Council Opinion of 12 February 2002 on the updated stability programme of Greece, 2001-2004
Date: 2002-02-12
Institutions: Council of the European Union
Subjects: Greece, economic stabilisation

26.2.2002

EN

Official Journal of the European Communities

C 51/5

COUNCIL OPINION

of 12 February 2002

on the updated stability programme of Greece, 2001-2004

(2002/C 51/04)

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 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 2001 update
of the stability programme of Greece, which covers the period
2001-2004.

Real GDP growth remained robust in 2001, at 4,1 %, although
lower than projected in the 2000 stability programme, as a
the deterioration in the external environment.
result of
Inflation resurgence under the impact of
increasing energy
prices in 2000 started to decelerate since summer 2001 but
the improvement might weaken in the coming months. The
general government accounts are estimated by the updated
programme to reach a 0,1 % of GDP surplus
in 2001
(including non-budgeted UMTS receipts of 0,4 % of GDP)
instead of 0,5 % of GDP as projected in the 2000 stability
programme.

The updated stability programme projects annual real GDP
the period
growth of around 4 % in yearly average for
2002-2004 as against 5,4 % in the 2000 stability programme.
The Council considers the projected real GDP growth, which
should be underpinned by high private and public investment,
as attainable. The Council notes that the budgetary projections
remain in surplus throughout the period of the programme in
both actual and cyclically adjusted terms and that they respect
the close to balance or surplus requirement of the stability and
growth pact.

The Council notes that the government debt ratio is currently
expected to decline from 99,6 % of GDP in 2001 to 90,0 % of
GDP in 2004 instead of 84,0 % of GDP as projected in the
2000 stability programme. The Council also notes that the
improvement in the government balance in the period from
2002 to 2004 primarily relies on the steady reduction in
in current
interest payments;
the ratio of
primary expenditure is expected. Furthermore,

in contrast, no retrenchment

the general government primary surplus to GDP, although
reaching a high level until 2004, progressively declines
throughout the period. The Council strongly encourages the
Greek authorities to set promptly a clear binding norm for
current primary expenditure as it was recommended in its
opinion on the 2000 stability programme (2).

The Council considers it is appropriate to keep high primary
surpluses above 6 % of GDP and to pursue, if necessary, further
budgetary adjustment effort, taking into account the high level
In the short-term, vigilance should be maintained
of debt.
regarding price developments in particular with respect
to
the forthcoming wage negotiations. Furthermore, taking into
consideration the still very high level of the government debt
ratio, as well as the perspective of increasing budgetary costs
stemming from the ageing population, the Council urges the
Greek Government to take advantage of the current favourable
macroeconomic situation to reduce the government debt as fast
as possible. The Council notes that the debt reduction foreseen
in the programme is much slower
than what would be
warranted by expected GDP growth and the projected
to
primary surplus. The Council
provide more detailed information on financial operations in
future programme updates in order to allow a better under-
standing of debt developments.

the authorities

invites

The Council notes that strengthening structural reforms is a
key economic policy objective of the updated programme; the
Council considers that although considerable progress has been
made in recent years in this area, implementation of structural
reforms must continue in the product, services and labour
markets in order to enhance the efficiency of markets and
the competitiveness of the economy; the Council encourages
the government to proceed to the necessary reforms rapidly.
The Council welcomes the intention of
the government to
implement reforms in the area of budgeting and management
of expenditure in the public sector.

The Council welcomes the information provided in the updated
programme on long-term sustainability of public finances. The
Council considers that there is a serious risk of budgetary
imbalances emerging in the future due to the ageing popu-
lation and that there is a need to reform the public pension
system. The Council notes that no progress was made in this
area in 2001 and that
the updated programme does not
include any specific plans or timetable for pension reform.
The Council recommends that the government proceeds to
the reform of the pension system with no further delay.

(1) OJ L 209, 2.8.1997.

(2) OJ C 77, 9.3.2001.