Common Position (EC) No 27/2005 of 21 June 2005 adopted by the Council, acting in accordance with the procedure referred to in Article 252 of the Treaty establishing the European Community, with a view to adopting a Council regulation amending Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
Date: 2005-06-21
Institutions: Council of the European Union
Subjects: budget policy, coordination of EMU policies, economic convergence, economic policy, economic stabilisation, multilateral surveillance

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I

(Information)

COUNCIL

COMMON POSITION (EC) No 27/2005

adopted by the Council on 21 June 2005

with a view to adopting Council Regulation (EC) No …/2005 of … amending Regulation (EC)
No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance
and coordination of economic policies

(2005/C 188 E/01)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Com-
munity, and in particular Article 99(5) thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Central Bank (1),

Acting in accordance with the procedure laid down in Article
252 of the Treaty (2),

Whereas:

(1)

The Stability and Growth Pact
initially consisted of
Council Regulation (EC) No 1466/97 of 7 July 1997 on
the strengthening of the surveillance of budgetary posi-
tions and the surveillance and coordination of economic
policies (3), Council Regulation (EC) No 1467/97 of 7
July 1997 on speeding up and clarifying the implemen-
tation of the excessive deficit procedure (4) and the Reso-
lution of the European Council of 17 June 1997 on the
Stability and Growth Pact (5). The Stability and Growth
Pact has proven its usefulness in anchoring fiscal disci-
pline, thereby contributing to a high degree of macroe-
conomic stability with low inflation and low interest
rates, which is necessary to induce sustainable growth
and employment creation.

(2)

On 20 March 2005,
the Council adopted a report
entitled ‘Improving the implementation of the Stability

and Growth Pact’ which aims to enhance the governance
and the national ownership of the fiscal framework by
strengthening the economic underpinnings and the effec-
tiveness of the Pact, both in its preventive and corrective
arms, to safeguard the sustainability of public finances in
the long run, to promote growth and to avoid imposing
excessive burdens on future generations. The report was
endorsed by the European Council in its conclusions of
23 March 2005 (6), which stated that the report updates
and complements the Stability and Growth Pact, of
which it is now an integral part.

(3)

According to the 20 March 2005 Ecofin report endorsed
the Member
by the Spring 2005 European Council,
States, the Council and the Commission reaffirm their
commitment to implement the Treaty and the Stability
and Growth Pact in an effective and timely manner,
through peer support and peer pressure, and to act in
close and constructive cooperation in the process of
economic and fiscal surveillance, in order to guarantee
certainty and effectiveness in the rules of the Pact.

(1) OJ C 144, 14.6.2005, p. 17.
(2) Opinion of

the European Parliament of 9 June 2005 (not yet
published in the Official Journal), Council common position of 21
June 2005 and position of the European Parliament of … (not yet
published in the Official Journal).

(4)

to allow the full application of

Regulation (EC) No 1466/97 needs to be amended in
order
the agreed
improvement of the implementation of the Stability and
Growth Pact.

(3) OJ L 209, 2.8.1997, p. 1.
(4) OJ L 209, 2.8.1997, p. 6.
(5) OJ C 236, 2.8.1997, p. 1.

(6) Annex 2 of conclusions of the European Council of 22 and 23

March 2005.

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(5)

(6)

(7)

(8)

The Stability and Growth Pact lays down the obligation
for Member States to adhere to the medium-term objec-
tive for their budgetary positions of ‘close to balance or
in surplus’ (CTBOIS). In the light of the economic and
budgetary heterogeneity in the Union, the medium-term
budgetary objective should be differentiated for indivi-
dual Member States, to take into account the diversity of
economic and budgetary positions and developments as
well as that of fiscal risk to the sustainability of public
finances, also in the face of prospective demographic
changes. The medium-term budgetary objective may
diverge from CTBOIS for individual Member States. For
euro area and ERM2 Member States, there would thus
be a defined range for the country-specific medium-term
budgetary objectives, in cyclically adjusted terms, net of
one-off and temporary measures.

through

discipline

enhanced

budgetary

A more symmetrical approach to fiscal policy over the
cycle
in
economic good times should be achieved, with the
objective to avoid pro-cyclical policies and to gradually
reach the medium-term budgetary objective. Adherence
to the medium-term budgetary objective should allow
Member States to deal with normal cyclical fluctuations
while keeping the government deficit below the 3 % of
GDP reference value and ensure rapid progress towards
fiscal sustainability. Taking this into account, it should
allow room for budgetary manoeuvre, in particular for
public investment.

