Council Opinion of 13 March 2000 on the updated stability programme of Portugal, 2000 to 2004
Date: 2000-03-13
Institutions: Council of the European Union
Subjects: Portugal, economic policy, economic stabilisation, gross domestic product, public finance

18.4.2000

EN

Official Journal of the European Communities

C 111/3

COUNCIL OPINION

of 13 March 2000

on the updated stability programme of Portugal, 2000 to 2004

(2000/C 111/03)

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 13 March 2000 the Council examined the updated stability
programme of Portugal which covers the period 2000 to 2004.
The Council notes with satisfaction that
the Portuguese
economy has been growing at rates above the EU average, to
which the implemented structural reforms have contributed.
The Council also notes with satisfaction that the defict target
for 1998 and 1999 set in the orginal stability porgramme were
met despite somewhat lower than expected economic growth.
The updated programme envisages a gradual decline in the
general government deficit from 2,0 % of GDP in 1999 to a
balanced position in 2004.

the updated programme
The macroeconomic scenario of
assumes that the Portuguese economy will grow at an annual
average of 3,5 % over the period 2000 to 2004, a quarter of a
percentage point above the original programme’s assumption
and mainly driven by domestic demand, while the contribution
of net exports remains negative, thus widening further the
already high external
imbalances. While considering that an
average growth rate of 3,5 % cannot be considered as over-
ambitious
the
the growth pattern assumed in the
Council considers that
programme relies mainly on domestic demand with investment
therefore,
being its most dynamic component; the Council,
encourages the Portuguese Government
to monitor closely
macroeconomic developments and to take corrective action if
needed. This might require, in addition to reinforcing competi-
tiveness through, inter alia a moderation of wage increases and
structural measures, a tightening of budgetary policy with a
view to dampening domestic demand.

catching-up country like Portugal,

for

a

able

As regards government finances the Council notes that the
deficit out-turn in 1999 (and 1998) was made possible
mainly because higher-than-projected revenue, thanks mainly
to domestic-demand driven growth, was
to offset
significant overruns of current primary expenditure, due
chiefly to overspending in the health sector and a strong rise
in the government’s wage bill. Government
revenue and
primary expenditure are planned to continue to increase
strongly in 2000, and only after that year they are projected
to decline marginally. The Council
the
that
implementation of
should be in
keeping with the broad economic policy guidelines, as
already noted in its opinion (2) on the original programme.
Moreover,
the
ratio of current primary expenditure to GDP after 2000
should be achieved by enlarging the scope for expenditure
restraint in a more efficient and sustainable way.

the Council considers that

the reduction of

this adjustment

considers

strategy,

The Council considers that the budgetary position underlying
the medium-term deficit
the Portuguese stability
target of
programme update is in line with the requirements of the
the government
Stability and Growth Pact. However, as
balance is projected to reach the required minimum position
only from 2002, the Council reiterates the recommendation in
its opinion on the original programme that a faster decline in
the deficit ratio should be achieved with a view to increasing
the
the necessary safety margin allwing Portugal
automatic
cyclical
event of
stabilisers work in the
downturn. The Portuguese authorities should do their best to
achieve better than planned results. Moreover,
the Council
to adhere firmly to the
urges the Portuguese government
deficit target for 2000 by tightly controlling expenidture; the
Council welcomes the ex-ante freezing of some expenditures in
the budget
if necessary for
achieving the target, they should not be used.

for 2000 and considers that,

to let
a

The Council welcomes the planned budgetary and structural
reform measures that are outlined in the programme which
are broadly in line with the recommendations on the broad
economic policy guidelines. Among those, the most urgent are
the implementation of a new basic law for the budget, and a
new law on social security pensions. The measures announced
in the area of health care to improve expenditure control and
efficiency are also needed to underpin the process of budgetary
consolidation. A rapid and detremined implementation of these
reforms, some of which were already announced in the original
programme, would therefore be necessary in order
to
strengthen the effectiveness of the economic policy strategy.

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

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