Council Opinion of 12 February 2002 on the updated stability programme of France, 2003-2005
Date: 2002-02-12
Institutions: Council of the European Union
Subjects: France, economic stabilisation

C 51/4

EN

Official Journal of the European Communities

26.2.2002

COUNCIL OPINION

of 12 February 2002

on the updated stability programme of France, 2003-2005

(2002/C 51/03)

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 12 February 2002 the Council examined the updated
stability programme of France which covers
the period
2002-2005.

the deficit for that year will stay rather at the same level as in
2000. The deficit remains roughly unchanged in 2000-2003
In spite of a higher than
also in cyclically adjusted terms.
expected deficit in the first few years, a balanced position is
still reached in 2005. Nevertheless, this is one year later than
recommended in the opinion of
last year. The Council
therefore urges the French authorities to use every opportunity
to reach a balanced position in 2004.

The budgetary objectives included in the 2001 update of the
stability programme respect the requirement of close to balance
or in surplus of the stability and growth pact in 2004 and
2005, although only in the latter year a balance in cyclically
adjusted terms is expected. However, the underlying budgetary
position provides a safety margin to avoid breaching the 3 % of
GDP threshold as from 2001 despite the downside risks in the
macroeconomic projections.

a

the

current

(cid:145)cautious(cid:146)

considered to be

The 2001 update of the stability programme projects real GDP
growth at 2,3 % in 2001 and 2,5 % in 2002. From 2003 to
the projections are based on two macroeconomic
2005,
scenarios:
scenario in which GDP growth
level of
averages 2,5 %,
potential growth, and a (cid:145)favourable(cid:146) scenario where real GDP
growth accelerates to 3 %. The general government deficit is
estimated to remain unchanged in 2001 and in 2002 at 1,4 %
the level reached in 2000. From 2003 to 2005,
of GDP,
according to the cautious scenario,
the government deficit
should decline to 1,3 % of GDP in 2003 and 0,5 % of GDP
in 2004; the government balance is expected to be attained in
2005. The budgetary adjustment would be faster should the
favourable scenario materialise, a government balance being
expected in 2004, turning into a 0,3 % of GDP surplus in
2005. The general government debt estimated at 57,1 % of
GDP in 2001 is projected to be lowered in 2005 to 52,9 %
of GDP in the cautious scenario and to 51,8 % of GDP in the
favourable scenario.

a

terms;

in real

expenditure

spending norms,

the spending norm as it was set

The French budgetary strategy is based on predetermined
multiannual
the Council
commends such a strategy, considering that a clear binding
transparent budgetary
secures
norm for
the Council notes that, with macro-
adjustment. However,
in line with official expectations,
economic developments
respect of
in the 1998
stability programme for the period 2000-2002 would have
broadly ensured the projected reduction in the general
government deficit for the same period, despite the implemen-
tation of the tax reform. In particular, the Council notes that,
in 2002, expenditures are planned to increase slightly faster
than recommended in the 2001 broad economic policy
guidelines. The Council welcomes, however, that the multi-
annual spending norm for the period 2003-2005 has now
been reduced to 4 %. The Council encourages the French auth-
orities to fully respect this norm.

The Council considers that
the macroeconomic projections
encompass downside risks in the short term: in more recent
forecasts, real GDP growth is expected not to exceed 2 % in
2001 and 1,5 % in 2002; consequently, the Council notes that
the starting year of
in 2002,
the government deficit
the
favourable than initially
projections
likely to be less
expected. Regarding following years,
the Council considers
in which real GDP growth averages
the (cid:145)cautious(cid:146) scenario,
2,5 % from 2003 to 2005, as the more plausible one.

is

The Council notes that, in the cautious scenario, the general
government deficit is projected to be reduced significantly only
from 2004; the reduction projected for 2003 is marginal and

The Council welcomes the intention to make any reduction in
the tax burden after 2003 conditional on real GDP growth and
on the attainment of a close to balance or in surplus budgetary
position.

The target of moving towards a budgetary balanced position is
a necessary step to placing public finances on a more
sustainable footing in view of the budgetary burden arising
from ageing population in France. The Council notes that the
strategy outlined in the 2001 updated programme to prepare
for this challenge needs more ambition. The Council considers
it necessary that France makes as soon as possible further
progress in the reform of the pension system.

(1) OJ L 209, 2.8.1997.