Member States that have not yet reached their medium-
term budgetary objective should take steps to achieve it
over the cycle.
In order to reach their medium-term
budgetary objective, Member States of the euro zone or
of ERM2 should pursue a minimum annual adjustment
in cyclically adjusted terms, net of one-offs and other
temporary measures.

In order to enhance the growth-oriented nature of the
Pact, major structural reforms which have direct long-
term cost-saving effects,
including by raising potential
growth, and therefore a verifiable impact on the long-
term sustainability of public finances, should be taken
into account when defining the adjustment path to the
medium-term budgetary objective for countries
that
have not yet reached this objective and in allowing a
temporary deviation from this objective for countries
that have already reached it. In order not to hamper
structural reforms that unequivocally improve the long-
term sustainability of public finances, special attention
should be paid to pension reforms introducing a multi-

pillar system that includes a mandatory, fully funded
pillar, because these reforms entail a short-term dete-
rioration of public finances during the implementation
period.

(9)

set

for

the examination of

Deadlines
stability and
convergence programmes by the Council should be
extended in order to allow for a thorough assessment of
stability and convergence programmes,

HAS ADOPTED THIS REGULATION:

Article 1

Regulation (EC) No 1466/97 is hereby amended as follows:

1. The following heading and Article shall be inserted:

‘SECTION 1A

MEDIUM-TERM BUDGETARY OBJECTIVES’

‘Article 2a

Each Member State shall have a differentiated medium-term
objective for its budgetary position. These country-specific
medium-term budgetary objectives may diverge from the
requirement of a close to balance or in surplus position.
They shall provide a safety margin with respect to the 3 %
of GDP government deficit ratio; they shall ensure rapid
progress towards sustainability and, taking this into account,
they shall allow room for budgetary manoeuvre, considering
in particular the need for public investment.

Taking these factors into account, for Member States that
have adopted the euro and for ERM2 Member States, the
country-specific medium-term budgetary objectives shall be
specified within a defined range between — 1 % of GDP
and balance or surplus, in cyclically adjusted terms, net of
one-off and temporary measures.

A Member State's medium-term budgetary objective can be
revised when a major structural reform is implemented and
in any case every four years.’

2. Article 3(2) is hereby amended as follows:

(a) point (a) shall be replaced by the following:

‘(a) the medium-term budgetary objective

and the
adjustment path towards
the
general government surplus/deficit and the expected
path of the general government debt ratio;’

this objective for

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(b) point (c) shall be replaced by the following:

‘(c) a detailed and quantitative

assessment of

the
budgetary and other economic policy measures
being taken and/or proposed to achieve the objec-
tives of the programme, comprising a detailed cost-
benefit analysis of major structural reforms which
have direct long-term cost-saving effects, including
by raising potential growth;’

(c) the following point shall be added:

‘(e) if applicable, the reasons for a deviation from the
required adjustment path towards the medium term
budgetary objective.’

3. Article 5 is hereby amended as follows:

reference value is preserved and that the budgetary posi-
tion is expected to return to the medium-term budgetary
objective within the programme period,
the Council
shall take into account the implementation of major
structural reforms which have direct
long-term cost-
saving effects, including by raising potential growth, and
therefore a verifiable impact on the long-term sustain-
ability of public finances.

Special attention shall be paid to pension reforms intro-
ducing a multi-pillar system that includes a mandatory,
fully funded pillar. Member States implementing such
reforms shall be allowed to deviate from the adjustment
path to their medium-term budgetary objective or from
the objective itself, with the deviation reflecting the net
cost of the reform to the publicly managed pillar, under
the condition that the deviation remains temporary and
that an appropriate safety margin with respect to the
deficit reference value is preserved.’

(a) the first subparagraph of paragraph 1 shall be replaced

by the following subparagraphs:

(b) in paragraph 2,

the words

‘two months’

shall be

replaced by the words ‘three months’.

‘1.
Based on assessments by the Commission and the
Committee set up by Article 114 of the Treaty, the
Council shall, within the framework of multilateral
surveillance under Article 99 of the Treaty, examine the
medium-term budgetary objective presented by the
Member State concerned, assess whether the economic
assumptions on which the programme is based are plau-
sible, whether the adjustment path towards the medium-
term budgetary objective is appropriate and whether the
measures being taken and/or proposed to respect that
adjustment path are sufficient to achieve the medium-
term objective over the cycle.

