Council Opinion of 12 February 2001 on the updated stability programme of Austria, 2000-2004
Date: 2001-02-12
Institutions: Council of the European Union
Subjects: Austria, coordination of EMU policies, economic convergence

C 77/6

EN

Official Journal of the European Communities

9.3.2001

fiscal

improving the functioning of

real expenditure growth; however,

The Council welcomes that an important tax reform is being
trend.
implemented without compromising the global
This reform is in line with the recommendations of
the
broad economic policy guidelines concerning the measures
the labour market.
aimed at
the budgetary strategy based on
The Council commends
control of
the Council
considers
that a budgetary policy based on expenditure
ceilings requires an effective system to rein in spending as
soon as any slippage is detected especially in the field of
health care expenditure; consequently the Council invites the
French Government to introduce the appropriate mechanism
enabling the respect of the expenditure norms. The Council
notes
the increase in expenditure included in the
Finance Law for 2001, 1,8 % in real terms, accounts for a

that

significant part of the norm for the cumulated increase for
the period 2001 to 2003 fixed at 4 % in real terms in the
1999 updated programme. Moreover the Council notes that
the norm for the cumulated increase in expenditures has
spending being allowed to
been revised upwards,
increase by 4,5 % in real terms from 2002 to 2004. In the
view of the Council, a lower increase in expenditure would be
desirable to allow a faster reduction in the government deficit.

real

that

considers,
should be used,

available budgetary
further,
The Council
margins
in
as
strengthening the budgetary position and preparing for future
challenges, notably the budgetary burden from the ageing of
population.
further progress with pension
reform would be welcome.

a matter of priority,

In this respect,

COUNCIL OPINION

of 12 February 2001

on the updated stability programme of Austria, 2000-2004

(2001/C 77/06)

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 12 February 2001 the Council examined the updated
stability programme for Austria which covers
the period
2000-2004.

The updated programme envisages a decline in the general
government budget deficit from 1,4 % of GDP in 2000 to a
balanced position in 2002 and the following years. The
government gross debt is expected to decrease from 61,1 %
of GDP to below the 60 % reference value in 2002 and
further to 55,3 % in 2004. The Council notes with satisfaction
that, in compliance with its recommendation on the previous
update of the programme (2), the current programme envisages
a much faster reduction of the government deficit. Moreover,
the Council acknowledges that the budgetary goals are to be
achieved without resorting to the one-off measures included in
the previous update.

(1) OJ L 209, 2.8.1997, p. 1.
(2) OJ C 162, 10.6.2000, p. 1.

that,

in spite of higher-than-projected
The Council notes
growth, the estimated deficit for 2000 in the current update
is not lower than projected in the previous programme once
originally unbudgeted universal mobile telecommunications
system (UMTS) proceeds are excluded. The Council recom-
mended in its opinion on the previous update and in the
recommendations of the June 2000 broad economic policy
guidelines (BEPG)
in the event of higher growth, a
better deficit outcome should be achieved. The available data
do not allow at present a conclusive appraisal of the implemen-
tation of the budget in 2000. If, however, the outcome for the
general government deficit were not lower than the objective
of 1,7 % of GDP, Austria would not have fully complied with
last year’s Council opinion and the BEPG recommendations.

that,

The deficit projections of
the programme are based on a
macroeconomic scenario expecting output growth to decline
from its cyclical peak of 3,5 % in 2000 to 2,3 % in 2003 and
resume to 2,5 % in 2004, amounting to an annual average
growth of 2,6 % over the forecast period.

The Council considers that the expected growth is feasible in
view of the presently good supply and demand conditions for
the Austrian economy.

The underlying budgetary position implicit in the deficit goals
is in line with the requirements of the stability and growth pact
from 2001 onwards,
i.e. they provide Austrian Government
finances with a large enough safety margin to withstand a
normal cyclical downturn without breaching the 3 % of GDP
reference value for the deficit. The Council notes with satis-
faction that,
the
stability and growth pact is now respected earlier, which is
appropriate in view of
the currently favourable economic
conditions.

in accordance with its recommendations,

9.3.2001

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Official Journal of the European Communities

C 77/7

However, the Council notes that in the initial years of the
programme the deficit reduction relies heavily on revenue
side measures. As a consequence,
the already high tax
burden in Austria rises further in 2001, thereby more than
the income tax reform 2000. The
offsetting the effects of
Council,
to
the Austrian Government
consider measures which permit a significant decline in the
tax burden,
especially on labour, while preserving the
budgetary adjustment path.

therefore,

invites

those

strictly

envisaged

in
contingent

including
be made

reductions,
should

the
revenue
programme,
on
compensatory expenditure cuts. In light of the medium- and
longer-term challenges to public finances, due not
to
population ageing, and the need to render government
finances more conducive to investment and growth the
Council
to be
considers
continued with determination.

adjustment needs

fiscal

least

that

The Council considers that, to achieve a balanced budget by
2002, a strict budgetary implementation at all
levels of
government is crucial. This seems essential in view of uncer-
tainties regarding the savings estimates of the public adminis-
tration and pension reforms. At the level of the Bundesl(cid:228)nder
the expenditure cuts necessary to achieve the surpluses
required by the national stability pact largely remain to be
defined.

The Council acknowledges that, by 2003, more than half of the
total envisaged consolidation originates
from expenditure
savings. This requires that achievements in budgetary consoli-
dation are locked in and budgetary discipline is maintained in
the years 2003 and beyond. Any additional spending or further

the Council encourages

The Council acknowledges ongoing structural reforms of the
Austrian economy in line with the broad economic policy
guidelines. The recent reform of early retirement is particularly
welcome. However,
the Austrian
Government to continue its reform efforts in order to better
achieve and safeguard sustainable government finances in the
medium and longer term, namely in the pension system and
the health care sector. The Council invites the authorities to
provide more information on this issue in the next update of
the programme. The Council also encourages the Austrian
Government
to continue determinedly with the reforms of
product and capital markets, with a view to enhancing
risk capital and
competition,
improving
corporate
governance.

fostering the provision of
entrepreneurial

dynamism and

COUNCIL OPINION

of 12 February 2001

on the 2000 update of Ireland’s stability programme, 2001-2003

(2001/C 77/07)

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:

the 2000 update. Employment growth in 2000 is estimated at
4,5 %, with the unemployment rate declining further to 4,1 %
on average.
Inflationary pressures have intensified. Average
HICP inflation rose to 5,3 % in 2000. While this upsurge in
price inflation is partly due to external and temporary factors,
which are expected to fall gradually out of the consumer price
index, domestically generated inflation has increased too, house
price inflation remains very high and wages are rising rapidly.

As a result of strong economic growth, the projections in the
1999 update of the stability programme for the improvement
in the budgetary situation were exceeded by a large margin.
The Council welcomes the fact that the general government
balance for 2000 remains in substantial surplus, estimated to
be around 4,7 % of GDP, and that another sharp reduction in
the general government debt ratio was achieved.

On 12 February 2001 the Council examined the 2000 update
of
Ireland’s stability programme, which covers the period
2001-2003.

The Council notes that the Irish economy continues to grow
rapidly in 2000, with real GDP growth of 10,7 % expected in

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

Projections for the period 2001 to 2003 show an average
surplus ratio of 4,2 %, with the debt ratio declining further
to less than one quarter of GDP by 2003. The Council
welcomes the fact that, as in the original programme and its
1999 update, Ireland fully and comfortably fulfils the stability
and growth pact obligations throughout the period covered.
The projected general government surplus is clearly sufficient
in each year to provide a safety margin against breaching the
3 % of GDP reference value in the event of normal cyclical
fluctuations.