Council Opinion of 15 March 1999 on the stability programme of Germany, 1998 to 2002
Date: 1999-03-15
Institutions: Council of the European Union
Subjects: Economic and Monetary Union, Germany, coordination of EMU policies, economic convergence, economic policy, economic stabilisation

5.5.1999

EN

Official Journal of the European Communities

C 124/3

the commitment of

coming years, such as, for example, the uncertain budgetary
therefore
impact of major structural reforms. The Council
welcomes
to
pursue the public finance targets regarding public expenditures
in the programme as rigorously as possible and to take any
measures necessary to prevent or correct a deterioration of the
consolidation path announced in the programme.

the French authorities

The Council welcomes the introduction of measures aimed at
creating favourable conditions for employment and enhancing
economic efficiency by promoting innovation, risk-taking and
the modernisation of
It encourages the
French Government to proceed further in implementing the
necessary reforms in order to enhance the performance of
the economy.

the public sector.

COUNCIL OPINION

of 15 March 1999

on the stability programme of Germany, 1998 to 2002

(1999/C 124/03)

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 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 for Germany which covers the period 1998 to
2002. The Council notes with satisfaction that the German
authorities have been able to present the stability programme
within the agreed deadlines, despite the short period available
since the institution of the government at the end of October
1998. Due to these circumstances the information provided in
the stability programme is not in all respects as detailed as
would have been desirable, in particular regarding the quanti-
tative effects of
the
the general government budget
detailed components of
balance. The Council welcomes
the
German authorities to provide this additional information by
the next update of the stability programme.

the envisaged budgetary measures or

the commitment of

of

by

the

reunification.

consequences

is aware that fiscal policy in Germany is still
The Council
burdened
The
programme foresees a decline in the general government
budget deficit to 1 % of GDP by 2002, while the gross debt
ratio is expected to decrease to 59,5 % of GDP over the same
period. The Council notes that the programme builds on the
significant budgetary consolidation in the run-up to monetary
union as well as the achievement of a further decline in the
government deficit below the budget target to 2,0 % of GDP in
1998.

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

to downside risks.

The programme is based upon a macroeconomic forecast
forecast expecting output to grow by 2 % in 1999 and by
2,5 % per year during 2000 to 2002,
implying average
growth slightly above trend. The Council considers that the
is
scenario for growth appears realistic but notes that
subject
in the event of a
international slowdown output
continuation of
growth in 1999 could be lower
in the
than expected;
medium term, growth prospects and unemployment are
stability
closely linked. The Council welcomes
programme aims at a marked reduction in unemployment
and stresses the importance of moderate wage developments
and structural policies in the fight against unemployment
within a framework of policies for sustained growth.

In particular,

the current

that

the

it

it appropriate that

The Council considers
the budgetary
consolidation envisaged in the programme is achieved by a
decrease in the expenditure ratio which is only partially
offset by a decline in the revenue
ratio. The Council
welcomes, in particular, the envisaged approach of controlling
government
expenditure by limiting its overall nominal
increase to 2 % per year, which is 2 percentage points lower
than the expected nominal GDP growth. The Council also
notes with satisfaction that the planned tax reform provides
tax relief, which is expected to reinforce the
for a net
employment generating capacity of the economy.

The Council acknowledges that the envisaged medium-term
deficit objective of 1 % of GDP would be sufficient to allow
in a normal cyclical downturn the automatic stabilisers to work
without any large risk of breaching the 3 % of GDP reference
value.
the
the Council
medium-term deficit target of the programme is in line with
the provisions of the Stability and Growth Pact.

concludes

In this

sense

that

The Council notes that the overall objective of a reduction in
the general government deficit by 1,1 % of GDP and in the
gross debt ratio by 1,5 % of GDP between 1998 and 2002
appears modest. The consolidation efforts are largely concen-
trated towards the end of the period: due to the temporary
weakening of the macroeconomic situation in 1999, hardly any
improvement
is planned for 1999 and 2000. The Council
considers that the German authorities should aim to reduce
the
the deficit beyond the projected level at

the end of

C 124/4

EN

Official Journal of the European Communities

5.5.1999

situation. An explicit

programme period when growth is projected to have picked
up. The recent ruling of
the German Constitutional Court,
requiring the indroduction of tax allowances for the children
of married couples, constitutes a clear example of the existence
of budgetary risk over and above those related to the
commitment by the
conjunctural
such risks would be
German government
desirable in view of
In
addition, the Council considers that the German government
should take any measures necessary to avoid a renewed
increase in the government debt ratio and that it would be
desirable to go beyond the 1 % deficit
in 2002,
particularly if economic growth is higher than expected.

to counter
the minimal position aimed for.

level

The Council notes that the successful implementation of the
stability programme hinges on close coordination of actions at
in
all
Germany to pay due regard to this callenge.

levels of government;

the authorities

it encourges

The Council notes that the programme envisages a restruc-
turing of the budget in favour of government investment but
intends to keep overall investment spending as a percentage of
GDP unchaged at
level. The Council
encourages the German Government to give further attention
jeopardising the budgetary
to investment without, however,
targets of the programme.

current

lowel

its

The Council welcomes the reform measures announced in the
programme, in particular in the domains of the pension and
health systems and in public administration, which are key to
sustainable public finances and employment growth, but
considers that they ough to be supported by further supply
oriented policy measures. A determined implementation of the
reforms, in combination with measures aimed at increasing the
flexibility of product and labour markets, as recommended by
the Broad Economic Policy Guidelines and envisaged in the
German structural progress report
for the Cardiff process,
would be conducive to the achievement of the objectives of
the stability programme.

COUNCIL OPINION

of 15 March 1999

on the stability programme of Belgium, 1999 to 2002

(1999/C 124/04)

THE COUNCIL OF THE EUROPEAN UNION,

the Council considers that the programme is consistent with
the Broad Economic Policy Guidelines.

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 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 Belgium, which covers the period 1999 to
2002. The Council notes that the programme aims at further
reducing the general government deficit and debt as percent of
GDP, by maintaining the pace of the fiscal consolidation effort
pursued under the second convergence programme. Moreover,

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

that

the budgetary projections of

the
The Council notes
programme are based on a prudent macroeconomic scenario
forecasting real GDP growth of 2,4 % for 1999 and 2,3 % per
year, for the period 2000 to 2002. Under this scenario, the
general government deficit is projected to fall to 0,3 % of GDP
in 2002 and the debt ratio is expected to decline by about 11
percentage points between 1998 and 2002. The considerable
improvement in the macroeconomic performance realised in
Belgium in recent years, characterised by low inflation,
declining interest rates, wage moderation and good export
performance, suggests that the projected growth rates should
be attainable.

The Council commends the emphasis given in the programme
on maintaining annual primary surpluses at 6 % of GDP as a
central element of the strategy for budgetary consolidation and
debt reduction; the achievement of high primary surpluses has
been the anchor of budgetary policy in Belgium in recent years
and their contribution to further
in
particular the steady decline in government debt, will remain
decisive in the medium-term. The Council notes that
the
stability programme considers that no additional discretionary
measures will be necessary to achieve this target, assuming that

fiscal consolidation,