The Council, when assessing the adjustment path
toward the medium-term budgetary objective,
shall
examine if the Member State concerned pursues the
annual
improvement of its cyclically-adjusted balance,
net of one-off and other temporary measures, required
to meet its medium-term budgetary objective, with 0,5 %
of GDP as a benchmark. The Council shall take into
account whether a higher adjustment effort is made in
economic good times, whereas the effort may be more
limited in economic bad times.

4. Article 7(2) is hereby amended as follows:

(a) point (a) shall be replaced by the following:

‘(a) the medium-term budgetary objective

this objective for

and the
adjustment path towards
the
general government surplus/deficit and the expected
path of
the
medium-term monetary policy objectives; the rela-
tionship of those objectives to price and exchange
rate stability;’

the general government debt ratio;

(b) point (c) shall be replaced by the following:

‘(c) a detailed and quantitative

assessment of

the
budgetary and other economic policy measures
being taken and/or proposed to achieve the objec-
tives of the programme, comprising a detailed cost-
benefit analysis of major structural reforms which
have direct long-term cost-saving effects, including
by raising potential growth;’

When defining the adjustment path to the medium-term
budgetary objective for Member States that have not yet
reached this objective and in allowing a temporary
deviation from this objective for Member States that
have already reached it, under the condition that an
appropriate safety margin with respect to the deficit

(c) the following point shall be added:

‘(e) if applicable, the reasons for a deviation from the
required adjustment path towards the medium term
budgetary objective.’

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5. Article 9 is hereby amended as follows:

(a) the first subparagraph of paragraph 1 shall be replaced

by the following subparagraphs:

‘1.
Based on assessments by the Commission and the
Committee set up by Article 114 of the Treaty, the
Council shall, within the framework of multilateral
surveillance under Article 99 of the Treaty, examine the
medium-term budgetary objective presented by the
Member State concerned, assess whether the economic
assumptions on which the programme is based are plau-
sible, whether the adjustment path towards the medium-
term budgetary objective is appropriate and whether the
measures being taken and/or proposed to respect that
adjustment path are sufficient to achieve the medium-
term objective over the cycle.

The Council, when assessing the adjustment path
towards the medium-term budgetary objective, shall
take into account whether a higher adjustment effort is
made in economic good times, whereas the effort may
be more limited in economic bad times. For ERM2
Member States, the Council shall examine if the Member
State concerned pursues the annual improvement of its
cyclically adjusted balance, net of one-off and other
temporary measures, required to meet its medium-term
budgetary objective, with 0,5 % of GDP as a benchmark.

When defining the adjustment path to the medium-term
budgetary objective for Member States that have not yet
reached this objective and in allowing a temporary
deviation from this objective for Member States that
have already reached it, under the condition that an

appropriate safety margin with respect to the deficit
reference value is preserved and that the budgetary posi-
tion is expected to return to the medium-term budgetary
the Council
objective within the programme period,
shall take into account the implementation of major
structural reforms which have direct
long-term cost-
saving effects, including by raising potential growth, and
therefore a verifiable impact on the long-term sustain-
ability of public finances.

Special attention shall be paid to pension reforms intro-
ducing a multi-pillar system that includes a mandatory,
fully funded pillar. Member States implementing such
reforms shall be allowed to deviate from the adjustment
path to their medium-term budgetary objective or from
the objective itself, with the deviation reflecting the net
cost of the reform to the publicly managed pillar, under
the condition that the deviation remains temporary and
that an appropriate safety margin with respect to the
deficit reference value is preserved.’

(b) in paragraph 2,

the words

‘two months’

shall be

replaced by the words ‘three months’.

6. References to Articles 103 and 109c of

the Treaty are
replaced throughout the Regulation by references to Articles
99 and 114 respectively.

Article 2

This Regulation shall enter
into force on the 20th day
following its publication in the Official Journal of the European
Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at …

For the Council

The President

…

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STATEMENT OF THE COUNCIL'S REASONS

I. INTRODUCTION

On 20 March 2005, the Council (ECOFIN) adopted a report on ‘Improving the implementation of the
Stability and Growth Pact’. The European Council, meeting on 22 and 23 March, endorsed the Council
report and invited the Commission to bring forward proposals for amending Regulations (EC) No
1466/97 and (EC) No 1467/97.

