Council Opinion of 15 July 2003 on the updated Stability Programme of the Netherlands, 2001 to 2007
Date: 2003-07-15
Institutions: Council of the European Union
Subjects: Economic and Monetary Union, Netherlands, economic stabilisation, gross domestic product, stability programme

23.7.2003

EN

Official Journal of the European Union

C 173/1

I

(Information)

COUNCIL

COUNCIL OPINION

of 15 July 2003

on the updated Stability Programme of the Netherlands, 2001 to 2007

(2003/C 173/01)

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 15 July 2003 the Council examined the revised updated
stability programme of
the Netherlands, which covers the
period 2001 to 2007. The revised update complies with the
code of conduct on the format and content of stability
programmes and broadly complies with the 2003 Broad
Economic Policy Guidelines.

finances

programme. Government

In 2002 real GDP growth decelerated sharply to 0,2 %, from
1,3 % in 2001, well below the forecast included in the 2001
stability
deteriorated
markedly in 2002, mainly in response to the economic
slowdown. In 2002 the general government balance showed
a deficit of 1,2 % of GDP, compared to a slight surplus of 0,1 %
of GDP in 2001. HICP inflation decelerated to 3,9 % on
average in 2002, from 5,1 % in 2001, to a large extent due
to trends in import prices and the fading of the impact of
increases in indirect and energy taxes in 2001 in the wake
of the tax reform.

The Council notes that since the presentation of the initial
2002 updated stability programme in December 2002, the
macroeconomic projections have been significantly revised
downwards, with a negative impact on budgetary conditions.
The Council notes that while the gradual but relatively muted

(1) OJ L 209, 2.8.1997.

economic recovery projected in the programme appears
plausible, risks are clearly skewed to the downside and that
the expected recovery is contingent on a pick-up in global
demand and the successful restoration of the competitiveness
of the Dutch market sector. The latter requires appropriate
wage developments and an increase in the rate of productivity
growth.

The Council welcomes the main elements of the budgetary
framework put in place by the new government, which inter
alia encompass the use of separate expenditure ceilings defined
in real terms for the three subsectors of government defined,
the rule that extra revenues should be exclusively used to
reduce the deficit (or the debt should the deficit disappear),
the general
and the requirement
government deficit
the
Stability and Growth Pact has to be countered by additional
measures.

that would imply a violation of

that a development of

The Council notes that in the central projection of the update
the government balance is expected to deteriorate initially from
a deficit equal to 1,2 % of GDP in 2002 to a 1,7 % deficit in
2004. A subsequent improvement is expected subsequently to
reach a deficit of 0,5 % of GDP in 2007. The government debt
ratio is expected to remain below the level of 60 % of GDP and
to remain broadly stable, at around 52,5 % of GDP in the
period 2002 to 2007.

The Council welcomes the substantial consolidation effort
entailed in the 2003 budget and in the coalition agreement
of the new government for the period 2004 to 2007, which
in cumulative terms amounts to 1,2 % of GDP in 2003, 1,7 %
of GDP in 2004 and up to close to 3 % of GDP in 2007.
Against
the background of a steeper economic downturn
than previously expected, budgetary policies are expected to
lead to an improvement
in the cyclically adjusted general
government balance by 1 % of GDP between 2002 and
2005. A position close to balance in cyclically adjusted terms
would be reached in 2005 and maintained in the two
subsequent years. The Council considers that with the full
implementation of the consolidation measures announced by
the new government and given normal macroeconomic fluc-
tuations, a safety margin is provided not to breach the 3 % of
GDP deficit threshold.

C 173/2

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Official Journal of the European Union

23.7.2003

are

concerned,

the requirement

As far as the projected changes in the cyclically adjusted
general government balance
the Council
regrets that in 2003 and 2004 the path of adjustment falls
short of
to reduce the cyclically adjusted
deficit by at least half a percentage point in each year, albeit
not by a wide margin. The Council recommends the Dutch
authorities to implement as planned the announced measures,
which amount to 0,5 % of GDP in 2004, or more if needed to
prevent a significant deterioration in the deficit, and to ensure
adjusted general
that
government balance is in line with the second specific recom-
mendation to the euro area (GL 25) in the 2003 BEPGs.

adjustment

cyclically

in the

the

Given the downside risks attached to the growth projections,
the Council notes that additional measures might be needed to
ensure that a budgetary position close to balance or in surplus
would be maintained in the medium term. Against this back-

ground, the Council welcomes the readiness of the Dutch auth-
orities to take additional measures to ensure compliance,
should downside risks materialise.

The Council considers that on the basis of current policies, the
Netherlands appear to be in a relatively good position to meet
the budgetary costs associated with ageing. The debt to GDP
ratio will continue to decline in coming years. However, a
slight reverse trend of the debt to GDP ratio in the long run
cannot be excluded. To avoid the risk of imbalances in the long
run,
the ‘Global
Agreement’, in particular as regards the reforms in the social
insurance sector that aim at increasing participation rates and
the effective retirement age. The Council considers
that
achieving in the longer-term a surplus budgetary position
would contribute to ensuring the sustainability of government
finances in the Netherlands.

it would be necessary to fully implement

Information concerning the extension of the International Agreement on Olive Oil and Table
Olives, 1986

(2003/C 173/02)

At its eighty-eighth session (Madrid, 23-25 June 2003), the International Olive Oil Council decided, under
the provisions of the International Agreement on Olive Oil and Table Olives (1986) (1), as amended by the
1993 Protocol extending the International Agreement on Olive Oil and Table Olives (2), to extend the
Agreement for eighteen months until 31 December 2004.

(1) OJ L 214, 4.8.1987, p. 1.
(2) OJ L 298, 3.12.1993, p. 37.