2007/490/EC: Council Decision of 5 June 2007 abrogating Decision 2003/89/EC on the existence of an excessive deficit in Germany
Date: 2007-06-05
Institutions: Council of the European Union
Subjects: EC Decision, Germany, budget deficit, budget policy, public finance, repeal, stability pact

13.7.2007

EN

Official Journal of the European Union

L 183/23

(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COUNCIL

COUNCIL DECISION

of 5 June 2007

abrogating Decision 2003/89/EC on the existence of an excessive deficit in Germany

(2007/490/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:

for

the data

implementation of

provides
the
the
procedure. As part of the application of the Protocol,
Member States are to notify 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
the European
annexed to the Treaty
Community (4).

establishing

the Treaty,

By Council Decision 2003/89/EC (1), following a recom-
mendation from the Commission in accordance with
it was decided that an
Article 104(6) of
excessive deficit existed in Germany. The Council noted
that the general government deficit was 3,7 % of GDP in
2002, significantly exceeding the 3 % of GDP Treaty
reference value, while general government gross debt
was expected to reach 60,9 % of GDP, slightly above
the 60 % of GDP Treaty reference value.

(4)

(1)

(2)

the

implementation of

On 21 January 2003, 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 clar-
ifying the
excessive deficit
procedure (2), the Council addressed a recommendation
to Germany with a view to bringing the excessive deficit
situation to an end as rapidly as possible and by 2004 at
the latest. The recommendation was made public. In view
of
the unique circumstances created by the Council
conclusions of 25 November 2003 and of the ruling
of the European Court of Justice of 13 July 2004 (3),
the year 2005 should be considered to be the relevant
deadline for the correction of the excessive deficit.

(3)

In accordance with the Protocol on the excessive deficit
the Commission
procedure annexed to the Treaty,

indicated that

Following a provisional notification by Germany in
February 2006, actual data provided by the Commission
(Eurostat)
the excessive deficit had not
been corrected by 2005. Acting in accordance with
Article 10(3) of Regulation (EC) No 1467/97, and
based on a recommendation from the Commission, the
Council on 14 March 2006 immediately took a Decision
the Treaty giving notice to
under Article 104(9) of
Germany to take measures for
reduction
judged necessary in order to remedy the situation of
excessive deficit as rapidly as possible and at the latest
by 2007 (5). Specifically,
in
2006 and 2007 Germany should ensure a cumulative
in its cyclically-adjusted balance net of
improvement
one-off
least one
percentage point.

and temporary measures by at

the Council decided that

the deficit

(5)

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
in the view of the
the Member State concerned has,
Council, been corrected.

(1) OJ L 34, 11.2.2003, p. 16.
(2) OJ L 209, 2.8.1997, p. 6. Regulation as amended by Regulation (EC)

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

(3) Case C-27/04, Commission v Council, [2004] ECR I-6649.

(4) 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).
(5) Council Decision 2006/344/EC (OJ L 126, 13.5.2006, p. 20).

L 183/24

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Official Journal of the European Union

13.7.2007

(6)

Based on data provided by the Commission (Eurostat) in
accordance with Article 8g(1) of Regulation (EC) No
3605/93 following the notification by Germany before
1 April 2007 and on the Commission services’ spring
2007 forecast, the following conclusions are warranted:

— the general government deficit, after

rising from
3,7 % of GDP in 2002 to 4,0 % of GDP in 2003,
was reduced to 3,7 % of GDP in 2004, to 3,2 % of
GDP in 2005, and finally to 1,7 % of GDP in 2006.
This is lower than the target of 3,3 % of GDP set in
the February 2006 update of the stability programme
and well below the 3 % of GDP deficit reference value
one year before the time limit set by the Council,

— in previous years of favourable cyclical conditions,
Germany had not created enough budgetary leeway
to accommodate the extended slow growth period
between 2002 and 2005 with average real GDP
growth at 0,5 % per year. A series of
tax cuts,
carried out until 2005, burdened the budget further,
while offsetting measures on the expenditure side
were implemented only with some delay. Consoli-
dation measures included restraint in public sector
wages, accompanied by a reduction in staff levels,
the reform of the public health system in 2004, a
reduction of subsidies and public investment, but also
the fact that low wage growth in the private sector
dampened pension outlays. Furthermore,
in 2006,
direct
related to profits,
than economic devel-
yielded stronger
cyclically-
opments would have
adjusted balance improved from 2002 onwards,
without recourse to significant one-off measures. Par-
ticularly in 2006, the estimated structural balance,
excluding one-off and other temporary measures, as
a percentage of GDP improved by close to one
percentage point,

especially those
revenues

suggested. The

taxes,

— for 2007,

the Commission services’ spring 2007
the deficit will be reduced
forecast projects that
further to 0,6 % of GDP, driven by continuing high
GDP growth and,
in particular, the increase in the
standard VAT rate from 16 % to 19 % as of
January 2007. No one-offs are envisaged.
In the
the German authorities
spring 2007 notification,
at 1,2 % of GDP.
estimated the 2007 deficit
an
Moreover,
improvement
a
percentage of GDP amounting to ¾ percentage
point in 2007. Thus, Germany appears to comply

the Commission services project
as
structural

balance

the

in

with the recommended improvement in the structural
balance of at least one percentage point in 2006 and
2007 in cumulative terms. For 2008,
the spring
forecast projects, with unchanged policies, a further
decline in the deficit to 0,3 % of GDP. This indicates
that the deficit has been brought below the 3 % of
GDP ceiling in a credible and sustainable manner.
With unchanged policies,
is
expected to decline only marginally in 2008. This
should be seen against the need to make progress
the
towards
the medium-term objective
budgetary position, which for Germany
a
balanced budget in structural terms,

the structural deficit

for

is

— after rising from 60,3 % of GDP in 2002 to a peak of
67,9 % of GDP in 2005, the debt ratio stabilised in
2006 and is projected to decline to 65,4 % of GDP in
2007 and to about 63½ % by 2008 on a no-policy
change basis according to the Commission services’
spring 2007 forecast,
thus coming closer to the
reference value more rapidly than projected in the
most recent update of the stability programme.

(7)

In the view of
in
Germany has been corrected and Decision 2003/89/EC
should therefore be abrogated,

the excessive deficit

the Council,

HAS ADOPTED THIS DECISION:

Article 1

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

Decision 2003/89/EC is hereby abrogated.

Article 2

This Decision is addressed to the Federal Republic of Germany.

Article 3

Done at Luxembourg, 5 June 2007.

For the Council
The President

P. STEINBRÜCK