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

26.2.2002

EN

Official Journal of the European Communities

C 51/9

a number of

The Council urges the Portuguese authorities to ensure strict
sectors of government.
budgetary implementation for all
Moreover,
reforms have been
announced in the programme update, particularly in some
areas with a direct impact on public finances, whose timely
and determined implementation will be paramount
for a
successful
the budgetary consolidation
strategy.

implementation of

important

The Council notes that the debt ratio remains clearly below the
60 % ceiling, but has been revised upwards throughout the
programme period. Only part of
revision can be
explained by the developments of the government deficit and
GDP growth. The Council
invites the authorities to provide
more detailed information on financial operations in future

this

programme updates in order to allow a better understanding
of debt developments.

the

contribution

the sustainability of government
The Council notes
that
the budgetary
finances should be strengthened in light of
costs of ageing populations. If debt reduction is to make a
noticeable
of
towards
government finances, the target of a balanced budget position
by 2004 must be reached. In addition, structural reforms are
the
necessary to strengthen the financial
pension system. The Council notes with satisfaction that the
reform of the pension system recently agreed by the social
partners goes
in the right direction. The main challenge
facing Portugal is to complete the process of pension reform
and to continue with the reforms of the health-care sector.

sustainability of

sustainability

COUNCIL OPINION

of 12 February 2002

on the updated stability programme of Spain, 2001-2005

(2002/C 51/08)

THE COUNCIL OF THE EUROPEAN UNION,

theless more
complete
projections would have been desirable.

information regarding

long-term

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),

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

The Council notes with satisfaction that implementation of the
previous update has been broadly on track despite weaker
growth. After a deficit of 0,3 % of GDP in 2000, the target
of a general government balanced budget in 2001 is expected
to have been reached and the debt
ratio objective over-
achieved. The achievement of the fiscal targets for 2001 was
helped by stronger than planned containment of expenditure
and higher than expected nominal GDP. Taking into account
the worsening in the international environment, the update
centrally projects GDP growth slowing to 2,4 % in 2002 but
from 2003.
to resume at a 3 % rate, close to potential,
the
Although somewhat optimistic
medium-term outlook is plausible, given recent performance
and the ongoing catching-up process. The inflation projection
also seems attainable, helped by the recent agreement among
social partners aimed at wage moderation, though it would be
advisable to end indexation in wage bargaining in line with last
year’s Council Opinion.

in the

term,

short

On 12 February 2002 the Council examined Spain’s updated
stability programme covering the 2001-2005 period. The
information provided in the updated programme is broadly
in line with the revised (cid:145)Code of conduct on the content and
format of stability and convergence programmes(cid:146) (2). Never-

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

Budgetary consolidation for the period 2002-2005 is based on
primary current expenditure restraint and lower
interest
charges while government investment is set to increase and
the tax burden to moderate slightly. Despite the current
economic slowdown, the update extends a balanced budget
target
to 2002 (and 2003) and targets small surpluses in
2004 and 2005, of 0,1 % and 0,2 % of GDP respectively. The
debt ratio is set to continue declining, reaching 50 % of GDP
by 2005.

C 51/10

EN

Official Journal of the European Communities

26.2.2002

appear
The medium-term budgetary projections overall
revenue growth and
prudent, with cautious estimates of
reductions
room of
charges,
in interest
manoeuvre in case less positive developments materialise;
intentions on implementing the necessary control of primary
current expenditure are not, however, detailed.

giving

some

including their evaluation in
The targets in the programme,
the (cid:145)close-to-balance or
respect
cyclically adjusted terms,
surplus(cid:146) objective of the stability and growth pact throughout
the period. The Council therefore considers that the updated
stability programme is in conformity with the provisions of the
stability and growth pact, with the targets indicating respect of
the objective with an increasingly comfortable margin. The
fiscal stance, defined as the change in the cyclically adjusted
balances, implies a mild tightening, broadly in line with the
recommendations
in the 2001 broad economic policy
guidelines.

The Council welcomes important developments in Spain’s insti-
tutional budgetary setting, notably the recently approved
General Law of Budgetary Stability and the 2002 budget
reforms which have transferred important tax and spending
powers to regional authorities. Although the Council does
not advocate any specific form regarding the necessary
internal
territorial
governments,
the involvement of all government subsectors
is
in maintaining budgetary discipline is welcome, and it
important that the existing coordination should also operate
efficiently under the new arrangements.

coordination

between

central

and

Structural reforms implemented in 2001 essentially stem from
the package approved in June 2000 aiming at further deregu-
lating markets and strengthening the competition authority.

The Council notes that the updated programme does not give
more detailed information on measures
to be taken to
strengthen the long-term sustainability of the public finances.
This is of particular concern given Spain’s exposed demo-
graphic profile and the adverse budgetary consequences of
ageing. The risk of serious imbalances in the long term
cannot be excluded unless appropriate measures are imple-
mented. The budgetary impact of ageing is not adequately
reflected in the update’s projections of pension expenditure
and social security contributions which extend only to 2015.
The announced intention to reform the pension system lacks a
detailed calendar. The Council considers that
the pension
system measures adopted in April 2001 did not represent the
significant positive reforms advocated in its Opinion on the
previous update. The main measure recently adopted to deal
with ageing is the social security fund created in 2000, assets
of which are planned to reach at least 1 % of GDP by 2004.

Finally, the Council welcomes the important role to be played
by other structural policies, particularly in the market for goods
and services, in ensuring non-inflationary employment-oriented
consistent with the broad
growth. These measures
economic policy guidelines. Those implemented so far should
be closely monitored and if necessary strengthened.

are