Communication of the Commission to the Council and the European Parliament - Towards a european governance strategy for fiscal statistics
Date: 2004-12-22
Institutions: European Commission
Subjects: Eurostat, budget policy, economic policy, governance, public finance, stability pact, statistics

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 22.12.2004 
COM(2004) 832 final 

COMMUNICATION OF THE COMMISSION TO THE COUNCIL AND THE 
EUROPEAN PARLIAMENT 

TOWARDS A EUROPEAN GOVERNANCE STRATEGY FOR FISCAL STATISTICS 

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COMMUNICATION OF THE COMMISSION TO THE COUNCIL AND THE 
EUROPEAN PARLIAMENT 

TOWARDS A EUROPEAN GOVERNANCE STRATEGY FOR FISCAL STATISTICS 

1. 

INTRODUCTION 

In the EU economic policy framework, compliance with budgetary discipline is examined on 
the basis of quantitative criteria relating to government deficit and debt. Therefore, the quality 
of budgetary statistics is crucial to ensure adequate implementation of the agreed framework 
for  surveillance  and  effective  co-ordination  of  fiscal  policies.  In  November  2002,  the 
Commission adopted a Communication on the need and the means to upgrade the quality of 
budgetary statistics1 whereby it  proposed  that the  ECOFIN  Council  endorses  a  code  of  best 
practice on the compilation and provision of data within the context of the excessive deficit 
procedure. The ECOFIN Council of 18 February 2003 adopted conclusions containing a code 
of best practice. 

The  issue  of  the  quality  and  reliability  of  the  deficit  and  debt  figures  for  the  EU  fiscal 
surveillance  has  recently  been  the  subject  of  increased  attention.  Substantial  data  revisions 
contained  in  fiscal  notifications  have  occurred  and  the  credibility  of  budgetary  surveillance 
has at times been put at risk. 

The  Council  of  Ministers  (ECOFIN)  of  2  June  2004  acknowledged  deficiencies  in  the 
compilation  and  reporting  of  fiscal  statistics  to  the  Commission,  and  in  particular  their 
vulnerability to political and electoral cycles. After having noted that “reliable statistics are 
essential for the credibility of the excessive deficit procedure” it invited the Commission “to 
strengthen  the  monitoring  of  the  quality  of  reported  fiscal  data  and  to  report  back  to  the 
Council before the end of the year 2004”. It also invited the Commission to make, by June 
2005, a proposal for the development of “minimum European standards for the institutional 
set-up  of  statistical  authorities”…  …”which  reinforce  the  independence,  integrity  and 
accountability of the Member States’ national statistical institutes”. These standards should 
also help to address the specific concerns on the quality of fiscal statistics”. 

The  Commission  adopted  on  3  September  2004  a  Communication  on  “Strengthening 
economic  governance  and  clarifying  the  implementation  of  the  Stability  and  Growth  Pact” 
(COM (2004) 581 final). In its Communication, the European Commission suggests possible 
improvements to the enforcement of the EU fiscal framework : 

“The  implementation  of  the  fiscal  framework  and  its  credibility  also  relies  on  the  quality, 
timeliness  and  reliability  of  fiscal  statistics  and  the  assessment  of  government  budgetary 
positions. An improved monitoring at the EU level of the reported data will contribute to this 

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Communication from the Commission to the European Parliament and the Council on the need and the 
means to upgrade the quality of budgetary statistics (COM(2002) 670 final). 

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end:  following  the  ECOFIN  Conclusions  of  2  June  2004  the  Commission  will  prepare 
minimum European standards for the institutional set-up of statistical authorities”. 

The Greek fiscal notification  of  September 2004 showed significant revisions of deficit and 
debt figures for the years 2000 to 2003. This raised concerns about the reliability of the deficit 
and debt figures previously notified by Greece and highlighted the possibility of weaknesses 
in the monitoring of fiscal statistics. 

In  his  statement  of  23  September  2004  on  the  revision  of  Greek  deficit  and  debt  data, 
Commissioner Almunia said: “In our EMU architecture, statistics are and will remain under 
the new constitution a national responsibility. It is therefore of outmost importance that the 
independence,  integrity  and  accountability  of  the  Member  States’  national  statistical 
institutions  be  reinforced  in  the  future.  As  highlighted  in  our  Communication  of  economic 
governance  and  in  line  with  the  ECOFIN  conclusions  of  2  June  2004,  the  Commission  will 
make proposals to that effect soon.” 

