Council opinion of 20 January 2004 on the Updated Convergence Programme of Denmark 2003 to 2010
Date: 2004-01-20
Institutions: Council of the European Union
Subjects: Denmark, economic convergence, economic policy, public finance, stability programme

C 29/4

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Official Journal of the European Union

3.2.2004

2003. In cyclically-adjusted terms, based on Commission calcu-
lations according to the commonly agreed methodology, there
is an improvement in the surplus from 0,5 % to 1 % of GDP.
For 2005 and 2006, the projections are for headline surpluses
of 1,4 % and 1,9 % of GDP respectively. In cyclically-adjusted
terms, the corresponding surpluses would amount to 1,8 % and
2,3 % of GDP respectively. The debt ratio is projected to
decline gradually, from 51,7 % in 2003 to 48,3 % in 2006.
Under plausible macroeconomic and budgetary assumptions,
the Stability and Growth Pact's medium-term objective of a
budgetary position of close to balance or in surplus should
be maintained throughout the programme period.

The budgetary stance in the programme provides a sufficient
safety margin against breaching the 3 % of GDP deficit
threshold with normal macroeconomic fluctuations.

However, on the basis of the Commission's analysis and the
estimates in the 2003 update, the cyclically adjusted budgetary
position is expected to be in surplus although up to 2005 it is
below the medium term objective of 2 % of GDP. This results
from the fact that the considerable fiscal stimulus in 2002 is
only partially reversed in the following years. Strict expenditure

control therefore remains important in this respect, not least by
ensuring continued adherence to the expenditure ceiling in
2004, 2005 and 2006.

to be addressed as

On the basis of current policies, Sweden should be able to
meet the projected budgetary costs of an ageing population.
However, the increase of health care expenditure,
including
expenditure related to ill health, foreseen in the projections
needs
further
measures are necessary in order to achieve the target of half
the number of
according to the
sick days. Moreover,
Commission's analysis the medium term target has to be
reached;
failure to do so can determine some budgetary
imbalances in the very long term.

the update notes

that

The economic policies as reflected in the updated programme
are broadly consistent with the recommendations in the Broad
Economic Policy Guidelines, specifically those with budgetary
implications. Completing the tax reform, and efforts to reach
the key policy objectives of raising employment, reducing the
number of social security recipients and days of sick-leave
should be given priority within the framework of sound
public finances.

COUNCIL OPINION

of 20 January 2004

on the Updated Convergence Programme of Denmark 2003 to 2010

(2004/C 29/04)

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 9(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

the Council examined Denmark's
On 20 January 2004,
updated Convergence Programme, which covers the period
2003 to 2010. The programme is
rich in information,
especially with regard to the amount of data provided for
the analysis of medium- and long-term challenges of
the
Danish public finances, and complies with the Code of
Conduct on the
and format of Stability and
Convergence Programmes.

content

(1) OJ L 209, 2.8.1997.

The strategy for public finances presented is largely unchanged
and continues to focus on ensuring sustainable public finances
in the medium and long term. The foundation for the strategy
continues to be both the maintenance of general government
surpluses of the order of 1,5-2,5 % of GDP on average towards
2010, and the tax freeze, which also is intended to help ensure
public expenditure control. Tax reductions on labour income
are to be implemented in 2004, aiming at enhancing labour
supply. Moreover, a series of labour market initiatives have
been implemented. However, additional measures to raise
labour
acknowledged in the
programme.

are necessary,

supply

as

The update projects GDP growth to accelerate from an
estimated 1,4 % to above 2 % in 2004 and 2005. The
for 2004 and
growth picture of
2005 is realistic and it
is close to the Commission's. For
2003, the Commission services (and recently the Danish auth-
orities) forecast a markedly lower growth.

the programme forecast

Public finances in Denmark continue to remain sound. For
2003 to 2005 the programme update forecasts budget
surpluses of 1,25 % of GDP to 1,75 % of GDP, which is
broadly in line with the Commission's estimates. For the rest
of the period the programme projects surpluses just below 2 %
of GDP. Also in underlying terms public finances should
remain sound over
is
expected to decrease from 45,5 % of GDP in 2002 to 27,5 %

the projection period. The debt

3.2.2004

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Official Journal of the European Union

C 29/5

assumptions,

of GDP in 2010. Under plausible macro-economic and
budgetary
and Growth Pact
medium-term objective of a budgetary position of close to
balance or in surplus is maintained over the programme
period.

Stability

the

The budgetary stance provides
safety margin against
breaching the 3 % of GDP deficit threshold with normal macro-
economic fluctuations.

a

The achievement of the medium term public finance targets
hinges on expenditure control and the realisation of a set of
ambitious labour market goals, which include increasing the
labour force participation rates from their already high level.
The updated programme acknowledges that
further labour
market reforms are required in order to obtain these goals. A
the labour market objectives may have
non-realisation of
important
the projected developments of
public finances, notably the available room for expenditure
growth. The programme would therefore have benefited from
more information about future direction of reform.

implications

for

The Danish authorities intend to reduce the tax ratio in the
programme period, while ensuring the sustainability of public
finances. However, as stated in the Council Opinion on the
2002 update of Denmark's Convergence Programme,
‘the tax
ratio in Denmark will remain high compared to other indus-
trialised countries, and consideration could be given to further
reductions, in a framework of sound public finances’.

On the basis of current policies and the medium term
projections in the updated programme, the low public debt
and the large public pension funds projected would put
Denmark's public finances in a good position to handle the
impact of the ageing population.

The 2003 Broad Economic Policy Guidelines included recom-
mendations to the Danish authorities to continue to make
work pay by increasing incentives to join the labour force;
and to ensure expenditure control at all levels of government.
The economic policies as reflected in the updated convergence
programme are broadly consistent with the 2003 Broad
Economic Policy Guidelines, specifically those with budgetary
implications.

Contact points in the EU Member States for the common use of liaison officers posted abroad

(2004/C 29/05)

Member States

Contact points for the common use of liaison officers posted abroad
(Article 7 of Council Decision 2003/170/JHA of 27 February 2003 on the common use of
liaison officers posted abroad by the law enforcement agencies of the Member States (OJ L
67, 12.3.2003, p. 27))

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