Council Opinion of 28 February 2000 on the updated stability programme of Italy for the period 1999 to 2003
Date: 2000-02-28
Institutions: Council of the European Union
Subjects: Italy, economic convergence, economic cooperation, economic stabilisation, public finance

C 98/2

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Official Journal of the European Communities

6.4.2000

the budget

The Council notes that, despite the programme’s intentions of a
restructuring of
government
investment, the federal government plans to reduce investment
spending in nominal terms from its current level. The Council
reiterates its recommendation that the German Government
review its investment plans without, however,
joepardising
the budgetary targets of the programme.

in favour of

The Council welcomes the reform measures announced in the
programme, in particular in the domains of the pension and

finances

the reforms,

health systems and in public administration, which are key to
and employment growth. A
sustainable public
determined implementation of
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
stability
programme.

the objectives of

achievement of

the

COUNCIL OPINION

of 28 February 2000

on the updated stability programme of Italy for the period 1999 to 2003

(2000/C 98/02)

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(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

(GDP)

On 28 February 2000 the Council examined Italy’s updated
stability programme, which covers the period 1999 to 2003.
The Council notes with satisfaction that despite the cyclical
the initial programme’s objective of a budget
slowdown,
deficit of 2,0 % of gross domestic product
in 1999
appears to have been attained, as recommended in the Broad
Economic Policy Guidelines. Lower
than expected interest
payments and higher than expected revenues, namely from
improved tax collection, have contributed to this outcome.
The decrease in the gross government debt/GDP ratio kept
pace in 1999, as
the
negative impact of lower growth. The Council notes the confir-
mation of the objectives for the net borrowing of the general
government in 2000 and 2001 (respectively, 1,5 % and 1,0 %
of GDP). It welcomes the commitment to further budgetary
consolidation, which would support a decline by over three
percentage points per year in the debt/GDP ratio, to reach
the updated
100,0 % in 2003. The Council considers that
programme is consistent with the Broad Economic Policy
Guidelines.

large privatisation receipts offset

The macroeconomic projections
in the updated stability
programme assume a gradual acceleration in GDP growth,
from an annual rate of 1,3 % in 1999 to nearly 3 % in 2002
such an acceleration
to 2003. The Council notes

that

constitutes a realistic scenario and that the cyclical upswing in
2000 and 2001 could turn out stronger than assumed in the
updated programme; on the other hand, the new assumptions
on interest rates could be too optimistic in the light of recent
developments in financial markets.

The Council notes the continuation of the budgetary strategy
outlined in the initial programme, aiming at pursuing the
stabilisation of public finances and promoting growth and an
equitable distribution of
income. The strategy is based on
keeping the primary surplus at a high level and on reducing
current expenditure as a percentage of GDP, in parallel with
some easing of the still heavy tax burden and an expansion of
public investment, particularly in the South. The Council notes
that the deficit targets are maintained even though the primary
surplus is now planned to stabilise at the level of 5 % of GDP
lower than in the initial programme. The Council notes the
commitment of the Italian authorities to reduce non-interest
current expenditures as a percentage of GDP from 37,9 % of
GDP in 1999 to 36,2 % of GDP in 2003.

The Council considers that the underlying budgetary position
in 2000 should be sufficient to provide a safety margin against
breaching the three percent of GDP deficit threshold in normal
cyclical fluctuations; the proposed path of budgetary consoli-
dation would widen such a safety margin, implying that Italy
would continue to satisfy the requirements of the Stability and
Growth Pact up to 2003. However, the Council reaffirms that
Italy must secure a steady decline in its still high government
debt ratio, and it considers that the budgetary objectives in the
updated programme should be fulfilled in order to respect the
commitment on the part of the Italian government to reduce
the debt/GDP ratio to below 100 % by 2003. Should growth
turn out stronger than projected in the updated programme,
the Council expects Italy to achieve better budgetary outcomes
than planned and thus accelerate the reduction in the debt/GDP
ratio towards the 60 % reference value.

Following its opinion (2) on the original stability programme,
the Council urges the Italian government to address with deter-

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

(2) OJ C 68, 11.3.1999, p. 1.