The Commission adopted on 1 December 2004 a Communication from the Commission to the 
European  Parliament  and  the  Council  on  “Report  of  the  acountability  issue  related  to  the 
revision of Greek budgetary data”2, which provided an analysis of systemic issues at a global 
level. 

The  present  Communication  aims  at  presenting  a  consistent  Commission  strategy  for 
strengthening the EU governance of fiscal statistics along the following three lines of action: 

–  first,  the  relevant  provisions  on  the  quality  of  statistical  data  used  in  the  context  of  the 
Excessive  Deficit  Procedure  should  be  clarified.  A  proposal  will  be  presented,  aiming  at 
supplementing  the  existing  rules  by  strengthening  data  monitoring  mechanisms.  Under 
existing law, the Commission (Eurostat) lacks the power to monitor government accounts 
directly.  The  existing  set  of  rules  needs  to  be  extended  to  ensure  that  Eurostat,  as  the 
statistical authority, can carry out effective checks on the data notified by Member States; 

–  second,  the  operational  capacities  of  the  Commission,  most  notably  Eurostat  and  of  the 
Directorate-General for Economic and Financial Affairs need to be improved. Systematic 
planning  of  existing  missions,  plus  longer  and  more  in-depth  verification  missions,  are 
required. There is also the need to mobilise all existing expertise, including that at national 
level; 

–  third,  there  is  a  need  to  establish  Europe-wide  standards  as  regards  the  independence, 

integrity and accountability of the national statistical institutes.  

2. 

BUILDING UPON THE EXISTING EXPERIENCE 

2.1. 

The EU legal framework 

Article 104 of the EC Treaty establishes that Member States shall avoid excessive government 
deficits  and  that  the  Commission  shall  monitor  the  development  of  the  budgetary  situation 

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COM(2004) 784 final. 

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and of the  stock of government debt in the Member States  with a view to identifying gross 
errors in order to ensure compliance with the required budgetary discipline. 

The Protocol on the Excessive Deficit Procedure annexed to the Treaty establishes inter alia 
that the Member States shall report their planned and actual deficit and debt levels promptly 
and  regularly  to  the  Commission.  Furthermore,  the  statistical  data  used  for  its  application 
shall be provided by the Commission. 

The  detailed  rules  of  the  Protocol  (including  the  notification  procedure  to  the  Commission) 
are specified in Council Regulation (EC) No 3605/933 (amended by Council Regulation (EC) 
No  475/20004  and  Commission  Regulation  (EC)  No  351/20025).  The  terms  used  in  the 
Protocol and in the Regulation (such as "government" or "deficit") are defined in accordance 
with  the  European  system  of  integrated  economic  accounts  ("ESA  95"),  established  by 
Council Regulation (EC) No 2223/966. The ESA 95 is the statistical reference system for the 
standards,  definitions,  and  accountancy  provisions,  aiming  to  ensure  coherence  and 
comparability of data supplied by the Member States.  

The  Economic  and  Financial  Affairs  Council  of  18  February  2003  adopted  a  code  of  best 
practice  for  the  compilation,  transmission  and  publication  of  data  for  the  purposes  of  the 
excessive  deficit  procedure,  in  order  to  clarify  the  procedures  at  the  level  of  the  Member 
States and of the Commission, following a proposal from the Commission7. 

The Code lays down that the Commission’s role as statistical authority in the context of the 
Excessive  Deficit  Procedure  (EDP)  is  taken  on  by  Eurostat,  on  behalf  of  the  Commission. 
However, the Commission does not directly compile government data in the Member States 
but depends on data compiled and reported by the national authorities. 

The Code of Best Practice also includes provisions for securing the quality of budgetary data 
by  laying  down  guidelines  for  resolving  methodological  issues  and  monitoring  the 
compliance of data with the accounting rules.  

Recent developments and in particular the large revisions of the notified Greek government 
deficit and debt statistics show the need to complement the present set of rules. 

2.2. 