The Commission adopted on 20 April 2005 its proposal for a Council Regulation amending Regu-
lation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveil-
lance and coordination of economic policies.

The European Central Bank delivered its opinion on 3 June 2005 (1). The European Parliament deliv-
ered its opinion on 9 June 2005 (2).

On 21 June 2005 the Council adopted its common position pursuant to Article 252(a) of the Treaty.

II. OBJECTIVE

The objective of the amending Regulation is to translate the pertinent changes to the legal framework,
as agreed in the Council report, into the legislative framework.

III. ANALYSIS OF THE COMMON POSITION

The overall approach taken by the Council
in examining the Commission's proposal has been to
remain as close as possible to the Council's report of 20 March. Certain passages of the report are
reproduced in the Regulation so as to provide the appropriate level of legal certainty, while others
need not be reproduced since they can either stand on their own as political commitments or are
covered in the revised Code of Conduct for the implementation of the Pact as a whole.

With a view to facilitating Parliament's work towards a rapid completion of its second reading, the
Annex to this note provides a comprehensive explanation of the reasoning behind the handling of all
individual amendments to the Commission proposal, both those adopted by the Parliament and those
introduced by the Council.

IV. CONCLUSIONS

The approach of remaining as close as possible to the text of the Council report is the one that the
Council feels gives the best chance of rapid agreement on the relevant texts, since it reproduces an
agreement already achieved at the level of the European Council. It also offers the best possibility for
rapid and coherent implementation of the revised Stability and Growth Pact.

(1) OJ C 144, 14.6.2005, p. 17.
(2) Not yet published in the Official Journal.

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ANNEX

Council and European Parliament amendments to the Commission proposal

Amendment

Justification

Recital 2:

At the end of recital 2, the text in bold was added: ‘The
in its
report was endorsed by the European Council
conclusions of 23 March 2005, which stated that
the
report updates and complements the Stability and Growth
Pact, of which it is now an integral part’.

This change was introduced in order to clarify the status of
the 20 March 2005 report, as an integral part of the Stabi-
lity and Growth Pact, on a par with the Amsterdam Reso-
lution of
the European Council on the Stability and
Growth Pact.

Recital 2A:

The European Parliament proposed a new recital 2A,
reading as follows:

This amendment was not accepted for
reason:

the following

‘The implementation of the fiscal framework, the surveil-
lance and coordination of economic policies and their
credibility rely on the quality, reliability and timeliness of
fiscal statistics. The quality of statistics at national and
Community level must be ensured in order to guarantee
the independence,
integrity and accountability of both
national statistical offices and Eurostat’.

The issue of the quality, reliability and timeliness of fiscal
statistics does not fall within the remit of Regulation (EC)
No 1466/97. Regulation (EC) No 3605/93 contains the
relevant definitions and timetable for the purpose of the
excessive deficit procedure. Regulation (EC) No 3605/93 is
currently in the process of being amended specifically to
address quality aspects and strengthen monitoring in the
context of the excessive deficit procedure.

Recital 2B:

The European Parliament proposed a new recital 2B,
reading as follows:

This amendment was not accepted for
reason:

the following

‘The Commission should compare the figures submitted to
it by the Member States with the reports of the national
central banks to the ECB’.

a comparison of

In practice,
such data is already
happening through the representation of national central
banks and the European Central Bank in the Economic
and Financial Committee, which plays a key role in the
multilateral fiscal surveillance process.

Recital 3:

Recital 3 was redrafted.

Recital 5:

Recital 5 is a re-drafted and completed version of recital 6
— Commission proposal.

This recital was amended to place more emphasis on
Member States ‘renewed commitment to observe the rules
of
the Stability and Growth Pact and to emphasise
Member States’ responsibilities under the Stability and
Growth Pact.

The revised recital 5 presents more clearly the principle of
country-specific medium-term budgetary objectives and
the underlying economic rationale, while also clarifying
that
each
Member State is based on the underlying requirement to
remain close to balance or in surplus.

the medium-term budgetary objective

for

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Amendment

Justification

Recital 6:

Recital 6 is a redrafted and completed version of recital 5
— Commission proposal.