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Official Journal of the European Communities

C 98/3

mination the medium-term structural challenges to public
finances from pension and other age-related budgetary expen-
ditures. Recent
the
government proposals
expansion of
funded pension provisions go in the right
direction but would not eliminate the need to reexamine the
parameters of the present system. A timely reassessment of the
parameters of the pension system would allow the expected

to promote

to

increase in the ratio of pension expenditures to GDP to be
the
contained. The Council
Italian
further
government
privatisation
programme and to enhance the structural reforms of labour
and product markets and of the public administration, which
are all needed in order to foster competition and efficiency and
revitalise the Italian economy.

encourages
its

pursue with

vigour

COUNCIL OPINION

of 28 February 2000

on the updated stability programme of Belgium for the period 2000 to 2003

(2000/C 98/03)

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(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

On 28 February 2000 the Council examined the 1999 update
of the stability programme of Belgium which covers the period
2000 to 2003. The Council notes with satisfaction that the
general government deficit for 1998 was substantially lower
than that estimated in the initial stability programme and
that budgetary adjustment continued in 1999 despite a
slowdown in economic activity and extra expenditure related
to unforeseen events;
the debt ratio was reduced by 6,3
percentage points during the last two years to an estimated
114,9 % of gross domestic product (GDP) at the end of 1999.
is
that
The Council
consistent with the Broad Economic Policy Guidelines.

the updated programme

considers

The budgetary projections of the updated stability programme
are based on a prudent macroeconomic scenario assuming real
GDP growth of 2,5 % per year for 2000 and 2001 and a trend
GDP growth rate of 2,3 % for the following years. The Council
considers that
the updated
the GDP growth projections of
programme are likely to correspond to the lower limit of a
range of probable macroeconomic projections; as a conse-
in the event of stronger
quence,
growth, the budgetary outcomes will be better than projected
in the updated programme, particularly in 2000.

the Council expects that,

The Council notes the intention of the Belgian government to
the target of
advance, compared to the initial programme,
balanced government accounts to 2002, and to achieve a
budget surplus in 2003;
it commends the commitment of
the Belgian authorities to seek better budgetary results in
2000 than those projected in the updated programme; such
a development would facilitate achieving a debt ratio close to

100 % of GDP in 2003, as projected in the programme. The
Council considers that the underlying budgetary position of the
general government
since 1999 provides a safety margin
against breaching the 3 % of GDP deficit threshold in normal
circumstances,
thus fulfilling the Stability and Growth Pact
requirements; however, the Council takes the view that the
improvement of
in the
programme is necessary in order to allow a steady decline of
the still high debt ratio and to create room for the announced
reform of income taxation.

fiscal position envisaged

the

The Council welcomes the renewed commitment in the 1999
update to maintain high primary surpluses as a central element
of the fiscal consolidation strategy in Belgium; this strategy has
proved its crucial role in advancing budgetary adjustments in
in consolidating
the recent past and is considered essential
progress made
continued
in this
the debt ratio. The Council considers that a
reduction of
in real
growth in primary expenditure of 1,5 % per year,
targeted
terms,
primary surplus and encourages the Belgian Government to
implement it with rigour.

and ensuring a

is appropriate

to achieve

in order

area

the

is

increase

that a key objective of

the updated
The Council notes
in the
to achieve a substantial
programme
employment rate in Belgium and to enhance economic effi-
ciency by means of a package of
reforms and policy
measures; in this context, the Council welcomes the decision
of the government to strengthen the effort towards reducing
overall tax burden, in particular on labour. In the vein of its
opinion on the initial stability programme (2),
the Council
encourages the Belgian Government, within the expenditure
limits fixed by the programme, to give priority to government
and the
to improve
investment
productive potential of the economy; it invites the government
to provide,
its stability programme,
projections on main categories of government expenditure,
notably government investment.

in future updates of

infrastructure

in order

The Council welcomes the cooperation agreement under which
budgetary objectives, within a medium-term time horizon, will
be fixed for all
in Belgium as an
levels of government
important element enhancing transparency and credibility of
the updated stability programme.

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

(2) OJ C 124, 5.5.1999, p. 4.