The experience of statistical monitoring 

Accurate  monitoring  of  the  budgetary  developments  in  the  Member  States  requires 
comprehensive,  reliable  and  timely  fiscal  statistics.  EU  legislation  imposes  that  the  fiscal 

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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  (OJ  L  332, 
31.12.1993, p. 7). 
Council Regulation (EC) No 475/2000 of 28 February 2000 amending Regulation (EC) No 3605/93 on 
the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the 
European Community (OJ L 58, 3.3.2000, p. 1). 
Commission Regulation (EC) No 351/2002 of 25 February 2002 amending Council Regulation (EC) No 
3605/93 as regards references to ESA 95, OJ L 055 , 26/02/2002, p. 23 
Council Regulation (EC) No 2223/96 of 25 June 1996 on the European system of national and regional 
accounts  in  the  Community  (OJ  L  310,  30.11.1996,  p.  1)  last  amended  by  Regulation  (EC)  No 
1267/2003 of the European Parliament and of the Council of 16 June 2003 (OJ L 180, 18.7.2003, p. 1). 
COM(2002) 670 final. 

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figures reported  to the Commission meet  the  requirements with  respect to the  definitions in 
the  European  System  of  Economic  Accounts,  ESA  95.  Fiscal  figures  that  meet  the  ESA  95 
statistical standards are suitable for comparative analysis. 

Member  States  have  been  notifying  their  ESA  government  deficit  and  debt  figures  to  the 
Commission  within  the  framework  of  the  Excessive  Deficit  Procedure  (EDP)  since  its 
implementation began in 1994. The experience gained is that the quality of the ESA figures 
submitted to the Commission has improved steadily throughout these ten years. 

However, experience also shows that there is room for further improvement as various types 
of difficulties still impinge on the quality of statistics, and that it is now opportune to adopt 
measures to ensure harmonised implementation of the rules in this key area, as presented in 
Section 3. 

In this respect, it is important to ensure that the accounting rules of the ESA 95 are interpreted 
correctly and that the necessary methodological requirements are implemented in a consistent 
way.  In  addition,  it  is  important  to  ensure  that  Member  States  have  sufficient  statistical 
capacity  to  enable  reliable  data  to  be  issued  within  the  deadlines  stipulated.  Finally,  it  is 
essential to confirm that Member States have robust systems of compilation and classification 
of basic government data, that they produce budgetary accounts of good quality and that they 
make  the  quantitative  information  available  to  the  statisticians  according  to  the  necessary 
timetable. 

Eurostat  has  the  key  responsibility  of  ensuring  that  the  data  used  in  EU  fiscal  surveillance 
meet the necessary statistical quality standards. This requires a regular and in-depth dialogue 
with national statistical offices. Eurostat has steadily intensified its monitoring of the quality 
of  data  notified  in  the  framework  of  the  EDP.  EU  statistical  legislation  has  been  adopted 
through the years in order to develop the coverage and the timeliness of the transmission by 
member States of ESA 95 government accounts statistics to Eurostat. 

3. 

THE COMMISSION PROPOSES THREE LINES OF ACTION 

To deal with the current situation, the Commission has proposed, in its Communication on the 
acountability  issue  related  to  the  revision  of  Greek  budgetary  data8,  three  lines  of  actions 
relating  to,  respectively,  building  up  the  legislative  framework,  improving  the  operational 
capacities  of  Eurostat  and  the  Directorate  General  for  Economic  and  Financial  Affairs  (DG 
ECFIN),  and  lastly,  establishing  European  standards  on  the  independence  of  national 
statistical  institutes.  The  main  objective  is  to  establish  stronger,  common  oversight  of  the 
governance  of  fiscal  statistics  at  European  level,  which  is  itself  essential  to  economic 
governance.  

3.1. 

Completing the legal framework 

To  begin,  the  Commission  will  propose  to  supplement  the  existing  rules  to  strengthen  data 
monitoring mechanisms. As the law currently stands, the Commission does not have the right 
to monitor public accounts directly, much less to compile data in the stead of Member States. 

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The  Commission,  as  per  the  principle  of  subsidiarity,  cannot  extend  its  prerogatives  to  the 
point  of  taking  the  place  of  Member  States  within  a  system  for  collecting,  compiling  and 
notifying on data if the legislator has not provided for this. Insofar as Eurostat, as a statistical 
authority, must be able to actually verify the figures provided, there is a need to supplement 
the current provisions with an instrument which would consolidate the following aspects: 

–  the  recognition  of  audits  on  the  basis  of  documents  consisting  of  a  right  for  the 
Commission  to  directly  examine  public  accounts  –  together  with  the  corresponding 
obligation on national authorities to keep and make available all of the relevant sources of 
information; 

–  the establishment of on-the-spot checks consisting of verification missions, with a precise 
definition  of  the  scope  of  the  Commission’s  powers  within  these  missions,  such  as 
guaranteed access to all locations, all pieces of information and all individuals; 

–  precisely defining exceptions to confidentiality when this is invoked by Member States and 
does in fact relate to legitimate interests; in return, the Commission is under an obligation 
to maintain confidentiality; 

–  the rules under which these checks are to operate, for example, whether experts from other 

national administrations may take part in them. 

