Council opinion of 27 November 2000 on the updated stability programme of Finland for the period 2000-2004
Date: 2000-11-27
Institutions: Council of the European Union
Subjects: Community budget, Finland, coordination of EMU policies, economic convergence, economic policy, multilateral surveillance

C 374/4

EN

Official Journal of the European Communities

28.12.2000

a

foresees

updated

balanced

programme

general
The
government budget by 2004, while the gross debt ratio is
expected to decrease to 54,5 % of GDP by the end of the
programme 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
recognises that the ongoing expenditure restraint has created
some room for the planned tax reforms in the year 2001, while
also recognising that in this year the decline in the revenue
ratio will be higher than the decline in the expenditure ratio.
However, with these reforms leading to a clear deterioration in
the actual deficit in 2001 and in the structural deficit in years
recommendation to
2001/2002,
reiterates
to
the reforms with greatest caution so as not
implement
provoke a lasting deterioration in the structural deficit.
In
this context,
it is important that expenditure is kept under
strict control.

the Council

its

The Council considers that the objective for the medium-term
budgetary position, set for 2002 and subsequent years, will be
in conformity with the Stability and Growth Pact.

Moreover, the Council considers that the programme is broadly
the broad economic
in line with the recommendations of
policy guidelines. The Council recommends, however,
that,
should tax revenues be higher than expected, they be used to

reduce the deficit below the targeted level with a view to
widening the safety margin in line with the broad economic
policy guidelines. Thereby it should be ensured that no further
pro-cyclical stimulus is provided to the economy which in turn
might pose a threat to price stability.

Regarding government debt, the Council welcomes the fact
that, owing to the improved position of government finances,
the trend of a rising debt ratio has been broken. In view of the
the
foreseeable challenges associated with the ageing of
German population, continued privatisation efforts at all
levels of government would help achieve the programme’s
medium-term debt objectives.
the Council
welcomes the fact that the government will use all of the
UMTS proceeds to reduce debt. While welcoming the federal
government’s plans to use part of the resulting interest savings
to increase investment spending, the Council considers that, in
light of the non-negligible risks to the budgetary projections, it
would be appropriate not to spend all of the resulting interest
savings.

In this context,

The Council welcomes the fact that the tax reforms are inserted
in a medium-term oriented comprehensive economic reform
the pension system and of
strategy. Continued reforms of
improve the
labour and product markets could further
potential growth path not only of Germany, but of
the
euro-zone as a whole.

COUNCIL OPINION

of 27 November 2000

on the updated stability programme of Finland for the period 2000-2004

(2000/C 374/03)

THE COUNCIL OF THE EUROPEAN UNION,

After consulting the Economic and Financial Committee,

Having regard to the Treaty establishing the European
Community,

HAS DELIVERED THIS OPINION:

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,

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

On 27 November 2000 the Council examined Finland’s
the period
updated stability programme, which covers
2000-2004. The Council notes with satisfaction that
the
Finnish general government surplus, registered since 1998,
increased in 1999, and is projected to exceed 4 % of GDP
throughout
general
the period 2000-2004, while
government debt to GDP ratio is projected to continue to
decline. Moreover,
the updated
programme is consistent with the broad economic policy
guidelines.

the Council considers that

the

28.12.2000

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Official Journal of the European Communities

C 374/5

the projections then made, with all

The Council welcomes the overall record of implementation of
the 1999 updated programme, although it noted that
the
improvement in the budget surplus actually achieved in 1999
and the reduction in government debt both fell some way short
three subsectors of
of
in the
general government contributing to the shortfall
overall surplus and with lower revenue than expected.
In
addition,
inflationary pressures have emerged. The rise in
domestically generated inflation appears linked to a corre-
sponding rise in inflation in the service sector.

The macroeconomic scenario presented in the latest updated
stability programme includes strong economic growth in 2000
internal and external demand.
due to continued robust
Thereafter, GDP is assumed to decelerate from 2001 for the
remainder of the projection period. The central characteristic of
a medium-term slowing down in the economy appears
plausible, taking into account the rapid recent growth of the
Finnish economy and the strains on capacity already evident in
certain areas. The risk remains that the economy may overheat
and that excessive demand may add to inflationary pressures.
The Council considers that moderate wage developments will
be crucial in this respect.

As already referred to in the 2000 broad economic policy
guidelines,
fiscal
stance in Finland is necessary to contain risks of overheating.

the Council also considers

that a tight

Subject to this, the Council commends the fiscal strategy of the
updated stability programme. This
consolidates previous
programmes and aims to maintain surpluses around 4,5 % of
GDP through a reduction in government expenditure in
relation to GDP but at the same time reduces the tax burden.

The underlying budgetary position corresponding to the 4,5 %
expected surplus for 2000 will allow Finland to continue to
fulfil the requirements of the Stability and Growth Pact. The
Council considers that continued fiscal restraint embodied in
the updated programme is justified in view of the future effects
of population ageing on pensions and health care costs, to
which Finland is particularly exposed.

the commitment

in the updated
The Council welcomes
programme to continued structural
reforms. Reforms are
particularly important in promoting the government’s central
objective of raising employment and at the same time safe-
guarding price stability. Fiscal reform, reducing the still heavy
overall taxation and social contribution burden on labour, can
reinforce this potential. Concerns remain that the structure of
the pension system contains disincentives for older workers to
remain in the labour market and that pension system funding
may need to be strengthened in the face of rapid ageing. The
reductions in government expenditure and revenue relative to
GDP anticipated in the programme and continued structural
reforms should both help to increase employment.

RESOLUTION OF THE COUNCIL AND OF THE REPRESENTATIVES OF THE GOVERNMENTS OF
THE MEMBER STATES, MEETING WITHIN THE COUNCIL,

of 14 December 2000

on the social inclusion of young people

(2000/C 374/04)

COUNCIL

THE
THE
GOVERNMENTS OF THE MEMBER STATES, MEETING WITHIN THE
COUNCIL

REPRESENTATIVES OF

AND

THE

Whereas:

(1) Article 2 of

the Treaty

the European
Community gave the Community the task of promoting
throughout the Community a harmonious, balanced and
sustainable development of economic activities and a

establishing

high level of employment and of social protection and the
raising of the standard of living and quality of life.

(2) Article 136 of the said Treaty assigned to the Community
and the Member States the particular objectives of
the
promotion of employment,
improved living and working
conditions and the combating of exclusion.

(3) Article 149 of the said Treaty provides for action by the
Community to be aimed in particular at encouraging the
development of youth exchanges and of exchanges of
socio-educational instructors.