2006/627/EC: Council Decision of 11 July 2006 abrogating Decision 2005/184/EC on the existence of an excessive deficit in Cyprus
Date: 2006-07-11
Institutions: Council of the European Union
Subjects: Cyprus, budget deficit, public finance, stability pact

20.9.2006

EN

Official Journal of the European Union

L 256/13

II

(Acts whose publication is not obligatory)

COUNCIL

COUNCIL DECISION

of 11 July 2006

abrogating Decision 2005/184/EC on the existence of an excessive deficit in Cyprus

(2006/627/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty
Community, and in particular Article 104(12) thereof,

establishing the European

Having regard to the recommendation from the Commission,

Whereas:

(1)

(2)

By Decision 2005/184/EC (1),
following a recommen-
dation from the Commission in accordance with Article
104(6) of the Treaty,
it was decided that an excessive
deficit existed in Cyprus.

the excessive deficit procedure (2),

In accordance with Article 104(7) of
the Treaty and
Article 3(4) of Council Regulation (EC) No 1467/97 of
7 July 1997 on speeding up and clarifying the imple-
the
mentation of
Council made a recommendation on 5 July 2004
addressed to Cyprus with a view to bringing the
excessive deficit situation to an end by 2005 at
the
latest. The recommendation was made public. Speci-
the measures
fically,
envisaged in the May 2004 convergence programme be
implemented with vigour;
that effective
action be taken by 5 November 2004 in order to
bring the deficit below 3 % of GDP in 2005 in a
credible and sustainable manner. The Council also
recommended ensuring that the rise in the debt ratio

recommended

in particular,

it was

that

(3)

(4)

be brought to a halt in 2004 and reversed thereafter.
The Council
invited the Cypriot authorities to ensure
that budgetary consolidation towards the medium-term
objective (MTO) be sustained after the excessive deficit
has been corrected.

In accordance with Article 104(12) of
the Treaty, a
Council Decision on the existence of an excessive
deficit is to be abrogated when the excessive deficit in
the Member State concerned has,
in the view of the
Council, been corrected.

for

the data

implementation of

In accordance with the Protocol on the excessive deficit
the Commission
procedure annexed to the Treaty,
provides
the
the
procedure. As part of the application of that Protocol,
Member States are to provide data on government
deficits and debt and other associated variables twice a
year, namely before 1 April and before 1 October,
in
accordance with Article 4 of Council Regulation (EC)
No 3605/93 of 22 November 1993 on the application
the Protocol on the excessive deficit procedure
of
annexed to the Treaty
the European
Community (3).

establishing

(5)

Based on data provided by the Commission (Eurostat) in
accordance with Article 8g of Regulation (EC) No
3605/93 following the notification by Cyprus before 1
April 2006 and on the Commission services' Spring
2006 forecast, the following conclusions are warranted:

(1) OJ L 62, 9.3.2005, p. 19.
(2) OJ L 209, 2.8.1997, p. 6. Regulation as last amended by Regulation

(EC) No 1056/2005 (OJ L 174, 7.7.2005, p. 5).

(3) OJ L 332, 31.12.1993, p. 7. Regulation as last amended by Regu-

lation (EC) No 2103/2005 (OJ L 337, 22.12.2005, p. 1).

L 256/14

EN

Official Journal of the European Union

20.9.2006

in the May 2004 update of

— the general government deficit was reduced from
4,1 % of GDP in 2004 to 2,4 % of GDP in 2005,
which is below the 3 % of GDP deficit reference
value. This compares with a target of 2,9 % of GDP
the convergence
set
programme and with the 2,5 % target of the latest
Convergence Programme update of December 2005.
The reduction below the reference value in 2005 is in
line with the recommendation under Article 104(7)
of the Treaty. Fiscal adjustment was pursued in 2005
through both revenue increases and expenditure
restraint. Although some one-off measures helped
reduce the deficit,
the budgetary consolidation in
achieved mainly through structural
Cyprus was
cyclically
deficit
measures. The
adjusted deficit net of one-off and other temporary
measures) fell to 3 % of GDP, compared to almost
5 % and 8 % of GDP in 2004 and 2003 respectively,

structural

(the

— for 2006,

the Commission services' spring 2006
forecast projects the deficit to be reduced further, to
2,25 % of GDP,
largely through measures of a
structural nature. This is slightly above the official
deficit target of 1,9 % of GDP set in the December
2005 update of
the convergence programme. For
2007, the spring forecast projects, on a no-policy-
change basis, a further decline in the deficit to 2 %
the deficit has been
of GDP. This suggests that
brought below the 3 % of GDP ceiling in a credible
and sustainable manner, as required by the recom-
mendation under Article 104(7),

— Government debt declined from 71,75 % of GDP in
2004 to 70,25 % in 2005. According to the
Commission services' spring 2006 forecast, the debt
ratio is projected to fall further to around 69 % and
68 % of GDP in 2006 and 2007 respectively. The
pace of debt reduction towards the 60 % of GDP
reference value is in line with the recommendation
under Article 104(7).

2009, the measures planned by the Cypriot authorities
over the programme period would bring the structural
deficit
to about 0,5 % of GDP by 2009, which is
considered the medium-term objective chosen by the
Cypriot authorities. Based on the estimated outturn for
2005 and taking account of the balance of risks to the
the
the
targets,
budgetary
to
programme
the
sufficient
seems
programme's MTO is almost
reached by 2009, as
envisaged in the programme. In the years following the
correction of the excessive deficit, the pace of adjustment
towards
the
programme is broadly in line with the Stability and
Growth Pact.

programme's MTO implied

budgetary

in
that

ensure

stance

the

by

(7)

Decision 2005/184/EC should therefore be abrogated,

HAS ADOPTED THIS DECISION:

Article 1

From an overall assessment it follows that the excessive deficit
situation in Cyprus has been corrected.

Article 2

Decision 2005/184/EC is hereby abrogated.

Article 3

This Decision is addressed to the Republic of Cyprus.

Done at Brussels, 11 July 2006.

(6)

According to the Council opinion of 14 March 2006 on
the updated convergence programme of Cyprus, 2005 to

For the Council
The President

E. HEINÄLUOMA