The Commission intends to propose draft legislation that will enable it to carry out in-depth 
verification of the figures. The draft legislation will also include measures to make Member 
States  truly  responsible  for  the  budgetary  figures  that  they  transmit  to  the  Commission,  in 
particular through provisions which make those providing the figures liable for them. 

Furthermore,  it  will  include  the  implementation  of  a  number  of  initiatives  improving 
transparency, such as disseminating the fiscal notification tables and publishing the reports on 
verification missions to Member States. 

The proposal will build upon the experience gained in the implementation of the Code of Best 
Practice and will aim at setting up surveillance mechanisms, resolving methodological issues 
and  increasing  accountability  and  transparency.  The  modalities  for  implementation  of  the 
Council  Regulation  will  be  defined  and  adopted  by  the  Commission,  taking  into  account 
experience gained. 

The Commission intends to adopt this legislation proposal in the course of the first months of 
2005. 

3.2. 

Developing the operational capacity 

Secondly,  Eurostat’s  operational  capacity  has  to  be  addressed,  as  well  as  the  way  in  which 
Eurostat’s  statistical  checks  interact  with  DG  ECFIN’s  budgetary  surveillance  under  the 
Stability and Growth Pact. This will include the following: 

–  systematic planning of verification missions in addition to the missions which are currently 

carried out; 

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–  mobilisation of all of existing expertise: intellectual resources in the highly-technical field 
of  national  accounting,  particularly  in  the  public  sector,  are  not  limitless.  The  goal  must 
therefore  be  to  allow  Eurostat  to  benefit  from  the  expertise  which  already  exists  in  the 
Member  States  by  providing  the  Commission  with  the  support  of  national  bodies  and 
statistical experts;  

–  budgetary  support  for  the  goal  of  reinforcing  and  making  systematic  the  checks  on  the 
accounts  of  national  public  administrations.  The  financial  and  human-resource 
requirements need to be analysed and may have to be reallocated in order for Eurostat and 
DG  ECFIN  to  be  able  to  carry  out  in-depth  evaluations  of  fiscal  statistics  and  budgetary 
positions. 

3.3. 

Towards minimum European standards 

The  third  line  of  action  concerns  the  development  of  minimum  European  standards  for  the 
institutional set-up of statistical authorities. This action requires a thorough consultation of the 
competent  national  authorities  in  order  to  ensure  a  coherent,  comparable  and  efficient 
framework to be applied as soon as feasible, as well as careful examination of the legal basis, 
taking due account of the principle of subsidiarity. 

The Commission is currently working on guidelines to improve statistical governance. There 
is  a  need  to  establish  minimum  European-wide  standards  in  the  domain  of  statistics,  which 
reinforce the independence, integrity and accountability of the National Statistical Institutes, 
in  order  to  respond  to  the  invitation  of  the  ECOFIN  Council  on  10  September  2004.  The 
Commission  is  examining  various  possible  legal  instruments  for  organising  the  framework, 
such as a Code of Conduct or a Directive.  

These  standards  should  have  the  dual  purpose  of,  on  the  one  hand,  improving  trust  and 
confidence  in  statistical  authorities  by  proposing  certain  institutional  and  organisational 
arrangements, and, on the other hand, reinforcing the credibility and quality of the statistics 
they  produce  and  disseminate,  by  promoting  the  coherent  application  of  best  international 
statistical principles, methods and practices by all producers of official statistics in Europe. 

Eurostat had the occasion to discuss the outline of such a Code in November 2004 with the 
Member  States  in  the  framework  of  the  Statistical  Programme  Committee,  comprising  the 
Directors General of the National Statistical Institutes; work continues in the first months of 
2005 within a task force comprising Member States and Eurostat representatives, in order to 
finalise the minimum European standards by June 2005, as required by the ECOFIN Council. 

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