Council Opinion of 12 February 2001 on the updated convergence programme of Denmark, 2000-2005
Date: 2001-02-12
Institutions: Council of the European Union
Subjects: Denmark, coordination of EMU policies, economic convergence

C 77/4

EN

Official Journal of the European Communities

9.3.2001

COUNCIL OPINION

of 12 February 2001

on the updated convergence programme of Denmark, 2000-2005

(2001/C 77/04)

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 9(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

government

On 12 February 2001 the Council examined Denmark’s
updated convergence programme, which covers the period
2000-2005. The updated convergence programme foresees
between
general
2,6-2,9 % of GDP over the entire period and projects the
gross consolidated debt to be reduced to 34 % of GDP in
2005. In 2000 the budget surplus turned out to be higher
than earlier projected and amounted to 2,7 % of GDP, mainly
due to stronger-than-expected growth.

budgetary

surpluses

of

assumptions on productivity rises

The macroeconomic
scenario assumed in the updated
programme projects real GDP growth, following an upward
revision to 2,4 % in 2000, to slow down to around 1,7 %
annually for 2001-2005. The Council notes that this growth
scenario has been lowered from the previous update and that
the programme’s
are
moderate by international comparisons. Given the robust
in
performance of
particular
in equipment, and the
investment
structural reforms undertaken, a somewhat stronger growth
and productivity performance could be expected. Moreover,
such moderate productivity rises could imply a further loss
in cost competitiveness for Danish companies if relative wage
increases again turn too high.

the Danish economy in recent years,

the buoyant

The inflation rate started to rise in 1999 and has remained
relatively high in 2000. The updated programme expects
inflation to gradually decline up to 2002 as externally
induced price rises should taper off and wage growth should
turn slightly more moderate in the light of a weaker domestic
the
demand growth. While
inflationary outlook, as assumed in the updated programme,
seems plausible, the Council reiterates its recommendation to

the Council

considers

that

the Danish Government
significant upward deviations (2),
the more
monetary
inflationary pressures.

to take further actions in case of
including budgetary ones,
the
addressing

so as ERM2 membership clearly limits
policy’s

room of manoeuvre

in

to fulfil

The Council notes with satisfaction that Denmark has
criterion on the
continued
long-term interest
the exchange rate has
remained stable vis-(cid:224)-vis the euro, also after the referendum
on 28 September 2000.

rate and that

convergence

the

Regarding government finances, the Council welcomes that the
Danish authorities maintain their ambition of large budgetary
surpluses. As a result, Denmark continues clearly to fulfil the
requirement of the stability and growth pact of a budgetary
position of
(cid:145)close to balance or in surplus(cid:146) over the entire
period covered by the programme.

The budgetary consolidation strategy outlined in the previous
update of the programme is largely upheld, with a declining
primary expenditure to GDP ratio and tax burden over the
programme period. However, for the year 2001 the updated
programme projects a small
increase in both the primary
expenditure ratio and the tax burden. The Council would
have preferred that the decline in both ratios was implemented
without disruption.

The Council calls on all levels of general government to make
efforts to limit the real increase in public consumption to the
target of an annual 1 %. Furthermore,
in 2001 local and
regional governments are expected to raise taxes clearly
above the agreements with the central government. As these
agreements
of
levels
in public
government,
consumption and taxes, frequently have been exceeded in the
past, the Council invites the Danish Government, in line with
the recommendations in the broad economic policy guidelines,
to avoid further
to strengthen the institutional
slippage in the future.

central
restricting

lower
increases

between the

framework,

aiming

and

at

The Council welcomes the Danish authorities’ ambition to
to
continue substantially to lower the ratio of gross debt
GDP with a view to preparing for the forthcoming financial
burden of an ageing population. The focus on longer-term
sustainability issues in the updated programme is welcomed
and the Council encourages
to
continue its efforts in preparing to cater for the ageing popu-
lation.

the Danish Government

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

(2) Council opinion of 28 February 2000 on the updated convergence

programme of Denmark for the period 1999 to 2005.

9.3.2001

EN

Official Journal of the European Communities

C 77/5

invites the Danish authorities to maintain the
The Council
prominent place of structural reforms on the policy agenda.
In particular, efforts
supply could prove
to raise labour
necessary. The Council therefore encourages the authorities to
consider lowering taxes on labour income also beyond 2002,

for which a tax reduction is already planned. However, given
that the Danish economy currently seems to be operating at a
level slightly above its potential, such a tax cut would need to
be compensated by offsetting budgetary measures in order not
to add to the risk of overheating.

COUNCIL OPINION

of 12 February 2001

on the updated stability programme of France, 2002-2004

(2001/C 77/05)

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,
stability programme of France which covers
2001-2004.

the Council examined the updated
the period

Economic growth has been robust over the past two years,
broadly in line with the projections of
the 1999 updated
stability programme. In 2000, the French economy registered
a third consecutive year of strong GDP growth with relatively
low inflation. The unemployment rate continued to decline and
reached 9,2 % in November, down from 10,9 % one year
in unemployment, wage and
earlier. Despite this sharp fall
price
very moderate. Headline
remained
inflation increased from 0,5 % in 1999 to 1,7 % in 2000
mainly due to higher oil prices.

developments

The Council notes
that, building on a more favourable
outcome than expected in 1999 and an expenditure growth
slower than initially projected, the general government deficit
for 2000, estimated at 1,4 % of GDP, will be lower than
ratio in 2000,
the government debt
initially expected;

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

estimated at 58,4 % of GDP, was also lower than targeted by
one percentage point. The broad economic policy guidelines
which aim at using better than expected revenues to achieve
faster
the
reduction in the government deficit. Therefore,
Council
finds that a better budgetary outcome could have
been achieved in 2000, taking into account the favourable
economic and public finances developments.

in which potential growth stays at

The budgetary projections of
the updated programme are
based, as in the past, on two macroeconomic scenarios, a
its
scenario,
cautious
current
level of 2,5 % a year, while in the favourable
scenario, potential output is estimated to gradually increase
to 3 % due to stronger investment and employment growth.
From 2001, real GDP growth is projected to follow one of the
two non-inflationary scenarios. The favourable one is presented
as the economic policy target and the most likely projection. In
both cases, inflation is projected to stay at a low level over the
entire period.

The Council considers that the two macroeconomic scenarios
of the programme provide a plausible range of values for GDP
growth between 2002-2004 and that
the macroeconomic
performance of France in recent years indicates a probable
rise in the capacity of the French economy to sustain higher
non-inflationary growth than in the past, resulting from a rise
in capital accumulation and a fall in structural unemployment;
the Council considers,
the macro-
in view of
economic projections of the favourable scenario as attainable.

the above,

scenarios. These developments

The updated programme is projecting a general government
surplus of 0,2 % of GDP in 2004 under
the favourable
scenario and a deficit of 0,5 % under the cautious one. The
government debt ratio is expected to decrease from 58,4 % in
2000 to 54,5 % or 53 % according to the alternative macro-
economic
reflect mainly
structural progress; however, the Council regrets that a deficit
the
remains in 2004 under the cautious scenario. Even if
projected budgetary position provides an adequate safety
margin against breaching the 3 % of GDP deficit threshold in
normal circumstances (cid:151) in conformity with the requirements
of the stability and growth pact (cid:151) the Council considers that
the French Government should seek a situation of budgetary
balance in 2004 also under the cautious scenario and to
advance the timing of budgetary surplus ahead of 2004
under the favourable one. This would be in line also with its
recommendation on the 1999 updated stability programme.