Council Opinion of 12 February 2002 on the updated stability programme of Italy, 2001-2005
Date: 2002-02-12
Institutions: Council of the European Union
Subjects: Italy, economic stabilisation

C 51/6

EN

Official Journal of the European Communities

26.2.2002

COUNCIL OPINION

of 12 February 2002

on the updated stability programme of Italy, 2001-2005

(2002/C 51/05)

The budgetary targets in 2002 and 2003 rely heavily on
one-off measures,
in particular the sale of publicly-owned
real assets, while few details are provided on the planned
sizeable reduction in non-interest expenditure in percentage
of GDP over the programme period. The Council remarks
that the extensive recourse to one-off operations in a cyclical
downturn should be complemented by measures aimed at
restraining primary current expenditures, which need to be
clarified.

that

The Council observes
the projected medium-term
budgetary position of close to balance or in surplus from
2003 onwards
the
stability and growth pact. The Council notes that there is a
margin to avoid breaching the 3 % of GDP deficit threshold
throughout the programme period.

in line with the requirements of

is

that

The Council considers it essential
the balanced fiscal
position over the medium term is achieved as planned and
that
the required high levels of primary surpluses in the
order of 5 % of GDP are secured by measures aimed at a
lasting reduction of primary current expenditures. The careful
design and timely implementation of such measures is all the
more important in the light of the challenges arising from the
planned reform of taxation, which should result in a further
significant reduction of the tax burden. The Council urges Italy
to adopt rules allowing for a more effective monitoring and
control of current outlays at all levels. It further recommends
that Italy stand ready to keep fiscal consolidation on course
the programme’s high trend
after 2003 in the event
growth assumptions are not supported by actual developments.

that

The Council observes that Italy’s capacity to absorb age-related
imbalances depends crucially on maintaining high primary
surplus over the long term and large increases in labour
force participation rates. Reforms of the pension system so
far helped to contain the growth in pension expenditures.
The Council encourages Italy to accelerate the implementation
of the pension reform to control expenditure and to promote
supplementary private pension provisions, as stated in the
programme. Moreover it notes the key importance of labour
market reforms and of accelerating the reduction in the debt
ratio, in view of the necessity to increase participation ratios
and provide in advance for competing claims on public
resources.

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 2002 the Council examined Italy’s updated
stability programme, which covers the period 2001-2005.

The new update broadly complies with the requirements of the
revised (cid:145)code of conduct on the content and format of stability
and convergence programmes(cid:146) (2), although some minor incon-
sistencies exist in the aggregation of expenditures and revenues
in ESA 95 terms.

to continue to
The Council welcomes Italy’s commitment
secure high primary surpluses throughout
the programme
period, while allowing for some easing in the tax burden. It
further notes with satisfaction the confirmation of the previous
updated programme’s objectives for the general government
balance in 2002 and 2003.
It welcomes in particular the
balanced budget
in the latter year. Notwithstanding lower
than expected growth and in compliance with the 2001
for 2001 only slightly exceeds
BEPGs,
the original objectives. While acknowledging the market.
Related difficulties in meeting the privatisation objectives, the
Council regrets, that the reduction of the debt ratio below
100 % of GDP is now postponed by one year in contrast
with Italy’s commitments since 1998.

the projected deficit

expected to steady at

The programme’s macroeconomic scenario assumes an accel-
eration of real GDP growth already at the end of 2001, with a
further strengthening in 2003 and beyond, when economic
is
growth is
supported by structural reforms. However, in the short term,
the macroeconomic scenario is based on external assumptions
which do not sufficiently reflect the deterioration in the global
economic outlook observed during 2001. Hence, the Council
observes that the risks to the macroeconomic scenario are
mainly on the downside.

around 3 %. This

(1) OJ L 209, 2.8.1997.
(2) Revised Opinion of the Economic and Financial Committee on the
content and format of stability and converge programmes, endorsed
by the Ecofin Council on 10.7.2001.