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

6.4.2000

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Official Journal of the European Communities

C 98/1

I

(Information)

COUNCIL

COUNCIL OPINION

of 28 February 2000

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

(2000/C 98/01)

THE COUNCIL OF THE EUROPEAN UNION,

German authorities provide this additional information, at the
latest, in the next update of the stability programme.

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EEC) 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 updated
stability programme of Germany which covers the period
1999 to 2003. The Council notes with satisfaction that the
deficit outcomes both for 1998 and 1999 were clearly better
than expected in the initial programme. This achievement in
conditions of
lower-than-expected economic growth has
significantly advanced the objective of attaining a medium-term
budgetary position of close to balance or
in surplus, as
required by the Stabiblity and Growth pact. The Council
notes, however, that the better results in 1998 were almost
exclusively due to the difficult-to-predict development of
regional and local government finances. These developments,
tend to underline the importance of an efficient
therefore,
cooperation on government
to
facilitate the planning and monitoring of the budgetary consoli-
dation process.

finances at national

level

that

case

as was

the information provided in the
The Council notes
updated stability programme,
the
the
previsous programme, does not in all respects comply with
the code of conduct on the content and format of stability
and convergance programmes. In particular, the programme
lacks detailed information on the components of government
revenue and expenditure and on the factors determining the
debt ratio. The Council, therefore, repeats the request made in
its opinion on the previous stability programme (2) that the

for

of

macroeconomic

The
updated
scenario
programme (3)assumes that the German economy will enjoy
average annual grown of som 2,5 % over the programme
period. The Council considers this scenario realistic, provided
that wage moderation and structural reforms on product and
labour markets continue.

the

The updated programme foresees a decline in the general
government deficit to 0,5 % of gross domestic product (GDP)
by 2003, while the gross debt ratio is expected to decrease to
58,5 % of GDP over the same period. The Council considers it
appropriate that 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 commends, in particular, the envisaged approach
of controlling government expenditure by limiting its overall
nominal
increase to less than the expected nominal GDP
growth. The Council recognises that the planned expenditure
savings will create some room for tax relief in the framework
of the reforms of income and corporate taxation which are
welcome as they will
lead to a desirable reduction in the
high overall tax burden in Germany. The Council recommends,
however,
the reforms be implemented with greatest
caution so as to minimise the risk of a lasting deterioration
of the structural geovernment deficit.

that

The Council considers that the envisaged medium-term deficit
objective of 0,5 % of GDP in 2003 is in conformity with the
provisions of the Stability and Growth Pact, as is the objective
for 2002. Moreover, Germany’s budget balance will remain
close to the minimum benchmark position, which allows the
automatic stabilisers
the deficit
to work without
breaching the 3 % of GDP reference value, already from
1999 on. The Council recommends, however,
in the
event of higher growth than expected the fiscal gains be used
to reduce the deficit below the targeted level with a view to
widening the safety margin and creating additional room for
the desirable further
tax reductions planned beyond the
programme’s horizon. Furthermore, available privatisation
opportunities should be used at all
levels of government in
order to make sure that the debt ratio is firmly kept on a
downward trend.

risk of

that

(1) OJ L 209, 2.8.1997, p. 1.
(2) OJ C 124, 5.5.1999, p. 3.

(3) In its revised version as of 1 February 2000,
addendum to the updated stability programme.

i.e.

including the

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.