2004/917/EC: Council Decision of 5 July 2004 on the existence of an excessive deficit in Greece
Date: 2004-07-05
Institutions: Council of the European Union
Subjects: Greece, loss, public finance

30.12.2004

EN

Official Journal of the European Union

L 389/25

II

(Acts whose publication is not obligatory)

COUNCIL

COUNCIL DECISION

of 5 July 2004

on the existence of an excessive deficit in Greece

(2004/917/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty
Community, and in particular Article 104(6) thereof,

establishing the European

Having regard to the recommendation from the Commission,

Having regard to the observations made by Greece,

Whereas:

(1)

(2)

(3)

According to Article 104 of the Treaty Member States
are to avoid excessive government deficits.

sound

government

The Stability and Growth Pact is based on the objective
of
of
strengthening the conditions for price stability and for
strong sustainable growth conducive to employment
creation.

a means

finances

as

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
provisions of the said Protocol.

(5)

(6)

considers that an excessive deficit in a Member State
exists or may occur. The Commission addressed such
an opinion on Greece to the Council on 24 June
2004. Having examined all relevant factors taken into
account in its report in accordance with Article 104(3)
and having regard to the opinion of the Economic and
Financial Committee in accordance with Article 104(4),
the Commission concluded in its opinion on 24 June
2004 that there exists an excessive deficit in Greece.

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 deciding,
after an overall assessment, whether an excessive deficit
exists.

to

the

assessment

leads
the general government deficit

following
The
overall
conclusions:
reached
3,2 % of GDP in 2003 in Greece. The breach of the
3 % of GDP Treaty reference value in 2003 did not
result,
in the sense of the Stability and Growth Pact,
from an unusual event outside the control of the Greek
authorities, nor is it the result of a severe economic
downturn. On the contrary, it occurred in a context of
strong economic growth at 4,2 % in 2003, and a positive
output gap of around 1,5 % of GDP. The outturn of the
in 2003 compares with a
general government deficit
target deficit of 0,9 % of GDP set
in the December
2002 updated stability programme. According to the
Commission,
the significant slippage is attributed to
extraordinary factors (overruns in expenditure related to
the Olympic Games and compen-
the preparation of
sation for weather damages),
to higher than planned
transfers and public sector
current
wages) and to a shortfall of revenues (VAT,
income
taxes and reclassification, as a financial transaction, of a
payment from the Saving Postal Bank to government).

spending (social

(4)

Article 104(5) of the Treaty requires the Commission to
if the Commission
address an opinion to the Council

(7)

(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).

According to its spring 2004 forecasts, based on the
assumption of no policy change and a deficit figure for
2003 of 2,95 % of GDP notified at the end of March, the
Commission projects the general government deficit in
Greece to reach 3,2 % of GDP in 2004.

L 389/26

EN

Official Journal of the European Union

30.12.2004

(8)

(9)

The debt-to-GDP ratio reached 103 % of GDP in 2003,
well above the 60 % reference value of
the Treaty.
Moreover, in its Spring 2004 forecasts, the Commission
projects the debt ratio to decline only marginally to
102,8 % of GDP in 2004, which is above the 98,3 %
of GDP reported by the Greek authorities on 4 May
2004. The high level of government debt and its slow
pace of reduction are a cause of concern, especially in a
period of high nominal growth and positive
and
widening output gap.

At present the quality of public finance data remains
uncertain. The deficit figure for 2003 of 3,2 % of GDP
in the notification of 4 May compares with a deficit of
1,7 % of GDP notified in early March, which was
modified to 2,95 % of GDP at
the same
month, following the new government’s initiative for a
far-reaching auditing of public finances. Since open issues
remained about the underlying data, the Greek autho-
rities are committed to resolve most pending issues
promptly
Eurostat.
Moreover, although Eurostat validated the figures of the
4 May notification, there are firm indications that there
will be significant further, and as regards deficits almost

collaboration with

the end of

close

in

certainly upwards, revisions for 2003 and earlier years,
when a customary notification is made in September
2004. Such revisions are moreover expected to have an
upward impact on the deficit figures for 2004,

HAS ADOPTED THIS DECISION:

Article 1

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

Article 2

This Decision is addressed to the Hellenic Republic.

Done at Brussels, 5 July 2004.

For the Council
The President

G. ZALM