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

C 124/2

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Official Journal of the European Communities

5.5.1999

COUNCIL OPINION

of 15 March 1999

on the stability programme of France, 1999 to 2002

(1999/C 124/02)

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:

the Council examined the stability
On 15 March 1999,
programme of France which covers
the period 1999 to
2002. From a formal point of view, the Council notes that
the French authorities presented the programme pluriannuel de
finances publiques as its stability programme. The Council notes
that the objective of the programme is to reduce further the
general government deficit and ensure that the debt ratio starts
declining and continues to remain below the 60 % of GDP
reference value. Moreover,
the
programme is consistent with the Broad Economic Policy
Guidelines.

the Council considers that

stability programme presents

The
two macroeconomic
scenarios for the period 1999 to 2002. Under a favourable
scenario, the GDP growth rate is projected to rise to 3 %, on
average for the period 2000 to 2002, from 2,7 % forecast for
1999. According to a more cautious scenario the growth rate is
adjusted downwards to 2,4 % for 1999 and to 2,5 % on
average, for the period 2000 to 2002. The general Government
deficit is projected to decline at the end of 2002 to 0,8 % of
GDP under the favourable scenario and to 1,2 % under the
cautious scenario. The debt ratio is expected to fall to 57,1 %
or 58,3 % of GDP, according to the alternative scenarios.

The Council considers that the macroeconomic performance of
French economy in recent years characterised by sound funda-
mentals, strong domestic demand in a context of price stability
and declining unemployment enhances the capacity of
the
economy to achieve the objectives of the stability programme.
The Council notes that
the more cautious macroeconomic
scenario presents realistic GDP growth assumptions close to

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

growth potential
growth
projections based on the favourable scenario can be considered
as the upper bound of a range of growth projections.

and past performance; GDP

to

the

entirely

expected

reduction

attributable

expenditure

current primary

The Council commends the fact that the Government deficit
reduction over the period covered by the stability programme
is
in
Government expenditure; this addresses the problem of the
in France,
very high level of Government
particularly
the
expenditure. Moreover,
for
Council welcomes the adoption of a norm of restraint
real Government expenditure as an anchor for fiscal consoli-
dation; an annual increase of 1 % in real terms is the ceiling
established for general Government spending as a whole, while
central Government spending is limited at 0,3 % and social
security and local Government spending at 1,5 %. To be
successful, a strategy based on expenditure ceilings requires
an effective scheme to rein in expenditure as soon as any
slippage is detected.

The Council welcomes the fact that the programme recognises
the need for such a mechanism. The Council considers that
the
the
respect of
is
expenditure
the Government deficit objectives. The
achievement of
Council urges the French Government
to define ways to
maintain strict adherence to these norms, including the case
of inflation lower than estimated in the programme.

essential

ceilings

for

The Council notes that the share of public investment in GDP
is above the European average. It considers nevertheless that a
more resolute restructuring of expenditure towards investment
would be beneficial to potential growth and competitiveness,
provided that it does not jeopardise the budgetary targets of
the programme.

The Council welcomes the fact that in parallel to budgetary
consolidation, a key objective of the stability programme is the
reduction in the tax burden, notably taxes on labour, in order
to foster employment.

to let

The Council notes that the underlying Government deficit for
the year 2002, under both macroeconomic scenarios, provides
a safety margin allowing France,
in the event of a normal
cyclical downturn,
the automatic stabilisers work
without any large risk of exceeding the 3 % of GDP reference
the
value.
medium-term budgetary situation in the programme is in
line with the requirements of the Stability and Growth Pact.
However, the Council considers that the safety margin provided
by the projections of the stability programme should be wider
in order to accommodate unforeseen developments in the

the Council

considers

In this

sense

that

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Official Journal of the European Communities

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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