2008/560/EC: Council Decision of 3 June 2008 abrogating Decision 2005/694/EC on the existence of an excessive deficit in Italy
Date: 2008-06-03
Institutions: Council of the European Union
Subjects: Italy, budget deficit, public finance

10.7.2008

EN

Official Journal of the European Union

L 181/39

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

II

DECISIONS

COUNCIL

COUNCIL DECISION

of 3 June 2008

abrogating Decision 2005/694/EC on the existence of an excessive deficit in Italy

(2008/560/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,

(3)

(4)

Whereas:

(1)

(2)

the Treaty,

By Council Decision 2005/694/EC (1), following a recom-
mendation from the Commission in accordance with
Article 104(6) of
it was decided that an
excessive deficit existed in Italy. The Council noted that
the general government deficit was above but close to
the 3 % of GDP reference value in both 2003 and 2004,
while general government gross debt stood at around
106-107 % of GDP in both years, clearly above the
60 % of GDP Treaty reference value, and it had not
declined at a satisfactory pace over recent years.

On 28 July 2005, 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 implementation of the excessive deficit procedure (2),
the Council made, based on a recommendation from the
Commission, a recommendation addressed to Italy with a
view to bringing the excessive deficit situation to an end
by 2007 at the latest. The recommendation was made
public.

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.

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 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 (3).

establishing

(5)

Based on data provided by the Commission (Eurostat) in
accordance with Article 8g(1) of Regulation (EC) No
3605/93 following the notification by Italy before
1 April 2008 and on the Commission services' spring
2008 forecast, the following conclusions are warranted:

— the general government deficit, after

rising from
3,5 % of GDP in 2004 to 4,2 % of GDP in 2005,
was reduced to 3,4 % of GDP in 2006 and finally to
1,9 % of GDP in 2007, which is below the 3 % of
the budgetary
GDP deficit reference value. Net of
impact of one-off measures,
the deficit would be
1,7 % of GDP in 2007. This compares with a target
of 2,8 % of GDP set in the December 2006 update of
the stability programme,

(1) OJ L 266, 11.10.2005, p. 57.
(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) 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 181/40

EN

Official Journal of the European Union

10.7.2008

— the

tax

in
adjustment was driven by an increase
permanent
the 2006-2007
revenues over
period, which largely exceeded expectations. This
was mostly thanks to a higher-than-expected effec-
the adopted measures and somewhat
tiveness of
higher-than-projected economic growth. After an
estimated worsening by ¼ of a percentage point of
GDP in 2005,
the
cyclically-adjusted balance net of one-off and other
temporary measures) is estimated to have improved
by 1¾ and 1¼ percentage points of GDP in 2006
and 2007, respectively,

structural balance

(i.e.

the

— for 2008,

of

estate. The

envisaged worsening

the spring 2008 forecast projects an
increase in the deficit to 2,3 % of GDP,
including
0,1 % of GDP one-offs proceeds from the sale of
real
the
budgetary balance will be driven by both a rise in
the ratio of current primary expenditure to GDP and
lower current
taxes. This is partly offset by an
anticipated decline of capital expenditure, which
reflects the substantial one-off expenditure accrued
in 2007. Although the 2,3 % of GDP deficit
projection is only slightly above the official deficit
target of 2,2 % of GDP set in the November 2007
update of
the latter was
projected using an estimated deficit outturn in
reported
higher
2007
outcome. For 2009, the spring forecast projects, on
a no-policy change basis, a deficit of 2,4 % of GDP.
This implies that the deficit has been brought below
the 3 % of GDP reference value in a credible and
sustainable manner,

the stability programme,

significantly

than

the

— nevertheless,

the structural balance is projected to
worsen by more than ¼ of a percentage point of
GDP in 2008 and, on a no-policy change basis, to
improve by ¼ of a percentage point in 2009. This
has to be seen against the need to make progress
towards the medium-term objective (MTO) for the
budgetary position, which for Italy is a balanced
position in structural terms,

— after decreasing for a decade to just below 104 % of
GDP in 2004 (from more than 121 % of GDP in
1994), the government debt ratio increased by two

reversal

ratio would have

in 2007. Without

i.e. the accumulation of liquid assets,

percentage points of GDP in 2005 and by further 0,6
of a percentage point in 2006, to 106,5 % of GDP.
The debt ratio fell again to 104 % of GDP in 2007.
The development of the debt ratio was significantly
affected by a temporary debt-increasing financial
in
operation,
this
2006 and its
operation the debt
remained
broadly stable in 2006, reflecting the improvement
in the primary surplus in line with the Council
recommendation. According to the Commission’s
spring 2008 forecast, under
the assumption of
unchanged policies the debt ratio is projected to fall
to around 102½ % by 2009. While the debt ratio in
Italy remains high and clearly above the reference
value,
it can be considered to have diminished in
line with the correction of the excessive deficit in
2007.

(6)

In the view of the Council, the excessive deficit in Italy
has been corrected and Decision 2005/694/EC should
therefore be abrogated,

HAS ADOPTED THIS DECISION:

Article 1

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

Decision 2005/694/EC is hereby abrogated.

Article 2

This Decision is addressed to the Italian Republic.

Article 3

Done at Luxembourg, 3 June 2008.

For the Council
The President

A. BAJUK