Council Opinion of 15 March 1999 on the stability programme of Luxembourg, 1999 to 2002
Date: 1999-03-15
Institutions: Council of the European Union
Subjects: Economic and Monetary Union, Luxembourg, coordination of EMU policies, economic convergence, economic policy, economic stabilisation

5.5.1999

EN

Official Journal of the European Communities

C 124/5

the measures of permanent nature already adopted will
continue to provide a sufficient yield;
this policy option
seems credible to the Council.

fluctuations. Therefore,

The Council considers that the underlying budgetary position
corresponding to a deficit of 0,3 % of GDP for the year 2002 is
sufficient to provide a safety margin to prevent the deficit from
breaching the 3 % of GDP threshold as a result of normal
cyclical
the budgetary medium-term
the Belgian stability programme is in conformity
target of
with the requirements of
the Stability and Growth Pact.
However, fiscal consolidation in Belgium needs to be pursued
beyond the horizon of the programme in order to ensure the
continuation of the decline in the debt ratio and to respond to
longer term issues in particular those stemming from the
ageing of population.

the
The Council commends the affirmed determination of
Belgian Government to adopt corrective measures in case any
deviation from the norm set for the primary surplus should
occur;
it also notes that the stability programme defines a
realistic rule for accelerating the deficit reduction in case of
higher than expected growth. It urges the Belgian authorities
to monitor
the situation of public finance and take all
necessary measures in order to ensure the achievement, at
levels, of the objectives set in this area.
federal and regional

the planned fiscal
The Council notes with satisfaction that
consolidation effort will be accompanied by measures aimed
at reducing the overall tax burden and labour costs, through
the indexation of income tax brackets and the reduction in
social security contributions paid by employers. However, the
Council considers that efforts should be pursued in order to
further alleviate the tax burden in Belgium.

It also notes that the stability programme provides for a margin
for an annual increase in real primary expenditure of 1,5 %.
The Council acknowledges that
increased
resources to the current low level of government investment
would enhance the potential of Belgian economy. It encourages
the Belgian authorities to proceed further in introducing and
implementing the necessary structural reforms in order to
improve the functioning of labour and product markets and
the quality of public expenditure.

the allocation of

The Council notes that the successful implementation of the
stability programme hinges on the close coordination of
actions at all
it encourages the auth-
orities in Belgium to continue their close cooperation to this
end.

levels of government;

COUNCIL OPINION

of 15 March 1999

on the stability programme of Luxembourg, 1999 to 2002

(1999/C 124/05)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulaltion (EC) No 1466/97 of 7
July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic
policies (1), and in particular Article 5(1) and (2) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

On 15 March 1999,
the Council examined the stability
programme of
the period
the
1999-2002. The Council notes with satisfaction that
government financial accounts will continue te be in surplus
throughout the period covered by the programme, while the

Luxembourg, which covers

(1) OJ L 209, 2.8.1997, p. 1.

government gross debt to GDP ratio will remain very low. The
Council notes that, from a formal point of view, the stability
programme is only partially in line with the agreed code of
conduct on the content and format of stability and convergence
programmes. The Council considers that the programme is
consistent with the Broad Economic Policy Guidelines.

as

takes

stability programme presents

three macroeconomic
The
scenarios for the period 1999 to 2002. Under the central
macroeconomic scenario, which for reasons of prudence the
programme
finance
projections, real GDP growth is estimated at 3,4 % for 1999
rising to 3,7 %, on average, for the period 2000 to 2002. The
least favourable scenario forecasts GDP growth of 2,8 % for
1999 and 3,0 % for the period 2000 to 2002, while growth
under the most favourable scenario is projected to reach 4,0 %
in 1999 and 4,5 % during 2000 to 2002.

the public

the basis

for

The Council considers that
the macroeconomic framework
presents, under the three alternative scenarios, a range of
plausible assumptions for GDP growth, which are in line
with the record of past performance and the long-term

C 124/6

EN

Official Journal of the European Communities

5.5.1999

the

economy of Luxembourg. The general
potential of
government accounts, expected to remain in surplus over the
period under all three scenarios, is estimated at 1,7 % of GDP
in 2002, under the central scenario, and at 1 % and 2,5 % of
GDP under
scenarios,
respectively.

and most

favourable

least

the

strategy of

The Council notes that the performance of the economy in
recent years and sound policies have been the basis of the
healthy public finances situation achieved by Luxembourg. It
commends the approach of the programme to pursue further
the joint
sound public finance management,
together with the effort to improve the functioning of the
economy through structural reforms and other appropriate
policy measures. The Council welcomes in this respect the
planned government action involving active employment and
equal opportunities policies,
enterprise
initiative and professional training.

development of

The Council shares the analysis of the programme that a small
open economy such as that of Luxembourg may be subject to
wide variations of economic acivity and,
therefore, should
dispose of an adequate safety margin in order to cope with
fluctuations while being able to maintain a sound
cyclical

budgetary position and puruse active policies. The Council
considers that the projected surplus in the general government
accounts provides an adequate safety margin in order to avoid
breaching the 3 % of GDP reference value for the deficit, under
normal cyclical movements. Moreover, the very low level of
government debt ratio enhances this safety margin. Therefore,
the
of
Luxembourg are in conformity with the requirements of the
Stability and Growth Pact. The Council welcomes the readiness
of the government to take the necessary measures to ensure
respect of
than
projected economic growth.

the budgetary targets in case of weaker

stability programme

targets of

budgetary

the

to control

expenditure

that the effort

should continue;

The Council notes, however,
the
in this
growth of public
respect, the decision of the government to extend over the
next five years the limit on the growth of central government
expenditure, in place since 1994, is appropriate. The Council
considers that vigilance must also be exercised regarding the
in particular social
other components of public expenditure,
security spending,
the budgetary cost of
policies undertaken in this area; such expenditure control,
underpinned by the necessary reforms,
is also necessary to
prepare for the challenge of population ageing.

taking account of