2005/441/EC: Council Decision of 17 February 2005 giving notice to Greece, in accordance with Article 104(9) of the EC Treaty, to take measures for the deficit reduction judged necessary in order to remedy the situation of excessive deficit
Date: 2005-02-17
Institutions: Council of the European Union
Subjects: Greece, budget deficit, budget policy, multilateral surveillance, public debt, stability pact

16.6.2005

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Official Journal of the European Union

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II

(Acts whose publication is not obligatory)

COUNCIL

COUNCIL DECISION

of 17 February 2005

giving notice to Greece, in accordance with Article 104(9) of the EC Treaty, to take measures for
the deficit reduction judged necessary in order to remedy the situation of excessive deficit

(2005/441/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty
Community, and in particular Article 104(9) thereof,

establishing the European

Having regard to the recommendation from the Commission,

Whereas:

According to Article 104(1) of the Treaty, Member States
are to avoid excessive government deficits.

as

sound

finances

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. The Stability
includes
Council Regulation (EC) No 1467/97 of 7 July 1997
on speeding up and clarifying the implementation of
the excessive deficit procedure (1).

and Growth Pact

a means

(1)

(2)

(3)

(4)

(5)

(6)

By Council Decision 2004/917/EC (3), on 5 July 2004, it
in accordance with Article 104(6) of the
was decided,
Treaty, that an excessive deficit existed in Greece.

the Treaty and
In accordance with Article 104(7) of
Article 3(4) of Regulation (EC) No 1467/97,
the
Council addressed a Recommendation to Greece on
5 July 2004 establishing the deadline of 5 November
to bring the
2004 for Greece
existence of an excessive deficit to an end in 2005 at
the latest.

to take measures

After the adoption of Decision 2004/917/EC, the Greek
government data notified on 4 May 2004 was signifi-
cantly revised in September 2004. The deficit figure for
2003 rose to 4,6 % of GDP (from the 3,2 % notified on
4 May), while according to the Commission’s autumn
2004 forecasts,
the general government deficit was
likely to reach 5,5 % of GDP in 2004, compared with
the 3,2 % projected in spring. Furthermore, the measures
approved by the Greek Parliament in the 2005 budget
might not ensure that the general government deficit is
brought below 3 % of GDP in 2005. According to the
Commission’s autumn 2004 forecasts, which projected a
growth rate of 3,3 % in 2005, the measures included in
the Greek budget for 2005 are projected to lead to a
nominal deficit of 3,6 % of GDP, which is above the 3 %
threshold.

The Resolution of the European Council of 17 June 1997
and Growth Pact, Amsterdam (2)
on the Stability
solemnly invites all parties, namely the Member States,
the
the Council and the Commission to implement
Treaty and the Stability and Growth Pact
in a strict
and timely manner.

(7)

By Council Decision 2005/334/EC (4), it was established,
in accordance with Article 104(8) of the Treaty, that
taken effective action in response to
Greece had not
the Council Recommendation according to Article
104(7) of 5 July 2004.

(1) OJ L 209, 2.8.1997, p. 6.
(2) OJ C 236, 2.8.1997, p. 1.

(3) OJ L 389, 31.12.2004, p. 25.
(4) OJ L 107, 28.4.2005, p. 24.

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set

According to Article 104(9), if a Member State persists in
failing to put into practice the recommendations of the
Council, the Council may decide to give notice to the
Member State to take measures for the deficit reduction
within a specified time-limit. The Council considers that
the deadline,
in the Council Recommendation
according to Article 104(7) of 5 July 2004, based on
the present Commission forecast will not be met.
Article 5 of Regulation (EC) No 1467/97 indicates that
any Council decision to give such notice is to be taken
within one month of the Council decision establishing
that the Member State in question has not taken effective
action in accordance with Article 104(8).

(13)

(8)

(9)

The following factors should be taken into account in
determining the recommendations to be included in the
notice. Firstly, the estimated deficit out-turn for 2004
will be substantially higher than expected when the
recommendation under Article 104(7) was adopted and
the overruns more than offset the restraining measures
implemented for 2004. As a result, the entire fiscal effort
to be made in order to correct the excessive deficit by
2005 at the latest, as called for in the Council Recom-
mendation according to Article 104(7) of 5 July 2004,
should take place in the current year. Secondly, according
to the Commission’s autumn 2004 forecasts,
fully
implemented, the measures in the budget adopted by
the Greek Parliament for 2005 would lead to a deficit
reduction of 1,9 percentage points of GDP. This
represents a considerable improvement of
the fiscal
position, but would be
to bring the
this
nominal deficit below the 3 % threshold. Finally,
additional adjustment might become even higher if a
number of uncertainties regarding the macroeconomic
scenario for 2005 and the fiscal outturn for 2004 mate-
rialise. Taking these elements into account,
the total
adjustment necessary to correct the excessive deficit in
2005 could be higher than 2,6 percentage points of
GDP, which would require additional measures of a
permanent nature leading to a correction in the deficit
of at least 0,7 of a percentage point of GDP. Such an
effort in a single year may prove economically costly.

