2003/89/EC: Council Decision of 21 January 2003 on the existence of an excessive deficit in Germany — Application of Article 104(6) of the Treaty establishing the European Community
Date: 2003-01-21
Institutions: Council of the European Union
Subjects: Germany, budget deficit, gross domestic product, public debt

L 34/16

EN

Official Journal of the European Union

11.2.2003

II

(Acts whose publication is not obligatory)

COUNCIL

COUNCIL DECISION

of 21 January 2003

on the existence of an excessive deficit in Germany — Application of Article 104(6) of the Treaty
establishing the European Community

THE COUNCIL OF THE EUROPEAN UNION,

(5)

(2003/89/EC)

Having regard to the Treaty establishing the European Commu-
nity, and in particular Article 104(6) thereof,

Having regard to the Recommendation from the Commission
under Article 104(6) of the Treaty,

Having regard to the observations made by Germany,

Whereas:

(1)

(2)

(3)

(4)

In stage three of economic and monetary union (EMU),
according to Article 104 of the Treaty Member States
should avoid excessive government deficits.

The Stability and Growth Pact is based on the objective
of sound government finances as a means of strength-
ening the conditions for price stability and for strong
sustainable growth conducive to employment creation.

The Amsterdam Resolution of the European Council on
the Stability and Growth Pact of 17 June 1997 solemnly
invites all Parties, namely the Member States, the Council
and the Commission, to implement the Treaty and the
Stability and Growth pact in a strict an timely manner.

The excessive deficit procedure under Article 104
provides for a Decision on the existence of an excessive
deficit. The Protocol on the excessive deficit procedure
annexed to the Treaty sets out further provisions relating
to the implementation of the excessive deficit procedure.
Council Regulation (EC) No 3605/93 of 22 November
1993 on the application of the Protocol on the excessive
deficit procedure annexed to the Treaty establishing the
European Community (1), lays down detailed rules and
definitions for the application of the provision of the
said Protocol.

(1) OJ L 332, 31.12.1993, p. 7. Regulation as last amended by
Commission Regulation (EC) No 351/2002 (OJ L 55, 26.2.2002, p.
23).

Article 104(5) of the Treaty requires the Commission to
address an opinion to the Council
if the Commission
considers that an excessive deficit in a Member State
exists or may occur. The Commission has addressed
such an opinion on Germany to the Council on 8
January 2003. According to this opinion:

— following the publication of its own Autumn forecast
on 13 November 2002, which showed a government
deficit of 3,8 % of GDP in 2002 for Germany, the
Commission,
in accordance with Article 104(3) of
the Treaty, prepared in November 2002 a report on
Germany which takes account of the relevant factors,

— in accordance with Article 104(4) of the Treaty, the
Economic and Financial Committee has formulated
an opinion on the report of the Commission,

— Germany has

submitted

an updated

Stability
Programme in accordance with Article 3 of Council
Regulation (EC) No 1466/97 of 7 July 1997 on the
strengthening of the surveillance of budgetary posi-
tions and the surveillance and coordination of
economic policies (2), which had been adopted by
the Federal government on 18 December 2002.
According to the update, the government deficit in
2002 amounted to 3,75 % of GDP,

— the Commission considers that there exists an exces-

sive deficit in Germany.

(6)

Article 104(6) of the Treaty lays down that the Council
should consider any observations which the Member
State concerned may wish to make before the Council
decides after an overall assessment whether an excessive
deficit exists.

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

11.2.2003

EN

Official Journal of the European Union

L 34/17

(7)

The overall assessment leads to the following conclu-
sions: in the late 1990s, when Germany enjoyed rela-
tively strong economic growth, progress in fiscal conso-
lidation was limited, with the general government deficit
remaining at around 1,5 % of GDP. Thus, there had been
little budgetary leeway to accommodate for the effects of
a cyclical slowdown or for any unexpected revenue
shortfalls from a tax reform implemented in 2001. From
a low of 1,4 % of GDP in 2000, the deficit rose to 3,7 %
of GDP in 2002, significantly exceeding the reference
value of 3 % in that year. While general economic condi-
the
tions have weakened in Germany as elsewhere,
overrun in budgetary expenditure and the shortfall
in
revenue can only partially be explained by cyclical
factors. Moreover, government debt is projected to rise
to 60,9 % of GDP by the end of 2002, a level also
exceeding, albeit slightly, the respective reference value
of 60 % of GDP,

HAS ADOPTED THIS DECISION:

Article 1

From an overall assessment it follows that an excessive deficit
exists in Germany.

This Decision is addressed to the Federal Republic of Germany.

Article 2

Done at Brussels, 21 January 2003.

For the Council

The President

N. CHRISTODOULAKIS