Council opinion of 9 March 2004 on the updated Stability Programme of Belgium, 2004 to 2007
Date: 2004-03-09
Institutions: Council of the European Union
Subjects: Belgium, stability programme

C 68/4

EN

Official Journal of the European Union

18.3.2004

COUNCIL OPINION

of 9 March 2004

on the updated Stability Programme of Belgium, 2004 to 2007

(2004/C 68/03)

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 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 9 March 2004 the Council examined the 2003 update of
the stability programme of Belgium, which covers the period
2004 to 2007. The updated programme largely complies with
the data requirements of the revised ‘Code of conduct’ on the
content and format of stability and convergence programmes.

The budgetary strategy of the Belgian authorities continues to
be aimed at: (i) respecting the objectives of the Stability and
Growth Pact, that is, a budget close to balance or in surplus; (ii)
ensuring a steady reduction in the debt to GDP ratio in a
medium to long-term perspective; (iii) promoting job creation
consistent with the maintenance of sound public finances.

The 2003 estimate of GDP growth in the programme is 0,9 %.
It is the third consecutive year of GDP growth lower than 1 %.
For the subsequent years, the projections for GDP growth in
the update are for a pick-up to 1,8 % in 2004 and 2,8 % in
2005.
In 2006-2007, GDP growth is estimated to average
2,3 %. Employment growth is expected to accelerate from
– 0,1 % in 2003 to 0,7 % in 2004 and 0,8 % on average in
2005-2007. HIPC inflation is projected to remain stable at
1,4 % over the period 2004-2007.

On the basis of currently available information, the macro-
realistic,
economic scenario underlying the update seems
although possibly optimistic in 2005, when GDP growth is
projected in the update at 2,8 %, half a point higher than in
the Autumn 2003 forecast by the Commission.

Despite the slowdown in economic activity,
the updated
programme shows a surplus of 0,2 % of GDP in 2003 on

(1) OJ L 209, 2.8.1997.

the general government accounts (a more recent estimate
indicates a surplus of 0,3 % of GDP). However, this result is
influenced by one-off measures with a net positive effect of
1,2 % of GDP, notably an operation involving the mainly
publicly owned telecommunication company Belgacom.

The balanced budget target for 2004 relies on one-off measures
amounting to 0,7 % of GDP,
including proceeds from a tax
regularisation operation for 0,3 % of GDP. For 2005-2006
the authorities continue to project a balanced budget and a
small surplus of 0,3 % of GDP is foreseen for 2007.
In
connection with a projected reduction in interest payments,
the primary surplus moves from 5,6 % of GDP in 2003 to
4,8 % in 2005 and then stabilises.

In cyclically adjusted terms, based on Commission calculations
on the programme data according to the commonly agreed
methodology, the budget balance moves from a surplus of
0,8 % of GDP in 2003 to a balanced budget in 2004-2006
and a small surplus in 2007. Excluding one-off measures, the
cyclically adjusted figures would show an improvement from a
deficit of 0,4 % of GDP in 2003 to a surplus of 0,3 % in 2007.

Under plausible macro-economic and budgetary assumptions, a
budgetary position of close to balance or in surplus is main-
tained over the programme period. This would also provide a
safety margin against breaching the 3 % of GDP threshold with
normal cyclical fluctuations.

Public debt has been falling steadily, from an all-time high level
of 138 % of GDP in 1993 to slightly more than 100 % in
2003, and it is envisaged to reach 87 % of GDP in 2007.

the

strategy outlined in the programme

is
The budgetary
compatible with improving
sustainability of public
finances. However, given the still high debt ratio, Belgium
still presents some risks of long-term imbalances,
linked to
the consequences of ageing, especially for health care expen-
diture. The outstanding level of debt requires attention and
maintaining high primary surpluses in the next 10 to 15
years as planned is necessary to keep Belgium on a sustainable
path. Also, in line with the Broad Economic Policy Guidelines,
the existing government strategy to reduce the debt, improve
labour participation,
increase the effective retirement age,
maintain efforts to finance the Ageing Fund and pursue the
reform of the pension systems, should be strengthened in order
to cope with the budgetary implications of population ageing.