insufficient

if

(10)

In the light of these factors, it appears that the deadline
which was set in July 2004 for the elimination of the
excessive deficit in Greece should be extended by one
year.

in debt

2004 and 2005, and to fall only marginally to about
110 % in 2006. This is well above the 60 % reference
value of the Treaty. Moreover, the contribution to the
changes
than net
borrowing is also high. It is necessary that the Greek
authorities should continue to pay due attention to
such factors in order to reduce the debt ratio at a satis-
factory pace, consistent with the projections for the
general government balance and nominal GDP growth.

factors other

levels of

In view of significant statistical revisions and in order to
allow for an adequate monitoring of the situation of
public finances in Greece, further efforts are needed to
collection and processing of general
improve
government
legal
data
framework, notably by enhancing the mechanisms that
ensure the prompt and correct supply of these data.

required

existing

the

the

by

(14) Greece should submit a report to the Commission before
21 March 2005, outlining measures to be implemented
in order to comply with this Decision. In particular, the
report should include a description of the measures to be
implemented in 2005 to reduce the budget deficit, an
assessment of the implications of the 2004 deficit out-
turn to be disclosed in the excessive deficit procedure
notification in March 2005 and a description of
the
uncertainties
the macroeconomic
scenario. Greece should also include in that report as
precise a description as possible of the measures to be
the deficit. The
implemented in 2006 to reduce
Commission and the Council
should examine that
report with a view to assessing compliance with this
Decision.

associated with

(15) According to the second subparagraph of Article 104(9)
of the Treaty, the Council may request Greece to submit
reports in accordance with a specific timetable in order
to examine the adjustment efforts made in order to
comply with this Decision. It is appropriate for Greece
to submit
the usual deadlines for
reporting government deficits and debt provided for by
Article 4 of 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)
in order to
enable the Commission to assess compliance with this
Decision.

reports just after

(11) On the basis of a growth rate of 3,3 % in the
Commission’s autumn 2004 forecasts for 2005 and
2006 and given the uncertainties regarding the macro-
economic and budgetary outlooks, a rigorous implemen-
tation of the 2005 budget, together with measures of a
permanent nature leading to a correction in the deficit of
at least 0,6 of a percentage point of GDP in 2006, would
result in a deficit of 3,6 % of GDP in 2005 and bring it
below 3 % of GDP in 2006.

(16)

towards

In the view of the Council, adjustment measures should
secure a lasting improvement in the general government
balance. In order to ensure a sustained budgetary conso-
lidation
of
government finances close to balance or in surplus, as
prescribed by the Stability and Growth Pact, a reduction
in the cyclically-adjusted deficit by at
least 0,5 of a
percentage point of GDP per year is necessary after the
correction of the excessive deficit,

the medium term position

(12)

The Commission’s autumn 2004 forecasts project the
ratio to stabilise at around 112 % of GDP in
debt

(1) OJ L 332, 31.12.1993, p. 7.

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HAS ADOPTED THIS DECISION:

Article 1

Greece shall put an end to the present excessive deficit
the latest by 2006

1.
situation as rapidly as possible and at
through:

Greece shall submit reports by 31 October 2005, 30 April
2.
2006 and 31 October 2006, examining progress made in
respecting the
this Decision. These
reports shall be analysed by the Commission and the Council
with a view to assessing compliance by Greece with this
Decision.

recommendations of

(i) a rigorous implementation of the 2005 budget as approved

Article 3

by its Parliament;

(ii) implementing in 2006 adjustment measures of a permanent
nature leading to a correction in the deficit of at least 0,6 of
a percentage point of GDP.

Greece shall

2.
further pursue the efforts to identify and
control factors other than net borrowing, which contribute to
the change in debt levels, with a view to ensuring that the
and
government gross debt
approaches the reference value at a satisfactory pace in line
with the correction of the excessive deficit.

ratio diminishes

sufficiently

The Council urges Greece to take the necessary measures to
ensure that budgetary consolidation towards the medium-term
position of government finances close to balance or in surplus
is sustained through a reduction in the cyclically-adjusted deficit
by at least 0,5 of a percentage point of GDP per year after the
excessive deficit has been corrected.

Article 4

Greece shall take effective action to comply with this Decision
by 21 March 2005.

Greece shall

further pursue the efforts to improve the
3.
collection and processing of general government data, notably
by enhancing the mechanisms that ensure the prompt and
correct supply of the general government data required by the
existing legal framework.

Article 5

This Decision is addressed to the Hellenic Republic.

Article 2

Done at Brussels, 17 February 2005.

1.
Greece shall submit, by 21 March 2005 at the latest, a
report outlining the decisions to respect the recommendations
of this Decision. The Commission and the Council shall analyse
the report with a view to assessing compliance by Greece with
this Decision.

For the Council
The President

J.-C. JUNCKER