The revised recital 6 more clearly states the economic
rationale for reaching and adhering to the medium-term
budgetary objective.

Article 2A:

Article 2A has been redrafted by the Council.

The Euorpean Parliament's
follows:

suggested drafting was as

‘Medium-term objectives of budgetary positions close to
balance or in surplus shall be set for every Member State
in the framework of the procedure referred to in Article
99(2) of the Treaty. These medium-term budgetary objec-
tives shall be reviewed at least annually and whenever
major structural and budgetary reforms are under-
taken and, where appropriate, revised. Each Member
State could establish an economic council of wise
people who would advise on the main macroeco-
nomic projections. These country-specific medium-term
budgetary objectives shall be set at a level which allows
Member States to deal with normal cyclical fluctuations
while keeping the government deficit below the 3 % of
GDP reference value, ensure rapid progress towards fiscal
sustainability and, taking this into account, allow room for
budgetary manoeuvre, in particular for public investment.’

Article 3(2)(a):

According to the revised article, the stability programme
shall also present the medium-term budgetary objective.

As Article 2A is ‘definitional’, the procedural element (in
the framework of the procedure referred to in Article
99(2) of the Treaty) has been moved to Articles 3 and 5.

revised Article 2A specifies

The
that medium-term
budgetary objectives may vary from country to country,
but that they are confined to a defined range (applicable to
euro area and ERM2 Member States), from — 1 % of GDP
to balance or surplus.

The revised Article 2A states
the medium-term
budgetary objective is defined in cyclically-adjusted terms,
and net of one-off and other temporary measures.

that

Finally, the revised Article 2A clarifies the procedure for
revising the medium-term budgetary objective (when a
major structural reform is implemented and in any case
every four years). This establishes the medium-term objec-
tives as structural parameters that reflect structural charac-
teristics of Member States
(notably potential growth,
current debt stock, implicit liabilities) and their relatively
slow evolution: hence the four-year cycle for their revision.

The proposal to establish a council of ‘wise people’ is fully
report,
compatible with the 20 March 2005 Council
which calls upon Member States to enhance the role of
independent budgetary institutions at the national
level,
but its optional nature is more suitable for a political
declaration than a Regulation.

This amendment clarifies the procedure for setting the
medium-term budgetary objective. Member States will
present their medium-term objective, set according to the
principles of Article 2A, in their stability programmes. The
the medium-term
Council will
budgetary objective has been set at the appropriate level
and it may ask a Member State to adjust its stability
programme if it reaches the conclusion that the medium-
term objective is not set at
(see
Article 5).

then examine whether

the appropriate level

Article 3(2):

(e)

is added, on the basis of which stability
A point
programmes shall provide the following information:
‘if
applicable, the reasons for a deviation from the required
adjustment path towards the medium term budgetary
objective’.

In line with the underlying objective of strengthening the
preventive arm of the Stability Pact, the monitoring of
Member States' efforts
to achieve their medium-term
budgetary objective is reinforced.

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Amendment

Justification

Article 4(1):

In Article 4(1), the European Parliament has proposed the
following amendment:

This amendment was not accepted for
reason:

the following

‘Stability programmes shall be submitted before 1 March
1999. Thereafter, updated programmes shall be submitted
two years. A Member State
annually for a period of
adopting the single currency at a later stage shall submit a
stability programme within six months of the Council
Decision on its participation in the single currency.’

Article 5(1):

In Article 5(1), three elements are added to the original
Commission proposal.

An efficient and effective implementation of the process of
multilateral
stability
programmes be submitted and assessed on an annual
basis.

surveillance

requires

fiscal

that

First, it is clarified that in order to assess whether Member
States pursue a sufficient budgetary adjustment in order to
reach their medium-term objective, an adjustment effort of
0,5 % of GDP will serve as a benchmark.

Second,
it is clarified that deviations from the medium-
term budgetary objective or from the adjustment path
towards the objective on the basis of the implementation
of structural reforms are conditional on the preservation of
an appropriate safety margin with respect to the deficit
reference value and that the budgetary position is expected
to return to the medium-term budgetary objective within
the programme period.

Furthermore, the amendment clarifies that under the same
conditions, multi-pillar pension reforms introducing a
fully-funded second pillar outside the control of
the
government sector but diverting social contributions from
it, are eligible reforms that allow deviations from the
medium-term budgetary objective or the adjustment path
towards this objective.

