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

26.2.2002

EN

Official Journal of the European Communities

C 51/1

I

(Information)

COUNCIL

COUNCIL OPINION

of 12 February 2002

on the updated stability programme for Germany, 2001-2005

(2002/C 51/01)

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 for Germany which covers the period
2001-2005. The Council notes that the new update broadly
complies with the requirements of the revised (cid:145)code of conduct
stability and converge
on the
programmes(cid:146) (2), although there is some need for improvement,
notably regarding the use of rounding.

and format of

content

The Council notes that the estimated deficit outcome for 2001
(2,6 % of GDP) is clearly higher than projected in the October
2000 update (1,5 % of GDP). The Council acknowledges that
this important nominal divergence can be explained by the
weakening in growth, with 2001 GDP growth more than
the October 2000
two points below the projections of
update of
the programme. While the federal government
implemented the budget as planned, the Council notes that
the deficit outcome of other levels of government, including
social security, is higher than estimated.

The baseline macroeconomic
the updated
programme expects annual output growth of 1,25 % in
the period 2003-2005 annual average output
2002;

scenario of

for

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

growth is estimated to accelerate to some 2,5 %; the general
government finances are expected to improve from a deficit of
2,5 % of GDP in 2001 to a balanced position in 2004 and
2005. The Council notes that with the presentation of the
annual economic report on 30 January 2002, the German
authorities now consider the alternative scenario contained in
in line with the
the programme to be realistic.
Commission autumn forecast
for 2001 and 2002. For the
years 2003 to 2005 it assumes an annual growth rate of
2,25 % on average. The Council concurs that this lower-growth
scenario is plausible. Even this scenario is conditioned on a
favourable external and internal environment, notably the
expected pick-up of world economic growth, continued wage
moderation and enhanced structural reform efforts, especially
in the labour market.

is

It

The Council considers that,
if growth turns out lower than
expected, there is a risk that the general government deficit
in 2002 comes even closer to the 3 % of GDP reference value
than in 2001. Therefore, the Council welcomes the German
Government’s determination to ensure that the 3 % of GDP
reference value will not be breached. To this end,
the
to closely monitor budgetary devel-
government
including the
opments at all
and to
(L(cid:228)nder)
States
implement
this year carefully in
order to avoid any further deterioration in the deficit. It is
also prepared to find the most appropriate ways to counter
any shortfall; and to avoid any measures likely to lead to a
further deterioration in the government deficit.

levels of government in 2002,
social
and the

the budgetary plans for

security system;

intends

The German Government has confirmed its intention to take
all appropriate measures to reach a close to balance budget
position by 2004, in accordance with previous commitments,
so as to comply with the requirements of the stability and
growth pact from that year onwards. This may require, once
the economic recovery is established, discretionary measures in
addition to those included in the 2001 updated stability
programme.

Sound public finances should be supported by the decisive
implementation of structural reforms geared at improving the
growth potential of Germany,
in the labour
market and in social security and benefit systems. This is all
the more important as the German economy is still burdened
with the financing of the reunification process, and, despite its
large size, remains highly vulnerable to external shocks.

in particular

C 51/2

EN

Official Journal of the European Communities

26.2.2002

The Council urges the German authorities to ensure strict
budgetary implementation at all
levels of government. As
shown once again by the budgetary outcomes for 2001, this
will be crucial to attain the projected deficit targets. While the
Council welcomes the recently implemented change to the law
on budgetary principles, stating that all levels of government
should contribute to the achievement of
the medium-term
budgetary targets, the mechanism enshrined therein is not yet
sufficient
to guarantee compliance with mutually agreed
objectives by all levels of government. The Council therefore
welcomes the intention of the federal government, through
agreements with the regional authorities,
to make every
effort to ensure that the abovementioned budgetary objectives
are met.

The Council notes with satisfaction that the German authorities
will continue in their efforts to bring the debt level down
below the Treaty’s reference value. However,
in view of the
significant pressures for increased public spending due to an
ageing population, the slow decline in the debt ratio remains a
source of concern given the need to ensure the sustainability of
If debt reduction is to make a noticeable
public finances.

contribution towards meeting the budgetary cost of ageing
populations, a balanced budget position must be reached as
soon as possible. In addition to intensified budgetary consoli-
dation efforts the recently implemented reform of the pension
system is a step in the right direction. This needs to be comple-
mented by structural reforms geared towards a rise in labour
market participation rates, particularly of women and older
workers. Such measures
soon as
possible, given that the budgetary impact of ageing populations
will take hold soon.

should be enacted as

The 2001 update does not contain projections on the
long-term sustainability of public finances in line with the
revised code of conduct. The programme provides detail on
the recent pension reform. While these reforms are a step in
the right direction,
further reforms may be needed in the
future. Raising employment rates, especially amongst women
and older workers, will form a key part of any overall strategy
to prepare for ageing populations. The key challenge facing
Germany is to achieve a position of budget balance and
thereafter to sustain it over the very long-run.

COUNCIL OPINION

of 12 February 2002

on the 2001 update of Ireland’s stability programme, 2002-2004

(2002/C 51/02)

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
Ireland’s stability programme, which covers the period
of

(1) OJ L 209, 2.8.1997.

2002-2004. The update broadly complies with the revised
(cid:145)code of conduct on the content and format of stability and
convergence programmes(cid:146) (2), although some data are not in
line with EU standards. The Council notes that the macro-
economic scenario in the update envisages a deceleration
from record real GDP growth of 11,5 % in 2000 to just
under 7 % in 2001 followed by below 4 % in 2002 and a
recovery to Ireland’s medium-term sustainable growth rate of
about 5 to 6 % thereafter.

The general government surplus for 2001 is expected to be
close to 1,5 % of GDP, more than 2,5 percentage points lower
than budgeted, and this is largely blamed on the economic
downturn. The Council regrets that
this under-performance
has apparently resulted in a downward shift in the projected
path for the general government balance in the new update
from 2002 onwards. The Council notes that the budgetary
path in the new update does not
follow the previous
approach of high surpluses and a further reduction of the
debt ratio. The update targets a surplus of 0,7 % of GDP in
2002 (0,2 % of GDP excluding the transfer from the Central

(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.