 
impact  of  weaker
growth  should  be  limited  as  much  as  possible,  namely
through  a  higher  contribution  from  privatisation  receipts.
Therefore,  the  Council  invites  the  Italian  Government  to
accelerate  its  privatisation  plans.

lower 

The  Council  takes  note  that  the  Italian  government  is
targeting  the  stabilisation  of  pension  expenditure  as  a

in 

the  years  covered  by 

the
percentage  of  GDP 
programme.  The  commitment 
to  adopt  corrective
measures  if  unexpected  deviations  from  the  projections
are  detected  is  particularly  welcome,  as  current  devel(cid:220)
opments  in  pension  expenditure  give  some  reason  for
concern.  Moreover,  the  Council  underlines  that  the
expected  increase  in  the  ratio  of  pension  outlays  to  GDP
after  2003  will  weaken 
financial
position  in  the  medium  term.  Therefore,  the  Council
encourages  the  Italian  authorities  to  re(cid:220)assess  the  reform
of  the  pension  system.

the  Government’s 

The  Council  notes  that  the  envisaged  medium(cid:220)term
deficit  target  of  1(cid:216)%  of  GDP  in  2001  would  allow  Italy,
in  the  event  of  a  normal  cyclical  downturn,  to  let  the
automatic  stabilisers  work  without  any 
large  risk  of
exceeding  the  3(cid:216)%  of  GDP  reference  value.  In  this  sense
it  is  compatible  with  the  requirements  of  the  Stability  and
Growth  Pact.  However,  a  lower  deficit  would  be  recom(cid:220)
mended,  notably  in  order  to  accelerate  the  reduction  in
the  debt  ratio.  The  Council  also  takes  note  that  Italy
intends  to  meet  these  requirements  fully  by  the  year
2002.

COUNCIL  OPINION

of  8  February  1999

on  the  stability  programme  of  Portugal,  1999(cid:220)2002

(1999/C  68/02)

THE  COUNCIL  OF  THE  EUROPEAN  UNION,

HAS  DELIVERED  THIS  OPINION:

Having  regard  to  the  Treaty  establishing  the  European
Community,

Having  regard  to  Council  Regulation  (EC)  No  1466/97
of  7  July  1997  on  the  strengthening  of  the  surveillance  of
budgetary  positions  and  the  surveillance  and  coordi(cid:220)
nation  of  economic  policies(cid:216)(˛),  and  in  particular  Article
5(1)  and  (2)  thereof,

Having 
Commission,

regard 

to 

the 

recommendation  of 

the

After  consulting  the  Economic  and  Financial  Committee,

On  8  February  1999  the  Council  examined  Portugal’s
Stability  Programme  which  covers  the  period  1999(cid:220)2002.
The  programme  envisages  a  decline 
in  the  general
government  budget  deficit  to  0,8(cid:216)%  of  GDP  by  2002,
while  the  gross  debt  ratio  is  expected  to  decrease  to
53,2(cid:216)%  of  GDP.  The  Council  notes  with  satisfaction  that
the  programme  builds  on  the  budgetary  consolidation
realised 
in  the  run(cid:220)up  to  EMU  and  commends  the
regular  achievement  of  better(cid:220)than(cid:220)targeted  budgetary
outcomes.  The  Council  notes,  however,  that  in  1998,  in
view  of  the  above  trend  growth  and  a  strong  fall  in
interest  payments,  only  a  small  reduction  in  the  budget
deficit  was  achieved.

(˛)(cid:217)OJ  L  209,  2.8.1997,  p.  1.

The  central  macroeconomic  scenario  underlying 
the
programme  assumes  output  growth  to  decline  from  its