18.3.2004

EN

Official Journal of the European Union

C 68/5

The economic policies as reflected in the updated programme
are partly consistent with the recommendations in the Broad
Economic Policy Guidelines, specifically those with budgetary
implications. While
renewed
the programme
to allocate, as a matter of priority, proceeds
commitment
stemming from higher than expected economic growth to

contains a

the updated programme
improve the budgetary position,
lacks information on how the authorities intend to comply
with the recommendation to limit the increase in real expen-
diture in Entity I (Federal Government and Social Security) to
1,5 %.

COUNCIL OPINION

of 9 March 2004

on the updated Stability Programme of Portugal, 2004-2007

(2004/C 68/04)

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 5(3) thereof,

Having regard to the recommendation of the Commission,
after consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

On 9 March 2004 the Council examined the 2003 update of
the stability programme of Portugal which covers the period
from 2004 to 2007. The updated programme was submitted in
December 2003 and
data
requirements of the revised ‘Code of conduct on the content
and format of
and convergence programmes’.
information notably on expected privatisation
However,
revenue would have been desirable.

complies with the

stability

largely

On 5 November 2002, the Council decided that an excessive
deficit existed in Portugal and issued a recommendation
requesting Portugal to bring this situation to an end by 2003
at the latest.

the
The medium-term budgetary consolidation strategy of
2003 update of the stability programme is similar to that
adopted in the previous update. It is centred on three axes:
1. a comprehensive programme of structural reforms with a
particular
incidence in areas that bear directly on public
such as public administration, health-care, and
finances,
education; 2. a sustained policy of curbing government
consumption via wage moderation and a quasi-employment

(1) OJ L 209, 2.8.1997.

improvement

freeze; and 3. a gradual
in productivity and
competitiveness to be fostered, inter alia, by a substantial cut
in the corporate tax rate. In addition, the adoption in 2002 of
a Budgetary Framework Law (‘Lei de Estabilidade Orçamental’)
is expected to have reinforced fiscal coordination between
different government levels. As a consequence, the Portuguese
this
the
authorities
medium-term adjustment strategy will bring about a cumu-
lative decline by 3.2 percentage points in the government
primary expenditure-to-GDP ratio over the period 2004 to
2007, partly offset by lower tax revenue to the amount of
0.7 percentage points of GDP.

implementation

project

that

of

by

adopted

budgetary

consolidation strategy

an adjustment
rather

The
the
Portuguese authorities appears to be economically sound. In
relies on expenditure
strategy that
fact,
restraint
considered to
than on tax increases
improve the confidence of private economic agents, thereby
supporting growth over the medium-term. Moreover, such a
in public
strategy should secure a lasting improvement
finances, and prevent the emergence of major imbalances in
the private sector of the economy.

is

The 2003 update projects real GDP to increase by 1,0 % in
2004, after having declined by an estimated 0,8 % in 2003. For
the period from 2005 to 2007, real GDP growth is estimated
to average by 2,75 % per year. Employment growth is expected
to pick up from 0,4 % in 2004 to 1,3 % on average in the
period from 2005 to 2007. Declining from 3,3 % in 2003,
HICP inflation is expected to stabilise at 2 % throughout the
period from 2004 to 2007. The macroeconomic scenario
underlying the update seems realistic, notably because the
to be
ongoing correction of major
completed; moreover, it incorporates an element of prudence
that could absorb moderate unfavourable shocks. The ‘caution
bias’ is built around two assumptions: 1. an average growth
rate only 0,25 of a percentage point above the figure projected
for the EU as a whole, a plausible deviation for a catching-up
country; and 2. constant export market-shares, in spite of the
in (labour) productivity and a
expected moderate gains
significant deceleration in wage growth,
in line with the
Commission's Autumn 2003 forecast.

imbalances

is about