Article 5(1):

In Article 5(1)(1), the European Parliament has proposed
the following amendment:

This amendment was not accepted for
reason:

the following

the Treaty,

‘Based on assessments by the Commission and the
Committee set up by Article 114 of
the
Council shall, within the framework of multilateral surveil-
lance under Article 99, examine whether the adjustment
path in the programme is sufficiently ambitious, whether
the economic assumptions on which the programme is
based are realistic and whether the measures being taken
to achieve the targeted
and/or proposed are sufficient
adjustment path towards
the medium-term budgetary
objective. For this purpose the Commission shall
undertake financial auditing missions in the countries.’

Proposed amendments to Regulation (EC) No 3605/93 as
regards the quality of statistical data in the context of the
excessive deficit procedure address this issue and will
define the objectives and content of dialogue visits and
the European Commission
methodological visits by
(Eurostat) to the Member States.

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Amendment

Justification

Article 5(2):

In Article 5(2), the European Parliament has proposed the
following amendment:

This amendment was not accepted for
reason:

the following

‘The Council shall carry out the examination of the stabi-
lity programme referred to in paragraph 1 within at most
three months of the submission of the programme. The
Council, on a recommendation from the Commission and
after consulting the Committee set up by Article 109c,
shall deliver an opinion on the programme. Where the
Council, in accordance with Article 103, considers that the
objectives and contents of a programme should be
strengthened, in particular regarding the improvement
on the adjustment path toward the medium-term
budgetary objective pursued in economic good times,
the Council shall, in its opinion, invite the Member State
concerned to adjust its programme.’

The amendment proposed by the European Parliament
could be understood to imply that a Council request to
strengthen the adjustment path is conditional on the
prevalence of economic good times. This is clearly not the
case. The process of revision of budgetary objectives fore-
seen by this Article entails that Member States may be
asked to strengthen notably the medium-term objective
itself or the adjustment path to it whenever this is possible
given the prevailing circumstances, and not only in
economic good times. Thus, consolidation when feasible is
the overarching policy objective, and consolidation in
economic good times is subjugated to this more general
requirement.

Article 6(1):

In Article 6(1), the European Parliament has proposed the
following amendment:

This amendment was not accepted for
reason:

the following

The Council report on ‘Improving the implementation of
the Stability and Growth Pact’ states in part 3.5 that there
should be increased focus on debt and sustainability. The
Council concluded that the debt surveillance framework
should be strengthened and that no change to the existing
Regulations is required to that effect.

‘As part of multilateral surveillance in accordance with
Article 99(3), the Council shall monitor the implementa-
tion of stability programmes, on the basis of information
provided by participating Member States and of assess-
ments by the Commission and the Committee set up by
Article 109c, in particular with a view to identifying actual
or expected significant divergence of the budgetary posi-
tion from the medium-term budgetary objective, or the
adjustment path towards it, as set in the programme for
the government surplus/deficit, and of the expected path
of the general government debt ratio.’

Similar amendments proposed for Articles 6(2) and 6(3)
are rejected for the same reasons.

Article 7(2)(a):

to the

According
convergence
revised article,
programme shall also present the medium-term budgetary
objective.

the

See Article 3(2)(a) above

Article 7(2):

A point (e) is added, on the basis of which convergence
programmes shall provide the following information:
‘if
applicable, the reasons for a deviation from the required
adjustment path towards the medium term budgetary
objective’.

See Article 3(2) above.

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Amendment

Justification

Article 9(1):

In Article 9(1), three elements are added to the original
Commission proposal.

First, it is clarified that in order to assess whether Member
States pursue a sufficient budgetary adjustment in order to
reach their medium-term objective, an adjustment effort of
0,5 % of GDP will serve as a benchmark.

Second,
it is clarified that deviations from the medium-
term budgetary objective or from the adjustment path
towards the objective on the basis of the implementation
of structural reforms are conditional on the preservation of
an appropriate safety margin with respect to the deficit
the budgetary position is
reference value is and that
expected to return to the medium-term budgetary objec-
tive within the programme period.

Furthermore, the amendment clarifies that under the same
conditions, multi-pillar pension reforms introducing a
fully-funded second pillar outside the control of
the
government sector but diverting social contributions from
it, are eligible reforms that allow deviations from the
medium-term budgetary objective or the adjustment path
towards this objective.